External Environment of Business

A host of external and often largely uncontrolled factors influence a firm's choice of direction and action and ultimately its organizational structure and internal processes. These factors which constitute the external environment can be divided into two interrelated subcategories those in the remote environment and those in immediate operating environment.

Remote environment
The remote environment is composed of a set of forces that originate beyond and usually irrespective of any single firm 's operating situation--

Economic
Political
Social
Technological
Industry

Economic Consideration
It refers to the nature and direction of the economy in which the business operates

Social Consideration
This involves the beliefs ,values, attitudes, opinions , and lifestyles of those in a firm's external environment, as developed from their cultural,ecological,demographic,religious,educational and ethnic conditioning.

Political Conditioning
The direction and stability of political factors is a major consideration for managers in formulating company strategy. Political considerations define the legal and otherwise governing parameters in which the firm must or may wish to operate.

Technological Considerations
To avoid obsolescence and promote innovation, a firm must be aware of technological changes that might influence its industry.

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