- It has been established that businesses do not operate in a vacuum
- It has also been demonstrated that there is an internal and external environment that affects and is affected by the operations of the business
- The business’s environment can also be divided into two important categories:
- The Macro-economic environment
- The Micro-economic environment
The Macro-economic environment
- This refers to factors pertaining to the performance, structure, behaviour, and decision-making of an economy as a whole
- This can be on a global, national, federal, economic bloc or regional level
- These factors can have a real effect on the operations, strategies and performance of the business
- Macro-economic factors include:
- Changes in employment level
- Gross Domestic Product
- Economic Growth
- Inflation or deflation
- Economic cycles (boom or depression)
- Infrastructure development
- Political Environment
- Corruption levels
- Legal environment
- Money supply
- Foreign Currency availability
- Access to Foreign Direct Investment
- A country’s credit rating
- Fiscal Policy
- Monetary Policy
- Again as has been said the operations of the business is affected by this environment
- The best macro-economic environment is one that is characterised by economic growth
- At the very minimum, the macro-economic environment must be stable, an unstable environment is bound to have adverse effects on businesses
The Micro-economic environment
- The micro-economic environment refers to the individual aspects of the business that are unique to it
- It includes such factors as:
- The business’s suppliers
- Its customers
- The skills of its management
- The skills and experience of its workforce
- It’s competitors
- It’s customers
- The wider public i.e any group that has an actual or potential interest in or impact on a company’s ability to achieve its objective
- People who live within the same area as the business etc
- All these factors interact to create a local environment that affects the operations of the business
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