Select a company of your choice.

Recollect the current events and

identify the important macro environmental factors which had an
impact on the company. Try to study the opportunities and the threats
posed to the company due to the macro environmental factors.

Macro environment is explained as one which is largely external to Dell Computer

Corporation and thus beyond the direct influence and control of the organization, but
which exerts powerful influence over its functioning. The external environment of the
enterprise consists of individuals, groups, agencies, organizations, events, conditions
and forces with which the organization comes into frequent contact in the course of its
functioning. It establishes interacting and interdependent relations, conducts
transactions, designs and administers appropriate strategies and policies to cope with
fluctuations therein and otherwise negotiates its way into the future.

Demographic environment

The term demographics denote characteristics of population in a area, district, country

or in world. It includes factors such as race, age, income, educational attainment, asset
ownership, home ownership, employment status and location. Data with respect to
these factors within a demographic variable, and across households, are both of
interest, as well as trends over time to businessmen in addition to economist. Marketers
and other social scientists often group populations into categories based on
demographic variables. Some of the demographic factors have great impact on the
business. Factors such as general age profile, sex ratio, education, growth rate affect
the business with different magnitude. India has relatively younger population as
compared to some countries. China on the other hand is having an aging population.
Multinationals are interested in India considering its population size. With having
approximately sixteen percent of the world’s population, the country holds huge
potential for overseas companies.

Dell needs to study different demographic factors. Particularly, it needs to address

following issues:

♦What demographic trends will affect the market size of the industry?

♦What demographic trends represent opportunities or threats?

The business, as such, is concerned with a population's size, age structure, geographic
distribution, ethnic make-up, and distribution of income. While each of the major
elements of discussed below, the challenge for strategists is to determine what the
changes that have been identified in the demographic characteristics or elements of a
population imply for the future strategic competitiveness of the company. We will briefly
discuss a few factors that are of interest to a business.

(i) Population Size:

While population size itself, large or small, may be important to companies that require
a "critical mass" of potential customers, changes in the specific make-up of a
population's size may have even more critical implications. Among the most important
changes in a population's size are:

♦Changes in a nation's birth rate and/or family size;

♦Increases or declines in the total population;

♦Effects of rapid population growth on natural resources or food supplies.

Changes in a nation's birth rate or life expectancy can have important implications for
companies. Are people living longer? What is the life expectancy of infants? There will
be implications for the health care system (for companies serving that segment) and for
the development of products and services targeted at older (or younger) population.

(ii) Geographic Distribution:

Population shifts from one region of a nation to another or from non-metropolitan to

metropolitan areas may have an impact on a company's strategic competitiveness.
Issues that should be considered include:

♦The attractiveness of a company's location may be influenced by governmental

support.

♦Companies may have to consider relocation if population shifts have a significant

impact on the availability of a qualified workforce.

♦The concepts of working-at-home and commuting electronically on the information

highway have also started in India in a very small level. These may imply changes in
recruiting and managing the workforce.

(iii) Ethnic Mix:

This reflects the changes in the ethnic make-up of a population and has implications
both for a company's potential customers and for the workforce. Issues that should be
addressed include:

♦What do changes in the ethnic mix of the population imply for product and service
design and delivery?
♦Will new products and services be demanded or can existing ones be modified?

♦Managers prepared to manage a more culturally diverse workforce?

♦How can the company position itself to take advantage of increased workforce
heterogeneity?

(iv) Income Distribution:

Changes in income distribution are important because changes in the levels of

individual and group purchasing power and discretionary income often result in changes
in spending (consumption) and savings patterns. Tracking, forecasting, and assessing
changes in income patterns may identify new opportunities for companies.

Economic environment

The economic environment refers to the nature and direction of the economy in which a
company competes or may compete. The economic environment includes general
economic situation in the region and the nation, conditions in resource markets (money
market, manpower market, raw material components, services, supply markets and so
on) which influence the supply of inputs to the enterprise, their costs, quality, availability
and reliability of supplies.

