Analysis of The Global

Macroenvironment
Adam Dilip Mutum
FMA3093
Introduction
Macro (or ‘far’) environment is the
part of the environment over which
the business can rarely exert any
direct influence but to which it
must respond.
Analysed by categorizing
environmental influences at the
macro-level into broad groupings.
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STEP Analysis
Acronym also rearranged as PEST
Extended forms of PEST analysis
are used,
 SLEPT (plus Legal) or
 the STEEPLE analysis:
Social/demographic, Technological,
Economic, Environmental (natural),
Political, Legal and Ethical factors.
 Geographical factors may be relevant.

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Sociocultural Factors
The social and cultural influences on business vary
from country to country.
 Income distribution
 Demographics, Population growth rates, Age distribution
 Labor / social mobility
 Lifestyle changes
 Work/career and leisure attitudes
 Entrepreneurial spirit
 Education
 Fashion, hypes
 Health consciousness & welfare, feelings on safety
 Living conditions

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Sociocultural Factors
Questions:
 What is the dominant religion?
 What are attitudes to foreign products and services?
 Does language impact upon the diffusion of products onto
markets?
 How much time do consumers have for leisure?
 What are the roles of men and women within society?
 How long are the population living? Are the older
generations wealthy?
 Do the population have a strong/weak opinion on green
issues?

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Technological Factors
Technology is vital for competitive advantage, and
is a major driver of globalization.
 Government research spending
 Industry focus on technological effort
 New inventions and development
 Rate of technology transfer
 Life cycle and speed of technological obsolescence
 Energy use and costs
 (Changes in) Information Technology
 (Changes in) Internet
 (Changes in) Mobile Technology

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Technological Factors
Questions:
 Does technology allow for products and services to be
made more cheaply and to a better standard of quality?
 Do the technologies offer consumers and businesses
more innovative products and services such as Internet
banking, etc?
 How is distribution changed by new technologies e.g.
books and flight tickets via the Internet, etc?
 Does technology offer companies a new way to
communicate with consumers e.g. banners, Customer
Relationship Management (CRM), etc?

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Economic Factors
Marketers need to consider the state of a trading
economy in the short and long-terms.
 Economic growth
 Interest rates & monetary policies
 Government spending
 Unemployment policy
 Taxation
 Exchange rates
 Inflation rates
 Stage of the business cycle
 Consumer confidence

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Political Factors
Has a huge influence upon the regulation of
businesses, and the spending power of
consumers and other businesses.
 Environmental regulations and protection
 Tax policies
 International trade regulations and restrictions
 Contract enforcement law
 Consumer protection
 Employment laws
 Government organization / attitude
 Competition regulation
 Political Stability
 Safety regulations

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Political Factors (incl.
Legal)
Questions :
 How stable is the political environment?
 Will government policy influence laws that regulate
or tax your business?
 What is the government's position on marketing
ethics?
 What is the government's policy on the economy?
 Does the government have a view on culture and
religion?
 Is the government involved in trading agreements
such as EU, NAFTA, ASEAN, or others?

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A PEST analysis can be done via
workshops using brainstorming
techniques.
Usage of PEST analysis can vary
from business and strategic
planning, marketing planning,
business and product development
to research reports.
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Porter’s Diamond
Introduced by Porter (1990)
Book: The Competitive Advantage of Nations
Can help understand the competitive position
of a nation in global competition
Competitive Advantage of nations has been
the outcome of 4 interlinked advanced factors
and activities in and between companies in
these clusters.

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Porter’s Diamond

Chance

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Porter’s Diamond
Factor endowments: nation’s position in factors of
production such as skilled labor or infrastructure
necessary to compete in a given industry.
Demand conditions: the nature of home demand for
the industry’s product or service.
Related and supporting industries: the presence or
absence in a nation of supplier industries or related
industries that are nationally competitive.
The Business’s strategy, structure and rivalry: the
conditions in which companies are established,
organized, and managed and the nature of domestic
rivalry.

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Porter’s Diamond
Success occurs where these attributes
exist.
 More/greater the attribute, the higher
chance of success.
 The four condition s need to be
favourable if an industry in a country is to
gain competitive advantage
The diamond is mutually reinforcing.

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Porter’s Diamond
Factor Conditions
 Basic can provide an initial advantage.
 Must be supported by advanced factors to
maintain success.
 "Non-key" or basic or general factors, such
as unskilled labor and raw materials, do not
generate sustained competitive advantage.
 Porter argues that the "key" factors of
production (or specialized factors) are
created, not inherited.

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Porter’s Diamond
 Specialized factors of production are
skilled labor, capital and infrastructure.
 Specialized factors involve heavy,
sustained investment. They are more
difficult to duplicate.
 This leads to a competitive advantage,
because if other firms cannot easily
duplicate these factors, they are valuable.

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Porter’s Diamond
Role of Chance
 Events like wars, technological decisions by
foreign govts., significant shifts in world
financial markets, etc. can also affect
national competitive advantage
Role of Government
 Role "acting as a catalyst and challenger; it
is to encourage - or even push - companies
to raise their aspirations and move to higher
levels of competitive performance …" .

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