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Businesses cannot operate in a vacuum: if they did they would not survive. Businesses depend on external forces to survive and thrive, but business owners need to understand how to monitor and manage external forces. The main external forces impacting small businesses include competition, political/legal forces, social/cultural forces, and technological forces. Competition is good for most businesses. Just as an athlete needs competition as a motivation to improve performance, successful businesses also use competition to improve the quality of their products and services or to improve their marketing strategies. In addition to competition, political or legal forces can also change the ways businesses operate. All legitimate businesses need to work within the law, and owners must be aware of any constraints on their operations including environmental laws or regulations on certain products. The law has a bearing on how employees are treated and how much they are paid; what licenses are required, and how many taxes to pay. Businesses are also affected by social and cultural forces. A smart business owner understands cultural trends and does not assume that all products will sell in all markets. Social and cultural forces also help determine the character of the businesses' advertisements and the image it projects to the public. Finally, technology has a strong bearing on the future success of a business. Being able to use technology to our advantage will ensure success. Of each of these external forces, I foresee political and legal forces as having the most potential impact on the success of my business because laws affect licensing, taxation, and product regulation.
Financial information systems help small business owners communicate with the market. Although they require an initial expense, financial information systems will help business owners save money by understanding their market share, offering key data on the market environment, and helping a business owner decide whether or not to expand or diversify. At the initial stages of my business, however, I will rely more on managerial accounting information because my partners and I will rely on internal data to guide our early decisions. Soon after we are established I will rely more on financial information systems.
References
Financial Information Systems." Reuters. Retrieved April 19, 2007 at http://about.reuters.com/productinfo/s/financial_information_systems/
Managerial Accounting." Answers.com. Retrieved April 19, 2007 at http://www.answers.com/topic/managerial-accounting
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