Business Environment: Macro and Micro Environmental Factors

This report discusses the macro and micro environmental factors that impact the performance of organizations. It covers frameworks such as PESTLE analysis for understanding the external environment and SWOT analysis for understanding the internal environment. It also includes Porter's Five Forces model for understanding competition in the market sector.

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
P1 Macro environment.................................................................................................................3
LO2..................................................................................................................................................7
P2 Micro environmental..............................................................................................................7
LO3..................................................................................................................................................9
P3 Porter's Five Force model.......................................................................................................9
LO4................................................................................................................................................11
P4 Strategic management plan ..................................................................................................11
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Business environment refers as the combination of all internal and external elements
which gives impact on organization performance. Internal factors are employees, management,
supplier, owners and economic changes gives impact in organization functions. On the other
hand, external factors are social trends, customers, client, supply and demand gives impact on
organization performance. Business environment plays essential role in organization because
they enable to recognize opportunities, supports in trapping beneficial resources as well helps in
planning for business growth. To understand business environment have an example of Marks
and Spencer. It is a British multinational retailer which is headquartered in a Westminster,
London, UK. It offers wide variety products i.e. home products, food products and standard
quality clothing to customers. This report covers macro and micro environmental factors. It
covers appropriate framework such as Pestle analysis for understanding external environment of
company. It includes Swot analysis frameworks to understand internal environment of business.
It covers porter's five forces model for understand competition in market sector for organization.
LO1
P1 Macro environment
Macro environment can be defined as a set of external condition which influences
decision-making and gives impact on organization performance either positive or negative.
Macro environmental comprises various factors such as gross domestic product (GDP), inflation,
employment, monetary and fiscal policy (Kljucnikov, and et.al., 2016)Hamilton and Webster,
2018). Additionally, it contains six different forces i.e. demographic, economical, political,
socio-cultural and technological forces.
M&S is a famous British multinational company in UK which applies Pestle analysis
framework to analyse external environment of company. Apart from this, it's impact on strategic
management decisions.
PESTLE ANALYSIS
Pestle analysis is a tool which use for analysing and monitoring macro environmental
factors. These factors give impact on business performance as well (Bashir and Verma, 2017).

M&S applies pestle analysis framework to analyse its impact on organization. It includes various
factors which is described below:
Political factors: In UK, political factors are free trade policies, political stability, trade
restriction etc. M&S is UK company which gets impact in organization performance and
strategic management decision.
Positive impact: Political stability can give positive impact on organization because they
don't have to change their policies during trading with other companies. UK's government offers
free trade policies to retailer where organization can get positive impact because they don't have
to pay high tax during retailing products or introducing new products within UK market (Cepel
and et.al., 2018). Apart from this, government stability can influence strategic management
decision of promoting trade business to other sector i.e. fashion industry. Brexit gives
transparency in trading which can give positive impact on M&S during promoting business to
other countries.
Negative impact: Organization can get negative impact during trading business in various
countries because there is a trade restriction policy. According to policies a company can't trade
to multiple companies. Strategic management prepare plan to expand business in other countries
as result trade restriction policies will give negative impact on decision (Almalki, Al-fleit and
Zafar, 2017). Brexit also can give negative impact on organization because it is hanged close free
trial policies (FTP). It gives negative impact on M&S because they have to pay high taxes during
import raw material from neighbour countries. It will enhance cost of production, in that state
organization have to enhance cost of product as result purchasing behaviour of customer can
reduce. Thus, organization can get negative impact on strategic management decision.
Economic factors: In UK, economic factors are inflation rate, recession rate, interest rate,
discount competitors etc. It gives impact on M&S:
Positive impact: Inflation rate is high in UK which can give positive impact on strategic
management decision. For example, strategic management makes plan to offer premium branded
cloth on low price. There are various competitors who sell clothing but on high cost in UK. It
gives huge competition to service providers. To improve purchasing behaviour of customers
offers discount strategy on premium brand by organization. High inflation rate can influence
discount strategy decision because customer gets similar product on low cost automatically
purchasing behaviour boost up of customers in UK.

