The Macro Environment
Macro analysis is about understanding the limits – the things that you are an individual or organisation have no control over. The macro-environment is the cards that you are dealt, and you need to play as well as you can with what you have.
The macro-environment is normally seen as a constraint, but it can be exploited and sometimes very innovatively used to and organisation’s advantage!
Understanding your macro environment is usually the first step in strategic analysis. Some will also call this external analysis, but that is not entirely correct as market-analysis is also essentially an external analysis.
The tried and tested way of looking at the macro environment is doing PEST or PESTLE analysis, but keep in mind that looking at threats and opportunities in SWOT or TOWS analysis can also be a form of macro analysis.
The purpose of doing macro-analysis is to identify opportunities and threats that will impact the business or even broader on the industry your business plays in.
By doing macro analysis, you would ideally be able to identify the factors that will affect you and your industries, performance, growth and profitability.
Environmental analysis should also include looking at trends and patterns – for instance, growth rates, interest rates consumer spending etc.
Because of the pace of change in all environments, macro analysis has become more complex and has become a constant evaluation rather than doing a PESTLE analysis once a year.
Leaders need to continually scan macro-environmental factors by always keeping abreast with the latest news and happenings.
Here are some things you can do better to understand the macro environment on a continual basis.
- Networking in your industry and with leaders formulating policy and legislation
- Subscribe to 3rd party industry and environmental reports
- Reading the newspaper, financial and current affairs publications and watching the news
- Listening to PODcasts and consuming other web resources
Although it’s not the intent of this course to teach you all the techniques referenced here, we will give you a short overview of what the technique is about; we advise you to dig deeper and ensure that you understand non-ADapT techniques or methods used in ADapT.
Although you can do a PESTLE analysis on your own, it’s best to do it in a diverse group with different views and experiences.
For each of the Factors below, list things that could affect your business or industry, both positive and negative and note why you say that, lastly try and guess the effect of the impact in some quantifiable way.
Political: identify changes in the policies, issues and also new legislation currently being propagated or debated
Economic: identify trends such as changes in personal disposable income, interest rates, inflation, exchange rates, unemployment and the effect of globalisation.
Social: identify trends in society, their beliefs, behaviours, values and norms, about social and environmental issues, population growth, age distribution and other forms of segmentation that may be pertinent.
Technological: identify changes in the application of technology and uptake and use of technology. New technologies and their impact on other factors. (Interesting note – none of the factors are independent, they are all interdependent)
Legal or legislative: although closely linked to the political environment, this should attempt to look at the intent and effect of legislation and also should include understanding court decisions and how they change or shift over time.
Environmental: identify how changes in the environment will impact on your industry.
Once done, create a summary and attempt to identify identified opportunities and threats to your industry, your company and specifically your company if current growth trends continue.
Maybe you see an opportunity that the rest of your industry has missed, and you can exploit that, the reverse is also true, you may spot a threat that others don’t see, and you can take actions to safeguard your organisation against these.