Macro Environment
The macro environment of business belongs to the environment made by the factors at the national and international level the business organization cannot have control over these factors but these factors influence the business a lot. Hence every business organization needs to study the macro environment and according to the favourability of these macro-environmental factors, the business organization formulate the strategy and run the business.
Following are the various macro-environmental factors which influence the business But are beyond the control of the business organization. Hence these factors belong to the external environment of the company.
Economic Factors
Economic factors consist of inflation rate fiscal policy monetary policy which isn’t taken by trade blocs or intergovernmental agreements Exchange rate unemployment rate and economic growth influence every president’s organization in a different way but the business cannot make changes or influences in these factors business organization formulate this strategy according to these factors influences on business.
Examples
- The inflation rate when the purchasing power of the people decreases influences the cells of any business organization hence business organizations need to make the products or services considering the affordability of the people or customers.
- The monetary policy of the government can make changes to increase or reduce the liquidity in the market which can also influence the business organizations. Monetary policy sometimes may be in favor of business or sometimes may not be in pure of business that depends upon the business type capital and liquidity required for the business. Hence business organizations need to make changes or improvements according to the monetary policy.
Political and Legal Factors
The political environment can make the portable environment of business or may not make the favorable environment of the business that depends upon the various utmost regulations government schemes policies and strategies regarding the business. Legal factors can bind the business organizations with their roles and regulations which are in favor or sometimes not in favor. The business organization needs to formulate its strategies and policies and execute them according to the political environment and legal factors so that it can survive in the market and grow without any threat.
Example
- The tax policy of the government towards a specific product can influence the business of that product a lot hence the business organization needs to understand study and formulate the strategies and policies according to the government policy so that they can survive in the business first off
- The government may provide subsidies to the Farmers who stabilize the prizes in the market.
- Trade block or intergovernmental agreements such as bricks European Union permits the member countries to torrent economic activities smoothly without any restrictions or barriers.
- Undeveloped countries or less developed countries have eliminated from the tariff applied on importing or exporting the goods across the globe. Hence the businesses in those countries can easily export their goods to any country without any customs duty or taxes first as a result they can sell their goods more across the globe and export more. Bangladesh is an example of exporting textile products more than India due to the tax-free exporting to any country Bangladesh.
Socio-Cultural Factors
Social and cultural factors are beyond the control of any business organization but these factors play a vital role in the execution of the business organization. Hence any business organization needs to study socio-cultural factors and then formulate strategies and policies of the business organizations. These factors belong to the external environment so these are influencing the business but cannot make changes. Business organizations are offering products and services that meet the customer’s expectations. Cultural factors required to be considered while offering the products or services that meet the customer’s expectations please stop.
Example
White cloth can be sold more in the South India Region whereas less in other regions of the country. The culture of the South Indians made them attracted to white cloth.
Muhurt’s Purchasing of costly products enables businesses to offer different offers during the festivals and boost sales.
Technological Factors
Advancement in technology and innovation in the existing technology enables business organizations to offer products with additional features. Competition is becoming tougher. To survive in such a competitive market businesses need to adopt innovative technology or do research and development to provide
Example
Touchscreen technology in mobile phones attracted all the customers to purchase the mobile phone with this technology. The companies that adopted this technology and launched a right of mobile phones in the market captured the largest part of the market whereas those companies such as Nokia had not adopted the touch screen technology due to which they lost their market. At the same time, Samsung adopted touchscreen technology and captured the largest part of the market by offering a variety of mobile phones in the market.
Global Factors
Global factors at the national level or international level influence business but the business cannot take control of these factors but can formulate strategies according to these factors study. Following are the various global factors classifications pulsed
Economic factors
Rate of unemployment
Policies regarding trade and tariff
Exchange rates and currency fluctuation
Implication and interest rates
Growth of economy and recession trends
Political and legal factors
Policies rules and regulations framed by the government
Intergovernmental agreements Regarding trade trade
Tax-related policies
Laws regarding intellectual property
Technological Factors
Innovations and advancements in technology
Automation and artificial intelligence
Cybersecurity threats
Research and development trends
Global connectivity and digital transformation
Environmental factors
Global warming and climate change
Green energy revolution
Natural disasters and their impact on businesses
Environmental regulations
Micro Environment
Microenvironmental factors are the factors that are beyond the control of a business organization but very close. These factors include the customers, suppliers, competitors, intermediaries, public(Media)
Customers play a vital role in the execution of business organizations. The organization can influence the customer but can not control them completely hence the customer factor belongs to the external business environment.
Suppliers
Suppliers supply the raw materials or spare parts to the business organization to fulfill the need for input to manufacture or produce the products. Sufficient quantity of raw material or spare parts or input material in the essential need of any manufacturing or production company. A consistent supply of the required quantity is needed to make a healthy relationship with the supplier.
Organizations can make good relationships with suppliers but can not control the suppliers. Hence supplier factors however very close but beyond the control and so belong to the external business environment
Competitors
The competitor’s business execution or activities influence our business but can not make changes in competitors’ policies, strategies, and ways of business. The organization can only make changes or formulate business strategies considering the competitor’s study. Hence competitor analysis is important for any business organization.
Intermediaries
Intermediaries such as distributors, retailers, and many players play important roles in the growth of the business. The market and revenue generation can be significantly done by intermediaries.
Media
Media is the external factor that significantly influences the promotion of business organizations’ products or services. It can be positive or negative depending upon the way and the situation. Usually, the business organization promotes the brand through media more effectively than any other medium. The influence of media in communicating the product and service features and all the information more effectively than any other medium.
Example
Cadbury’s fault in the chocolate spread immediately in society influences drastic reduction in sales.
Social media plays an effective role in promoting the products and services of any business organization. Social media have two sides, one which is positive and involved in promoting the good features and qualities of products and services. The positive influence of social media is the effective positioning of products’ image in the market. Whereas on the other side little fault in the product or services can immediately spread across the mass people through social media.