External Environment

Types of businesses:

1-     The private sector: Private individuals and firms that are owned by private individuals (not controlled by the government). It include Sole Traders, Private Limited Companies (Ltd), Partnerships and Public Limited Companies (PLC).

2- The public sector: Made up of central government, local government, and businesses that are owned by government (controlled and operated by the government).

The external environment

A business exists within an external environment consisting of the actions of other players who are outside the business. A Key Success Factor (KSF) for any type of business is an accurate understanding of the external environment can be defined and analysed using the STEEP model (STEEP is an acronym for Sociological, Technological, Economic, Environmental and Political factors).

STEEP stands of five factors:

1- Sociological factors:

It include demographic changes in the age and structures of populations, patterns of work, gender roles, patterns of consumptions and ways in which culture of population or country changes and develops.

2- Technological factors:

It include information technology (IT) for business management and information and communications technology (ICT) which influence on:

•          Lowering the barriers of time and place.

•          Creates new industries.

•          Depends of many individual jobs and internal service functions on ICT systems. 

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3- Economic factors:

It include economic growth, interest rates, inflation, energy prices, exchange rates and levels of employment.

4- Environmental factors:

The impact of businesses activities on the natural environment (sustainability, recycling, emissions and waste disposal). Businesses need to consider a number of environmental factors (such as: legislations, environmental management systems 'ISO 14000', information about environmental audit and performance reports, employees, shareholders, pressure groups, and customers).

5- Political factors:

It include legislations, trading relationships (such as: the World Trade Organization ‘WTO’ and the European Union ‘EU’), government, the level and nature of public services (e.g. health, education etc.), financial policy, levels of taxation and potential elections.

Stakeholders:

Stakeholders are groups of people who have an interest in a business. They can be seen as being either external (e.g. creditors, customers, suppliers, government, community), or internal (e.g. shareholders ‘owners’, managers, staff or employees).

A stakeholders for - profit business:

Stakeholders	Expectations
	Primary	Secondary
Owners	Financial return	Capital growth
Employees	Pay	Work satisfaction, training, social integration
Customers	Supply of goods/services	Quality
Creditors	Credit worthiness	Security
Suppliers	Payment	Long-term relationships
Community	Safety and security	Contribution to the community
Government	Compliance	Improved competitiveness