Macro Envmnt - Prsntn

8/7/2019 Macro Envmnt - Prsntn

1/54

MACRO ENVIRONMENTMACRO ENVIRONMENT

BUSINESSBUSINESSENVIRONMENTENVIRONMENT


2/54

BUSINESS COMPRISES OF DIVERSE SET OF ACTIVITIES TO BE CARRIED OUBUSINESS COMPRISES OF DIVERSE SET OF ACTIVITIES TO BE CARRIED OUT IN A PLANNEDT IN A PLANNED

MANNER AND WITH A PURPOSE LIKE TO EARN PROFIT BY SELLING GOODS AMANNER AND WITH A PURPOSE LIKE TO EARN PROFIT BY SELLING GOODS AND SERVICES,ND SERVICES,

TO SATISFY CUSTOMERS NEED/ WANT/ DEMAND, TO DISCHARGE OBLIGATIOTO SATISFY CUSTOMERS NEED/ WANT/ DEMAND, TO DISCHARGE OBLIGATION TON TO

EMPLOYEES AND STAKEHOLDERS, TO RETURN SOMETHING WORTH TO THE SOCEMPLOYEES AND STAKEHOLDERS, TO RETURN SOMETHING WORTH TO THE SOCIETYIETY

BUSINESS COVERS COMPLEX ACTIVITIES OF INDUSTRY ANDBUSINESS COVERS COMPLEX ACTIVITIES OF INDUSTRY AND

COMMERCE INVOLVING ORGANIZING PRODUCTION, DELIVERING PRODUCT TOCOMMERCE INVOLVING ORGANIZING PRODUCTION, DELIVERING PRODUCT TO

CUSTOMER WITH ULTIMATE OBJECTIVE OF PROFITCUSTOMER WITH ULTIMATE OBJECTIVE OF PROFIT

MAXIMIZATIONMAXIMIZATIONBusiness Environment

What is Business ?What is Business ?


3/54


4/54

Comprises of the complex factors, Comprises of the complex factors,

largely if not totally beyond the controllargely if not totally beyond the control

of management in which a particularof management in which a particular

enterprise operatesenterprise operates

Consist of set of internal factors and Consist of set of internal factors and

of external factors which affect anof external factors which affect anenterprise and its managemententerprise and its management

Business Environment


5/54

WHY STUDY OF BUSINESS ENVIRONMENTWHY STUDY OF BUSINESS ENVIRONMENT

IS IMPORTANT?IS IMPORTANT?

y Business enterprises cannot function inisolation

y Open systems interact with theirenvironment

y Business enterprises exist in and aresurrounded by an environment the

business or organisational environmenty Society and business enterprises are

mutually dependent Business enterprises satisfy societal needs

y Relationship between society and businessenterprises takes place in a changingenvironment


6/54

Components of the BusinessComponents of the Business

EnvironmentEnvironment

y Different environmental variables existinternally and externally which affect the

business enterprise.y

Environmental variables have a positive ornegative influence on the enterprise.y Business environment consists of two sub-

environments: Internal environment External environmentx Micro environmentx Macro environment

y Mutual relationships exist between theseenvironments


7/54

Internal

Environment

Macro/General/Remote Environment

External Environment


8/54


9/54

Macro environmentMacro environment

y Macro environment -the far environment

(outside anorganizationsindustry and markets)

Internal

Industry

Macro-

Environment

Part of external environment mainly responsible forcreating opportunities as well as threats for thefirm, and is more uncontrollable than microenvironment.


10/54

Characteristics of the MacroCharacteristics of the Macro

environmentenvironment

y Influences the microenvironment(industry and market)

y Will impact all organizations in anindustry, a market, or even allorganizations in an economy

y Source of competitive advantage being able to predict changes in themacro environment and take action


11/54

The Marketing Environment andThe Marketing Environment and

Competitor AnalysisCompetitor Analysis

y SWOT analysis

y PESTEL analysis

y Five forces analysis by Porter


12/54

SWOT analysisSWOT analysis

y

Strengths (internal)yWeaknesses (internal)

y Opportunities (external)

y

Threats (external)


