AMANTE,EMMANUEL M.

MBA 206

I. INTRODUCTION

The company is not alone in its business environment. It is surrounded by and operates in a larger context. In
every business there are factors to be considered. Making decisions comes along the way especially in
marketing aspect of an organization. Marketers must be aware on what was the implication of these factors for
the survival of the business. One of the factors to understand and consider was the macro environment. Macro
environment analysis, or external analysis, is the first step an organization takes when analyzing the business
environment to create its strategy. Organizations conduct macro-environmental analyzes to identify
opportunities and threats that are uncontrollable within the industry.

II. Definition of terms

Macro-Environment- set of external conditions that affect a business' development efforts either positively or
negatively.

Economic-social science concerned with the production, distribution, and consumption of goods and services

Legal forces- Forces in the marketing environment that are shaped by government laws affecting business.

Demographic-the statistical characteristics of human populations (such as age or income) used especially to identify

markets a change

Technological-resulting from improvements in technical processes that increase productivity of machines and eliminate
manual operations or operations done by older machines

Automation- the technique of making an apparatus, a process, or a system operate automatically

Socio-Cultural-term related to social and cultural factors, which means common traditions, habits, patterns and beliefs
present in a population group

III. Report Content

Macro-environment factors

Every business is affected by a myriad of factors. In other words, an organization as such can never exist and
operate “in a vacuum”. It is a part of a larger entity known as the business environment. In broad terms, this
environment can be divided into two categories. The first one is the micro-environment. This category
influences the functionality of a particular business itself. The latter one is the macro-environment which affects
the operation of all existing business entities out there.
The two categories may be different, but both are essential to understand in order to truly see your business in
its full context. You have to be knowledgeable about the business environment in order to be able to track and
comprehend how various factors affect your company.

A macro environment is a set of external conditions that affect a business’ development efforts either positively
or negatively. These elements are considered uncontrollable and they have an impact in the company’s overall
performance.

In the field of marketing, the macro environment is the set of external factors and forces, not controlled by the
company, that influence its development

Economic factors

Basically, the very environment of the economy can have an effect on two essential aspects – your company’s
levels of production and the decision-making process of your customers.

The Economic forces relate to factors that affect consumer purchasing power and spending patterns. For
instance, a company should never start exporting to a country before having examined how much people will be
able to spend. Important criteria are: GDP, GDP real growth rate, GNI, Import Duty rate and sales tax/ VAT,
Unemployment, Inflation, Disposable personal income, and Spending patterns

Some examples of economic factors affecting business:

● Interest rates

▪ the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual
percentage of the loan outstanding
▪ Interest rates affect the decisions you make with money. Some of these are obvious – think about how
much more money you would stick in your savings account if it paid 15% interest instead of 0.5%. How
much less money would you put into stocks or your 401(k) if you could get 15% in a simple bank
account? On the flip side, you might take out a new credit card at 3%, but you probably wouldn't borrow
at 30% unless you absolutely needed to.
▪ There are less obvious impacts, too. For entrepreneurs and bankers, interest rates affect calculations
about future profitability. For instance, it's easy to enter the capital markets and finance a new project
when interest rates are at historic lows, but the same project might not be a money maker long term if
expected interest payments double. This, in turn, affects which products and services are offered in the
economy, which jobs become available and how investments are structured.

● Exchange rates- An exchange rate is the value of a nation's currency in terms of the currency of another
nation or economic zone.
● Recession- a recession is a business cycle contraction when there is a general decline in economic activity.
Recessions generally occur when there is a widespread drop in spending
● Inflation- Inflation is the decline of purchasing power of a given currency over time. ... The rise in the
general level of prices, often expressed as a percentage, means that a unit of currency effectively buys less
than it did in prior periods.
● Taxes- a compulsory contribution to state revenue, levied by the government on workers' income and
business profits, or added to the cost of some goods, services, and transactions
● Demand / Supply- supply and demand, in economics, relationship between the quantity of a commodity that
producers wish to sell at various prices and the quantity that consumers wish to buy. It is the main model of
price determination used in economic theory
Demographic forces

Each and every chunk of the market is affected by universal demographic forces. These are age, education level,
cultural characteristics, country and region, lifestyle, and so on.

Demographic forces relate to people. The name refers to the term Demography. The latter refers to the study of
human populations. This includes size, density, age, gender, occupation and other statistics. Why are people
important? Because, on the whole, their needs is the reason for businesses to exist. In other words, people are
the driving force for the development of markets. The large and diverse demographics both offer opportunities
but also challenges for businesses. Especially in times of rapid world population growth, and overall
demographic changes, the study of people is crucial for marketers. The reason is that changing demographics
mean changing markets. Further, changing markets mean a need for adjusted marketing strategies.

