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What Is a Macro Environment?

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  • Written By: Osmand Vitez
  • Edited By: Kristen Osborne
  • Last Modified Date: 25 August 2014
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A macro environment comprises the external factors that can influence a business. These factors are often out of the control or management ability of a company. Factors typically include economic, demographic, political, and technological forces in business. Business owners and managers often spend copious amount of time and effort to assess the overall economic environment in order to determine the number and strength of each factor. Strategies and performance reviews can help owners and managers use the macro environment factors to create a competitive advantage for their respective companies.

General economic factors in the macro environment can include supply and demand, number of competitors in the market, availability of economic resources, and efficient production methods employed by companies. Each of these factors impact a company’s production output and potential profit margins when selling goods and services to consumers. Free market economies often have more competition because more individuals and businesses can avail themselves to the raw materials, labor, and facilities in the market.

Demographics relates to information about the consumers in an economic market. This information includes statistics on consumer age, sex, race, religion, education, household size, marital status, and other similar information. Companies use this information to create products and marketing strategies to meet the needs of each consumer in the macro environment. This information also plays a role into general economic factors. Companies must be able to determine consumer supply and demand by measuring consumer income and the desire to spend money on various goods and services.

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Political forces typically represent the government agencies and policies responsible for governing a nation’s economy. These policies can relate to business taxes, interest rate regarding loans and availability of currency. Companies often make business decisions based on the tax liability or government involvement in a business industry or sector. Creating business divisions or departments in these areas can decrease a company’s profits and subject it to more compliance laws and regulations, which often increases operating costs.

Technological changes in the last few decades have transformed the way companies do business in the macro environment. Websites, Internet-based software, and fulfillment centers allow companies to sell goods and services in national and international economic markets. Companies can also improve production output and lower costs through technological additions to their company. Companies who implement business technology can force competitors in the marketplace to adjust their practices to meet new product improvements. Developing an in-house custom software package or application can also shift the macro environment if other companies cannot replicate this technology.

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TrogJoe19
Post 4

I think that macro environment issues can also be environmental, and will be very environmental, if we do not shift the harmful practices of businesses and industries in relation to the earth's atmosphere. These macro issues may include natural disasters brought on by negligence on the part of large companies which pollute the earth.

JavaGhoul
Post 3

Micro environment issues include working environment, structure, and mission, as well as many smaller details that address small details. The Japanese business model of kaizen is a helpful way to get everyone's input on many of these details and make the whole structure function better as a result of new ideas and methods.

Armas1313
Post 2

@BigBloom

I think that most macro issues are actually caused by us these days, rather than natural phenomena. This is because they are often political and economic. We need to establish a solid set of practices to avoid the constant cycle of economic highs and subsequent depression. In the past ten years, we didn't really know what hit us. Now that economic and political theory is at a place where it can be recorded and implemented to an unprecedented extent, it is to be hoped that those who come after us will be more easily enabled to avoid these mistakes we have made.

BigBloom
Post 1

The Black Swan Theory is effective in addressing macro issues. This theory is used in operations and collective psychology to refer to the fact that most large scale issues are completely unpredictable and can come out of nowhere to cause mass devastation. In the older days, these issues occurred more frequently, including famine, disease, and war. Today, we have made it so that random macro issues occur less frequently, but they are still there.

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