Macro environment factors are external forces or components that may affect the running of a business or organization. Despite being largely beyond the control of a business, macro environment factors often require changes and shifts in operating, management, production, and marketing. There are many different types of macro environment factors, including political, economic, social, and technological concerns — also known as “PEST” — factors. Some firms also include environmental and legal concerns in their definition.
Political factors can have a profound effect on how a business is operated and managed. Tax policy, government-issued safety regulations, the availability of government contracts, and even shifts in the controlling political party may all change the macro environment for an organization. International laws, such as trade agreements and tariffs, may affect the supply and demand chains and available markets for many different businesses as well.
A market boom, recession, or growing inflation problem can all change the way a business plans for the future and operates in the present. Economic macro environment factors are often difficult to assess, since economic forecasts and analyses vary widely between experts. Unemployment levels, comparative foreign exchange rates, and the state of the global economy can all help or hurt a business' ability to get components it needs and maintain stable profit levels.
The mood and demographics of the population make up the social area of macro environment factors. Many sociologists have noted that the generation that came of age with the turn of the 21st century places an emphasis on self-guided jobs with room for creativity, rather than traditional job structures that focus on performing a specific set of tasks in a proscribed manner. This social shift may cause organizations to redefine job descriptions and adapt the model of the workplace to attract young professionals. Social trends, such as a growing preference for on-demand mobile media devices over traditional movie theaters and televisions, can also influence which products a company manufacturers and where it chooses to spend advertising dollars.
Technological macro environment factors can influence how a company does business. A new type of machinery, advanced computer chip, or product created through research and development can help a company stay modernized and ahead of the market curve. Keeping up with technological advances can be something of a marathon and a gamble; smart business owners must be able to accurately identify which new developments will be truly useful, and which are merely shiny objects with no real ability to improve business.
Environmental concerns are quite important to businesses with a view toward long-term operations. In the short-term, environmental issues such as natural disasters can disrupt production and supply operations, or even destroy company assets. Programs such as environmental risk assessment can help companies prepare to handle many of the most likely short-term environmental crises. In the long view, however, businesses may have an interest in ensuring that their supply chains are not destroyed by unsustainable practices, and that their operations are not endangered by the threat of global warming and environmental degradation.
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GiraffeEars
Post 3 |
@Glasshouse- There are events that even PESTEL Framework will not protect against. Black swan incidents are completely unpredictable and cannot be foreseen. These events share four common characteristics, and are almost always devastating in nature. The four factors of a black swan incident are: 1) They are random 2) The incidences cannot be predicted with empirical probabilities 3) They catch people by surprise 4) People often have hindsight bias once these events occur. These events cannot be predicted or mitigated at the organizational level. The only protections against these types of incidents would be institutional safeguards and robustness put in place within a nation. A company may survive a black swan incident in a nation like the United States or Japan, but would be hard pressed to do the same in a less developed country where the geopolitical climate is more risky. |
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Glasshouse
Post 2 |
@cougars- Although you cannot always prepare for environmental problems, you can minimize their damage. Businesses with god leadership will recognize threats through analysis. Using a PESTEL or STEER (Socio-cultural, Technical, economic, ecological, and regulatory) analysis can help a business identify how each of these factors would affect their price, product, production and place in the market. Once a business can analyze these factors, they can implement strategies to mitigate these risks. For example, establishing multiple resource streams so production is not completely shut down in case of a disaster. The trick is to balance these risks and redundancies so that a business is maximizing profit for the least risk. The best way for a business to manage these risks is not to let them catch it off guard. |
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cougars
Post 1 |
How does a company prepare for macro environmental factors? Is there any way to hedge against these risks so they have less of an impact on the company? Incidents like natural disasters cannot be predicted, making them very hard to plan for. Is the only option to rely on insurance and hope that if a disaster occurs, it will not be catastrophic to a business? |
