Discuss the elements of a firms macroenvironment and illustr

Discuss the elements of a firm\'s macroenvironment and illustrate how each affects the firm.

Solution

Elements of a firm\'s macroenvironment are (i) governments (ii) economic conditions and (iii) other factors that affects all organizations and firms.

The government, through its policies and laws, can affect firms either positively or negatively. Policies being formulated by government can place constraints in front of the firms (for example placing stricter pollution norms by the government on industries can negatively affect many firms) or can provide opportunities for the firms (for example lower tax rates and duties announced by government).

Economic conditions have a direct bearing on the firms. In times of economic boom, there is a high demand for goods and services and firms see a high growth rate. The reverse is true during the period of economic slump. Demand is low and the firms witness negative growth.