Name: Abdelrahman Hany El-Sayed Nawar

ID: 231903746
Dr. Hossam Keshta

Subject:
1. What is a macro environment?
2. Understanding the macro environment
3. Factor of the macro environment
4. What are the differences between micro and
macro environment
5. What is macro environment analysis?
6. Example of a macro environment
What Is a Macro Environment?
Macro environment is the remote environment of the firm, i.e the external
environment in which it exists. As a rule this environment is not controllable by the
firm, it is to huge and to unpredictable to control.
Hence the success of the company, to a large extent will depend on the company’s
ability to adapt and react to the changes in the macro environment.
Primarily the company has to closely monitor the various elements of macro
environment. This will help them understand the dynamic nature of the macro
environment. It also helps them adapt to the constant changes in the environment.

Understanding the Macro Environment

The macro-environment refers to how the macroeconomic conditions in which a
company or sector operates influence its performance. Macro-economics deals
with aggregate production, spending, and the price level in an economy as opposed
to individual industries and markets.
The amount of the macro environment's influence depends on how much of a
company's business is dependent on the health of the overall economy. Cyclical
industries are heavily influenced by the macro environment, while basic staple
industries are less influenced. Industries that are highly dependent on credit to
finance purchases and business investments are strongly influenced by changes in
interest rates and global financial markets.
The macro-environment can also directly affect consumers’ ability and willingness
to spend. Luxury goods industries and big-ticket consumer goods can be highly
impacted by fluctuations in consumer spending. Consumers’ reactions to the broad
macro-environment are closely monitored by businesses and economists as a
gauge for an economy’s health.
Factors of the Macro Environment
Analyzing the macro environment is an important part of strategic management.
Business analysts often conduct a PEEST (political, economic, ecology & physical,
socio-cultural, and technological) analysis to identify macro-economic factors that
currently affect or in the future may affect business. Some of the key factors
composing the macro environment include the following:

1] Socio-Cultural Environment
The social values and culture of an environment play a huge role in the functioning
of the company. So when the social environment changes it can have a direct or
indirect effect on the company.
For example in recent time society has seen a shift, and people no longer retire at
60. They work five to ten years more after sixty. So this has had a huge impact on
companies.
Cultural forces also have a significant impact on the success of a company in the
long run. Especially in a country like India where the cultural influences are strong
and complicated.
2] Technological Environment
In the times we live in, technology is constantly changing it is important that
the business can keep up with the changes. Technology does not only confine to
computers and IT services. It includes products, manufacturing processes,
techniques etc.
The technological developments can be a huge advantage for a firm. But at the
same time of the technology used by the firm becomes obsolete due to such
developments, then it can also be a threat to the firm.

3] Economic Conditions of the Market

The economic conditions of the economy and the performance of a business have a
very close relationship. A business depends on the economy for all its inputs and
factors of production. It also sells its products and services in the same market.
A market is never in one stable condition. It is always in a flux. If there is a boom in
the market then all businesses will benefit from the favorable conditions. The
income will be higher, rate of interests will be low, new capital will be available etc.
Also, the opposite is also true in case of a bust.

4] Ecology and Physical Environment

Ecology and physical environment play a huge part in the performance of any
business. This is especially true for manufacturing/production companies. Let us
take the example for global warming.
This change in our physical environment has started affecting the rainfall in certain
regions. This in turn may affect the crops and cause a shortage in raw materials
such as jute, cotton, rubber etc.
Weather conditions, topographical elements, geographical location, climate
changes and other ecological factors are a very important element in the macro
environment of a business.
5] Political and Legal Factors
The political environment of a country is the combination of three branches of the
government – legislature, executive and the judiciary. The political environment of a
country will mainly depend on the political beliefs and ideologies of the party in
power at the state and central levels.
The legal environment refers to the rules, laws, regulations, and judgments etc. that
affect the functioning of a business. And this will also include the taxation laws and
the Budget for the given year. So stable legal and political government is really
important if the business and the economy as a whole has to succeed.

What Are the Differences Between a Micro

and Macro Environment?
The micro environment refers to the factors within a company that impact its ability
to do business. Micro environmental factors are specific to a company and can
influence the operation of a company and management's ability to meet the goals of
the business. Examples of these factors include the company's suppliers, resellers,
customers, and competition.

The micro environment is specific to a business or the immediate location or sector

in which it operates. In contrast, the macro environment refers to broader factors
that can affect a business. Examples of these factors include demographic,
ecological, political, economic, socio-cultural, and technological factors.
What Is Macro Environment Analysis?
Macro environment analysis is part of a company's strategic management that
enables it to analyze and identify potential opportunities and hazards that might
impact the business. The goal is to prepare management in advance with
information that assists them in making operational decisions.

Some companies will employ analysts trained to evaluate macro-environmental

factors and provide recommendations based on their research. These analysts will
review broad macro-environmental forces related to such factors as politics, the
economy, demographics, and technology.

Example of a Macro Environment

Political factors are an example of a macro-environmental force that can impact a
business. These include laws or government regulations governing companies or
the industry in which they operate.

For example, a government can enact tariffs that increase the cost of an imported
good a company needs to manufacture its products. Rather than paying the tariff,
the company can look for a domestic source for these goods that is cheaper than
the imported good. If they can't find a domestic source, they will have to purchase
the more expensive imported goods. In many cases, the company will need to pass
the additional cost on to the consumer in the form of increased product prices. This
could reduce the company's revenue if sales decrease because of the company's
higher prices.