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.