Before creating a business or entering a market, it is essential to analyze its macro-environment. In fact, the environment in which businesses operate includes external factors likely to have an impact on their operation, whether positive or negative.
> Download: Strategic Planning Kit for Businesses” align=”middle”/>
What is the macro-environment?
The Greek term “macro” means “big” in English. The macro-environment therefore corresponds to the general environment in which a company operates. This environment refers to general characteristics of the company and includes opportunities and constraints. Although often far from the company, all these factors can impact its activity.
The variables from the macro-environment do not only affect companies, but also society as a whole. These are factors on which companies cannot act since they do not depend on their commercial activity. Each company must therefore adapt to the different elements of its environment, for better or for worse. This is why a business strategy must be implemented according to the various factors of its macro-environment.
Studying a company’s macro-environment is important for anticipating, better protecting against potential threats and seizing opportunities that arise. The analysis of the macro-environment is a real strategic decision-making tool that leads companies to define a medium and long-term growth strategy. It is also part of a strategic analysis process, because it consists of considering one or more possible scenarios. The development of these scenarios allows companies to imagine possible changes in their macro-environment and to anticipate them. Different elements must then be taken into account:
- the components of the macro-environment;
- the likelihood of this scenario occurring;
- the opportunities and threats that may arise from the scenario;
- strategic adaptations.
The analysis of the company’s macro-environment is carried out using two methods: the PESTEL method and the SWOT analysis. These tools can be used in different cases: during a business creation, in the context of a business takeover, to conquer a new market, to launch a new activity or to present a new product or service.
The PESTEL method allows companies to analyze the various factors that influence their activity and to understand the functioning of the market in which they are positioned. This method also consists of identifying current and future structural trends and development scenarios allowing companies to anticipate these trends and adapt to their environment. The acronym PESTEL combines the first letters of the following 6 factors:
To understand how SWOT analysis works, it is essential to know its definition. SWOT is an acronym of the English terms “strengths”, “weaknesses”, “opportunites” and “threats” which mean in French “forces”, “weaknesses”, “opportunities” and “threats”. The SWOT method is therefore a tool that makes it possible to analyze the strengths and weaknesses of a company, as well as the opportunities and threats related to its macro-environment.
What are the elements of the macro-environment?
Political decisions and measures taken by governments exert a significant influence on the life of a company. In this area, the external variables that cause companies to evolve positively or negatively are:
- Taxation ;
- government stability;
- the organization of trade;
- subsidies granted or withdrawn;
- the taxes developed on certain products;
- Corruption ;
- government organizations;
- the powers of local authorities;
- Social Protection ;
- monetary policy;
- European politics, etc.
The macro-environment includes a number of economic actors that can affect businesses: the state, staff, customers, investors, banks, trade unions, partners, etc. The evolution of companies is thus influenced by various economic factors such as:
- Economic Growth ;
- unemployment rate ;
- the purchasing power ;
- Income ;
- the interest rate ;
- the exchange rate;
- the evolution of GDP;
- the evolution of savings.
Demographic factors can also have a positive or negative effect on a company’s activity. These include:
- the evolution of the population (births, deaths, aging of the population, etc.);
- the evolution of the age pyramid;
- life expectancy;
- migratory flows;
- income distribution;
- the number of marriages and divorces;
- social class;
- languages, etc.
Consumption habits and household characteristics in the target market push companies to always adapt to demand. Factors to consider are:
- family size and structure;
- the number of single-parent families;
- level of education;
- mobility and modes of transport;
- the style of life ;
- changes in consumer behavior;
- religious and cultural influences;
- hobbies ;
- social groups;
- social concerns;
- societal values;
- work habits (teleworking, co-working, etc.);
- reducing inequalities;
- the development of paid holidays, etc.
One must also take into account technological factors and their impact on the market in which companies are established. Technological developments bring their share of opportunities, but also threats. The development of a company can be impacted by, among other things:
- the filing of new technological patents;
- technological innovations;
- R&D discoveries (research and development);
- the development of the Internet;
- technology transfers;
- the obsolescence of technologies;
- public and private expenditure on R&D;
- the cost of energy;
- the use of new energies, etc.
Environmental and ecological factors
Ecology occupies an increasingly important place in society, and in particular within companies. The adoption of new norms and behaviors related to ecology opens the door to new markets, but can also represent an obstacle for the development of companies. The environmental and ecological factors that influence their activity are:
- environmental protection laws;
- renewable energies ;
- waste treatment, recycling;
- energy consumption ;
- green lobbying;
- weather, climate;
- clean technologies;
- protected areas, etc.
This involves analyzing the regulatory and legislative framework as well as its impact on businesses. Indeed, when a new law comes into force, it can have a certain impact on the operation of businesses, but also on the population. The legal factors encompassed by the macro-environment of a company are:
- the right of work ;
- contract law;
- health legislation;
- safety standards;
- market regulation;
- industrial property;
- monopoly laws;
- consumer lobbying.
What is the difference between micro and macro environment?
The environment of a company is distinguished into two main categories: the macro-environment and the micro-environment. However, the macro-environment is traditionally opposed to the micro-environment. Why ?
First of all, while the macro-environment is defined as the global environment of companies, the micro-environment corresponds to their close environment. If the macro-environment is made up of the major trends in the evolution of society, the micro-environment includes all the actors in immediate contact with companies.
Then, companies can control the different factors that make up their micro-environment, which is not the case for the macro-environment.
Finally, macro-environment and micro-environment are not studied in the same way. The analysis of the factors that make them up will indeed be different. While the PESTEL method makes it possible to study the macro-environment of a company, Porter’s 5 forces model will rather be used to analyze the micro-environment. It is also a tool for strategic analysis which makes it possible to assess competition in a market.
To go further, download this free kit and discover everything you need to know about making decisions and analyzing past performance for a promising future.