Question

Describe a firm's macro environment a and how managers use PESTEL to understand it?

Answer 1

The macro environment of a business includes factors that can influence the organisation, but are normally beyond its direct control. These components are features of the environment at large and are considerations that must be tackled by all firms, regardless of the field of which they are or the type of organisation they are.

Political Factors- Taxation, tariffs, trade deals, labour laws, and environmental regulations are political variables in the macro setting. Note that variables are not characterised in PESTEL as possibilities or risks. They are essentially items that an organisation, based on their own understanding or expertise, can take advantage of or treat as issues.

Economic Factors-The status of the national and global economies is influenced by both companies. The increased interdependence of the economies of each nation has made it more difficult to determine the economic conditions in the macro environment of an organisation. Companies evaluate economic indicators in order to make decisions about entering or leaving regional markets, investing in growth, and recruiting or laying off workers

Socio Cultural Factors- Sociocultural factors are most likely the largest group of macro environmental factors that an observer could analyse. This large range includes everything from changing domestic demographics to trends in fashion and many topics in between. Demographics, a branch of this definition, contains information about wealth, levels of schooling, age classes, and a population's ethnic and racial makeup. All these realities raise obstacles and opportunities in the business. Through researching the desires and expectations of demographic groups, such as working mothers (they might require day-care facilities but not watch daytime television), college students (who may be interested in inexpensive textbooks but could not afford to purchase new cars), or the elderly (who would be willing to pay for lawn-mowing facilities but might not be willing to buy new cars), marketers may tailor goods to particular market segments

Technological Factors- The emergence of the Internet may be the last century's most transformative technological change. Because of the quick, low-cost connectivity the Internet offers, the globe has become more interconnected and interdependent. Customer support agents in India can serve Kansas consumers because technology has progressed to the extent where the support company in India can automatically access the account records of the customer. Through businesses such as eBay, Alibaba, and Etsy, merchants around the world can meet consumers everywhere, and through PayPal, they can get paid, regardless of the currency of their consumers. The Internet has helped Jeff Bezos, who in 1994 began an online bookselling business called Amazon, to change the way customers shop for merchandise.

Envoromemmtal Factors- The physical world, which provides natural resources for processing and production of oil, has always been a core component of human enterprise activity. When services become scarcer and more competitive, companies are more impacted every day by environmental factors. Companies are designing technologies to run more efficiently and consume less capital. In the 21st century , political pressure on companies to reduce their effects on the natural world has grown internationally and significantly. London, Barcelona and Paris revealed in 2017 their plans to ban internal combustion engine vehicles within the next few decades to tackle air pollution problems.

Legal Factors- Judicial considerations also overlap with political factors in the external world, since government agencies pass legislation. This does not mean that, however, the same problems are found by the groups. While labour legislation and environmental policies have strong political ties, business results will be influenced by other legal considerations. In the streaming media industry , for instance, copyright costs are a major expense for businesses. For the right to broadcast their content, Netflix spends billions of dollars per year to movie and television studios. Netflix may acknowledge, in addition to the legal obligation to pay the studios, that viewers may find unauthorised ways to see the films they wish to see, making them less likely to pay to subscribe to Netflix. Intellectual property rights and trademarks in the legal realm are big challenges.