{"id":2777,"date":"2023-02-19T16:10:47","date_gmt":"2023-02-19T16:10:47","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/learn-it-1-4-1-external-forces-affecting-businesses\/"},"modified":"2025-05-19T14:12:11","modified_gmt":"2025-05-19T14:12:11","slug":"learn-it-1-4-1-external-forces-affecting-businesses","status":"publish","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/learn-it-1-4-1-external-forces-affecting-businesses\/","title":{"raw":"Learn It 1.4.1: External Forces Affecting Businesses","rendered":"Learn It 1.4.1: External Forces Affecting Businesses"},"content":{"raw":"<section class=\"textbox learningGoals\">\r\n<ul>\r\n\t<li>Identify external forces that affect businesses<\/li>\r\n\t<li>Understand how external forces affect businesses<\/li>\r\n<\/ul>\r\n<\/section>\r\n<h2>External Forces<\/h2>\r\n<p>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. How they respond\u2014and how quickly they respond\u2014to these external forces can make the difference between success and failure, especially in today's fast-paced business climate. Businesses operate with all of these forces in their environment simultaneously, and factors in one category can affect or complicate factors in another. We can organize the external forces that affect business into the following <span style=\"color: #000000;\">six <\/span>categories:<\/p>\r\n<ol>\r\n\t<li>Political forces<\/li>\r\n\t<li>Economic forces<\/li>\r\n\t<li>Social forces<\/li>\r\n\t<li>Technological forces<\/li>\r\n\t<li>Legal forces<\/li>\r\n\t<li>Environmental forces<\/li>\r\n<\/ol>\r\n\r\n[caption id=\"attachment_7621\" align=\"aligncenter\" width=\"416\"]<img class=\"wp-image-7621\" src=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/19134936\/L1.4..png\" alt=\"The external forces that shape business activities: Political, Economic, Social, Technological, Legal, and Environmental, abbreviated as PESTLE\" width=\"416\" height=\"432\" \/> Figure 1. A quick way to remember these categories is with the abbreviation PESTLE.[\/caption]\r\n\r\n<h2>Political Forces<\/h2>\r\n<p>Government policies have a huge impact on businesses. Tax policies at all levels of government can influence where businesses decide to locate their operations and how they make investments. The low corporate tax rate is one reason that companies such as Apple, Microsoft, and Google established offices in Ireland and are some of the largest employers there.[footnote]Sanyal, Shourjya. \u201cIs Ireland Really A Startup Nation?\u201d Forbes, November 27, 2018. https:\/\/www.forbes.com\/sites\/shourjyasanyal\/2018\/11\/27\/is-ireland-really-a-startup-nation\/[\/footnote] Actions by the government can favor certain industries by providing financial incentives to encourage production. For example, in the U.S., the CHIPS and Science Act of 2022, set aside $52.7 billion in subsidies to support businesses involved in the manufacture of semiconductor chips.[footnote]PricewaterhouseCoopers. \u201cThe CHIPS Act: What It Means for the Semiconductor Ecosystem.\u201d Accessed July 20, 2023. https:\/\/www.pwc.com\/us\/en\/library\/chips-act.html[\/footnote] Receiving a government subsidy essentially lowers the cost of production for the business.<\/p>\r\n<p>Businesses that source supplies from other countries or export their goods abroad are affected whenever governments have disputes over trade. War or conflict in another country can also affect government policies. The Russian invasion of Ukraine in 2022 resulted in the United States and many European countries imposing a variety of sanctions that limit trade, freeze assets, and limit how banks may transfer money, among other things.[footnote]Bown, Chad. \u201cRussia\u2019s War on Ukraine: A Sanctions Timeline.\u201d Peterson Institute for International Economics, March 14, 2022. https:\/\/www.piie.com\/blogs\/realtime-economics\/russias-war-ukraine-sanctions-timeline[\/footnote] As you can see, political forces are constantly changing and can be unpredictable.<\/p>\r\n<section class=\"textbox tryIt\">[ohm2_question height=\"450\" hide_question_numbers=1]3013[\/ohm2_question]<\/section>","rendered":"<section class=\"textbox learningGoals\">\n<ul>\n<li>Identify external forces that affect businesses<\/li>\n<li>Understand how external forces affect businesses<\/li>\n<\/ul>\n<\/section>\n<h2>External Forces<\/h2>\n<p>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. How they respond\u2014and how quickly they respond\u2014to these external forces can make the difference between success and failure, especially in today&#8217;s fast-paced business climate. Businesses operate with all of these forces in their environment simultaneously, and factors in one category can affect or complicate factors in another. We can organize the external forces that affect business into the following <span style=\"color: #000000;\">six <\/span>categories:<\/p>\n<ol>\n<li>Political forces<\/li>\n<li>Economic forces<\/li>\n<li>Social forces<\/li>\n<li>Technological forces<\/li>\n<li>Legal forces<\/li>\n<li>Environmental forces<\/li>\n<\/ol>\n<figure id=\"attachment_7621\" aria-describedby=\"caption-attachment-7621\" style=\"width: 416px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-7621\" src=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/19134936\/L1.4..png\" alt=\"The external forces that shape business activities: Political, Economic, Social, Technological, Legal, and Environmental, abbreviated as PESTLE\" width=\"416\" height=\"432\" srcset=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/19134936\/L1.4..png 635w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/19134936\/L1.4.