The external environment in which businesses operate can have a significant effect on their success. To what extent do you think that the external environments in markets are favorable for businesses at the moment? Justify your answer with reference to ex

The ‘external environment’ is the combination of factors that occur outside of the business. These include: political, economical, social, technological, legal and environmental factors. In terms of the external environment of markets being favorable to businesses, the oil prices are currently at a low point and therefore there is a cheaper supply of fuel to companies. An example of a company who is benefitting hugely from the drop in oil prices is Ryanair. They are expecting a 5% drop in prices in the upcoming year and are directly holding the drop in oil prices responsible for 4% of that drop. As Ryanair is a cost leadership company and their objectives are to offer the cheapest most reliable service to their customer, then their company will benefit directly from the drop in oil prices, as they will be able to offer a lower price to their customer, which is the main objective of their company. This will lead to an increased demand, which will lead them to require expansion to meet their customer need and grow the business.  On the other hand, there are factors that suggest the external environments in some emerging markets are not favorable at the moment, for example the laws that are placed on companies by the emerging market’s governments. Many of the countries have restrictive policies regarding freedom of speech, an example of this is Russia. A key example of a company that no longer feels that Russia’s (emerging market) is favorable to their business is Google, who pulled out of Russia in early 2015 by closing their engineering centre as they were asked to remove 253 links within six months. As a company that relies on searching of the entire internet, regardless of the results, they strongly require freedom of speech. Therefore if they were to remain in Russia and follow these regulations, they would compromise the culture of their company. By compromising their culture, they may experience a fall in customer loyalty, as they are no longer providing the same service that previously offered. This drop in customer loyalty may lead to a drop in market share and this drop in customer base will reduce revenue.