Negative impact: In UK, borrow interest rate is too high which can give negative on organization
because strategic management makes plan for product diversification. The main goal of
diversification to offer product line and promote business in wide scale. This strategy requires
high investment so, organization have to borrow funds as result market share can reduce. It can
give impact on diversification strategy decision.
Socio-cultural factors: Demographical changes, education, income etc. are socio-cultural factor
in UK which gives impact on organization such as:
Positive impact: Strategic management makes sector diversity strategy so that each type of
customer can easy to cover by company. So organization offers wide variety of products in
different sectors i.e. ready meal industry, fashion industry and house products etc. Organization
can get positive impact on sector diversification strategy (Akhmetshin and et.al., 2017). Meeting
social diversity needs helps organisation to build a stronger connection with the customers.
UK's public want to prefer that company which sells each type of product so that they don't have
to switch in other store for buying different products. M&S keeps diversity in product sector as
result can get positive impact in their decision.
Negative impact: Organization can get negative impact on clothing industry because youth
generation has different lifestyle in UK. they require continuous change in their clothing style, in
that situation, organization can unable to meet their objective which can lead financial loss in
company.
Technological factors: RFID, E-commerce and online shopping etc. are most famous
technologies in UK which is used by various industry for retailing products. Organization gets
impact of these technologies such as:
Positive impact: Currently strategic management makes decision to adapt new technology for
influencing customers shopping experience within company. This decision can promote by the
UK's public because they are more updated for new technology (Achinas and et.al., 2019). Self-
checked based on food joints and retail are introduced by M&S for saving high cost of labour
and improve services of customers. Online shopping app introduces by M&S for customers
where they can save their time to purchase product online app rather than to go and purchase.
Thus, new technology adoption can support organization to make strong presence among the
new generation. Also upgraded technology will play a crucial role in

Negative impact: Adaption of new technology can influence cost of product as result can give
impact on low price strategy. Additionally, these new technologies require expert for operating.
Thus, it can give negative impact on organization performance. It has been also observed that if
technological drawbacks related to security and privacy are not taken into consideration then it
can have adverse impact on firm’s reliability and service quality.
Environmental factors: Pollution and climate change are created environmental issues in UK, so
government is strict for retail products.
Positive impact: UK's government is strict for environmental issue, so they strictly require
environmental friendly production method which reduces pollution and climate crisis. Strategic
management of M&S introduces sustainable product strategy and implement decision on
company. Organization will get positive impact of this decision because UK's public also
concern for their health (Perera, 2017). They require such kind product which give positive
impact on their health. Sustainable product strategy can promote by government due to eco-
friendly products. This strategy can influence brand value amongst public and can get high
support of government.
Negative impact: This strategy is quite good but it can require high maintenance, in that state
organization can require expertise for managing overall business activities. Though
organisational response towards environmental changes can gain huge popularity among
customers but it can also affect the operational costs of company.
Legal factors: Employment law and legislation law are legal factors of UK which can affect
organization.
Positive impact: UK's government recruits various job vacancies for such kind people who don't
have job or doesn't get platform to perform themselves. Where strategic management offers
employee's recruitment strategy (Gürel and Tat, 2017). The main goal of this decision to improve
product demand in public by the help of large number of employee within workplace. This
decision can be promoted by the government because they recruit job opportunity for people.
With several legislations in operational and functional aspect organization can get change to
improve high productivity of employee within workplace by creating a well-defined standard or
code of conduct.
Negative impact: Minimum wage act is also most famous law in UK. According to this act,
Organization can't recruit employee on low wage. This law gives negative impact on employee

recruitment strategy as result M&S can't improve employee turnover at workplace. Thus, legal
factor will give negative impact on employee recruitment strategy decision. Adherence to
legislations can sometimes act as restrictive force for organisation’s planning. However, these
are mandatory to maintain a fix standard of quality and ethics in alignment with the business
goals.
LO2
P2 Micro environmental
Micro environment mention as collection of capabilities or resources in business
environment which gives impact on its performance and decision-making. Elements are
suppliers, competitors, marketing intermediators, customers and public. Micro environment also
can be defined as operating environment of business. M&S applies a framework to analyse
internal environment of company. Swot analysis is basically designed to analyse internal
environment of business.
SWOT Analysis
Swot analysis is a strategic tool which is used to support a person or company determine
own capabilities, resources, opportunities and threats that can be related to organization
competition or projects. M&S applies this framework to identify own capabilities, weaknesses,
threats. It is explained below:
Strength: M&S is a major British multinational company in UK which has many strength such
as:
 Organization has high brand power in UK due to high quality of its products.
Organization gets 2nd position as best supermarket in UK. It helps company to have good
brand value among consumers.
 Organization offers worldwide services to customers thorough their stores which
established across the world. Estimated 1463 stores of M&S are allocated around the
world who offers wide variety of product services to customers. So international presence
of M&S is higher. As a result of broad presence across the globe company is able to
strongly capture global market for enhancing its market share.
 Organization has wide scale product line i.e. clothing, food items and home product etc. it
is major strength of the organization because they enable to cover each type of customer
and to optimise its profitability range (Teece, 2018). Wide variety of product influences

