Four external forces that affect an Organization

Topics: Economics, Max Weber, Capitalism Pages: 9 (1292 words) Published: April 25, 2015

Organization Behaviour

Four external forces that affect an Organization

Written by Nazar Elkhawad

Table of Contents

Terms of reference:3
Global perspective5
Economic growth5
Interest rates5
PEST Macro analysis5
Political atmosphere5
Social environment6
Technological development7
Economical environment8

Terms of reference:
This report was commissioned by the lecture of Management and Organisation Behaviour as individual assessment on four external forces that can currently affect Organisation for these modules within the Bachelor of Business Degree in Management.


In this assignment I will present a brief literature review of the main four external forces that can currently affect an organization (a business). First I will introduce global economical powers that influence the four external forces after that I will then introduce the four forces in more detail.

Global perspective

As the world is emerging from the waters of deep economical crisis I think the best to start with are global influences that affect the main four forces. Each organization is directly strongly influenced by general laws of economics:

Economic growth - is influenced by various factors such as development on stock markets, which is strongly influenced by political activities around the world, prices of raw materials (metals, oil etc.) but also prices of energy and future of the economical development in general.

Inflation - increases cost of operations and price of products and reduces employment.

Interest rates – as many businesses operate with money borrowed from banks changing interest rates influence directly interest expense, which influences the cost of operations and the cost of product

PEST Macro analysis

Each local business is based in a certain environment that directly influences its performance. The environment a company exists in has a strong impact on every aspect of the company`s life. The following main four macro-economical external influences are interdependent.

Political atmosphere – each country has a specific political atmosphere, political culture. For instance countries of the EU would have very different atmosphere to North Korea. Local political decisions shape the countries economical perspective and enable or disable, speed up or slow down the development of local businesses. Political decisions directly influence law of the country (region) and some of them such as economic reforms make strong and long-lasting impact on local businesses. Even political decisions such as annual budget or introduction of income levy have profound impact on business performance. However this would be more applicable in Adam Smyth`s times. Currently we can still apply this influence of local politics on small or local businesses but the late seventies and eighties of the 20th century, started especially in the Euro-American civilization process of progressive economic liberalization that resulted in supra-national corporations that we know today. Many of these corporations are wealthier then countries they operate in and often dictate what the local political milieu will be. This route would eventually lead us to the question of monopolization and to the question of economic and political interests and their balance. Ultimately it is both international and local law that that create balance between these two areas.1 Great example of politics and law (even if enforced by the international public rather than by local corrupted politicians) impacting on businesses is from India, where supra-national companies producing clothing completely ignored health and safety regulations in order to produce more and cheaper. Unfortunately this lack of political ethic and responsibility resulted in tragedies and loss of many lives.

Social environment – main characteristics of social...

Bibliography: Swedberg, R. (2003). Principles of Economic Sociology, New Jersey: Princeton University Press, 158-159
Weber, M. (1920). The Protestant Ethic and the Spirit of Capitalism, Berlin: Klaus Lichtblau and Johannes Weiss
Waterman A.M.C. (1999). Religion and Economics: Normative Social Theory; Boston 1999: Unwin Hyman, London & Boston, 1930
Dean, M., Waterman, A. (1999). Religion and Economics: Normative Social Theory. Massachusetts: Kluwer Academic Publishers.
Swedberg, R. (2003). Principles of Economic Sociology, New Jersey: Princeton University Press, 283-284.
Smith A. (1776). An inquiry into the nature and causes of the wealth of nations, London: Adman Black and William Tait
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