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Businesses do not operate in a vacuum, as their ability to grow is largely dependent on the conduciveness of the business environment, which includes individuals, entities and several significant internal and external factors, which control the productivity and performance of a business.
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The business environment encompasses various components such as customer demands, supply, management, clients, suppliers, owners, government actions, technological innovation, social trends, market trends, economic changes e.t.c.  It is important to note that all of these components have an impact directly and indirectly on how business functions and even determines the longevity of a business, and is altered by them as well. Being a business owner means that you have to monitor how these components and factors affect your business as well as develop methods for overcoming these challenges.  A business environment can be classified into internal and external environment, where internal business environment refers to things such as products, organizational culture, manufacturing quality, value system, bad resource, poor staff quality, external business environment on the other hand refers to factors which may affect business growth, and are independent of the workings of a specific organization.
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HOW BUSINESS ENVIRONMENT AFFECTS SMALL BUSINESSES
  1. Political Factors
Generally, the political factors surrounding your area of business, especially as a small business, have a great impact on your business. Political factors relate to your interaction with local governments and various agencies.  In order to thrive as a small business, you need to have a good working relationship with the mayor and city council members in a city or town in which you operate, because whatever law they pass has an impact on your business. On the other hand, at the national level, when a new legislation is passed, it affects your business as well.
  1. Economic Factors
The state of the economy plays an important role in every aspect of your small business, and it remains a major determinant of the success of your business. When the economy trends downward and unemployment rises, small businesses may have to work harder to keep their staff and change their processes to continue earning revenue. An economic factor such as a strong labor market, has a great influence on your business, because it can increase competition among workers.
  1. Legal Factors
As legal officials and practitioners leave office after a while, new ones tend to replace them immediately, and most times, the policies they implement affect small businesses in relevant industries. This change of power and leadership in the legal service has resulted to inconsistent nature of politics, whereby businesses have to monitor legislative bills closely to prepare for potential changes.  Therefore, these small businesses have to modify their processes constantly to comply with new legislation and regulations. Some of these policies that affect small business in Nigeria include:
  • Taxation
  • Tariffs
  • Employment law
  • Import restrictions
  • Intellectual property law
On the other hand, the legal system in the environment might be slow and ineffective, this implies that a matter can be before the court for over a decade before being addressed or reaching the Supreme Court.
  1. Social factors
For a small business to thrive in an environment, the social factors must be taken into consideration before developing and marketing your products and services. Where people live, their personal values and their socio-economic status affect what, where and why people make purchases.  Catering to the specific preferences and expectations of minority groups, who have more influence on the market today than in past years, can also contribute to customer satisfaction and business growth. In addition to social factors, the security level of the environment must be considered properly as insecurity poses as a great threat to most small businesses. Featured image source: SME Digest
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This article was first published on 5th February 2022 and updated on February 13th, 2022 at 12:06 am

grace-christos

Grace Christos Is a content creator with a proven track record of success in content marketing, online reputation management, sales strategy, and so much more.

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