purchasing behaviour of customers because if company will not provide good product
strategy then it can limit the targeted consumer segment.
 Organization has strong e-commerce infrastructure which helps employee to offer high
quality services to customers within workplace. It is crucial strength because in this
digital era lack of effective e-commerce strategy can result in failure of business.
 M&S has goal to meet customer objectives, so they focus on improving customer
experience. It is also essential strength of organization.
 It has strong brand portfolio rather than other competitors.
Weaknesses
 M&S has good presence in Europe, UK and US. So organization unable to penetrate in
foreign markets i.e. Asia and Middle because their side most of the clothing designs are
western. These market has huge potential and limited exploration of them is resulting in
limited growth of company. While M&S possess traditional design in clothing it is also
observed that company is not able to attract young customers who give preference to
other modern competitors like IKEA or ZARA. Thus organisation gets high losses.
 Adaption of new technologies enhance cost and time etc. for example organization have
to give more focus on new technologies rather than customers as result it reduces
working efficiency of employees in company. However, improvement of this aspect will
affect organisation’s value proposition and supply chain.
 Organization has poor financial performance which is major weakness of organization
because it has direct impact on investment and growth plans of company. At present most
of the companies are exploring international markets for growth which is possible only
when sufficient financial sources are available.
 Profitability ratio of M&S is very low on the basis of industry level.
Opportunities
 New technologies give opportunities to organization for differentiating pricing strategy in
emerging market. It improves customer loyalty for company.
 Organization gets opportunity to invest in Indian markets where organization can
influence brand positioning, Indian market prefers traditional design rather than western
as result organization get possibilities to improve purchasing behaviour of customer by
offering traditional design clothes,

 Organization introduces self-checked services for influencing customer experience and
reduces labour cost. This technology can give positive impact on organization operation
because they can offer large number of product in minimum time. On the other hand,
customers gets profitability to choose product according to their preferences. Thus
organization can build trust of customer on company.
 Diversity in product line can give opportunity to company to take competitive advantage
in global market. Currently product diversification is very limited and thus company can
explore this aspect for improving its competitive position.
 Transportation cost also decreases due to lower shipping charges as result gets
opportunity to company because they can lower cost of product. It will boost selling
behaviour of employees in that state organization can uplift market share of company.
 Reshaping clothing segment also a golden opportunity for M&S because they can
differentiate clothing line on the basis of customer segment. Additionally, customer
segment helps organization to meet their objective by offering desirable product.
Threat
 Changing trend in clothing can give challenge to organization because reshaping clothing
continuously can enhance cost of product.
 Currently ASDA, Morrison and Tesco are a major competitor for M&S because they also
retail similar product. Thus suitable attempts must be made to ensure that organisational
strategies are effective enough to seek competitive advantage.
 Liabilities law of different countries can give challenge to company because each country
has their own liabilities law which requires change in policies, in that state organization
can get risk on business growth or product diversification.
LO3
P3 Porter's Five Force model
Porter's Five Force model is a powerful strategic tool used to understand competitiveness
of a business environment and to analyse an organisations potential profitability. It determines
and analyses five main competitive forces that have an influence in shaping the operations and

