CHAPTER 3: THE MACRO ENVIRONMENT

MGMT 488 – STRATEGY AND POLICY

OVERVIEW
The macro environmental analysis is the first step in creating the Environmental Analysis. The macro
environment examines the general business climate as it relates to the organization, but has nothing to
do with the organization itself.

The macro environment is primarily concerned with major issues and upcoming changes in the
environment. The acronym for the macro analysis is “STEEP.” The five areas of interest are Socio-cultural
and demographics; Technology; Economic conditions; Ecology and physical environment; and Political
and legal.

SOCIO-CULTURAL AND DEMOGRAPHICS

Societal values and lifestyles change over time, and the most important of these should be discussed.
For example, over the past generation, it has become acceptable for women to work outside the home –
or not; smoking is not as acceptable as it once was; people are not retiring at 65; students going to
college are older; and people are more aware of the environment and healthful living styles.

The changes in values and lifestyles may come from many sources: medical (smoking, healthy eating,
exercise); science (global warming, going “green”); economic (people working longer, women in the
workforce); cultural diversity (music preferences, foods, living accommodations, medicine); and
technologies (Internet dating, biodegradable plastic) are just a FEW examples.

Some changes in values and lifestyles will be important to the industry, but not to your business. For
example, the current trend is to adopt pets from a shelter, rather than from a pet store; this has an
impact on the pet store industry. However, if a pet store is located in a town that does not have a
shelter or the store does not sell pets (just supplies – like PetSmart), then the change does not affect the
business.

When discussing demographics do NOT discuss the target market. This section deals with changes to the
population and demographics as a WHOLE and those that may affect the specific industry not the
business.

It is not important that the population of Billings is growing. It is important that more people are moving
to smaller cities and rural areas. It is not important that the average age of the population of Montana is
35.2 years. It is important that people are living and working longer, in general.
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TECHNOLOGY
Technology encompasses more than computers! Remember that technology comes in many forms –
medical devices, new plastics, production techniques – and be sure to include them in the list if they are
important.

The technology discussion should not include what the business does – but what is available to
members of the industry!

ECONOMIC CONDITIONS
The state of the economy is usually in some sort of flux. The current situation (specific to the industry)
and any changes that may be forecast are important. The current economic situation is not conducive to
new car sales, but may be better for used car sales and while new appliance sales are in decline, repair
people are seeing a large increase. How might these situations change if the economy improves?

ECOLOGY AND THE PHYSICAL ENVIRONMENT

The ecology and physical environment plays a large part in many busineses – especially those who have
production facilities. But also, everyday businesses are affected. For example, the impact of climate
change must be considered: water and fuel costs could change dramatically if the world warms by only a
couple of degrees.

POLITICAL AND LEGAL

In this section, an analysis is made of pertinent local, state, and federal legal information in the business
and industry environment. But also consider political ramifications. Democrats and Republicans,
Independents and Green – all of these parties have fundamentally different views on business,
environment, taxes, and many other issues that may affect a business.

General business laws such as zoning, taxes, minimum wage, other human resource issues, and OSHA
should be mentioned, especially if changes to the laws are pending or being discussed.

Additionally, an industry may have specific laws and regulations. For example, a pet store would deal
with federal animal welfare and prohibited pet laws as wells as state laws concerning animal cruelty,
housing, veterinary care and so on. The major laws and regulations should be discussed, especially those
with pending legislation.
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ANALYSIS AND PRESENTATION

Introduce the section – what is it; why do it; what does it tell the business owner?

Present the analysis in bullet format with short complete sentences, if needed, or in paragraph form.
You may use a combination of both.

Here is an example of how a Macro environmental analysis should be presented for a mythical pet store
that sells pets and supplies in rural Montana.
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MACRO ENVIRONMENT
The purpose of the macro environmental analysis is to determine what outside influences may have an
effect on the industry, and, therefore, the business. The analysis examines five areas of interest: 1) Laws,
regulations, and legislation; 2) Societal values and lifestyles; 3) General economic conditions; 4)
Demographics and population; and 5) Technology.

SOCIO-CULTURAL AND DEMOGRAPHICS

• Pet Adoptions – Adopting pets, as opposed to buying them, has recently become a societal
issue. The awareness of animals in shelters has come about from several sources:
o A popular president, Barak Obama, stated his intention to adopt a dog from a shelter
o Increased advertising by the Animal Human Society and sponsors such as Pedigree®
brand dog food.
o Increasing amount of bad press regarding animal cruelty and abuse
• Pets as companion animals – Many nursing homes, assisted-living, retirement communities and
long-term care facilities are allowing residents to bring small pets as companion animals. This
trend is expected to continue and the number of eldercare facilities allowing small pets is
expected to increase for the foreseeable future (cite).
• Dumping – In some areas, generally large cities that are mostly surrounded by rural
communities, dumping unwanted animals in those rural areas seems to be acceptable. Some
urban people think that an animal dropped at a farm will automatically be taken in by the
landowner, however, this is not usually the case.

Several key factors regarding demographics and population are

• People are living longer, which may increase the need or want for companion animals (cite).
• Families are larger, with more children, which may indicate an increased desire for pets (cite).
• As children leave home, “empty nest” syndrome becomes important. Many older couples are
becoming “pet parents” – lavishing the attention and money on pets rather than their children.
• In the next five years the number of people moving from urban or suburban areas to rural areas
will increase 27% (cite).

TECHNOLOGY
Several enhancements in technology have affected the Pet store industry. Two of the most important
are micro chipping and advances in pet store POS systems.
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ECONOMIC CONDITIONS
The world economy is in a recession. However, a recovery is estimated to begin within the next 18
months.

• Current recession – In general, people are spending less. This may have an impact on the Pet
store industry because potential customers
o No longer have homes to house pets because of foreclosures
o May opt to adopt a mongrel rather than a more expensive pure bred animal
o May opt not to get a pet at all
o May not spend as much on non-essential pet supplies such as new toys, fancy leashes,
or upscale treats
o May shop at supermarkets rather than pet stores as they feel pet stores charge more
• Projected recovery – When the recovery begins some areas that may improve are
o Increased number of people wanting pets either because they can afford the pet itself,
its care, or a house that allows them to have pets.
o Increase in sales in upscale pet accessories as people feel guilty for “neglecting” their
pets when “times were hard.”

ECOLOGY AND THE PHYSICAL ENVIRONMENT

While pet ownership does not have a specific direct impact on the physical environment, several issues
must be considered:

• Exotic Pets
o May be depleting natural populations
o Some people release – they may replace native populations
 E.g. Alligators and Boa Constrictors in Florida
• Over population of domestic (dog and cat) populations
o Spay and neuter issues
o Unwanted kittens and puppies
o Feral populations
• Sustainable practices in manufacturing of pet food and accessories

POLITICAL AND LEGAL

Politics play no explicit role in pet stores. Pet ownership is deemed acceptable and desirable by most
political parties.
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Pet Stores must adhere to all standard local, state, and federal laws that are generally required of
businesses such as zoning, OSHA, EEO, and overtime pay. Additional laws and pending regulations that
are specific and important to the industry are:

• Federal Laws
o Animal welfare
o Prohibited pet laws
• State Laws and Regulations
o Animal cruelty
o Housing
o Veterinary care
o Minimum wage 1 – currently at $6.55 in Montana, expected to be raised to $7.00 on
January 1, 2010.
• Local Laws
o Zoning – many cities or counties limit the number of animals that may be kept within
specific zoning areas.

1
ABC Pets hires most of its clerks at minimum wage; otherwise, this would not be important.