External Forces
What you’ll learn to do: identify the external forces that shape the business environment
You are probably aware that businesses do not operate in a vacuum, immune to the forces that shape our everyday life. Just like people, businesses interact with their surroundings, and just like people, businesses react differently to their environment. Later in the course, you will explore these external forces in greater depth when you complete modules covering topics such as the global business environment, business ethics, and marketing. For the time being, this section will introduce the external forces that have an impact on business operations and decisions and serve as a foundation for things to come.Learning Outcomes
- List the external forces that affect businesses
- Give examples of how various external forces affect the participants in a business and its functional areas

- Economic environment
- Legal environment
- Competitive environment
- Technological environment
- Social environment
- Global environment
Businesses operate in all of these environments simultaneously, and factors in one environment can affect or complicate factors in another.
Economic Environment
The economic environment of business has changed dramatically in recent years. After decades of growth and dominance, the US economy is now challenged by the developing economies of other nations, which are jockeying to be number one. Since the financial crisis in 2008, the US economy and businesses have struggled to recover from the greatest economic crisis since the Great Depression of the 1930s. Long-established companies have closed their doors, costing workers their jobs, retirement savings, and even their homes. Thus far the US economy has proven resilient, and since the Great Recession in 2008, the stock market has more than recovered, home prices have reached an all-time high, and unemployment is at a record low. Despite this progress, there are still challenges to be faced in the economic environment. Wages have not grown in step with overall economic growth, the US workforce has shrunk, there are less buyers in the real estate market, and wealth inequality has continued to increase. These economic conditions have all had a direct impact on businesses, regardless of size.Legal Environment

Competitive Environment

Technological Environment
Almost daily, businesses are driven to rethink the business technology they use to reach customers, produce their products, and provide their services. When we refer to business technology we mean digital tools such as computers, telecommunications, and the Internet. The expansion of Internet access to virtually every corner of the world has forced many traditional brick-and-mortar businesses into e-commerce or online sales. The advantage to businesses is that their customers no longer have to live in proximity to their stores in order to purchase goods and services. Consumers can conveniently shop for products and services without leaving their home, their desk, or their phone. The disadvantage to businesses is that consumers are also able to compare competitors' prices, benefits, features, and services (which shows how one environment—technology—can affect another—the competitive environment). Today's businesses have to be vigilant about spotting emerging trends not only in technology but in the way consumers use that technology.Social Environment

Global Environment
From a business perspective, it is a small world, and it's only getting smaller. Free trade among nations has allowed goods and services to flow across international borders more efficiently and cheaply. Formal trade agreements among nations have forged unprecedented links and interdependencies among economies. Look at the items on your desk, and you may see items from China, Mexico, Canada, or Japan. It's possible that you drive a car that was made in the United States but was produced in a plant owned by a Japanese company. The growth of the Chinese economy has brought a flood of affordable goods into the United States and, along with those cheaper prices, created a reliance on foreign goods and materials. Now, when the Chinese economy slows down, the US economy is affected. When the price of foreign oil increases or decreases, businesses in the United States feel the impact. So, it's not just the local economy or even the national economy that businesses must track—they must also keep an eye on the world economy in order to anticipate and adapt to changes that will impact their products and services.