STRATEGIC BUSINESS

ANALYSIS

ASSIGNMENT – 1

SUBMITTED BY: SALWA SARFARAZ

SUBMITTED TO: SIR SABAHAT KHAN
SUBMISSION DATE: 4-NOV-2019
CLASS: MBA – HRM (3RD SEMESTER)
ROLL NO: 21
Q1. How macro environmental forces can offer threats and opportunities to
micro environment
There are 6 macro factors that affect business environment positively or negatively. PESTLE Analysis
tool is widely used in the business community to find out opportunities and threats.

Political Factors

In external environment, political factors are Government actions, rules and regulation. Change in
political situation can be a very sensitive issue to a company. Political factors that affect business are
uncontrollable like political stability, current and impending legislation. The only solution is
to conduct environmental analysis. It will help to know the threats and opportunities and take
precautionary measures as desired.

Economic Cycles

Companies are enormously sensitive to occurrence of changes in an economy. Economic factors include
inflation rate, currency exchange rate etc.

Examples

During bad times most of the consumers do not buy new cars, avoid eating out or building a new house
for them and vice-versa. However, we must understand that not all the industries are affected
negatively with the changes in economy. During bad times most of the families cut down their expenses,
they compromise on quality and brands in order to remain in their budget. They limit their savings by
cutting down their extra expenses without affecting their standard of living. In the same way companies
also cut down their expenses when their sales are down.

During the time of recession, rate of unemployment tends to rise which causes consumers to spend less.
And this often results in a “bad circle,” with more unemployed people and those who lost their jobs due
to the recession. Some companies use this situation very wisely and take this opportunity to invest in
growth since the things can usually be bought more cheaply.

Social Factors

Organizations can be affected by demographics change and change in customs.

Example

The demand for baby food has decreased because of birth control. The demand for prepared food has
increased with the increase in number of working women. This is an opportunity for few organizations
such as fast food restaurants but on other hand it is a problem for manufacturer of furniture with the
increase of unmarried singles, as some people don’t buy furniture until their marriage.
Technological Factors

The changing trends in the advancement of technology are very rapid. These technological changes can
affect business negatively or positively, if not responded properly. These changes can positively improve
business productivity, cut costs and minimize production and distribution cost.

Example

For example, Federal Express demand lowered with the invention of Fax Machine. Record stores have
vanished due to no business as people are more towards downloading songs from internet (illegally
getting it from friends – Even US President has confessed this act).

Legal Factors

Organizations are very susceptible to change in laws and interpretations done by courts.

Example

For instance, some people have sued McDonald’s blaming McDonald’s hamburger lead them to obesity.
There is not much that firms can do about several laws. For example, some laws require organizations to
make disclosure to customers about the applied interest rate they will be paying for product purchased
on instalments.

Inflation

Stating explicitly whether the amount being referred is in actual dollar or any other currency to be the
adjusted figure will be necessary. This is because with time a number of economies have faced inflation
crisis which has impacted on the real value of their currencies.

For example, a single dollar spent in 2007 will have a different value when compared with a dollar in
1960. Therefore, it is becoming increasingly important to state whether a quoted amount is inflation
adjusted.

FINAL WORD
We all know that macro factors are uncontrollable, but a better undemanding is unavoidable for
business expansion. This understanding will minimize business risk and give a competitive advantage
over competitors.

Q2. How micro environmental forces can offer threats and opportunities to an
organization
Six microeconomic business factors that affect almost any business are customers, employees,
competitors, media, shareholders and suppliers.

The Impact of Customers

Customers have the most direct microeconomic impact on a business. The simple fact is that you can't
successfully operate a for-profit company without attracting targeted customers. Knowing your ideal
customer types and developing and presenting effective marketing campaigns are integral to building a
customer base and generating revenue streams.

Availability of Employees

Your workers produce, sell or service the goods and service that drive your business. The availability of
qualified, motivated employees for your business type is vital to economic success. If you operate a
highly technical business, for instance, you might have to pay more in salary to attract a limited number
of available, specialized workers.

Distribution Channels and Suppliers

Sourcing goods used in production or resale and distributing your inventory to customers are important
as well. Manufacturers rely on materials suppliers and resale companies rely on manufacturers or
wholesalers to transport goods. To operate profitably, you need to get good value on products and
supplies and, in turn, offer good value to your customers with accessible solutions.

Level of Competition

The level of competition also impacts your economic livelihood. In theory, more competitors means
your share of dollars customers spend diminishes. However, a large number of competitors in an
industry usually signifies lots of demand for the products or services provided. If an industry lacks
competition, you might not find enough demand to succeed in the long run.

Availability of Investors

Shareholders and investors may help fund your company at start-up or as you look to grow. Without
funds to build and expand, you likely can't operate a business. You could look to creditors, but you have
to repay loans with interest. By taking on investors, you share the risks of operating and often gain
support and expertise. You do give up some control, though.

Media and the General Public

Your local community and media also affect your ongoing business image. Communities often support
companies that provide jobs, pay taxes and operate with social and environmental responsibility. If you
don't do these things, you may run into negative public backlash. Local media often help your story
proliferate, for better or worse.

In Summation

Both micro and macro factors have a strong influence on how successful your business is. Every decision
that you make needs to take these two environments into consideration. Your marketing strategies have
to be based on them as well, if you truly want them to be lucrative, and retain a reputable position on
the market.