What factors affect the business environment?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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When we talk about the "business environment" we are talking about a number of factors that affect all businesses in a certain country or area of a country.  These factors tend to affect how easy it is for firms to operate and make profit in that particular geographic area.

The factors that affect the business environment are sometimes discussed using the acronym PEST because there are political, economic, social, and technological factors that affect the business environment.  I will give one example of each.

  • Political: the stability of the government in a country.  The business environment in Egypt is probably not great right now because no one knows what the government will look like in a month.
  • Economic: the exchange rate of a country's currency affects all businesses that conduct any foreign trade.
  • Social: the amount of education people have in a country or area.
  • Technology: how advanced a country is in terms of its technology and ability to support that technology through (for example) infrastructure.

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