TECHNOLOGICAL FACTORS POLITICAL-LEGAL FACTORS
ECONOMIC FACTORS
These are the factors that affect the
health and vitality of the economic
system in which the organisation
operates. All organisations are
affected by national and global
economic factors. For example,
interest rates and fiscal policies are
set around economic conditions.
Important economic issues include
foreign exchange rates, wages paid to
employees, inflation, taxes, the cost
of acquiring materials or the prices at
which products and services are sold.
If there is a downturn in the
economy, banks can become hesitant
to provide loans and would not be
prepared to take unnecessary risks.
DEMOGRAPHICS AND
CULTURAL FACTORS
Demographics describe characteristics
of a population or group and includes
factors such as age, sex, education
level, income level, marital status,
occupation, religion, birth rate, death
rate, average size of a family,
average age at marriage, etc. Cultural
factors include people’s values,
beliefs, languages and religion. Social
forces affect people’s attitudes,
interests and opinions and all these
forces shape who they are, the way
they behave and ultimately what
they purchase. Organisations must be
able to offer products and services
that aim to complement and benefit
people’s lifestyle and behaviour. If
they do not respond to changes in
society, they will lose market share
and demand for their products and
services. Demographics and cultural
factors are also sometimes referred
to as socio-cultural factors.
Technological advances have
greatly changed the way
businesses operate and are
a very important driver of
change in the external
environment. Organisations
use technology to
transform inputs into
outputs. This means that
technology is used to
convert resources in the
organisation into goods and
services. This is done by
using knowledge, tools and
techniques.
FACTORS OR THE
MACRO/GENERAL
ENVIRONMENT
INTERNATIONAL FACTORS
The modern economy is globally
connected and is growing every day.
International factors have a major
impact on South African organisations.
Organisations are affected by trends
and developments that could pose an
opportunity or a threat to them.
Weighing the pros and cons of
international expansion is a key
strategic consideration and there are
various ways to enter the international
market. However, global expansion is
costly and complex, and organisations
need to have strong reasons for
developing a global strategy to offset
the costs and risks.
The political-legal factors refer
to the way in which government
provides a framework within
which business organisations can
operate and function. These
factors can create advantages
and opportunities for
organisations or they can place
obligations and duties on
organisations. They include
legislation, such as the minimum
wage or anti-discrimination laws,
voluntary codes and practices,
market regulations, trade
agreements, tariffs or
restrictions, tax levies and tax
breaks. Managers must be aware
of the impact these laws and
factors could have on the
organisation’s ability to operate
efficiently.
ECOLOGICAL FACTORS
Ecological (Ecosystem) factors refer to
environmental or ecological factors that
influence living organisms. It includes the
natural resources that a company uses as
inputs that affect their marketing activities.
There is concern about increased pollution,
shortages of raw materials and increased
governmental intervention and pressure to
comply with environmental best practices. It is
important for management to identify forces in
the macro environment, because they can
affect the business’s performance. The macro
environment plays a critical role in shaping the
future of the business. The business must
continuously evaluate the threats and
opportunities in the macro business
environment and adjust their strategies to stay
ahead of their competitors. This analysis assists
in getting the business’s strategic planning
process started. The rate at which the
environmental factors change has a direct
influence on environmental uncertainty. For
example, forecasting, planning and organisational
design and resource allocation are directly
dependent on changes in the macro
environment. Quite often the business needs to
change and adjust its core competencies to
become flexible to adapt to change and face
external challenges. For a business to be
successful and survive the impact of the macro
environmental forces, it needs to make
environmental analysis a key managerial activity.