Analyzing the general environment/Macro-environment - Essay Example

Analyzing the macro-environment [School Analyzing the macro-environment There are numerous elements involved in the macro-environment analysis that have an effect on the operational decisions of a company. The elements are beyond the control of the company but need to be identified because these items can impact the profitability of the firm. The goal of the macro-environment analysis is to discover potential opportunities and threats to the company. The company must determine how and why the macro-environmental elements have an effect on the company.

Three of the factors that can affect the company’s operational decisions fall into the economic, social, and demographics categories. One of the economic factors involved in the macro-environmental analysis is the business cycle. The growth or the decline of the economy can have an effect on marketing and the top line revenues of a company. The 2008 recession had a drastic effect on the profitability of company’s because consumers may had restrictions on their budgets that will affect their spending habits.

Target Corporation changed their marketing strategy to emphasize price in their “expect more, pay less” advertisements. The company wanted to gain market share from Wal-Mart whose marketing strategy, pervious to the recession, emphasized low price. A company must understand the direction of the economy in their in their macro-environmental analysis. Corporations must understand the sociological patterns of their customers otherwise, the corporation could lose market share to their competitors.

Understanding the consumer’s wants and desires is a necessity for companies to be successful in their top line revenue projections. Failing to recognize current social trends could possibly result in a loss of market share for a company. During the 2008 recession when Target implemented a low cost advertising initiative, Wal-Mart began to emphasize quality to lure customers from Target. Because they already had the low price strategy in place, Wal-Mart wanted to address the sociological needs of the consumer who wanted quality items for less and consumers who wanted to shop in one place for all of their needs.

When companies implement their marketing strategies, they must know the demographics of their shoppers. Companies advertise to their target market in order to attract market share from the competition. Demographics, such as age, education, and income levels are a vital ingredient to the marketing strategies of corporations. Wal-Mart’s and Target’s marketing efforts are geared towards their target market. Both companies utilize macro-environmental analysis to track the age, education, and income of their shoppers.

During the 2008 recession, both companies understood that the income levels of their consumers may have decreased. Target stressed the low prices and Wal-Mart stressed the quality aspects of their products. There are various components in the macro-environment investigation that have an effect a company’s profitability. The company has no control over these external components. The goal of the macro-environment examination is to detect possible opportunities and warnings. The company must determine how and why the macro-environmental elements have an effect on the company.

Three of the factors that can affect the company’s operational decisions fall into the economic, social, and demographics categories. References "PESTEL analysis of the macro-environment." Oxford University Press: OUP.COM Homepage. N.p., n.d. Web. 20 Apr. 2011.