← Strategic response to external factors
The six categories of external factor
Identifying the CATEGORY of external factor first is what points you toward a sensible strategic response — a legal change and a competitive threat call for completely different kinds of reaction.| Category | Example | Typical response direction |
|---|---|---|
| Economic | Exchange rates, inflation, interest rates, tariffs, a free trade agreement | Hedging, repricing, shifting markets to exploit or avoid the change |
| Political / legal | A new regulation, a compliance requirement, a trade restriction | Compliance investment, process redesign, lobbying |
| Social / demographic | Changing consumer tastes, an ageing or growing population | Repositioning the product range, new market segments |
| Technological | New automation, AI, e-commerce platforms | Investment and retraining, digitising a process or channel |
| Competitive | A multinational entering, a new local rival | Differentiation, niche focus, or alliances |
| Environmental | Climate impacts, resource scarcity, sustainability pressure | Supply-chain changes, new sourcing, sustainability programmes |
Naming the category explicitly, before naming the response, shows you understand WHY that response is the sensible one — not just that it exists.
A resource can name more than one category at once
- A rising exchange rate combined with a new tariff is both economic — name both explicitly rather than folding them into one label.
- Check whether the resource's wording points to one dominant category even when several are present.