The Macro or Societal Environment

This is that level of the firm external environment. Consists of components or factors that have less specific and less immediate implication for managing an organization successfully. The management cannot have control over this environment and it affects all players in the industry equally. The major variables at this level include: Political forces, Economic forces, Social forces, Technological forces, Ecological or Environmental forces and Legal forces. The PESTEL factors include:
(a) Political factor: which refers to government policy such as the degree of intervention in
the economy; role of government in production, service delivery; political inclinations with a
bearing on mission and vision including:- trading policies; funding, grants and initiatives; wars and conflict; government policies; government term and change; elections; inter-country
relationships/attitudes; terrorism; political trends; governmental leadership; government
structures; internal political issues; and shareholder/ stakeholder needs/ demands.

(b) Economic factors: in decision making include interest rates; general taxation issues; economic growth; inflation; exchange rates; home economy situation; home economy trends; overseas economies and trends; taxation changes specific to product/services; seasonality/weather issues; market and trade cycles; specific industry factors; market routes and distribution trends; customer/end-user drivers; international trade/monetary issues; disposable income; job growth/unemployment; tariffs; consumer confidence index; import/export ratios; production level; wage rates; minimum wage; working hours; credit availability; cost of living; internal finance and internal cash flow affect decision making of the organisation. For examples higher interest rates deter investment because it costs more to borrow. A strong currency makes exporting more difficult because it may raise the price in terms of foreign currency. Inflation which provokes higher wage demands from employees and raise costs. Higher national income growth could boost demand for a firm's products; hence the firms decision to expand production.
(c) Social factors: in the form of consumer attitudes and opinions; media views; law changes
affecting social factors; brand; company's image; consumer buying patterns; major events and influences; buying access and trends; ethnic/religious factors; advertising and publicity; ethical issues; demographics (age, gender, race, family size); lifestyle changes; population shifts; education; trends; Fads; diversity; immigration/emigration; health; living standards; housing trends; fashion & role models; attitudes to work; attitudes to people doing certain types of work; leisure activities; occupations; earning capacity; staff attitudes; management style; organisational culture and changes to education system. In Kenya, for example, the population is threatened by HIV and AIDS with regard to health care costs. Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. This has increased the costs for firms who are committed to insurance premiums payments for their employees because their staffs are sickly. The ailing population also has impact on demand: for example, demand for medicines and balanced diet has increased whereas demand for investment e.g. in shares are falling.

(d) Technological factors: New technologies create new products and new processes. New
technologies are continually being developed and the rate of change itself is increasing. MP3
players, computer games, online gambling and high definition TVs are all new markets created
by technological advances. Online shopping, bar coding and computer aided design are all
improvements to the way we do business as a result of better technology. Technology can reduce
costs, improve quality and lead to innovation. These developments can benefit consumers as well
as the organisations providing the products. Other technological factors includes:- Competing
technology development; research funding; associated/dependent technologies; replacement
technology/solutions; maturity of technology; manufacturing maturity and capacity; information
and communications; consumer buying mechanisms/technology; technology legislation;
innovation potential; technology access, licensing and patents; intellectual property issues; global communications; inventions; innovations; new discoveries; energy uses/sources/fuels;
communications; rate of obsolescence; health (pharmaceutical, equipment, etc.); manufacturing
advances; information technology; internet; transportation; bio-tech; genetics; waste
removal/recycling; e-mail; E-learning; and software changes.

(e) Environmental factors: Environmental factors include: environmental issues;
international/national/local environmental regulations; customer values; market values;
stakeholder/investor values; staff attitudes; management style; organisational culture; staff
morale; staff engagement; global factors; weather and climate change. Changes in temperature
can impact on many industries including farming, tourism and insurance. With major climate
changes occurring due to global warming and with greater environmental awareness this external
factor is becoming a significant issue for firms to consider. The growing desire to protect the
environment is having an impact on many industries such as the travel and transportation
industries (for example, more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting
demand patterns and creating business opportunities.
(f) Legal factors: on current and future legislation of home and international markets; regulatory bodies and processes; environmental regulations; employment laws; consumer protection, health and safety legislations; industry-specific regulations and competitive regulations. In recent years in Kenya there have been many significant legal changes that have affected firms' behaviour. The introduction of the New Constitution 2010 and the Labour Laws 2007 which has articles like non-discrimination of employees, higher payments for the workers injured at work, an increase in the minimum wage, recognition of casual labourers and greater requirements for firms to recycle are will largely affect an organisation's actions. Legal changes can affect a firm's costs (e.g. if new systems and procedures have to be developed) and demand (e.g. if the law affects the likelihood of customers buying the good or using the service).

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Titany answered the question on October 19, 2021 at 10:40