The external factors affecting a business comprise of such factors as technology, government, and its policies, economic forces and elements, socio-cultural factors, and international factors. Eventually, a booming economy reaches a peak point where economic growth rates start to fall, leading to an economic downturn. It is the up and downs of our economy. External Factors: The external factors emphasise the causes of business cycles in the fluctuations of something outside the economic system. There are basically three causes of business risk: 1. A business cycle can be defined as an economic sequence that is characterized by recession, recovery, growth and decline. External factors are things outside a business that will have an impact on its success. Which of the following is one of the five causes of a business cycle? The time period to complete this sequence is called the length of the business cycle. c.is used to predict changes in business cycles. The business cycle is characterised by four main phases:. Risk triggers can be internal or external. A business cycle, sometimes referred to as the economic cycle, is simply the up and down movements of the gross domestic product (GDP), a measure of an economy’s growth output over a period of time. Boom: high levels of consumer spending, business confidence, profits and investment.Prices and costs also tend to rise faster. One element of environmental scanning is the general economic environment. The internal factors that affect a business are such factors as employees, competitors, customers, suppliers and the culture of the organization.These are factors which business can control. The business cycle is made up for four phases: booms, downturns, recessions and recoveries. Causes of Business Cycles; 1] Help Frame Appropriate Policies. Similarly, it will also affect all sectors of a firm as well. Ten Common Causes of Business Failure By Erica Olsen. d.was designed to detect external shocks. Business Cycle Basics. A business cycle will affect all the sectors of an economy. Economic Shock: An economic shock is an event that occurs outside of an economy, and produces a significant change within an economy. External factors. Businesses operate in an ever changing world. But ignoring obvious (and subtle) warning signs of business trouble is a surefire way to end up on the wrong side of business survival statistics. A business cycle is completed when it goes through a single boom and a single contraction in sequence. 2. Failure is a topic most of us would rather avoid. A boom is characterized by a period of rapid economic growth whereas a period of relatively stagnated economic growth is a recession. The business cycle is crucial for businesses of all kinds because it directly affects demand for their products. 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