Analysis of The Global Macroenvironment

Adam Dilip MutumFMA3093

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Introduction

Macro (or ‘far’) environment is the part of the environment over which the business can rarely exert any direct influence but to which it must respond.Analysed by categorizing environmental influences at the macro-level into broad groupings.

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STEP Analysis

Acronym also rearranged as PESTExtended forms of PEST analysis are used, SLEPT (plus Legal) or the STEEPLE analysis:

Social/demographic, Technological, Economic, Environmental (natural), Political, Legal and Ethical factors.

Geographical factors may be relevant.

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Sociocultural Factors

The social and cultural influences on business vary from country to country. Income distribution Demographics, Population growth rates, Age distribution Labor / social mobility Lifestyle changes Work/career and leisure attitudes Entrepreneurial spirit Education Fashion, hypes Health consciousness & welfare, feelings on safety Living conditions

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Sociocultural Factors

Questions: What is the dominant religion? What are attitudes to foreign products and services? Does language impact upon the diffusion of products

onto markets? How much time do consumers have for leisure? What are the roles of men and women within

society? How long are the population living? Are the older

generations wealthy? Do the population have a strong/weak opinion on

green issues?

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Technological Factors

Technology is vital for competitive advantage, and is a major driver of globalization. Government research spending Industry focus on technological effort New inventions and development Rate of technology transfer Life cycle and speed of technological obsolescence Energy use and costs (Changes in) Information Technology (Changes in) Internet (Changes in) Mobile Technology

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Technological Factors

Questions: Does technology allow for products and services

to be made more cheaply and to a better standard of quality?

Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, etc?

How is distribution changed by new technologies e.g. books and flight tickets via the Internet, etc?

Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

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Economic Factors

Marketers need to consider the state of a trading economy in the short and long-terms. Economic growth Interest rates & monetary policies Government spending Unemployment policy Taxation Exchange rates Inflation rates Stage of the business cycle Consumer confidence

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Political Factors

Has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses.

Environmental regulations and protection Tax policies International trade regulations and restrictions Contract enforcement law Consumer protection Employment laws Government organization / attitude Competition regulation Political Stability Safety regulations

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Political Factors (incl. Legal)

Questions : How stable is the political environment? Will government policy influence laws that

regulate or tax your business? What is the government's position on marketing

ethics? What is the government's policy on the economy? Does the government have a view on culture and

religion? Is the government involved in trading agreements

such as EU, NAFTA, ASEAN, or others?

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A PEST analysis can be done via workshops using brainstorming techniques. Usage of PEST analysis can vary from business and strategic planning, marketing planning, business and product development to research reports.

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Porter’s Diamond

Introduced by Porter (1990)Book: The Competitive Advantage of Nations Can help understand the competitive position of a nation in global competitionCompetitive Advantage of nations has been the outcome of 4 interlinked advanced factors and activities in and between companies in these clusters.

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Porter’s Diamond

Chance

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Porter’s Diamond

Factor endowments: nation’s position in factors of production such as skilled labor or infrastructure necessary to compete in a given industry.Demand conditions: the nature of home demand for the industry’s product or service.Related and supporting industries: the presence or absence in a nation of supplier industries or related industries that are nationally competitive.The Business’s strategy, structure and rivalry: the conditions in which companies are established, organized, and managed and the nature of domestic rivalry.

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Porter’s Diamond

Success occurs where these attributes exist. More/greater the attribute, the higher

chance of success. The four condition s need to be

favourable if an industry in a country is to gain competitive advantage

The diamond is mutually reinforcing.

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Porter’s Diamond

Factor Conditions Basic can provide an initial advantage. Must be supported by advanced factors to

maintain success. "Non-key" or basic or general factors, such

as unskilled labor and raw materials, do not generate sustained competitive advantage.

Porter argues that the "key" factors of production (or specialized factors) are created, not inherited.

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Porter’s Diamond

Specialized factors of production are skilled labor, capital and infrastructure.

Specialized factors involve heavy, sustained investment. They are more difficult to duplicate.

This leads to a competitive advantage, because if other firms cannot easily duplicate these factors, they are valuable.

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Porter’s Diamond

Role of Chance Events like wars, technological decisions by

foreign govts., significant shifts in world financial markets, etc. can also affect national competitive advantage

Role of Government Role "acting as a catalyst and challenger; it

is to encourage - or even push - companies to raise their aspirations and move to higher levels of competitive performance …" .