Understanding a company's macro-environment
The macro-environment comprises factors that are outside of a particular firm (or industry’s) direct control. They impact all firms and industries – although depending on the firm’s setup there may be certain elements of the macro-environment that are particularly impactful, and others that have less of a direct impact.
Elements of the macro-environment
The PESTEL framework is a good way of summarising six buckets of factors that comprise the external macro-environment:
- Political
- Economic
- Social
- Technology
- Ecology
- Legal
Difference between the macro environment and industry factors
The key difference between the broad macro-environment and industry-level factors is that the macro-environmental conditions have impacts across the broad economy (i.e., multiple different industries), while industry-level factors specifically impact a particular industry.
Ability to influence the macro-environment
In general, it is not feasible for an individual firm or even an industry to influence the broad macro-environment. The environment is broadly set, and companies operate within it.
There may however be certain things that firms can do to adjust the environment – potentially lobbying to adjust the political aspect of the environment. Similarly, it may be possible to develop new technologies, thus adjusting the technological component of the environment. A key thing to recognize though is that while there may be specific things that a company can do to adjust the environment that it operates in, by and large, the environment is hard to change.
Firms can also adjust their operations to better align themselves with the external environment – changing their offering to potentially capitalize on changing demands or to incorporate new technologies.
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