Economic environment determines the strength and size of the market. The purchasing
power in an economy depends on current income, prices, savings, and circulation of
money, debt and credit availability. Income distribution pattern determines the marketing
possibilities. The important point to consider is to find out the effect of economic
prospect and inflation on the operations of the firms. Strategists must scan, monitor,
forecast, and assess a number of key economic factors mentioned in the table below for
both domestic and key international markets.

Key Economic Factors

Shift to a service economy Demand shifts for different categories of

goods and services

Availability of credit Income differences by region and

consumer groups

Level of disposable income Price fluctuations

Propensity of people to spend Worker productivity levels

Interest rates Global movement of labour and capital

 Inflation rates Monetary & Fiscal policies

Tax rates Stock market trends

Money market rates Foreign countries' economic conditions

Government budget deficits Import/export factors

Gross national product trend Company of Petroleum Exporting

Countries (OPEC) policies

Consumption patterns Coalitions of Countries/ Regional blocks

Trade Block Formations Unemployment trends

Political-Legal Environment

This is partly general to all similar enterprises and partly specific to an individual
enterprise. It includes such factors as the general state of political development, the
degree of politicalization of business and economic issues, the level of political morality,
the law and order situation, political stability, the political ideology and practices of the
ruling party, the purposefulness and efficiency of governmental agencies, the extent and
nature of governmental intervention in the economy and the industry, Government
policies (fiscal, monetary, industrial, labour and export-import policies), specific legal
enactments and framework in which the enterprise has to function and the degree of
effectiveness with which they are implemented, public attitude towards business in
general and the enterprise in particular and so on. There are three important elements
in political-legal environment.

(i) Government:
Business is highly guided and controlled by government policies. Hence the type
of government running a country is a powerful influence on business: A
strategist has to consider the changes in the regulatory framework and their
impact on the business.
Taxes and duties are other critical area that may be levied and affect the
business. For example, introduction of Fringe benefits Tax has major impact on
the business.
(ii) Legal:
Business Organizations prefer to operate in a country where there is a sound
legal system. However, in any country businesses must have a good working
knowledge of the major laws protecting consumers, competitions and
organizations. Businesses must understand the relevant laws relating to
companies, competition, intellectual property, foreign exchange, labour and so
on.

(iii) Political:

Political pressure groups influence and limit organizations. Apart from sporadic
movements against certain products, service and organizations, politics has
deeply seeped into unions. Also special interest groups and political action
committees put pressure on business organizations to pay more attention to
consumer’s rights, minority rights, and women rights.

Socio-Cultural environment

This is too general an entity which influences almost all enterprises in a similar manner.
It is a complex of factors such as social traditions, values and beliefs, level and
standards of literacy and education, the ethical standards and state of society, the
extent of social stratification, conflict and cohesiveness and so forth. Socio-cultural
environment consist of factors related to human relationships and the impact of social
attitudes and cultural values which has bearing on the business of the organization. The
beliefs, values and norms of a society determine how individuals and organizations
should be interrelated. The core beliefs of a particular society tend to be persistent. It is
difficult for businesses to change these core values, which becomes a determinant of its
functioning. Some of the important factors and influences operating in this environment
are:

♦Social concerns, such as the role of business in society, environmental

pollution, corruption, use of mass media, and consumerism.
♦Social attitudes and values, such as expectations of society from business,
social customs, beliefs, rituals and practices, changing lifestyle patterns, and
materialism.
♦Family structure and changes in it, attitude towards and within the family, and
family values.
♦Role of women in society, position of children and adolescents in family and
society.
♦Educational levels, awareness and consciousness of rights, and work ethics of
members of society.
The social environment primarily affects the strategic management process within the
organization in the areas of mission and objective setting, and decisions related to
products and markets.

