Macroenvironment and Competitive Analysis Essentials

Macroenvironment

The macroenvironment consists of those environmental factors that affect all or nearly all organizations in a given country or region. For analysis, it is divided into:

• Natural environment or ecosystem
• Economic system
• Legal and political system
• Sociocultural system

Politico-Legal System

This system governs public affairs, the state government, and the management of power. It has a strong connection with all laws of the country, as the exercise and distribution of political power are largely conditioned by such laws.

Government Policies

• Limitations imposed by strategic regulations.
• Opportunities provided through tax laws, economic policies, and international trade regulations.

Economic System

The economic system of a nation allocates resources among its citizens. It is highly complex and interrelated with social, cultural, political, and legal systems, which stimulate or hinder the development and behavior of any organization.

Natural Environment or Ecosystem

The natural environment is based on the full range of natural resources that humans have used and exploited throughout history to meet their needs and generate diverse cultures and technological progress. Some of these resources are renewable, such as wood, while others, such as oil, are non-renewable. Organizations transform these resources and return them to the environment as products and services for society.

Demography

Demography is the statistical study of the characteristics of a group of people that can be measured or counted over time or throughout history.

Sociocultural System

This system consists of all factors that influence a group of individuals to behave in a specific way. It is developed through human interaction and is the result of collective experience.

The Competitive Environment

The competitive environment includes specific organizations with which a company interacts. It includes:

• The power of customers
• The power of potential competition
• Indirect competition
• The power of direct competition
• The sales and distribution structure

Direct Competition

Individuals or organizations that offer similar products or services and therefore target the same market.

Indirect Competition

Competition that offers alternative solutions for the same consumer need. For example, a TV channel may face competition from video rental companies or publishers that offer entertainment for free time.

Potential Competition

Individuals or organizations that may become direct or indirect competitors to an organization.

Environmental Analysis

Environmental uncertainty means that managers have insufficient information about the environment. As environmental uncertainty increases, managers must develop techniques and methods to collect, select, and interpret information about their surroundings.