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.
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.