4. The macro environment

Question 1

What is the macro environment?

Answer 1

The environment which surrounds the business (outside world)

Question 2

What is the PESTEL analysis?

Answer 2

Political (taxation)
Economic (Inflation)
Social and demographic (education)
Technological (New products)
Ecological (Sustainability)
Legal (industry regulations)

Question 3

Which models would you use to carry out an external/ environmental analysis

Answer 3

PESTEL
Porter’s 5 forces

Question 4

What is porter’s diamond?

Answer 4

A model which can be used to explain why some nations have a competitive advantage

Question 5

What are the four determinants for porter’s diamond?

Answer 5

Demand conditions (the more demanding the environment, business is forced to be more innovative)

Related and supporting industry (proximity of supporting industries lead to increased innovation)

Factor conditions (availability of resources needed to operate)

Strategy, structure and rivalry (competition forces firms to become more efficient to survive)

Question 6

What is the PESTEL analysis used for?

Answer 6

Analysing the macro environment to identify potential opportunities and threats

Question 7

What is scenario planning?

Answer 7

Used to consider future responses to a range of potential outcomes