Global Factors of Strategy
There are a number of global factors that impact a business from the outside, including legal, political, social, technological and economic. By understanding these factors and how they impact on the business so that an organisation can adjust their strategy and address these positive and negative factors.
a. Social factors : Social factors relate to an area's social structure, including what can describe a society's preferences, behaviours, motivations, needs and lifestyles, which clearly differ from one society to another as tied to the culture, value systems, and even religious beliefs. Other aspects that shape social factors include gender and age. A business must consider the social factors of each country where it operates
b. Legal and regulatory factors - Legal and regulatory factors relate to laws and regulations that are set by local, national, and global government and regulatory bodies. These legal issues can help or hinder a business, depending on what they involve. Sometimes, laws open up previously closed markets whilst others require that a company change its operations, especially if it relates to health and safety, labour and employment, consumers and/or the environment. A business must then figure out how to adjust its strategy to address what can be viewed as threats or opportunities for the firm.
c. Economic factors - Economic factors are tied to the local and global economy. For example, an increase in economic development and opportunities would produce a higher standard of living and more disposable income, which provides more opportunities for a business to sell its products or services since demand would be on the rise. However, when there is an economic recession like in recent years that also was accompanied by a credit crunch, a business is faced with threats and challenges that force it to reconsider its strategy and find other ways to still achieve its revenue targets. These types of fluctuations in economic factors occur regularly but not necessarily in the same way, so a business needs to constantly be aware of changes in interest rates, wages, and inflation to help gauge when another economic cycle may be on its way whilst also having a plan to address those economic factors.
d. Political factors - Political factors relate to changes in government political regimes as well as its related policies. For example, when China decided to open its doors and create a free market economy because the government realised this would benefit them, it was an opportunity for numerous global organisations and multinational corporations to now do business in the country. However, political changes can also create supply issues for raw materials or force an organisation to meet certain emissions targets. Following the change in government control by different political parties is important for a business because each one has specific agendas that can either lead to more opportunities or threats to the business. If a business wants to operate in different countries, political factors become one of the most important factors to examine and observe.
e. Technological factors - Technological factors have become more important as the speed of new technological developments has increased and there are ongoing innovations and inventions that change the social factors as well as influence the level of competitive pressure. These technological factors can also help a business become more efficient, improving costs, speeding production, and offering more effective service. With technology as a driving force in the globalised business environment, businesses must stay attuned to changes in technology as well as look for ways to add their own technological developments to the offering.