Final answer:
The term 'external environment' refers to external factors impacting an organization's performance, including economic, socio-cultural, technological, legal, and global influences.
Step-by-step explanation:
The term ‘external environment’ refers to factors, forces, situations, and events outside the organization that affect its performance. This includes all the conditions that influence the business externally and are beyond its control, such as economic conditions, socio-cultural changes, technological advances, legal and governmental policies, and other global factors. The external environment plays a significant role in shaping organizational strategies and can lead to opportunities or threats for the business.
For instance, the introduction of stringent environmental regulations can significantly increase the production costs for a manufacturer. If such regulations are not implemented globally, they can impact the competitiveness of a firm on the international market. Similarly, the concept of cultural ecology suggests that there's an interplay between cultural practices and the physical environment, which can influence the organization's operations and decisions.
The interaction among biotic and abiotic factors in an ecosystem also highlights the complexity of environmental factors affecting organizational performance. This emphasizes the need for businesses to be adaptive and responsive to the various elements of their external environment.