Macro Business Environment

Economic environment

• Consist of Interest rates, inflation rates, changes in disposable income of people; stock market indices and the value of rupee
• For Example, in the case of construction companies and automobile manufacturers, low longer-term rates are beneficial because they result in increased spending by consumers for buying homes and cars on borrowed money.
• Rise in the disposable income of people creates an increasing demand for products.
• High inflation rates generally result in constraints on business enterprises as they increase the various costs of business such as the purchase of raw materials or machinery and payment of wages and salaries to employees.

Social environment

• Include the social forces like customs and traditions, values, social trends, society’s expectations from business, etc.
•  For example, the celebration of festivals provides opportunities for greetings card companies, sweets or confectionery manufacturers, etc
• Social trends present various opportunities and threats to business enterprises.
• For example, the health-and-fitness trend has become popular among a large number of urban dwellers. This has created a demand for products like organic food, diet soft drinks, gyms, bottled (mineral) water and food supplements.
• This trend has, however, harmed business in other industries like dairy processing, tobacco and liquor.

Technological Environment:

• Includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
• .Airline companies have Internet and World Wide Web pages where customers can look for flight times, destinations and fares and book their tickets online.
• Shifts in demand for electric engines, from fountain pens to ballpoint, from propeller airplanes to jets, and from typewriters to computer-based word processors, have all been responsible and creating new business.

Political Environment:

• Political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business.
• On the other hand, there may be uncertainty in business activities due to political unrest and threats to law and order.
• Political stability, thus, builds up confidence among business people to invest in long-term projects for the growth of the economy.
•  Similarly, the attitudes of government officials towards business may have either positive or negative impacts on business.
• For example, even after opening up our economy in 1991, foreign companies found it extremely difficult to cut through the bureaucratic red tape to get permits for doing business in India.

Legal Environment:

• Various legislation passed by the Government administrative, orders issued by government authorities, court judgments as well as the decisions rendered by various commissions and agencies at every level of the government— center, state or local.
• Adequate knowledge of rules and regulations framed by the Government is a requirement for better business performance.
• Non-compliance with laws can land the business enterprise into legal problems.
• Knowledge of Companies Act 1956 Consumer Protection Act, 1986, Competition Act, 2012-2013
• For example, the advertisement of alcoholic beverages is prohibited. Advertisements, including packets of cigarettes, carry the statutory warning ‘Cigarette smoking is injurious to health’.

Liberalization:

1. Liberalizing the Indian business and industry from all unnecessary controls and ending the license-permit-quota raj.
2. Freedom in fixing the prices of goods and services.
3. Abolishing licensing requirements in most industries.
4. Reduction in tax rates and lifting of unnecessary controls over the economy.
5. Making it easier to attract foreign capital and technology to India.
6. Simplifying procedures for imports and experts.

Privatization:

• Giving a greater role to the private sector and a reduced role to the public sector.
• To improve the efficiency of PSUs by giving them autonomy
• Transferring the public sector enterprises to the private sector by disinvestment

Globalization:

• Mixing the economy of the country with the world economy.
• Creation of networks and activities to go beyond economic, social and geographical boundaries.
• Increased level of interaction and interdependence among the various nations of the global economy.