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Macro-environment refers to the general conditions and forces in an economy, beyond the control of any one firm operating in the economy, and which is common to all the industries common operating within an environment. The macro-environment is frequently classified in 6 major groups of environmental factors, often called the PESTEL framework. These are political, economical, sociocultural, technological, environmental and legal. The name PESTEL has been formed out of first letters of names these factors.
Political factors cover the features of the economy which are largely influenced by the nature of government and their policies. This will include policies rules and regulations in areas such as taxation, monetary and fiscal matters, regulation of trade and industry, foreign relations, and social issues. Political environment also covers issues such as political ideology and stability.
Economic environment covers the current condition of the economy and the direction in which it is moving. It covers the overall state of economy in terms of variables like GNP, interest rates, inflation, rate of employment, and proportions of primary secondary and tertiary sectors accounting for total economic activity. It also includes the state of industry and terms in terms of features like types of industrial and trade activities, overall size of individual sectors, and the overall state of each industry.
Sociocultural factors, also called demographic factors, cover the various aspect of the people within the economy. It covers description of physical nature of the population such as total population, age and sex distribution, and population growth rate. It also covers overall description of nature of population in terms of social and psychological factors such as education, income distribution, culture, and attitudes.
Technological factors cover all aspects of availability. use and development of technology for various economic activities. This information pertains to the economy as a whole as well as to specific sectors within the country. As a measure of the rate of growth of technology it might include factors such as total spending on research and development, and rate of acquisition and use of new technologies.
Environmental Factors here refer to the physical or geographical environment. Apart from straightforward description of geographicals as area, nature of land and weather condition, it will include specific issues like locational advantages and environmental pollution related issues.
The legal environmental covers the general laws and legal system and the laws of the land. While different businesses may be more impacted by different laws, some laws may have wider application - for example those relating to monopolies, industrial regulation, employment, company affairs, and consumer protection.
As you will notice these macro-environmental factors are common for all types of economies. Also within an economy, every company is impacted by these factors. However, specific factors may affect different industry differently. Study and description of complete set of macro-environmental factors can run into thousands of pages and still not cover all the important aspects. And compiling such a description for all the southern African countries is even more gigantic, and perhaps futile task, for any single business. To make best use of this PESTEL framework each company needs to identify and study the factors most relevant for its business.
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