What Are External Factors?

In business, external factors are circumstances or situations outside the business that a business cannot control. These factors include social, political, technological, environmental, legal and economic issues.

Social factors, such as fashion, trends and demographics, determine the demand of certain goods and also affect consumers’ decisions. Decisions made by legal bodies in a country lead to changes in business law and even changes in the society. Economic issues, such as government spending, taxation, interest rates, exchange rates and other global factors affect the business’s financial and legal standing. Advancement in technology brings changes in production processes, which affect corporate productivity and efficiency. Political factors, such as changes in government policies, affect businesses too.