-289x300.png 289w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/19134936\/L1.4.-65x68.png 65w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/19134936\/L1.4.-225x234.png 225w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/19134936\/L1.4.-350x364.png 350w\" sizes=\"(max-width: 416px) 100vw, 416px\" \/><figcaption id=\"caption-attachment-7621\" class=\"wp-caption-text\">Figure 1. A quick way to remember these categories is with the abbreviation PESTLE.<\/figcaption><\/figure>\n<h2>Political Forces<\/h2>\n<p>Government policies have a huge impact on businesses. Tax policies at all levels of government can influence where businesses decide to locate their operations and how they make investments. The low corporate tax rate is one reason that companies such as Apple, Microsoft, and Google established offices in Ireland and are some of the largest employers there.<a class=\"footnote\" title=\"Sanyal, Shourjya. \u201cIs Ireland Really A Startup Nation?\u201d Forbes, November 27, 2018. https:\/\/www.forbes.com\/sites\/shourjyasanyal\/2018\/11\/27\/is-ireland-really-a-startup-nation\/\" id=\"return-footnote-2777-1\" href=\"#footnote-2777-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a> Actions by the government can favor certain industries by providing financial incentives to encourage production. For example, in the U.S., the CHIPS and Science Act of 2022, set aside $52.7 billion in subsidies to support businesses involved in the manufacture of semiconductor chips.<a class=\"footnote\" title=\"PricewaterhouseCoopers. \u201cThe CHIPS Act: What It Means for the Semiconductor Ecosystem.\u201d Accessed July 20, 2023. https:\/\/www.pwc.com\/us\/en\/library\/chips-act.html\" id=\"return-footnote-2777-2\" href=\"#footnote-2777-2\" aria-label=\"Footnote 2\"><sup class=\"footnote\">[2]<\/sup><\/a> Receiving a government subsidy essentially lowers the cost of production for the business.<\/p>\n<p>Businesses that source supplies from other countries or export their goods abroad are affected whenever governments have disputes over trade. War or conflict in another country can also affect government policies. The Russian invasion of Ukraine in 2022 resulted in the United States and many European countries imposing a variety of sanctions that limit trade, freeze assets, and limit how banks may transfer money, among other things.<a class=\"footnote\" title=\"Bown, Chad. \u201cRussia\u2019s War on Ukraine: A Sanctions Timeline.\u201d Peterson Institute for International Economics, March 14, 2022. https:\/\/www.piie.com\/blogs\/realtime-economics\/russias-war-ukraine-sanctions-timeline\" id=\"return-footnote-2777-3\" href=\"#footnote-2777-3\" aria-label=\"Footnote 3\"><sup class=\"footnote\">[3]<\/sup><\/a> As you can see, political forces are constantly changing and can be unpredictable.<\/p>\n<section class=\"textbox tryIt\"><iframe loading=\"lazy\" id=\"ohm3013\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=3013&theme=lumen&iframe_resize_id=ohm3013&source=tnh\" width=\"100%\" height=\"450\"><\/iframe><\/section>\n<hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-2777-1\">Sanyal, Shourjya. \u201cIs Ireland Really A Startup Nation?\u201d Forbes, November 27, 2018. https:\/\/www.forbes.com\/sites\/shourjyasanyal\/2018\/11\/27\/is-ireland-really-a-startup-nation\/ <a href=\"#return-footnote-2777-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><li id=\"footnote-2777-2\">PricewaterhouseCoopers. \u201cThe CHIPS Act: What It Means for the Semiconductor Ecosystem.\u201d Accessed July 20, 2023. https:\/\/www.pwc.com\/us\/en\/library\/chips-act.html <a href=\"#return-footnote-2777-2\" class=\"return-footnote\" aria-label=\"Return to footnote 2\">&crarr;<\/a><\/li><li id=\"footnote-2777-3\">Bown, Chad. \u201cRussia\u2019s War on Ukraine: A Sanctions Timeline.\u201d Peterson Institute for International Economics, March 14, 2022. https:\/\/www.piie.com\/blogs\/realtime-economics\/russias-war-ukraine-sanctions-timeline <a href=\"#return-footnote-2777-3\" class=\"return-footnote\" aria-label=\"Return to footnote 3\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":21,"menu_order":24,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Reading: External Forces\",\"author\":\"Linda Williams and Lumen Learning\",\"organization\":\"\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"original\",\"description\":\"Practice Questions\",\"author\":\"Robert Danielson\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"part":2754,"module-header":"learn_it","content_attributions":[{"type":"original","description":"Reading: External Forces","author":"Linda Williams and Lumen 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