General Environment or Remote Environment or Macro Environment
The general environment is composed of the factors that are broad and affect the industries and the firms competing with each other. The general environment should be scanned, monitored, forecasted, and assessed to determine its effects on the firm i.e. to recognize and evaluate opportunities and threats. The different components of the general environment are;
1. Economic system:
- Free market economy: it is based on private sector ownership of the factors of production.
- Centrally planned economy: it is based on public ownership of all the factors of production.
- Mixed system: it is based on the co-existence of both private and public sectors.
2. Economic policies:
- Monetary policy: it deals with money supply, interest rates, credit availability, and exchange rates.
- Fiscal policy: it is related to taxation and government expenditure.
- Industrial policy: it is concerned with industrial licensing, location, incentives, facilities, foreign investment, technology transfer, and nationalization of industries.
3. Economic conditions:
- Gross domestic product (GDP); It is the broadest measure of a country’s economy. It represents the total market value of all goods and services produced in a country during a given year.
- Inflation: it represents changes in the level of retail prices for the basic consumer basket. Inflation is tied directly to the purchasing power of a currency.
- Balance of payment: it represents the ratio between the number of payments received from abroad and the number of payments going abroad.
- Income distribution: it shows how a nation’s total GDP is distributed amongst its production.
- Business cycles: They affect the health of an organization. They may be depression (contraction), recovery (revival), prosperity, and recession.
4. Economic integration:
The basic components of the political environment are;
1. Political Ideology:
- a. Democratic: Under democratic ideology, the power is vested in the people. Fundamental rights are ensured. The private sector is regarded as an indispensable part of the development of the country.
- b. Totalitarian: Under it, power is centralized to the government that does not tolerate parties of differing opinion. The private sector doesn’t flourish under such ideology.
3. Political parties:
4. Government and its branches:
- a. Legislative: Its main responsibility is the formulation and enactment of the law. It also forms the executive i.e. the government.
- b. Executive: It refers to the organ of the state that is responsible for the overall administration of the nation. It is composed of the government and its organs as bureaucracy, army, and police.
- c. Judiciary: It refers to the court of law. It is responsible for settling disputes and interpreting the rules and laws if required. It has the right of judicial review under the constitution.
- d. Other constitutional bodies: They are the constitutional bodies created by the constitution. Some of them are; The commission for the investigation of abuse of authority. Office of the auditor general, federal public service commission, election commission, and national human rights commission.
The components of the legal environment are mentioned below:
- Constitution: It is the fundamental law of a country.
- Business laws: They consist of an array of laws that regulate business activities.
- Courts of law: They are the institutions to define and solve legal disputes.
- Law administrators: They are the various law enforcement agencies, which ensure implementation of the laws as well as judgments made by the courts of law.
- a. Attitudes: It is the positive or negative concept towards a product, person, organization, and other elements.
- b. Beliefs: Beliefs are descriptive thoughts about something. They are based on knowledge, experience, and religion.
- c. Religion: Religion reflects and shapes culture. It is shared beliefs, values, and rituals.
- d. Language: It is a medium of communication. It also reflects culture.
- e. Education: it is a continuous process of learning. Education is very important for developing and nurturing a culture.
- f. Family structure and social organizations: Social organizations are in the form of common interest groups and communities.
- Level of technology: It may be manual, mechanized, automated, computerized, and robotized technology.
- The pace of change: It is the stage and speed of the technological change.
- Technology transfer: It implies technology imported from foreign countries.
- Research and development budget: It is the spending by the government or business organizations for technological adaptation, up-gradation and development.
- Energy consumption: It is concerned with both organizations and nations.
- Environment policy: Companies are required to develop environmentally-friendly policies due to increasing concern about sustaining the quality of the physical environment.
- Compliance of environmental laws: Businesses should comply with all environmental laws. Besides, they should seek to understand their impact and continuously improve the business practices in many areas.
- Natural resources: It involves the availability and the sustainable use of natural resources like water, land, forest, mines, and minerals.
- Relevant global market: It involves the size and width of the market.
- International political events: It involves international political events which are likely to affect the operation of a business.
- Degree or regional and global integration: It indicates the involvement of the country with regional and global organizations.