In the United States, laws passed by Congress and numerous regulatory bodies cover areas such as competition, minimum wage, environmental protection, workplace safety, copyright, and patents. For example, Congress passed the Telecommunications Act of 1996 to deregulate the telecommunications industry. As a result, competition increased and new opportunities emerged as traditional boundaries between service providers blurred. Today, the dramatic growth of mobile technology has changed the direction of telecommunications, which now face challenges related to broadband access and speed, content streaming, and the necessary improvements in network infrastructure to cope with ever-increasing data transfers.  States and local governments also exercise control over corporations by levying taxes, issuing corporate charters and business licenses, establishing zoning ordinances and similar regulations. We discuss the legal environment in more detail in a separate annex. Companies that carefully analyze their environment not only cope with the changes presented, but feed on them. Adapting to external forces helps the company improve its performance and survive in the market. Knowledge of the environment facilitates the adoption of new products, designs and production techniques, and the company`s organization can maintain its market leadership through such innovations. «Any businessman or his organization who is not in contact with the environment will die or perish of his own accord in the long run. By studying social, religious and cultural factors, business management can benefit (i.e. utilization) from changing social values such as emerging fashion, enthusiasm for a higher standard of living (creating demand for new types of luxury goods/services), etc. Nowadays, every businessman has to compete with the products, techniques, costs, markets, distribution chains, production and sales methods of his competitors.
A businessman can try to amplify the good effects and reduce the negative effects by perceiving knowledge about the environment. Legal regulatory factors are important dimensions of the business environment. By intelligently examining the business environment, management can avoid the legal consequences resulting from non-compliance with legal requirements applicable to the company. It is better to swim with the current than against it. The definition of the business environment: «The sum of all the people, institutions and other forces that are beyond the control of a company, but on which the company still depends because they affect the overall performance and sustainability of the company.» A country`s political climate is another critical factor that managers must take into account in their day-to-day activities. The scope of government activity, the types of laws it passes, and the overall political stability of a government are three components of the political climate. For example, a multinational like General Electric assesses the political climate of a country before deciding to set up a factory there. Is the government stable or could a coup disrupt the country? To what extent are the regulations applicable to foreign companies, including foreign ownership of business property and taxation? Import duties, quotas and export restrictions must also be taken into account.
The company needs many resources such as raw materials, tools, equipment, finances, labor, etc. to carry out business activities. These resources are called inputs. The business environment provides companies with all these inputs to carry out their business and also expects something in return. «The viability of any organization is closely linked to knowledge of its environment.» It is also a strategic measure to deal with environmental economic influences. Acquisitions, mergers and joint ventures are a type of business combinations that strengthen business units by combining them. and enable them to face environmental pressures and uncertainties with greater vigour and confidence. (v) Identification of strengths and weaknesses: Knowledge of the business environment can help identify strengths or weaknesses or positive or negative aspects that generally directly control the company or decision-maker. These aspects can be weighed and compared to determine their performance in relation to their competitive position in the market. The external business environment includes the economic, political and legal, demographic, social, competitive, global and technological sectors.
Managers need to understand how the environment is changing and what impact these changes are having on the business. When economic activity is strong, unemployment rates are low and income levels rise. The political environment is shaped by the extent of government intervention in commercial affairs, the type of laws it adopts to regulate domestic and foreign enterprises, and the overall political stability of a government. Demographics, or the study of people`s most important statistics, is at the heart of many business decisions. Today`s businesses have to deal with the unique preferences of different generations, each requiring different marketing approaches and different goods and services. The population is increasingly diverse: currently, minorities make up more than 38% of the total population of the United States, and this number will continue to grow in the coming decades. The purchasing power of minorities has also increased significantly and companies are developing products and marketing campaigns aimed at different ethnic groups.