The Micro and Macroeconomic Environments - Essay Example

Learning Outcomes of ECN307 Module Introduction The essay provides a succinct review my understanding of the ECN307 module, whichhas several learning outcomes. For instance, I will describe and critically appraise the concepts required to analyses the impact of both micro and macroeconomic environment on business. Secondly, this work will also discuss an organization’s business plan. The third aspect of this analysis is an analysis of the appropriate techniques of strategic analysis to particular business problems. This work, therefore, presents a reflection of the understanding of the concepts in this module as well as their connections to real life business environment. My perspective of the mentioned learning outcomes is that the business environment is a complex setting with diverse factors that influence all the decisions that managers make concerning business. This work will seek to demonstrate the interrelations of the mentioned learning outcomes and their relevance to the performance of firms. The micro and macroeconomic environments and their relationship to business The environment consists of both internal and external factors that interplay to affect the way businesses make choices regarding what to produce and what to sell on the market. For this case, the market place forms the biggest force in the external environment that affects the choices from within the internal environment. I understand that the government forms unit of regulation of business activities in both the micro and macroeconomic environments. Economics deals with the choices that people make because of the limited resources, which for this case, contains both the individual producers and consumers as well as the aggregate economy. Microeconomics is, therefore, the study of individuals within an economy while macroeconomic concerns the aggregate economy. Both firms and consumers within the economy have to make choices regarding the use of limited resources. For this case, the consumers form the market forces because they affect the levels of demand for the goods and services that the firms make within the economy. I understand that the choices that companies make concerning the production of their products constitute the market structures such as the oligopolies, monopolies, and perfect competition. Managers of the firms have to make choices of the best alternatives that will give the best returns after studying the activities of their competitors. Such decisions constitute the market curves, which are actual theoretical tools that predict the likely outcomes of a given decision concerning the production of goods and services. It is evident that the environmental aspects of the business form a basis for all the management decisions and that the purpose of strategic management is to seek successful methods of doing business. There are those who manage businesses as a way of eliminating all the competitive aspects, such as the monopolies. Such firms seek to exploit all the competitive weaknesses of their potential rivals within the market. On the other hand, others look for strategies that will make them adaptable to the prevalent situations. A strategy should be one that seeks to balance between the internal and the external environment. For this case, strategic management is one that assesses the internal capabilities of a business and matches it with the competitive aspects in a way that will ensure that the firm still makes profits. A manager is, therefore, a link between the internal and the external environment. The managers have to scan, monitor and measure the aspects of the environment and find the best alternatives that will make the business profitable. The general environment is one that possesses risks in terms of invested capitals for businesses, as well as financial uncertainties. Such a consideration transformed my perception of management as one that will adapt a company to risk conditions. Managers have to conduct PEST analyses as a way of determining the levels of influence of the external factors of the environment. I learnt that the weakest signals of the environment could become forces that change the competitive environment even though they initially look unnoticeable. On the other hand, SWOT analyses determine the levels of adaptability of an organization to the external environment, which also means that they learn how the company competes. The macroeconomic environment is one that studies the general economy of a country in aspects such as the monetary system. Money is an acceptable medium of exchange for a given region, which will ensure the exchange of goods and services. Both monetary and fiscal policies have a remarkable influence on the demand for and supply of money within the economy. For this case, the financial tools are mechanisms that the central banks of nations constitute to control the availability of money to the people. The banks do so with a target of influencing the purchasing power of the currencies of their countries. The model thought me of the need for the government to regulate the amount of money in circulation within the economy. The amount of money that people hold on to at a given time is determined by three motives. The first is for transaction motive, which is holding on to money to meet daily operations. The precautionary motive determines the amount of money that individuals hold onto to meet emergencies. Lastly, people hold onto to money for speculative motives because anticipating changes in prices of goods and services in the market. The three motives of determine the amount of money that people hold onto while the fiscal policies determine the amount of money in circulation. Altogether, the state of the economy determines the performances of the market structures and the overall profitability of the firms. Conclusion In the essay, I have reflected my understanding of the relationship between strategic management and the business environment. I learned that the environment is responsible for the all the strategic management activities of the companies. The learning outcomes of these module link into one aspect of strategies and their relation to competition, which is still an aspect of the environment within which businesses operate. The market structures are an interaction of the forces of demand and supply and the strategies of performance for the businesses involved. Read More