Business Environment Analysis: Macro and Micro Factors

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Context of Business
Assignment-1, Individual Essay
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Table of Contents
Introduction................................................................................................................................3
Body...........................................................................................................................................3
Conclusion..................................................................................................................................5
Reference List............................................................................................................................6
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Introduction
In the present scenario, the level of competition in the business world has reached its peak;
thereby, compelling the business organisations to change their mode of operation by updating
them in accordance with the latest market trends and customers demand. In order to do so, it
is necessary for the marketers to analyse and comprehend the internal as well as external
factors that may have an impact upon the business environment. In this paper, the key macro
as well as micro environmental factors that can significantly influence or change the scenery
of contemporary business in context to the global environment will be highlighted.
Additionally, the importance of an organisation’s sustainable, ethical and responsible
approach towards the different environmental, economic, cultural and social issues will be
discussed.
Body
The microenvironment of a business comprises of the different factors such as, business
associates, suppliers, competitors, regular agencies, customers, labours, stakeholder and
investors, and so forth. On contrary, the macro environment includes factors like
demographic, technology, natural, socio-cultural, political, and economic (Indris and
Primiana, 2015). Therefore, it can be asserted that the business environment refers to all the
different aspects, which may both positively and negatively influence the operations and
activities of the business. In the words of Camelia (2018), the microenvironment of a
company refers to the elements that have a direct influence upon an organisation’s business.
The suppliers being one of the key factors of a business’s microenvironment are responsible
for supplying necessary inputs such as, raw materials to the business. The suppliers are of
immense significance for the businesses as they are accountable for facilitating the business
in meeting the market demands. Delay by the suppliers may perhaps result in delay of
products; thus, compelling the consumers to shift to other companies.
The customers also play a significant role in determining the success of a business. The
preference and taste of the consumers influences the business largely. Additionally, the
competitors or rival companies of an organisation also influence the business. Therefore, it is
necessary for a business to vigilantly analyse the strategies of its competitors in order to build
up counter strategies; thus, being able to successfully deal with the competition. The
investors and stakeholder are also an imperative micro-environmental factor that may affect
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the business operations of a company. In order to function effectively, a business requires
investors. They circumspectly monitor the business activities of the organisation and
accordingly make their investment decision. Hence, it is necessary for the business
organisations to maintain a transparent relationship with the investors in order to benefit its
business.
As per the discussions of Ashill and Jobber (2014), the macro environment of an organisation
is the factors that indirectly or circuitously influence the business. The economic conditions
and policies, such as inflation, fiscal policies, growth, and so on may significantly influence
the business operations of a company. Therefore, it is necessary for the business
organisations to consider the economic system and constrains when taking business
decisions. For instance, the incidence of Brexit has notably raised the inflation rate to up to
1.7 % in the country. This may significantly affect the business sector of UK, as the buyer’s
purchasing power may reduce (Economics Help., 2018). Furthermore, the political
environment of a country is also considered a significant macro-economical factor that may
affect the business functions and activities of a company. In order to function smoothly, it is
necessary for the business organisations to abide by the policies and legislations of the
country wherein, it operates.
The political scenario of a country plays a vital role in influencing the business of a company.
For instance, the political scenario of UK is presently considered to be quite firm in
comparison to the other nations; thereby, promoting better FDI policies, which is beneficial
for the business sector (Deloitte.co.uk., 2019). Other than that, factors such as, demographic,
socio-cultural and so forth are also necessary external factors that indirectly influence the
business operations of a company. For instance, class system, social caste, literary rate,
standard of living and so forth of a country also affect the functions and activities of a
business. For instance, the businesses organisations must be apprehensive of the standard of
living and class system of the country wherein they operate. This will help the companies in
comprehending the consumer needs and demand; thus, being able to fulfil them effectively.
In the global and complex business environment, the business organisations of every
dimension experience massive amount of ethical issues. The basic ethical issues in context to
the business sector include trust and integrity. This further asserts that every business entity
must carry out their business operations with honesty and treat consumers equally and fairly.
When the consumers feel that the business organisations are exhibiting resolute and steady
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commitment to business practices that are ethical, an elevated level of conviction and trust
can grow between the companies and its target customers; thus, facilitating the businesses in
achieving success. Other than the basic ethical issues, the other complex ethical issues that
the business organisations must be apprehensive of are containing diversity, considerate
decision-making, governance issues and compliance with the core values of the business and
so forth.
In the present global business, proper ethical behaviours along with corporate social
responsibility can facilitate in gaining considerable benefits to businesses. For instance, it
may facilitate in attracting more numbers of customers; thus, boosting profits and sales. This
is for the reason that, the customers tend to opt for the companies that are ethically precise
and are involved in CSR activities. Additionally, it helps the companies in ensuring employee
retention, as the employees want to work for the companies that are ethically correct and
sustainable in nature; thereby, increasing productivity. Furthermore, encompassing ethical
behaviour attracts more number of investors; thereby, keeping the share price of the
companies high; thus, defending the company from takeover. Lack of CSR activities and
unethical behaviour, may harm the reputation and brand image of the business; thus, making
the business less appealing to its key stakeholder’s thereby, affecting the profitability of the
business (O’Riordan and Fairbrass, 2014).
Conclusion
The above essay has extensively highlighted the fact that, the external and internal factors of
a business environment can affect directly and indirectly the functions and activities of a
business organisation. It further asserted that, in order to function effectively in the present
global business environment, it is necessary for the companies to ensure ethical practices
along with proper CSR activities. This will help the business organisations in improving its
reputation and brand image; thereby, ensuring better productivity and profitability of the
businesses.
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Reference List
Ashill, N.J. and Jobber, D., 2014. The effects of the external environment on marketing
decision-maker uncertainty. Journal of Marketing Management, 30(3-4), pp.268-294.
Camelia, B., 2018. SUCCESSFUL COMPANIES AND INFLUENCING FACTORS. Annals
of'Constantin Brancusi'University of Targu-Jiu. Economy Series, (5).
Deloitte.co.uk. (2019). [online] Available at:
https://www.deloitte.co.uk/investingintheuk/pdfs/india/uk_investingintheuk_in_twoforeigndir
ectinvestmentintheuk.pdf [Accessed 19 May 2019].
Economics Help. (2018). What are the effects of a rise in the inflation rate? - Economics
Help. [online] Available at: https://www.economicshelp.org/blog/140824/economics/what-
are-the-effects-of-a-rise-in-the-inflation-rate/ [Accessed 19 May 2019].
Indris, S. and Primiana, I., 2015. Internal and external environment analysis on the
performance of small and medium industries (SMEs) in Indonesia. International journal of
scientific & technology research, 4(04).
O’Riordan, L. and Fairbrass, J., 2014. Managing CSR stakeholder engagement: A new
conceptual framework. Journal of Business Ethics, 125(1), pp.121-145.
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