how physical environmental issues might influence business behaviour

6.1 External Influences – Environmental 🌍

Objective: Understand how physical environmental issues can influence business behaviour.

Key Environmental Factors

  • 🌡️ Climate Change: Rising temperatures, changing rainfall patterns, and extreme weather events.

  • 🌪️ Natural Disasters: Hurricanes, floods, earthquakes, and wildfires that can damage assets and disrupt supply chains.

  • 💧 Resource Scarcity: Limited water, raw materials, or energy supplies.

  • 🌬️ Pollution: Air, water, and soil contamination that can affect product quality and public perception.

  • ⚡ Energy Costs: Fluctuating prices of electricity, gas, and renewables.

Business Impact – Quick Reference

FactorBusiness Behaviour
Climate ChangeShift to sustainable sourcing, invest in green tech, adjust marketing to eco‑friendly image.
Natural DisastersDevelop disaster recovery plans, diversify supply chains, increase insurance coverage.
Resource ScarcitySeek alternative materials, improve efficiency, negotiate long‑term contracts.
PollutionUpgrade production processes, comply with regulations, engage in corporate social responsibility.
Energy CostsAdopt renewable energy, implement energy‑saving measures, pass on costs strategically.

Analogy – The Business Garden 🌱

Think of a business as a garden. The soil is the physical environment. If the soil dries out (water scarcity) or becomes too acidic (pollution), the plants (products/services) struggle to grow. Businesses must water (invest in resources), fertilise (innovate), and sometimes replant (pivot strategy) to keep the garden thriving.

Exam Tips & Sample Questions

Tip 1: Define each environmental factor clearly before giving examples.

Tip 2: Use the PESTEL framework to structure your answer: Political, Economic, Social, Technological, Environmental, Legal.

Tip 3: Always link the factor to a concrete business response (e.g., “a hotel reduces water usage by installing low‑flow taps”).

Sample Question: Explain how climate change can affect the tourism industry and suggest two strategies businesses can adopt to mitigate these effects.

Sample Answer Outline:

  1. Define climate change and its key impacts (e.g., rising sea levels, extreme heat).

  2. Explain specific effects on tourism: beach erosion, heat‑related health risks, seasonal shifts.

  3. Strategy 1: Diversify attractions (e.g., develop indoor activities).

  4. Strategy 2: Invest in sustainable infrastructure (e.g., solar panels, water‑saving systems).

  5. Conclude with the importance of proactive adaptation for long‑term viability.