The difference between a firm’s macro environment and industry structure

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Understanding a company's macro-environment

The macro-environment that a company operates in is the broad conditions that are outside of the firm and industry’s control. These include the PESTEL factors – political, economic, social, technological, ecological, and legal factors that influence firms.

What is industry structure?

Industry structure in comparison relates to the industry-level factors that influence competition in the industry. These again are broadly outside of the firm’s control, but whereas macro-environmental factors tend to have an influence across industries (i.e., groupings of firms producing similar products), the industry structure is specific to the industry itself.

Porter’s Five Forces is one framework to analyze the structure of the industry. It examines the likelihood that the industry is attractive by considering whether the power of the suppliers, the power of the buyers, barriers to entry, the threat of substitute products, and inter-industry rivalry. 

Differences between the macro-environment and industry structure

The key difference between macro-environmental factors and industry-level factors is the extent to which they impact the broad economy as opposed to one particular industry setting. Thus, while social trends are likely to influence many different industries (a macro-environmental factor), for example, the impact of barriers to entry is much more industry-specific (a component of industry structure).

Similarities: Both macro-environment and industry structure factors largely outside of a firm's direct control

One thing that is related between both macro-environmental factors and industry levels factors is that they tend to be largely outside of a firm’s direct control. While, it is possible that lobbying may change the political landscape (a macro-environmental component), and firms may be able to change industry structure by consolidating or buying suppliers, to a large extent, they are aspects that companies do not have direct control over.

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