Chapter 4: Macro Environment Flashcards
(11 cards)
What is a macro environment?
The macro environment includes external factors like the economy, laws, technology, and social trends that affect all businesses but can’t be controlled by them.
What are the four frameworks that help businesses analyse and interpret the factors shaping the macro environment?
Environmental analysis
PESTEL
Porter’s Diamond
Competitive advantage of nations
What is environmental analysis and how could a business use it to understand the macro environment?
Environmental analysis is assessing the social, political and environmental external factors such as the economy, laws, technology and culture that could potentially impact the businesses operations.
What is Porter’s Diamond and how could a business use it to understand the macro environment?
Porter’s Diamond is a model that explains why certain industries succeed in specific countries. It looks at factors like skilled labor, local demand, and strong suppliers. A business can use it to assess a country’s strengths and whether it’s a good place to compete or expand
What is PESTEL and how could a business use it to understand the macro environment?
PESTEL is a tool that breaks down the macro environment into six areas: Political, Economic, Social, Technological, Environmental, and Legal. A business uses it to analyze how these external forces might impact operations and decision-making
What is the Competitive Advantage of Nations and how could a business use it to understand the macro environment?
The Competitive Advantage of Nations is a theory that explains why some countries are better at certain industries. It focuses on things like innovation, infrastructure, and government policy. Businesses use it to understand which countries offer a strong environment for growth or investment
What can PESTEL analysis be used for?
To analyse the macro environment as part of strategic planning to identify potential opportunities and threats facing the industry.
What does PESTEL stand for?
Political, Economic, Social and demographic, Technological, Ecological/environmental, Legal
Define scenario planning
It consists of a business creating a picture of the potential future for the purpose of managerial learning and developing strategic responses.
What are the four determinants of Porter’s Diamond?
Factor conditions refer to the basic and advance resources possessed by a country that are required for success in a specific industry. For example an abundance of natural resources or skilled labour.
Demand conditions pertain to the domestic demand for a particular product. Local demand forces businesses to be innovative and meet the demand in order to remain in the industry.
Related and supporting industries allows the business to have easy and quick access to supplies, and the share of knowledge can encourage innovation.
Strong domestic rivalry ensures that companies are constantly innovating in order to survive, also the structure and strategy used by businesses in a particular nation can provide an advantage.
