External Environment (Mega or General Environment)

Legal-political element refers to the legal and governmental systems within which an organization must function. There are various federal, state, and local government regulations which can significantly influence the overall performance of an organization. For example civil Rights Act of 1991, Americans with Disabilities Act of 1990 etc are some of the US legislations affecting the businesses of different organizations. Similarly political stability and positive attitude of elected government official towards the business of an organization is very important for the organization’s progress and prosperity.

•    Socio-Cultural Element

Socio-cultural element includes customs, norms, behaviors, societal values, beliefs etc. Socio-cultural aspects are subject to change therefore managers must adapt their practices to the changing expectations of the society. It is necessary to monitor the prevailing trend from time to time because such changes might offer new opportunities or pose significant threats. For example if there is shift in behavior of people for certain product, the demand of the product will increase along with increase in price.

•    International Element

The political, social, cultural, and economic situations of one country are significantly different from other country. Therefore development in a country outside an organization’s home country has great influence on the success of organization. For example a slight increase in the value of dollar has great influence on the ability of an organization to conduct business abroad.  Therefore those organizations which are purchasing raw materials from USA will find it difficult to purchase from them because of increase in the cost of production due to higher prices. Conversely, if the dollar falls against foreign currencies, demand for the raw materials will increase.