General environment: Political or Legal, Economic, Socio-cultural, and Technological environment

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General environment

General environment: Political or Legal, Economic, Socio-cultural, and Technological environment
The general environment includes economic, technological, political, legal, sociocultural that generally affect all organizations. They create opportunities and threats to the organizations.
The general environment consists of broad external forces that directly affect the activities of an organization. It is also known as macro environment. It is uncontrollable and requires proper monitoring of the components to adopt on the basis of emerging changes. The general environment includes economic, technological, political, legal, socio-cultural that generally affect all organizations. They create opportunities and threats to the organizations.

1. Political environment Legal environment:

The political environment is related to the management of public affairs. Political environment mainly refers to the political structure, composition of bureaucracy, and ideology of the ruling government. Political philosophy can be democratic or autocratic. Democracy provides a greater role to the private sector. The political systems that exist in a country influence business organizations. The investment from the private sector highly depends on the political stability of the country. If the political risk is high, there will be less investment in the business sectors. Legal environment refers to all the legal principles and policies that affect organizations’ activities. It is the framework of laws, regulations, and court decisions intended to encourage and control business activities.

Components of Political Environment/Legal Environment:

a. Constitution:
It is the fundamental law acceptable to all the people of the country. It is an important formal document of a democratic system of government. It is a framework within which all people and activities are guided. It contains different acts, sections, and subsections describing basic principles to protect public interests.

b. Political parties:

There can be many political parties under different political systems. Different political parties have different ideologies and announcements for political and economic prospects. They try to implement their declarations when they form the government, which may affect in the business activities of many organizations.

c. Political philosophy:

Philosophy is an ideology that a state adopts. Usually, there are three types of political ideologies such as democratic, socialism, and mixed. In democratic philosophy, much emphasis is given to private sectors whereas, in socialistic ideology, the state holds all the economic activities. In mixed philosophy, both state and private sectors are involved in business activities.

d. Political intuitions:

It consists of legislative, executive, and judiciary, Legislative enacts rules, regulations, and laws whereas executives implement them. Judiciary ensures whether rules and laws are properly implemented or not. Science, the political institutions play major roles in the formulation, implementation, and supervision of rules and laws of the nation, their fair role contributes to developing economic activities.

e. Legal institutions:

These intuitions are different levels of courts consisting of the District Court, the Appeal Court, and the Supreme Court. The Attorney General’s office and other offices performing similar functions are also part of the legal institution. These institutions provide judgment and define unclear laws and regulations. Besides, police administration and bureaucrats are also involved in it, which are responsible for implementing court decisions.

2. Economic environment:

The economic environment of business is largely determined by the economic system of the country. A number of economic factors such as economic planning and control, national income, industrial policies, monetary and fiscal policies, investments, savings, inflation, and international economic activities reflect the economic environment. The economic environment dramatically affects an organization’s ability to function effectively and influences its strategic choices. Interest and inflation rates affect the availability and cost of capital, the ability to expand, prices, costs, and consumer demand for products. There is a close relationship between business and the economic environment. Business organizations get inputs from the economic environment and they also supply their outputs to the economic environment. Components of Economic environment:
Components of Economic Environment:

a. Economic system:

It is the economic value assumed by the government and has a long-term impact on the economy of the country. Broadly, there are three models of the economic system, an open market economy, state owned economy, and a mixed economy. In a state-owned economy, the government directly involves in all the economic activities of the nation. In an open market economy, more emphasis is given to private sectors whereas in a mixed economy, both state and private sectors in the economic activities of the nation.

b. Economic policies:

Economic policies are the guiding principles taken by the government for economic balance and development. The key economic policies that influence organizations are industrial, commercial, and monetary policy and fiscal policy. The industrial policy deals with all the steps taken by the government for industrial development which consists of licensing, infrastructure, and technology transfer. The commercial policy relates to the import-export, trade, and transit policy. Monetary policy is concerned with the demand and supply of money, credit policy, and interest rates that are formulated by a central bank. Similarly, the government declares the fiscal policy through a budget that involves government revenue, expenditures, tax policy, liberalization policy, infrastructure development, etc.

c. Economic conditions:

Economic conditions indicate the economic strength and weaknesses of the country in which organizations perform their business. It involves inflation, per capita income, business cycle, economic growth rate, stage of economic development. These forces influence organizational and management activities and practices.

d. Capital market:

The development of the capital market shows the shape of the economic environment of the nation. The capital market consists of finance companies, banks, insurance companies, stock markets, etc. The capital market organizes and utilizes the monetary resources of the public for mutual economic benefits.

3. Socio-cultural environment:

Socio-cultural forces consist of the attitudes, beliefs, and values of individuals and groups in society. As the values, customs, and tastes change in society, the managers must also change their organizational patterns. As society change, our life is also changed by new things. Lifestyles and social values promote social change. Socio-culture environment determines the product, service, and standard of conduct that the society is likely to value. The appropriate standard of business conduct also varies across cultures. Cultural forces may create opportunities and threats to the business operation of the organization. Therefore, the managers need to monitor changes in the socio-cultural environment.

Components of socio-cultural environment:

a) Demography:

It focuses on the composition of the population of a country. It consists of the size and distribution of population, age groups, urbanization, migration of people, etc.

b) Lifestyle:

Lifestyle is the pattern and living standard of the people. The change in the level of income, fashion, and education, social interrelationship, and media change the lifestyle of the people.

c) Social values:

Social values are the beliefs and norms of society.

d) Social institutions:

Social institutions involve basic components of society like family, reference groups, and social class

e) Religion:

Religion is the belief and trust that group’s people have accepted science long ago. It provides the foundation of perception that a group of people has accepted the norms and values of society.

f) Language:

Language is the medium of expressing views, ideas, knowledge, experience, etc. Language of the people may differ on the basis of castes and ethnicity (typical culture)

4. Technological environment:

The technology consists of skills, operating methods, systems, and tools that are designed to make work more efficient. It also includes inventions and Innovations, which make work more efficient. It also largely influences organizations by creating changes in jobs, skills, lifestyles, products, production methods, and processes. Information technology, automation, computerization, robotization, biotechnology, and new materials have influenced organizations. Today, a company cannot succeed without incorporating technologies that continue to develop. Technological advances create new products, advanced production techniques, and better ways of managing and communicating.

Components of technological environment:

a) Nature of technology:

Nature of technology depends on the nature and size of the business. Technology may be labor-intensive or automatic. Labor-incentive or manual technology is based on labor whereas automatic is a capital incentive.

b) Technological change:

Change in technology shows a direct impact on business. A business can do well only if it is capable to take the opportunities created by the changing technology.

c) Technology transfer:

Technology is changing rapidly. All business organizations highly depend on modern technology. Therefore, it becomes essential to transfer the technology from technologically advanced countries to developing countries.

d) Research and development budget:

Customer’s demands change rapidly on the basis of changes in fashion, quality, and price. R&D helps in the innovation of technology, which is required to cope with the changes in this rapidly changing environment.

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