Strategic Management: Formulation and Implementation

Analysis Of The Macroenvironment

An organizations ignores the macroenvironment at its own great peril. Many studies support the concept that there are needs to be a link between the organization's strategic decisions and its environment.

All organizations are affected by four macroenvironmental forces: political-legal, economic, technological, and social.

Political And Regulatory Forces

Political-legal forces include the outcomes of elections, legislation, and court judgments, as well as the decisions rendered by various commissions and agencies. The political sector of the environment presents actual and potential restriction on the way an organization operates.

Among the most important government actions are: regulation, taxation, expenditure, takeover (creating a crown corporation, and privatization. The differences among local, national, and international subsectors of the political environment are often quite dramatic. Political instability in some areas makes the very form of government subject to revolutionary changes.

In addition the basic system of government and the laws the system promulgates, the political environment might include such issues as monitoring government policy toward income tax, relative influence of unions, and policies concerning utilization of natural resources.

Political activity my also have a significant impact on three additional governmental functions influencing a firm's external environment:

* Supplier function. Government decisions regarding creation and accessibility of private businesses to government-owned natural resources and national stockpiles of agricultural products will profoundly affect the viability of some firm's strategies.

* Customer function. Government demand for products and services can create, sustain, enhance, or eliminate many market opportunities.

* Competitor function. The government can operate as an almost unbeatable competitor in the marketplace, Therefore, knowledge of government strategies can help a firm to avoid unfavorable confrontation with government as a competitor.

In general, the impact of government is far-reaching and increasing.