Published by MBA Skool Team, Last Updated: August 15, 2018
What is Macro Environment?
Factors affecting a decision are called its environment.
Macro environment refers to the external environment- the conditions that exist in the overall economy. It is not bound by geography and has direct bearing on the operations of a company.
The degree to which the company would be affected by the macro environment is determined by the extent to which the company is dependent on the health of the economy and its resources.
Some of the macroeconomic factors affecting a company’s performance are:
Gross Domestic Product (GDP)
These external factors are different from internal factors- which can be controlled by the company.
Macro Environment factors cannot be directly controlled by a company and is the collective result of the functioning of the entire economy.
Macro environment factors may not be specific to a particular industry.
From a marketing perspective, these macroeconomic factors are:
Demographic: It relates to the population mix, gender ratio, population growth, household pattern etc.
Economic: This is related to the demand and supply in the market- willingness to pay, per capita income, credit availability and many more factors.
Socio-Cultural: It relates to the beliefs and customs followed by people in the society
Natural: It refers to the environmental concerns, depletion of non renewable resources and alternate sources- renewable sources, eco–friendly practices etc.
Technological: This refers to the extent of utilisation of technology, being updated with latest available gadgets, implementation of IT etc.
Political: It relates to the current state of affairs, the policies, the regulations in the market etc.
Legal:It relates to consumer protection, jurisdiction, extent to which law is followed etc.
Example: An increase in inflation would cause the prices of goods to rise and hence, the consumption will fall. Similarly, a rise in per capita income would increase the willingness to spend and people would start consuming more.
Hence, this concludes the definition of Macro Environment along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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