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Factors Affecting Macro Environments

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Macro environment
Macro environment or external environment are those which are highly turbulent, complex and global- conditions that make interpreting them increasingly difficult. This constutite general environment which affect all the firms.
Factors affecting external environment are as follows:
1. Demographic segment
The demographic segment is concerned with a population size, age structure, geographic distribution and income distribution. Often demographic segments are analysed on global basis because it has its potential effects across country border and many firms compete globally.
 Population size
Observing demographic changes in population highlights the importance of this environmental segment. For example , it is projected that …show more content…

This gives companies the opportunity to expand their operations and earn higher profits because economy declaim( a recession) leads to a reduction in customer expenditures, it increases competitive pressure. Economic decline frequently causes price wars in mature industries.
The level of interest rates can determine the demand of company’s products. Interest rates are important whenever customers routinely borrow money to finance their purchase of these products. The most obivious example of housing market , where mortgage rates directly affect demand. Interest rates also have an impact on the sales of autos, appliances, and capital equipment. For such industries, rising interest rates are a threat and falling rates are opportunity
Interest rates are also important as they influence a company’s cost of capital and its ability to raise funds and invest in new assets. The lower the interest rate , lower will be the cost of capital for the company and promotes more …show more content…

For example there has been a strong trend toward deregulation of industries which was previously controlled by state and privatization of organization once owned by state. In the United State, deregulation of the airline industry in 1979 allowed twenty nine new airlines to enter the industry between 1979 and 1993. The increase in passenger carrying capacity after deregulation led to excess capacity on many routes, intense competation and fare wars. To respond to this more competitive task environment airlines had to look for ways to reduce operating costs. The development of hub and spoke system, the rise of nonunion airlines and the introduction of discount service are all responses to increased competition in the airlines task environment. Despite these innovations the airline industry still experience intense farewar which has lowered profits and caused numerous airline company

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