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Defining the macro environment
The micro environment comprises all those organisations and individuals with which a business unit interacts. The interaction can be direct or indirect.
The macro environment is concerned with general forces in the environment which may one day affect the company in its micro-environment.
It is critical that the organisation monitors the macro environment. Macro environment conditions include:
Ageing of the population;
Increasing ethnic diversity of the population;
Rapid development of telecommunications.
Macro environmental analysis includes:
Identifying the key factors in the environment;
Forecasting what is likely to happen to each of these factors in the future;
Responding to environmental change.
Factors in the environment
There are a number of models for describing the general environmental factors. One of them is SLEPT
Richard Daft proposed an alternative arrangement of ten sectors in the environment:
Financial resource sector;
Human resources sector;
Economic conditions sector;
Raw materials sector.
SLEPT analysis is widely used for discussion of the general environment. The sector approach merges general with specific environmental conditions.
The physical environment is seen by many people as becoming an increasingly important element of an organisations’ macro environment. Environmentalism does not fit neatly into the micro and macro environmental elements.
Physical environmental conditions are important for organisations in the following ways:
Physical environment is a source of resource inputs;
The physical environment presents logistical problems/opportunities;
The physical environment is under the control of other organisations.
Social change and social trends
Social change involves changes in the nature, attitudes and habits of society. Social trends can be identified:
Rising standards of living;
Society’s attitude to business;
The workforce itself.
R. Jones classified the social factors as:
People at work;
Individuals and society.
Demography is the study of population and population trends, and the following demographic factors are important:
The rate of growth/decline in a national population;
Changes in the age distribution of the population;
The concentration of population into certain geographical areas.
Each society has a certain culture. Within each society, there are many culture groups.
The political environment
Economic forecasts ignore the implications of a change in government policy, irrespective of change in government. This limits their value:
At national level there is legislation;
At international level there is regional policies;
The government and supra-national institutions control much of the economy. The government is the nation’s largest supplier, employer, customer and investor. The slightest shift in political emphasis can alter a particular market overnight;
Nationalism: nations want to have national champions in particular industries.
Political change complicates the task of predicting future influences, and planning to meet them. Some political changes cannot easily be planned for.
A change in government significantly affects the political-legal environment, yet it can be very difficult to predict the outcome of an election. A change in government has implications for many areas of legislation affecting businesses and economic policy.
Social and political trends are correlated. Higgins has recommended some guidelines for strategic planning:
The top management of an organisation must identify key political factors and keep them at the forefront of their thinking when setting objectives and defining the ethical and social constraints on those objectives.
Monitor and forecast the the social and political environment of the organisation.
No direct, obvious quantitative use to which social and political trend forecasts can be put.
Social and political considerations are built into the corporate plan. This can be achieved as follows:
Concentrating on traditional planning using economic and technological environmental inputs.
Checking the corporate plan that emerges against the constraints of the social and political forecast.
Marketing managers must be aware of the legal implications of their actions. The quantity of law is increasing in most countries.
Changes in law however are predictable. A government will publish a paper discussing a proposed law change.
The organisation will also need to know about the increasing number of quasi-law which affects marketers. This is based on voluntary codes which do not have legal punishment but companies abide by them because it is in their interest.
The economic environment
the state of the economy affects all organisations, commercial and non-commercial. The rate of growth in the economy is a measure of the overall change in demand for goods and services. Growth is an indication of increases in demand.
Other economic influences
Regional or national level:
The rate of inflation;
Unemployment and the availability of manpower with appropriate skills;
Interest rates and the availability of credit;
The balance of trade and foreign exchange rates;
Taxation levels and incentives;
Rate of inflation, unemployment etc:
Comparative growth rates, inflation rates, interest rates and wage rates in other countries;
The extent of protectionist measures against imports;
Freedom of capital movement between different countries;
The development of international economic communities and the prospects of international trade agreements between countries;
The levels of corporate and personal taxation in different countries;
Relative exchange rates;
The state of the economy or forecast of the economy will influence the planning process for organisations which operate within it. In times of boom and increased demand and consumption, the overall planning problem will be to identify the demand. The opposite happens in times of recession, the emphasis will be on cost-effectiveness, continuing profitability, survival and competition. Economists contribute to the strategic planning process with economic forecasts and information about economic trends.
Economic trends: regional, national and international
Three levels of economic trend analysis need to be considered: regional trends, national trends and international trends.
The economic environment changes continually. World trade and national economies go through cycles of growth and recession. Interest rates and foreign exchange rates fluctuate. Some countries achieve substantial growth over a period of time whereas others have been in relative decline for a very long time. Predicted changes or developments in the economic environment are important for planning decisions.
The technical environment