The impact of external forces on the company

The external environment influences a company’s performance in a variety of ways. For example, as Porter’s five forces posit, forces such as buyer’s bargaining power, supplier’s bargaining power, threats posed by new entrants, threats posed by substitute products and competitive rivalry  among existing firms influence industry competitiveness and thus the performance by each individual firm in the industry. Further, as highlighted by the PESTLE framework, macroeconomic factors such as political, economic, socio-cultural, technological, legal and environmental factors may influence the ability of an entity to perform well in a given environment. Accordingly, and as subsequently discussed, external forces can exert various influences on a firm’s features and thus affect its performance.

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