Macro-Environment
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When studying the macro-environment, I found it essential to recognize the factors that may in turn change a number of critical variables, which are likely to sway an organizations supply and demand levels. Often the major ongoing changes that are taking place in society produce an unclear environment and could have a negative influence on the organization. Checklists have been developed as a way of sorting through the vast number of possible issues that could affect an industry. There is the Porters Five Forces Model, which is merely a framework that analyzes macro-environmental influences by potential competitors, intensity of rivalry, bargaining power of buyers and suppliers, and closeness of substitutes to an industrys products. Analyzing these five forces, examines the impact of each on the switching costs and government regulation. The results can then be used to take advantage of opportunities and to incidentally plan for threats when preparing business and strategic plans (Hill, Jones Seventh Edition 2007).
It appears the Porter Five Forces Model is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. The categories for this model are a framework for reviewing a situation, and can in addition to SWOT and the areas of the macro-environment, be applied by organizations to review strategic directions, including marketing proposals. The use of this model can be seen as effective for business and strategic planning, marketing planning, and research and development. The Porter Five Forces Model can also ensure a companys performance is associated with the powerful forces of change that are affecting business environment. This model can also be useful when a company decides to enter its business into new markets or new countries. In this case, the model helps to break free of unconscious assumptions, and help to effectively adapt to the realities of the new environment. (Hill, Jones Seventh Edition 2007).
It is fair to assume that economic conditions affect how easy or difficult it is to be booming and profitable at any given time, because they affect both resource availability and cost, and also demand. If demand means to takeover, for example, and the cost of resources is low enough, it could be smart for firms to invest and grow with the potential of making money. On the other hand firms might find that profitability throughout the industry is low. Relative success and timing of particular strategies can be influenced by economic conditions. If the economy, in large is growing, demand may be present for a product or service, which would not be in demand under less favourable conditions. Similarly, an opportunity to take advantage of a particular strategy successfully could very well depend on demand and a growing economy, rather then conditions favouring a recession. However, a depressed economy could be seen as a treat if it results in a number of organizations going out of business, thus providing opportunities for some. (Hill, Jones Seventh Edition 2007).
A major influence affecting economic conditions and government decisions are political and government policies. Take for instance the issue of whether European countries join, or remain outside the single European currency. At anytime either exported or imported goods can seem expensive or inexpensive, relative to the currency exchange rates. There are still many other ways, however, in which government decisions will influence businesses both directly and indirectly, since they provide both opportunities and threats. (Hill, Jones Seventh Edition 2007).
While economic conditions and government strategy are closely related, they both manipulate a number of other environmental forces that can influence businesses. Thriving markets can determine the conditions for alternative types of financial support for businesses. Businesses more often than not tend to be subject to government controls, and are guided by current economic conditions. Take for instance the rate of interest charged for loans, they are affected by inflation and by international economics, although the rate may be fixed by a central bank, they are generally influenced by government policies and regulations (Hill, Jones Seventh Edition 2007).
The labour market reflects the availability of particular skills; this is directly influenced by training, which in turn is influenced by government and other regional agencies. Labour costs will be affected by inflation and by common trends in other industries.
The socio-cultural environments summarize demand