Macro environment Argumentative
- Pages: 1
- Word count: 237
- Category: Economics Innovation
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Order NowMacro environment factors are uncontrollable external forces that affect how a business operates. They are largely out of the control of the business, and often require changes in operating, management, production, and marketing. Analysts often categorize them using the acronyms PEST. PEST stands for political, economic, social, and technological concerns. Political factors include tax policy and environment law such as trade agreements and tariffs, may affect the supply and demand chains and available markets for many different companies as well. It is clear from the list above that political factors often have an impact on organisations and how they do business. Economic factors include interest rates and exchange rates. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm’s cost of capital and therefore to what extent a business grows and expands.
Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy. Social factors include population growth and health consciousness. These factors are of particular interest as they have a direct effect on how marketers understand customers and what drives them. Technological factors include ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation.
