In many cases, you will find developed economies to offer a favorable political environment, while developing countries can be more tricky. However, after analyzing the first few variables, you may quickly realize whether the country is attractive to do business in or not. Foreign trade policy (e.g., trade restrictions)Īs you can see, the list of factors to consider is long.Potential upcoming changes to legislation.Depending on the country and the region you are looking at, specifically consider: To understand the political forces, you should consider a variety of variables. The PESTLE method (or any other variation as described above) means going through the forces of the macro environment step-by-step.
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How to Analyze the Macro Environment using the PESTLE Method In the following, let’s go through each of the forces and discuss some specific analyses you can do to understand the macro environment. A SWOT analysis will enable the organization to identify the risks and opportunities in its environment, as well as to position itself in its market by identifying its strengths and weaknesses. Next to going through the six forces in the macro environment, companies may conduct SWOT analyses.
Basically, all the approaches refer to going through the forces in the macro environment step-by-step and carefully investigating each of them. Sometimes, you may also read PEST approach or any other subsets – in these cases, the analysis is limited to selective forces. It may also be called PESTEL, DEPEST or DESTEP approach. To analyze the macro environment, the PESTLE approach is commonly used. If there is an economic downturn, the company may consider to develop entry-versions of its products and introduce discount schemes. For instance, if there is a change in regulations visible, the company should consider adjustments to its products. This may often be included in broader role, for instance market research and planning. Depending on the size of the business, a part-time or full-time employee or even a whole department may be responsible for watching any developments closely and if necessary readjust the marketing strategy.
Therefore, the company should constantly monitor the macro environment. While some forces do not change much or at a very low rate (e.g., the socio-cultural environment), others may change rapidly (e.g., political or legal forces when there is a change in government or government strategy). The macro environment is subject to constant change.
However, analyzing the macro environment before entering a new market or region is not enough. The final decision to enter the market may very well stand or fall with the forces found in the macro environment. It should particularly figure out the opportunities and risks that it can expect. The first one is rather obvious: Before entering a new market (whether it is a region or a different market in the home region), the company should analyze the macro environment in detail. There are several points in time when you would want to conduct macro environment analysis. The goal is straightforward: to develop a likely scenario for the organization in order to position itself, for example, adopting the strategic stance that will allow it to prosper. We also hear the phrase “environmental strategic diagnostic” a lot. The examination of a company’s macro-environment is typically part of a wider global approach to strategic research. These analysts will examine broad macro-environmental influences such as politics, the economy, demography, and technology. Some businesses will hire analysts who have been trained to examine macro-environmental conditions and provide suggestions based on their findings. This is where macro environment analysis comes into play. Therefore, understanding the specific macro environment the firm plans to operate in is absolutely crucial.
It is one of the primary influences on both the firm’s ability to operate as well as on consumer demand. The forces in the macro environment, also referred to as DEPEST or DESTEP forces, shape the marketplace. Macro environment analysis is a critical step at various stages in the business cycle. Closing Words Why and When to do Macro Environment Analysis.Match Opportunities and Threats with your Strengths and Weaknesses.Conducting a SWOT Analysis to Understand the Macro Environment.How to Analyze the Macro Environment using the PESTLE Method.Why and When to do Macro Environment Analysis.
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