functioning of every business and the strengths and weaknesses of its strategies (Phadermrod,
Crowder and Wills, 2019). These five forces are: supplier's power, buyer power, competition in
industry, threat of substitution and threat from new entrants. Following is the Porter's five force
analysis of Marks and Spencer in relation to its competitor ASDA.
Threat From New Entrants (LOW): Although new industries entering retail market bring
innovation, creativity and new methods of productivity with them, the retail market has a high
entry barrier as required capital investments are enormous and the existing market share already
been captured by bigger companies. Marks and Spencer having been in business for 136 years
and expanding into different sectors such as food, clothing, household etc. have captured a large
sector of market share with loyal customers and they should not feel any threat from new
entrants in retail market. Marks and Spencer also has its own online store and invests hugely
towards advertising its products, which helps set it apart from others.
In case of threats from new entrants, Marks and Spencer can take advantage of its large
operations and use principle of economies of scale to repel entrants by making its products more
cost effective. Marks and Spencer can also innovate new products and services.
Power of Suppliers (LOW): The retail market possesses a large number of suppliers within the
industry Marks & Spencer and ASDA operate in. This weakens the supplier's bargaining power
and effectively provides them with less control over prices charged (Abdel-Basset, Mohamed
and Smarandache, 2018). Furthermore, the products these suppliers provide are standardised to
industry demands and possess very low substitution costs attached to them. This makes it
relatively easy for Marks & Spencer and ASDA to switch suppliers if their demands become
extravagant. Decreasing local supplier's power even further is the pressure they face from
international suppliers who use economies of scale to make products cost effective.
In case of high supplier's power in market, Marks & Spencer, ASDA can implement an
efficient supply chain, switch to other local suppliers or switch to international suppliers.
Threat from Substitutes (HIGH): The retail market in which Marks & Spencer, ASDA operate in
is overrun with companies offering substitute products, as it is quite easy and substantially
cheaper to simply copy designs with minor adjustments. Their Food business also faces
extremely high threat from substitutes as other big stores offer similar type of products with
competitive prices. This forces Marks & Spencer, ASDA to continuously innovate products in an

effort to keep their brand position strong and meet customers demands while trying to remain
distinct to their substitutes.
To tackle high threats faced from substitute products, Marks & Spencer, ASDA should
invest more into research and development of new products, innovation of older existing
products and use economies of scale to make their products more cost effective.
Competition in the Industry (High): Competition in the industry is also a major factor work
behind framing the marketing strategies. Retail sector has witnessed the major growth in recent
past years that also resulted into heavy competition for companies like M&S not just at
international level but also in the regional retail market (Varelas and Georgopoulos, 2017).
Heavy competition in the retail market has drives to separated customer base for all the
companies. Heavy competition also require constant improvement and up-gradation in product
quality in order to sustain in the competitive environment. Retail sector has also seen major
growth at the regional level across the globe that also became a huge challenge for big brand like
Asda, M&S. Such new entrants at regional level has also served customer services in the more
affordable price range that caused to reduced customer loyalty towards big brands in the sector.
Competition in the industry is a huge force that negatively work in the growth process of
companies. To tackle efficiently this force company management require constant development
of products and services in order to keep sustain in the competitive environment and also to cope
up with the customer expectations.
Power of Customer (High): Customers carry the huge power in order to sustain in such a
competitive environment. Customer not only influence the sustainability of the business
organisations but it also influence growth potential for the company. Management of M&S has
launched various marketing strategies like customer relationship building over social media and
other associated strategies in order to sustain its customer base. All strategies and policies of the
company has a great influence of company's target customer base. Company also launch various
new products after analysing the needs and requirements of target customer's.
Power of customer is a very aggressive factor as this force is comparatively high as
compare to other forces involve in Porter 5 forces. As the customer influence the sustainability
and growth of the company so this force works aggressively for the company.

LO4
P4 Strategic management plan
Theoretical approach:
Ansoff's matrix is a tool for strategic planning which provides a framework for helping
senior managers, executives and marketers for the future growth in the organization. Ansoff
matrix can be distributed into four levels which market penetration, product development, market
development and diversification (Man, 2016). These strategies help the companies to understand
as to what their product is capable of and what are the markets they want to enter.
Market penetration
In market penetration there is an existing product which is being sold in the existing
market (Bashir and Verma, 2017). This method is not to beneficial for organizations because
there are not many customers who get attracted and the number of customer remains same.
Product development
Product development is when there is a new product which is being launched in existing
market is a good method to find out if the new product will be liked by customers and if there are
changes which are required by the product so that they can attract more customers in the new
markets. Companies prefer taking this strategy so that they can understand the market and the
customers better.
Market development
In market development there is a new market with the existing product with no
innovation is going to capture the market in the beginning but later the customers will not
appreciate it. It is very important for the companies to get changes in their products so that they
can capture the market better.
Diversification
New market and new product is a risk which the companies do not take because without
being sure about the product the companies in market do not go for this product directly (Ainun,
Rini,. and Wibowo, 2019). It is very important to understand the customers of the new market
and the product only then the companies should take the risk of launching the products in new
market.
Recommendation

