Businesses have two types of environments: internal and external. Internal environments are controlled by the company, and may include elements such as organizational structure and workforce. External environments, however, exist outside of the company and are not within its range of control. As such, businesses may be vulnerable to the many threats that external environments can pose.
According to Bank of Biz/ed, the economy can be considered an external threat to businesses because, no matter how hard a company works or how good its products are, economic conditions dictate a business's profit and success. Economic downturns can decrease the demand for goods or services on the consumer market. On the other hand, a robust economy will inspire more consumer spending and business growth. According to the Economic Development Research and Training Center, studying economic trends, such as household spending or consumer demand reports, can help companies track economic patterns in their external environments.
Competition is a significant external threat to businesses and is a product of the marketplace. A competitive market requires knowing who your competitors are. Competition serves as an external threat because businesses compete with other organizations for the same customers. In turn, this challenge can cause one company to flourish and the other to flop.
The global environment can be risky for companies that rely on horticulture, agriculture or other types of natural resources. Weather patterns are examples of global environmental threats that can impact a company’s resources, projects and profitability. Businesses track and trend weather patterns and global changes to monitor what types of environmental risks are out there.
According to a November 2007 article in BBC News, political decisions or changes can threaten businesses. Foreign investments, for instance, can be threatened by political decisions to go to war with other countries. Or government-funded agencies xccan have their businesses impacted by budget cuts or budget deficits.
The technological field, with all of its advancements, can serve as a potential external threat to businesses. Technological changes can give companies a competitive advantage, leaving others behind. For instance, travel agencies were exposed to a technological threat when the Internet gave customers the ability to do their own research and make their own travel plans from their computers, thereby eliminating the need for travel agencies. Technological changes should be monitored to determine if there are any direct threats to a business.