External Factor Analysis of Accounting Firm Essay

It is a part of the external analysis when conducting a st lay outgical analysis or doing market research and gives a certain overview of the distinguishable macroenvironmental factors that the alliance has to take into consideration. Political factors, or how and to what degree a brass intervenes in the economy. Specifically, political factors imply areas such as tax policy, work law, environmental law, trade restrictions, tariffs, and political stability.Political factors may also admit goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads). Furthermore, governments have great watch on the health, education, and infrastructure of a nation. Economic factorsinclude economic growth, absorb rates, exchange rates and the inflation rate. These factors have major impacts on how businesses see and make decisions.For example, interest rates affect a firms cost o f capital and therefore to what extent a business grows and expands. trade rates affect the costs of exporting goods and the supply and price of merchandise goods in an economy Social factorsinclude the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a companys products and how that company operates. For example, an ageing population may imply a smaller and less-willing work force (thus increasing the cost of labor).Furthermore, companies may change various management strategies to admit to these social trends (such as recruiting older workers). Technological factorsinclude ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production train and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation.Environmental factorsinclude weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growth awareness to climate change is affecting how companies operate and the products they offerit is both creating new markets and diminishing or destroying existing ones. Legal factorsinclude diversity law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.