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The General Environment

Two kinds of external environments influence organizations: the general environment and the specific environment. The general environment consists of the economy and the technological, sociocultural, and political/legal trends that indirectly affect all organizations. Changes in any sector of the general environment eventually affect most organizations. Each organization also has a specific environment that is unique to that firm’s industry and directly affects the way it conducts day-to-day business. The specific environment, includes customers, competitors, suppliers, industry regulation, and advocacy groups. Because the economy influences basic business decisions, such as whether to hire more employees, expand production, or take out loans to purchase equipment, managers scan their economic environments for signs of significant change. The sociocultural component of the general environment refers to the demographic characteristics, general behavior, attitudes, and beliefs of people in a particular society. Not everyone agrees that companies’ legal risks are too severe. Indeed, many believe that the government should do more to regulate and restrict business behavior and that it should be easier for average citizens to sue dishonest or negligent corporations.