The macro environment of the company It can be defined as the total environment, which has a direct or indirect relationship with the operation of the company. The company is not alone in doing business. It is surrounded and operates in a larger context; this context is called macroenvironment.
It consists of all the forces that shape opportunities, but also pose a threat to the business. It is the set of external factors -such as economic, social, political, demographic, technological factors, etc.- that are uncontrollable in nature and affect the commercial decisions of a company.
All these aspects are external factors that are beyond the control of the business. Therefore, business units must adapt to these changes to survive and be successful in business. There is a close and continuous interaction between the business and its macro environment.
This interaction helps strengthen the company and use resources more effectively. Therefore, it is necessary to have a clear understanding of the concept of the company's macroenvironment and the nature of its various components..
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They are government activities and political conditions that can affect a company; for example, laws, regulations, tariffs and other trade barriers, wars and social unrest.
This includes the political system, government policies, and attitude towards the business community and unionism..
They are factors that affect the entire economy, not just a particular business. Interest rates, unemployment rates, currency exchange rates, consumer confidence, consumer discretionary income, consumer savings rates, recessions and depressions fall into this category..
The main factors that affect the economic environment are:
Gross domestic product, per capita income, availability of capital, foreign exchange reserves, growth of foreign trade, soundness of the capital market, etc..
Some of the most important are:
Regulations, standards and procedures that direct and control the country's industrial companies.
Regarding public spending, taxes and public debt.
All those activities that seek a supply without credit problems for the business.
Regulate the influx of foreign investment in various sectors to accelerate industrial development.
Increase exports and close the gap between exports and imports.
They are those related to society in general and the social relationships that affect the business. They include social movements, as well as changes in fashion and consumer preferences..
Consumers are increasingly aware of the quality of products. Consumption patterns and lifestyles of people belonging to different social and cultural structures vary significantly.
They are technological innovations that can benefit or harm a company. Some increase productivity and profit margins, such as software computing and automated production.
On the other hand, some technological innovations pose an existential threat to a business, such as streaming movies over the Internet, which challenges the movie rental business..
The pace of technological change is very fast. Therefore, to survive and grow in the market, a company must adopt technological changes with a certain frequency..
It refers to the size, density, distribution and growth rate of the population. For example, a country where the population rate is high and children make up a large part of the population, has a higher demand for baby products..
The demand of people in cities is different from that of people in rural areas. On the other hand, a high population rate indicates easy availability of labor. This encourages companies to use labor-intensive production techniques..
An understanding of the external operating environment, including political, economic, social and technological realms, is necessary to identify business opportunities and threats.
This analysis is called PEST, an acronym for Political, Economic, Social and Technological. Some variants of this method add other categories, such as legal and ecological environment.
The goal of PEST analysis is to identify opportunities and threats in a broader operating environment. Companies try to seize opportunities, while trying to protect themselves against potential threats.
Basically, PEST analysis guides strategic decision making. The steps to follow in this analysis are:
- Begin by defining environmental purposes in terms of their breadth (coverage), depth (level of detail), and forecast horizon (short, medium, or long term) based on the organization's current strategic plan, geographic scope, and product scope or service.
- Identify the key events and trends within each segment. How have they gotten involved? What is the rate of change? How do they impact the organization (negatively, positively or neutrally)? Provide evidence.
- Understand how the various trends are related to each other.
- Identify the trends that are likely to have the greatest impact on the organization.
- Forecast the future direction of these trends, including projections or multiple scenarios.
- Derive implications, focusing on structural forces within the industry that will affect future strategies.
Here are examples of political, economic, social, technological and legal factors that provide a description of the macroenvironment of a company.
The tobacco industry is a classic example. Since the 1950s cigarette companies have had to place warning labels on their products and have lost the right to advertise on television..
Smokers have fewer and fewer places where they can legally smoke. The percentage of Americans who smoke has decreased by more than half, with a corresponding effect on industry revenue..
With a strong economy it becomes quite easy to sell luxury and branded items. During recessions, automakers see a decline in their profit margin; to stay in the market they have to lower their prices and offer low interest rates for financing.
The demand for prepared food has increased with the increase in the number of working women. This is an opportunity for some organizations, such as fast food restaurants.
In another case, the increase in single people in the society is a problem for the furniture manufacturer, since many people do not buy furniture until they are married..
Shipping requests to Federal Express decreased with the invention of the fax machine.
Also, record stores have faded due to lack of sales, as people are more interested in downloading songs from the Internet..
Some people have sued McDonald's, blaming the McDonald's hamburger for their obesity.
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