The crucial variables include:

● Income variables influence business- Income is one demographic variable that can affect businesses. A
company's products usually appeal to certain income groups. For example, premium products such as
high-end woman's clothing usually appeal to women with higher incomes. Conversely, people with
comparatively lower incomes are more sensitive to price and, therefore, may prefer purchasing discount
products.
● People with lower incomes have less disposable income. Value is a major determinant in the products
they purchase. Hence, a company may best reach lower-income people through discount retailers and
wholesalers and attract higher-income buyers in specialty retail shops.
● Age variables that affect business- Age is another demographic element that impacts businesses. A
company's products and services are more likely to appeal to certain age groups. Younger people under
35 are often the first consumers to purchase high-tech products like cell phones, electronic books and
video games. The millennial generation is increasing buying power and growing market share while
baby boomers remain a large and viable group as well.
● Geographic Region Variables- People's buying preferences also vary by geographic region, which is
another type of demographic. Those who meet buyers' needs and requirements in certain geographic
regions can earn higher sales and profits. For example, people often prefer certain food and drink flavors
in certain markets.
● Companies that sell the flavors consumers desire in various areas are more likely to profit. Those who do
not offer these flavors may risk losing customers to other competitors
● Education Level as a Variable- Buyers' education levels also impact the types of purchases they make.
Higher levels of education are correlated with higher household incomes, and this higher income drives
many educated buyers' purchasing choices. One example is higher earning households' greater likelihood
to buy more nutritionally dense groceries. Another is educated parents' greater likelihood to invest in
their children's educations through tutoring, standardized test prep and financial planning for college

Technological factors

These factors are related to skills and ability that are implemented into production, as well as all the materials
and technology that a particular product requires to be made. They are essential and can have a big impact on
how well your business is running. It boils down to even the most basic factors, such as what kind of
maintenance trolleys you use in order to preserve your tools and equipment for as long as you possibly can.
Technological forces form a crucial influence in the Macro Environment. They relate to factors that create new
technologies and thereby create new product and market opportunities.

A technological force everybody can think of nowadays is the development of wireless communication
techniques, smartphones, tablets and so further. This may mean the emerge of opportunities for a business, but
watch out: every new technology replaces an older one. Thus, marketers must watch the technological
environment closely and adapt in order to keep up. Otherwise, the products will soon be outdated, and the
company will miss new product and market opportunities.

Some of the most common technological factors are:

● Automation
● Internet connectivity
● 3D technology
● Speed/power of computer calculation
● Engine performance and efficiency
● Security in terms of cryptography

Natural and physical forces

Ecological, or natural forces in the Macro Environment are important since they are about the natural resources
which are needed as inputs by marketers or which are affected by their marketing activities. Also,
environmental concerns have grown strongly in recent years, which makes the ecological force a crucial factor
to consider. For instance, world, air and water pollution are headlines every marketer should be aware of. In
other words, you should keep track of the trends in the ecological environment.
Important trends in the ecological environment are the growing shortage of raw materials and the care for
renewable resources. In addition, increased pollution, but also increased intervention of government in natural
resource management is an issue.

Because of all these concerns and the increased involvement of society in ecological issues, companies more
than ever before need to consider and implement environmental sustainability. This means that they should
contribute to supporting the environment, for instance by using renewable energy sources. Thereby, businesses
do not only support the maintenance of a green planet, but also respond to consumer demands for
environmentally friendly and responsible products.

Every business must also take into account the very planet and its resources. There are those that can be
renewed, such as forests and agricultural products, and those that cannot, such as coal, minerals, oil, and the
like. Both are strongly related to production. So, natural and physical forces can be:

● Climate change
● Pollution
● Weather
● Availability of both non-renewable and renewable resources
● Laws that regulate the environment
● Survival of particular biological species

Political and legal forces

Every business is limited by the political environment. This involves laws, government agencies and pressure
groups. These influence and restrict organisations and individuals in a society. Therefore, marketing decisions
are strongly influenced and affected by developments in the political environment.

Before entering a new market in a foreign country, the company should know everything about the legal and
political environment. How will the legislation affect the business? What rules does it need to obey? What laws
may limit the company’s ability to be successful? For example, laws covering issues such as environmental
protection, product safety regulations, competition, pricing etc. might require the firm to adapt certain aspects
and strategies to the new market.

As we have seen, the company is surrounded by a complex environment. The Macro Environment consists of a
large variety of different forces. All of these may shape opportunities for the company, but could also pose
threats. Therefore, it is of critical importance that marketers understand and have an eye on development in the
Macro Environment, to make their business grow in the long term.

The market develops according to the political and legal environment in various areas. This means that every
business needs to be up to date with such forces worldwide in order to be able to make the right decisions.

This generally includes legal factors such as:

● Copyright law
● Employment law
● Fraud law
● Discrimination law
● Health and Safety law
● Import/Export law

Social and cultural forces

The Socio-Cultural forces link to factors that affect society’s basic values, preferences and behavior. The basis
for these factors is formed by the fact that people are part of a society and cultural group that shape their beliefs
and values. Many cultural blunders occur due to the failure of businesses in understanding foreign cultures. For
instance, symbols may carry a negative meaning in another culture

Finally, it is crucial to understand that the product that you bring to the market can have a strong impact on
society. For example, your production needs to eliminate every practice that is hazardous to society, and show
that it is socially responsible. There is a wide variety of social and cultural factors, some of them being:

● Purchasing habits
● Level of education
● Religion and beliefs
● Consciousness about health issues
● Social classes
● Structure and size of a family
● Growth rate of the population
● Emigration and immigration rates
● Life expectancy rates and age distribution
● Different lifestyles

IV. Questions
 ● What is the significance of understanding macro environment for the marketers?
● What are the macro-environment factors?
● How does macro environment affects businesses?
● In line with the topic, in the aspect of geographical location of the Philippines what are the
things to be considered by marketers? Site example2

References

www.investopedia.com/articles/investing/112615/why-interest-rates-affect-everyone.asp

The Demographic Variables That Affect a Business,ByRick SuttleUpdated March 20, 2019

THE MACRO ENVIRONMENT – SIX FORCES IN THE ENVIRONMENT OF A BUSINESS written

by Maximilian Claessens 26th February 2015