Understanding Of Micro And Macro Factors That Affect Your Business

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Understanding Of Micro And Macro Factors That Affect Your Business

It is crucial to understand that your company exists in a business environment. This environment consists of a large number of aspects, classified into micro and macro factors. Most important, having a thorough understanding of Micro and Macro factors that affect your business is essential to run a business efficiently.

The micro-environment directly affects your business – its operations, processes, and performance. They don’t have a long-lasting effect but they are, nevertheless, extremely important. These are customers, competitors, the general public, resellers, and suppliers.

On the other hand, the macro-environment is much broader and it is related to the economy. It affects businesses in general, determining how they work, perform, strategize, and form decisions. It consists of external aspects such as economic factors, technological factors, demographic forces, political and legal forces, social and cultural forces, and natural and physical forces.

What are the micro-environment factors?

Understanding Of Micro And Macro Factors That Affect Your Business-business-women-working

Customers are, of course, essential. Every business is highly influenced by the kind of customer base that it attracts. One must think about relative profitability, the stability of demand, competition intensity, and prospects of expanding sales.

Of course, every business that sells a similar product is your competitor. It is important to understand them in order to outplay them. It is important to think about brand competition, desire competition, and product form competition.

What is also very important to appeal to the general public. This is why you must consider factors such as public opinion, media, and how much (if at all) you are polluting the environment.

Resellers are third parties that you can decide to make use of. If you do that, it is safe to assume that your success is going to depend on their actions. Their reputation is very important. You should keep in mind aspects like promotion, distribution, marketing, sales, and financial mediation.

Last but not least, there are suppliers. The reputation and size of your supplier are bound to have a significant effect on your business’ prosperity. You have to take into account the insurance that you’ve got all the required resources, value delivery process, and crucial determinants that make the price grow or diminish.

What are the macro-environment factors?

Understanding Of Micro And Macro Factors That Affect Your Business- analysis-brainstorming

When discussing macro-environment factors, let us begin with economic ones. It pretty much boils down to the fact that the state of the economy affects how productive your company is going to be and what decisions you need to make along the way. Economic factors include interest rates, taxes, inflation, exchange rates, recession, demand/supply, and so on.

Next, there are technological factors. The continual advancement of technology and materials that are used in production are crucial for the success of every business. If you don’t keep up with them, all your efforts are bound to suffer. According to experts, such as Sitecraft, this encompasses everything from brand new technology and machinery, down to basic aspects such as platform trolleys and other utilities. You must think about 3D technology, connectivity, automation, engine performance, security, wireless charging, and so on.

When it comes to demographic forces, they are pretty much universal, including age, cultural characteristics, level of education, country and region of residence, and so on. You have to consider how different variables, such as income, age, education, and geography affect your business processes.

Of course, every business is also heavily influenced by the political and legal environment that it exists in. You must take into consideration various laws, such as those related to copyright, fraud, import/export, discrimination, health and safety, employment, and the like.

There are also social and cultural forces that you have to take into consideration because every product that you come up with has an effect on the society around you. You must think about a lot of factors, like religion and beliefs, buying habits, education level, health awareness, population growth, various lifestyles, life expectancy rates, family structuring and size, rates of emigration and immigration, and the like.

Finally, it is unavoidable to consider natural and physical forces. One cannot forget about the planet that we live on and the availability of its resources. You must also think about pollution, climate change, weather, environmental regulation laws, the survival of specific biological species, and so on.

In summation

What we can ascertain is that both macro and micro factors have a huge influence on your business. This is why your decisions and strategies must be formed according to them. Your company’s success and reputation depend on it. In order to properly understand all of these factors, you should perform a SWOT analysis.


Mike is an Australian business consulting specialist. He often writes about technology, business and marketing and is a regular contributor on several sites.

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