Elements of the External Environment

1. Political/Legal Factors:
   An organisation’s political/legal climate consists of local and state laws on taxation, employment, exchange rates, and foreign trade regulations. Where these are favorable, it impacts positively on the entity’s operations and vice versa.
2. Economic Factors:
   The operations of a business organisation are influenced by the strength and stability of the national economy. Some economic variables which may have a bearing on an organisation are interest rates, levels of employment, rate of inflation, income levels of consumers, the strength of the country’s currency against major trading currencies.
3. Socio-Cultural Factors:
   Socio-cultural factors refer to the customs and values of the society in which the business operates, such as lifestyle changes, age distribution, life expectancy, and consumer behavior. In deciding on the strategies to pursue, the organisation must constantly pay attention to these factors since they influence its activities.
4. Technological Factors:
   Technological factors include the availability or state of technology. These affect a business organisation because a firm with the resources and ability to adopt new and improved technology will be more competitive. Technological factors that influence business operations include new patents, speed of change and adoption of new technology, and level of spending on research and development.
5. Globalisation:
   To the extent that the world has become a global village, the operations of a business organisation in one country tend to be affected by conditions prevailing in other countries. These, therefore, have profound implications for every business entity in the conduct of its activities.

(5 points @ 3 marks each = 15 marks)