External factors that may affect a company include the state of the economy, weather patterns, the law and social trends. External factors, which are uncontrollable, tend to affect companies differently.Continue Reading
The global financial meltdown in 2007-2008 exemplifies the impact of economic factors on a company. Even companies that were not involved with the housing crisis experienced a dip in revenue due to the crisis. Market fluctuations tend to have a trickle-down effect on companies because they affect the demand or supply of goods and services. Economic changes can also affect a company positively, as when the nation’s productivity increases.
Inclement weather can affect a company’s operations by disrupting the supply of raw materials or limiting access to markets. Tornadoes, hurricanes and wildfires damage property and may impede a firm’s productivity.
Changes in customer preferences due to prevailing social trends may affect a company’s sales. Companies that model their operations around social interests, such as those in the media industry, are particularly sensitive to trends.
A change in federal, state or local laws may affect the way a company conducts business by regulating its products and services. If the law outlaws a product or service, a company’s operations may stop. A change in zoning laws, for instance, may affect the use of commercial property, and such infrastructural changes can be fortuitous or detrimental to a business.Learn more about Managing a Business