Technological environment

The most important factor, which is controlling and changing people’s life, is technology.
Technology has literally created wonder. Man could realise its dream of walking in the
moon, traveling in spaceships, and go to the other side of the globe within few hours.
They have already started dreaming of living of very extended life of hundreds years
with the latest development of genetic sciences and technology.

Technology has changed the way people communicate with the advent of Internet and
telecommunication system. Technology has changed the ways of how business
operates now. This is leading to many new business opportunities as well as making
obsolete many existing systems. The following factors are to be considered for the
technological environment:

♦The pull of technological change.

♦Opportunities arising out of technological innovation.

♦Risk and uncertainty of technological development.

♦Role of R&D in a country and government’s R&D budget.

The technology and business are highly interrelated and interdependent also. The fruits
of technological research and development are available to society through business
only and this also improves the quality of life of the society. Hence, technology is
patronized by business. Then again technology also drives business and makes a total
change on how it is carried out. The interface between business and technology is
explained in the figure: Interface between Business & Technology. Important
technology-related issues that might affect a broad variety of companies include:

♦Access to the "information highway" through the Internet which may enable large
numbers of employees to work from home or provide strategists with access to richer
sources of information,

♦Business-to-business sales and exchanges,

♦Providing customers with access to online shopping through the Internet.

For example, Dell Computer Corporation reduces its paperwork flow, schedules its
payments more efficiently, and is able to coordinate its inventories efficiently and
effectively by using the capabilities of the Internet. This helps to eliminate/reduce
paperwork, flatten companies, and shrink time and distance, thus capturing a
competitive premium for the company. Because the technological aspects are so
important, some of the key questions that can be asked in assessing the technological
environment are given below.

♦What are the technologies {both manufacturing and information technologies} used by
the company?

♦Which technologies are utilised in the company's business, products, or their parts?

♦How critical is each technology to each of these products and businesses?

♦Which external technologies might become critical and why? Will they remain available
outside the company?

♦What has been the investment in the product and in the process side of these
technologies? For the company and for its competitors? Design? Production?
Implementation and service?

♦What are the other applications of the company's technologies? In which applications
does the company currently participate and why? In which applicating does the
company does not participate and why?

♦Which technological investments should be curtailed or eliminated?

♦What additional technologies will be required in order to achieve the current corporate
business objectives?

♦What are the implications of the technology and business portfolios for corporate
strategy?

STRATEGIC RESPONSES TO THE ENVIRONMENT

The business organization and its many environments have innumerous

interrelationship that at times, it becomes difficult to determine exactly where the
organization ends and where its environment begins. It is also difficult to determine
exactly what business should do in response to a particular situation in the environment.
Strategically, the businesses should make efforts to exploit the opportunity ad thought
the threats. In this context following approaches may be noted:

(i) Least resistance:

Some businesses just manage to survive by way of coping with their changing external
environments. They are simple goal-maintaining units. They are very passive in their
behaviour and are solely guided by the signals of the external environment. They are
not ambitious but are content with taking simple paths of least resistance in their goal-
seeking and resource transforming behaviour.

(ii) Proceed with caution:

At the next level, are the businesses that take an intelligent interest to adapt with the
changing external environment. They seek to monitor the changes in that environment,
analyse their impact on their own goals and activities and translate their assessment in
terms of specific strategies for survival, stability and strength. They regard that the
pervasive complexity and turbulence of the external environmental elements as ‘given’
within the framework of which they have to function as adaptive-organic sub-systems.
This is an admittedly sophisticated strategy than to wait for changes to occur and then
take corrective-adaptive action.

(iii) Dynamic response:

At a still higher sophisticated level, are those businesses that regard the external
environmental forces as partially manageable and controllable by their actions. Their
feedback systems are highly dynamic and powerful. They not merely recognise and
ward off threats; they convert threats into opportunities. They are highly recognise and
ward off threats; they convert threats into opportunities. They are highly conscious and
confident of their own strengths and the weaknesses of their external environmental
‘adversaries’. They generate a contingent set of alternative courses of action to be
picked up in tune with the changing environment.