What is a 'Macro Environment'
A macro environment is the condition that exists in the economy as a whole, rather than in a particular sector or region. In general, the macro environment includes trends in gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro environment is closely linked to the general business cycle as opposed to the performance of an individual business sector.
BREAKING DOWN 'Macro Environment'
The macro environment in which a company or sector operates influences its performance, and the amount of the influence depends on how much of the company's business is dependent on the health of the overall economy. Cyclical industries, for example, are heavily influenced by the macro environment, while consumer staples are less influenced. The macro environment can also greatly affect consumers directly, affecting their ability and willingness to spend. Consumers’ reactions to the broad macro environment are closely monitored by businesses and economists as a gauge for an economy’s health. Effects from some of the market’s key factors influencing the macro environment include the following:
Gross Domestic Product
GDP is a measure of a country’s output and production of goods and services. The Bureau of Economic Analysis releases a quarterly report on GDP growth that provides a broad overview of the output of goods and services across all sectors. GDP is often the lead influencing factor of corporate profits for the economy, which is another measure of an economy’s comprehensive productivity.
Inflation is a key factor watched by economists, investors and consumers. It affects the spending strength of the U.S. dollar and is a factor closely regulated through monetary policy by the Federal Reserve. The target rate for annual inflation from the Federal Reserve is 2%. Inflation higher than 2% significantly affects the purchasing power of the dollar, making each unit less valuable as inflation rises.
Employment levels in the United States are measured by the Bureau of Labor Statistics, which releases a monthly report on increases in business payrolls and the status of the unemployment rate. As of June 3, 2016, the U.S. unemployment rate is 4.7%. The Federal Reserve also seeks to regulate employment levels through monetary policy stimulus and credit measures that can ease borrowing rates for businesses to help improve capital spending and business growth, also resulting in employment growth.
The Federal Reserve’s monetary policy initiatives are a key factor influencing the macro environment in the United States. Monetary policy measures are typically centered around access to credit and federal interest rate limits, one of the main levers of the Federal Reserve’s monetary policy tools. The Federal Reserve sets a federal funds rate for which federal banks borrow from each other, and this rate is used as a base rate for all credit rates in the broader market. The tightening of monetary policy indicates rates are rising, making credit borrowing less appealing.
Show MoreThere are two kinds of external marketing environments; micro and macro. These environments’ factors are beyond the control of marketers but they still influence the decisions made when creating a strategic marketing strategy.
micro and macro environments
Micro Environment Factors
The suppliers: Suppliers can control the success of the business when they hold the power. The supplier holds the power when they are the only or the largest supplier of their goods; the buyer is not vital to the supplier’s business; the supplier’s product is a core part of the buyer’s finished product and/or business.
The resellers: If the product the organisation produces is taken to market by 3rd party resellers or market intermediaries such as…show more content…
Economic factors: The economic environment can impact both the organisation’s production and the consumer’s decision making process.
Natural/physical forces: The Earth’s renewal of its natural resources such as forests, agricultural products, marine products, etc must be taken into account. There are also the natural non-renewable resources such as oil, coal, minerals, etc that may also impact the organisation’s production.
Technological factors: The skills and knowledge applied to the production, and the technology and materials needed for production of products and services can also impact the smooth running of the business and must be considered.
Political and legal forces: Sound marketing decisions should always take into account political and/or legal developments relating to the organisation and its markets.
Social and cultural forces: The impact the products and services your organisations brings to market have on society must be considered. Any elements of the production process or any products/services that are harmful to society should be eliminated to show your organisation is taking social responsibility. A recent example of this is the environment and how many sectors are being forced to review their products and services in order to become more environmentally friendly.
Micro and macro environments have a significant impact on the success of marketing campaigns,