External environment refers to the major factors and forces outside the organization that have the potential to significantly affect the performance of an organization. External environment is divided into two parts i.e. mega environment or general environment and specific or task environment.  External environment can significantly influence the effectiveness of an organization to large extent. The explanation of mega or general environment is given below.

General Environment

General environment or mega environment is an important segment of external environment. The reason it is called mega environment is that it only refers to the broad trends and conditions in the societies within which an organization operates. The major elements of general environment are: legal-political, economic, technological, international and socio cultural. Since such elements are beyond the ability of a single organization to affect or alter them therefore they cannot be influenced in the short run.  The elements of general environment are explained below.

•    Technological Element

It refers to the current state of knowledge about the production of goods and services. Technological environment can positively or negatively impact the overall success of an organization. Different industries such as automobile, telecommunication, computer etc. are greatly affected by frequent changes in technology. Therefore in order to remain competitive, organizations must stay abreast of current technological developments.

•    Economic Element

Prevailing economic conditions have great impact on the management practices in an organization. Different economic factors such as inflation, interest rates, changes in per capita income, stock market fluctuations etc affect the profitability and success of an organization. For example if the per capita income of people decreases, it will decrease their purchasing power which will ultimately lower the demand for goods and services. Due to lower demand, prices fall and the profit of an organization shrink.

•    Legal-Political Element