Macro environment

Macro environment

1. Environments

   • Macro = external factors that affect the overall environment that the business operates in
   • Industry = external factors affecting the competitiveness of the industry the business operates in
   • Internal = org's own internal resources and capabilities

2. PESTEL analysis

   • Can be used to analyse macro environments as part of strategic planning to identify potential opportunities and threats facing the industry
   • Political - taxation/gov spending/foreign trade regs
     • Economic - economic growth/exchange or interest rates/inflation
       • Social/demographic - attitudes, tastes, fashions/population demographics/income distrubtion
         • Technological - new products/improved production methods/rate of obselescence
           • Ecological - sustainability/pollution/climate change/natural capital impact/'green finance' issues
             • Legal - industry regs/competition legislation/employment law

3. Porter's diamond

   • Can be used to explain why some nations have a competitive advantage in certain industries
     • • Factor conditions - supply side - availability of the factors of production (resources needed to operate) - these include human resources, physical resources, knowledge, capital and infrastructure - e.g french wine industry benefits from being able to grow good grapes
         • Demand conditions - demanding local consumers force firms to become more innovative - trend setting local consumers help local producers to anticipate future global trends - e.g german drivers demanded powerful cars from german manufacturers
           • Related and supporting industries - proximity of relating and supporting industries leads to easy access to components with reduced lead times and carriage costs, encourages knowledge sharing which increases innovation - e.g finance sector in the UK is aided by large accountancy and legal firms
             • Strategy, structure and rivalry - two key possible advantages - strong domestic rivalry forces local firms to become more efficient to survive - strategies or structures that have become prevalent in a particular nation may give advantages in particular industries - e.g flat decentralised org structures are popular in japan and are believed to encourage innovation

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