MACROENVIRONMENT OF THE COMPANY: FACTORS, ANALYSIS AND EXAMPLE - DUDAS - 2025

The macroenvironment of the company can be defined as the total environment, which has a direct or indirect relationship with the operation of the company. The company is not doing business alone. 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 business 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.

Factors

Political factors

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.

Economic factors

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 saving rates, recessions and depressions fall into this category.

The main factors that affect the economic environment are:

Economic conditions of the nation

Gross domestic product, per capita income, availability of capital, foreign exchange reserves, growth in foreign trade, sound capital market, etc.

Economic politics

Some of the most important are:

Industrial policy

Regulations, rules and procedures that direct and control the industrial companies of the country.

Fiscal policy

With respect to public spending, taxes and public debt.

Monetary politics

All those activities that seek a supply without credit problems for the business.

Foreign investment policy

Regulate the influx of foreign investment in various sectors to accelerate industrial development.

Import-export policy

Increase exports and close the gap between exports and imports.

Social factors

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.

Technological factors

They are technological innovations that can benefit or harm a company. Some increase productivity and profit margins, such as computer software 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.

Demographic factors

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.

Analysis

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 take advantage of 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 the environmental purposes in terms of their breadth (coverage), depth (level of detail) and forecast horizon (short, medium or long term) based on the current strategic plan of the organization, the geographical scope and the scope of the product 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 the structural forces within the industry that will affect future strategies.

Examples

Here are examples of political, economic, social, technological and legal factors that provide a description of the macroenvironment of a company.

Example of political factors

The tobacco industry is a classic example. Since the 1950s cigarette companies have had to put 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.

Example of economic factors

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.

Example of social factors

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 rise of single people in society is a problem for the furniture manufacturer, since many people do not buy furniture until they are married.

Example of technological factors

Requests for delivery to Federal Express decreased with the invention of the fax machine.

Also, record stores have vanished for lack of sales, as people are more interested in downloading songs from the Internet.

Example of legal factors

Some people have sued McDonald's, blaming the McDonald's hamburger for their obesity.

References

1. Shawn Grimsley (2018). What is Business Environment? - Definition & Factors. Study.com. Taken from: study.com.
2. Business Around Us (2018). BUSINESS ENVIRONMENT Module 3. Taken from: download.nos.org.
3. Maximilian Claessens (2015). THE MACRO ENVIRONMENT - SIX FORCES IN THE ENVIRONMENT OF A BUSINESS. Marketing-Insider. Taken from: marketing-insider.eu.
4. Oxford College of Marketing (2018). The Impact Of Micro and Macro Environment Factors on Marketing. Taken from: blog.oxfordcollegeofmarketing.com.
5. Brock University (2018). Analyzing the Macro Environment. External Analysis Research. Taken from: researchguides.library.brocku.ca.