The external environment of an organization are those set of factors which the organization cannot exercise control on. Though these factors are external to the organization, they have a significant influence over its operations, growth and sustainability.
Economic Factors – The macroeconomic factors like the political and legal environment, the rate of inflation and unemployment, monetary and fiscal policies of the government, etc. are causes that have a high influence on companies and prompt for changes in the organization. Managers need to carefully track these indicators in order to make the right decisions for change.
Socio-cultural Factors – The local and regional conditions greatly influence people’s values, habits, norms, attitudes and demographic characteristics in the society. All of these factors highly influence the business operations or will do so in the future.
Global Environment – The increasing globalization of markets has made organizations sensitive to changes. Any change or crisis in the global market affects every business, and corrective measures are not often easy and immediately taken.
Technology – Technology has become an intrinsic part of business operations. It regulates processes in all aspects like manufacturing, distribution, logistics, finance, etc. Organizations have to be up-to-date with the ever-changing technological advancements in order to improve efficiencies and remain competitive.