1. The external environment has a crucial role in shaping an industry and an individual company’s future (Tan 2013). In order to make the business ahead of the competition, a company must be able to adjust its strategies in such a way that it would reflect the environment where it operates. It is important for a company to understand its external environment since it affects the business and its operations. There is no business that is insulted from its external environment. Issues such as political decisions have an impact on a business because for example, it can change tax laws and other regulatory regimes. A company must be fully aware of what is happening outside the company such as new competitors that would enter the market, and so on. Otherwise, it may be caught unaware and won’t be ready to adapt to changes.
2. The general environment are those factors that have an impact on a company and go beyond a certain industry (Greening Johnson 1997). It describes how external conditions can affect an industry or a business in general. Examples of external environment are government regulations, taxation, employment, and even economic climate. On the other hand, industry environment refers to all conditions that affect a firm within its financial sector. It involves Porter’s five forces like the threat of new entrants, rivalry among industry’s firms, threat of substitute goods, bargaining power of customers and supplier. These are the forces that determine the degree of competitiveness of an industry as well as price pressure.
3. Since the trend nowadays in going for a healthy lifestyle, I choose the health food store industry. Health food stores usually offer organic produce, and other natural products. The general environment factors that affect this type of industry are political and economic factors. Political factors have an impact because a health food store must comply with consumer safety policies. They must create standards that would agree with consumer safety policies. Economic factors that would affect this industry are changes in transportation costs and household income. The higher spending on transporting goods can affect health food stores. If household income is higher, there would be higher demand for their products.
References
Greening, D and R. Johnson. (1997). Managing Industrial and Environmental Crisis. Sage Journals. Vol 36 Issue 4.
Tan Chee Teik. (2013). Importance of the External Environment. Retrieved from m360.sim.edu.org/article/pages/importance-of-the-external-envornment.aspx