M&S needs to adopt diversification strategy in business as it will help to increase the customer
base and sales by increasing product differentiation and innovation (Teece, 2018). This strategy
will also help M&S to maintain the quality by analysing the factors which are more effective in
new markets. As diversification strategy helps to increase the opportunity for company to expand
in new market which are growing this will also reduce the competition threats and increase
profitability and improve brand value. M&S will also develop new technology which will
provide core competency and innovative quality of products to increase satisfaction of
customers and increase sales effectively.
Purpose: The purpose of this plan is to develop strategies for M&S for promoting growth
and sustainability in UK in present environment of uncertainty due to Brexit issue.
Objective: The primary objectives for this strategic plan are as follows:
 To enhance the customer retention by 10%
 To increase market share by 5% within 1 year To encourage sustainability within organisational practices by reducing waste up to
40%
Strategies: The strategies which can be used by M&S for achieving its objectives are:
 Organisation must provide training to its employees. The training will ensure that its
employees provide good quality services to its customers. It will also result in
improving operational efficiency and reduction of resource wastage.
 There must be regular monitoring of employees and their work so that any kind of
inefficiency and performance drawbacks can be identified on time prior to their
impact on customer services (Dadzie and et.al., 2017). It will result in long term
customer loyalty which is necessary for sustaining competitive advantage.
 The lack of suitable market research can lead to wider gap in accomplishment of the
organisational objectives. Thus it is very important for the organisation to carry out
the suitable market research so that accurate analysis can be made and suitable
marketing decisions can be taken. It will help M&S to choose suitable product and
pricing strategy for its target customers.
 It is required that for long term growth organisation must also focus on retaining its
customers for long term. Thus for this purpose M&S must try to increase its

engagement with customers. This can be done by taking regular feedback from the
customers. This strategy will help organisation to identity the needs of its target
customers and to improve its services.
 Employee retention is also one of the strategy for the organisation to provide
satisfactory services and to enhance its profit margin and market share. This can be
done by organisation by providing motivation to its employees and by developing
effective work culture. This strategy will increase the employee productivity so that
customer services and retention can be improved.
 Another strategy which can be used by M&S is innovation. The innovation in
services will bring sustainability and waste reduction. Thus it will help company to
achieve its sustainability goals as well as to enhance its brand value among
customers.
 M&S must conduct regular improvement in its technology so that it can align itself
with changing market scenario. The regular updates in technology such as services on
mobile application or 24*7 operation facilities will help customers to have better
experience with organisation and thus their retention will improve.
 For increasing growth company must also conduct timely analysis of its competitors.
This can help organisation to regularly bring improvements in its services and to lead
amongst its other competitors.
 M&S must also focus on improving its leadership and management practices. The
flexible working culture and motivating leaders can enhance the productivity of
employees which will increase customer retention.
Key performance indicator:
M&S needs to measure revenue per client which helps to evaluate the profit margins of
company after implementing strategic planning.
Monitoring and controlling:
Company should improve the efficiency of employees to understand self analyse their
performance and correct themselves. M&S also should implement benchmarking strategy
to increase the quality of operations and also achieving the objectives effectively.

CONCLUSION
This report concludes various micro and macro environment factors that influenced the
business organisation decision making. This report also concludes PESTLE analysis for efficient
decision making in respect to business development and growth. This report also concludes the
SWOT analysis in order to analyse micro environment factors affect decision-making of business
organization. With the use of PESTLE analysis various external factors has concluded like
political, social, technological, legal and other associated factors that put a huge impact over
company's performance and growth in the business environment. Porter 5 forces has also
concluded in this report to analyse the competitiveness of the retail sector. Impact of all such
forces like competition in the industry and all other associated forces has also concluded over
business organization growth. This report also concludes about the suitable strategies to
overcome the threat of internal and external business environment factors.

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