13/54


14/54


15/54

SWOT-ANALYSIS: STRATEGIC

MEANING

S STRENGTHS Company

Market

W WEAKNESSES

O OPPORTUNITIES T THREATS


16/54

STRENGTHS

Competent leadershipAvailable financial resourcesQualified personnelGood reputation with the customers

Market leadershipProtection against competitionTechnological supremacyCost advantagesCompetitive advantagesInnovation capability and ability to

implementBetter production facilitiesPotential for external investment


17/54

WEAKNESSES

No clear strategy

declining competitive position

obsolete equipment

low profits

lack of managerial experience and insightlow competence

weak or no follow-up on strategy implementation

internal problems

vulnerability under pressure from competition

weak R&D

insufficient market knowledge/awarenessbad marketing

lack of finance to implement strategy

undeveloped distribution/ sales

high costs (higher than competition)

narrow product range


18/54

OPPORTUNITIES

new markets/ market segments

expanding production / services

expanding product range

supplementary products or services

weakening of competitors

market growth or expansion

lower trade barriers on new geographic markets

vertical integration (up or down)new technologies

availability of external funding


19/54

THREATS

new competitors

growing sales of substitute products or services

slowing market growthunfavorable government policy

growing pressure from competition

growing negotiating power of suppliers and

customers

changes in customer needs and preferences

unfavourable demographic situation

unfavourable currency fluctuations

high dependence on demand levels and life cycle of

business


20/54

SwotSwot analysis of The Indiananalysis of The Indian

economyeconomy


21/54

SwotSwot analysis of Indian economyanalysis of Indian economy

Strengths

Huge pool of labour force High percentage of cultivable land

Diversified nature of the economy Huge English speaking population, availability of skilled

manpower Stable economy, does not get affected by external changes Extensive higher education system, third largest pool of

engineers High growth rate of economy Rapid growth ofIT and BPO sector bringing valuable

foreign exchange Abundance of natural resources


22/54

Weaknesses

y Very high percentage of workforce involved in agriculture whichcontributes only 23% of GDP

y Around a quarter of a population below the poverty line

y High unemployment rate

y

Stark inequality in prevailing socio economic conditionsy Poor infrastructural facilities

y Low productivity

y Huge population leading to scarcity of resources

y Low level of mechanization

y Red tapism, bureaucracy

y Low literacy rates

y Unequal distribution of wealth

y Rural-urban divide, leading to inequality in living standards


23/54

Opportunities

y Scope for entry of private firms in various sectors for businessInflow of ForeignDirect Investment is likely to increase in manysectors

y

Huge foreign exchange earning prospect in IT and ITES sectory Investment in R&D, engineering design

y Area of biotechnology

y Huge population ofIndianDiaspora in foreign countries (NRIs)

y Area ofInfrastructure

y Huge domestic market: Opportunity for MNCs for sales

y Huge natural gas deposits found in India, natural gas as a fuelhas tremendous opportunities

y Vast forest area and diverse wildlife

y Huge agricultural resources, fishing, plantation crops, livestock


24/54

Threats

y Global economy recession/slowdown

y Threat of government intervention in some states

y Volatility in crude oil prices across the world

y Growing Import bill

y Population explosion, rate of growth of population stillhigh

y Agriculture excessively dependent on monsoons


25/54

Macro-environment PESTEL


26/54

An Example Of PESTELAn Example Of PESTEL

y The explosive population growth(demographic).

y leads to more resource depletion& pollution (natural) ,

y

Which leads consumers to call formore laws (political-legal),


27/54

yWhich stimulate newtechnological solutions &products (technological) ,

yWhich if they are affordable(economic) ,

yMay actually change attitudes &

behaviour (social-cultural).


28/54


29/54

POLITICAL

Macro-environment PESTEL(1)


30/54

MacroMacro--environmentenvironment PESTEL(1)PESTEL(1)

POLITICAL

y Includes political, governmental, legal andregulatory influences

y Influences at 3 levels: National level for example, laws and

regulations passed by the Indian government

Subnational level for example, laws andregulations passed by the Rajasthan Municipal

government Supranational level for example, agreements

made within the WTO, of which India is amember


31/54

ECONOMIC

Macro environment PESTEL (2)


32/54

Macro environmentMacro environment PESTEL (2)PESTEL (2)

ECONOMIC

y Macroeconomic changes andinfluences on the macro economy by

governments Fiscal policy government regulation

related to taxing and spending

Monetarypolicy government regulation

of the money supply Examples - Business cycles GNP trends,Interest rates, Money supply, Inflation,Unemployment,Disposable income


33/54

Example for Economic factorExample for Economic factor--

Markets require purchasingpower aswell as people.

And purchasing power in an economydepends on current income, prices,

savings, debt & credit availability.


34/54


ySocioculture


35/54


Socioculturey Influences originating from changes in

societyy Main influences social culture (values, attitudes and

beliefs) demography social structure

y Examples- Population demographics, Incomedistribution, Social mobility, Lifestyle changes,Attitudes to work and leisure, Consumerism, Levelsof education


36/54

Demographic environmentDemographic environment

y The main demographic force thatmarketers monitor is the population.

y i.e. the education level & agedistribution etc.

y Example for this is -

TheSinger Company should have

known that its sewing machinebusiness would be hurted by workingwives stil it was slow in responding.


37/54

TECHNOLOGICAL



38/54


TECHNOLOGICAL

Focuses on how changes in technologyaffect an industry, organizations in the

industry, and activities of theorganizations

Includes areas such as:

Goods and services

Production processes Information and communications

Transport and distribution

Society, politics and economics


39/54

Example for technological factorExample for technological factor

It is expectedthat the smartphoneswould

soon eclipsethe PC.

So the companies like Dell, HP, Compaq etc haveto look out for some new innovations


40/54


41/54


Environmental

Marketers need to be aware of raw

materials shortage, increased energycosts & pollution levels

y

Environmental protection lawsy Waste disposal

y Energy consumption


42/54

Examples for NaturalExamples for Natural

EnvironmentEnvironment--

The campaign against Coca-Cola by bythe local community in Plachimadavillage in kerala, alleging theenvironmental deterioration &shortage of drinking water in the

viscinity of the plant.


43/54

Legal



44/54


Legal

y Competition law

y Employment law

y Health and safety

y Product safety

y MONOPOLIES

LEGISLAT

ION/ ANT

ITR

USTREGULATION

y FOOD LAWS

y ENVIRONMENTAL LAWS


45/54


46/54

Porter's Five ForcesPorter's Five Forces AnalysisAnalysis

y The threat of entry.

y The power of buyers.

y The power of suppliers.

y The threat of substitutes

y Competitive Rivalry


47/54

Porter's Five Forces ModelPorter's Five Forces Model

Substitutes

BuyersCompetitive

Rivalry

Suppliers

Potential

Entrants

Bargaining

Power

Bargaining

Power

Threat

of Entry

Threat

of

Entry


48/54


49/54

The threat of entryThe threat of entry

y Economies of scale

y The high or low cost of entry

y

Ease of access to distributionchannels

y Cost advantages not related to thesize of the company

y Will competitor retaliate ?y Government action


50/54

The power of buyersThe power of buyers

y This is high where there a few, largeplayers in a market

y If there are a large number ofundifferentiated, small suppliers

y The cost of switching between

suppliers is low


51/54

The power of suppliersThe power of suppliers

Thepower ofsuppliers tends to be a

reversal of the power of buyers.

y Where the switching costs are high

y Power is high where the brand ispowerful

y

There is a possibility of the supplierintegrating forward

y Customers are fragmented (not inclusters) so that they have little

bargaining power


52/54

The threat of substitutesThe threat of substitutes

yWhere there is product-for-productsubstitution

yWhere there is generic substitution(competing for the currency in yourpocket

yWe could always do without e.g.cigarettes.


53/54

Competitive RivalryCompetitive Rivalry

This is most likely to be high whereentry is likely; there is the threat ofsubstitute products, and suppliersand buyers in the market attempt tocontrol. This is why it is always seenin the center of the diagram.


54/54

Macro Envmnt - Prsntn

Documents

Transcript of Macro Envmnt - Prsntn