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Create professional business plan by yourself. Chapter 3: analyzing micro & macro environments

Updated on August 3, 2014

Quick run through over this chapter

The third chapter will require little bit more effort because we are going to make a lot of research. Actually that's what analyzing micro and macro environments is all about - research. For some, the word research might sound troubling but as you will see it's really exciting and sometimes even addictive! You will be able to use any kind of information you consider reliable.

Throughout this chapter never forget that you are not only gathering information for your table's and word documents, but also analyzing this information. Main goal of this chapter is to decide whether we chose the right niche or not and to imagine abstract guidelines of our future business all according to this analysis. That is why rationality, reliable information and generalization will be the key things in this chapter.

Imagining Micro and Macro environmental forces

Let's say you already have a company. It doesn't matter what kind it is, who's working in it or how big it is. Just imagine this one company. Now, there are forces and factors that affect your company directly and some that affect it indirectly. Or in other words there are micro forces and macro factors. The micro environment refers to the forces that are close to the company and affect its ability to serve its customers.

Micro forces:

  • Competitors and substitutes
  • Customers
  • Suppliers
  • Intermediaries
  • Public
  • The company itself (theoretically it's a micro force, but we will discuss it only in the fourth chapter)

Analyzing all these micro forces shows you your company's strong and weak sides and lets you to make better conclusions, decisions about future business strategy.

The macro-environment refers to all factors that are part of the larger society and affect the micro-environment (which later will affect the company itself). It includes concepts such as demography, economy, natural forces, technology, politics, and culture. For the sake of simplicity we will use shortening 'PESTEL', which refers to all six

Macro factors:

  • Political - the effect of political factor can be seen if we analyze tax policy, labor law, environmental law and other political decisions for certain branches of business. Some branches might have very favorable set of laws and some might be constrained by them.
  • Economical - usually this is a factor that has the biggest impact on whatever business. Because economy is half the business is all about. Gross domestic product; interest rate; inflation rate; unemployment and other economic features greatly affect most of the businesses.
  • Social - this factor contains cultural aspects such as - population growth rate, career attitudes, residents' world view, health consciousness. It's perhaps the second most important factor of macro-environment.
  • Technological - it's the most fast changing factor, because technology growth rate has enormous acceleration. Although there are some branches of business that are almost separate from technology and does not need adaptations to it.
  • Environmental - factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance.
  • Legal - factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law.

And now analyzing all of these factors will show you opportunities and threats of your future business.

Picture below this paragraph illustrates micro and macro environments.

Searching information.

It's quite hard to describe how and where you should search for particular information. I would advise you to always keep in mind that you are searching for everything that is relevant to your concrete business idea. Try entering key words that would reflect your idea as well as possible in your own language - the outcome should be your future business' competitors in your region. To find information about your suppliers - obviously you have to know what goods you are going to buy in the first place. To find information and statistics about your future customers you have to research statistics of similar companies. This site is European statistics database, this one - American. Of course you can always easily find your own country’s statistics department.

Here are some more useful sites. One for almost all world's countries’ laws and second for the international statistics of labor. When analyzing macro environment don't forget to use your own knowledge (if it's reliable), news reports, papers, other statistics – also very suitable.

Final task: create analysis tables

This whole chapter was actually all about these two tables: micro-environment and macro-environment analysis. Before researching you should take a look at both tables and try to understand what exactly will you be searching for? Of course both tables are made to serve as templates - you should find considerably much more information, more concrete forces, describe current situation more widely and so on. For the sake of simplicity I made both tables from McDonald's managers' perspective.

To understand even better what you'll be searching for I will describe the table's contents:

  • Factors - in micro-environment: Competitors and substitutes, Customers, Suppliers, Intermediaries Public; in macro-environment: Political, Economical, Social, Technological, Environmental, and Legal.
  • Concrete force - all factors can be split into concrete forces, for example if the factor is suppliers - concrete force would be a particular supplier you researched.
  • Current situation - describe what is currently going, add some dry facts, important numbers, and your own thoughts about future changes.
  • Strengths and weaknesses (micro) - this is all about your conclusions. What your businesses' strengths and weaknesses can you think of towards the factor given the current information. Think of as many as you can (not 1 or 2)
  • Decisions, actions - what actions you should make to use your strengths best, hide your weaknesses undetected, make all opportunities count and threats vanish?

Micro-environment analysis table

Factors
Concrete force
Current situation
Factor's Influence to business
strenghts and weaknesses
Decisions, actions
Competitor
BurgerKing
BurgeKings popularity rising
High
McDonalds is more experienced, greater company; BurgerKing is more liked by mass media, has lower costs
insert new good in the menu
 
Subway
 
 
 
 
Customer
low income customers
More low income customers are using McDonald's services
Low
Low income customers usually unaware of unhealthy McDonalds food;McDonald's costs might be too high for low income customers
Make more reliable prices for low income customers, special offers for them
 
average income customers
 
 
 
 
 
high income customers
 
 
 
 
Supplier
Beef
Beef suppliers rising their costs
Medium
We are main customers of the beef farm, we can reduce the price; we might lose money if price isn't reduced
Make ultimate for suppliers to reduce the price, start searching for new suppliers
 
Potatoes
 
 
 
 
Intermediaries
 
 
 
 
 
Public
American media
Mass media's propoganda reduces McDonald's prestige
High
Our propaganda about healthy food continues to overcome mass media; we already lost millions of dollars because of mass media
Continue propaganda make heathier food
This table has lots of gaps, incomplete bars, to little information. It is only a template of what you should create.

Macro-environment table

Factor
Concrete force
Current situation
Factor's influence to business
opportunities and threats
Decisions, actions
Political
party in power
Liberals won the voting 3rd time in a row
Medium
Liberals keep comfortable business environment; democrats might win the next voting
Prepare for stricter business' environment
 
new allowances
obese people will get bigger allowances
Low
A percentage of people coming to McDonalds will have more money to spend
 
Economical
Average wage
Average wage has risein 8% per cent from the last year
Medium
People might waste more money on McDonald's goods; people could start eating healthier-more expensive goods
Increase advertising amount
 
Income tax
Income taxes in Kalifornia has risen
High
 
 
 
Inflation rising
 
Medium
 
 
Social
distribution of health care
 
Medium
 
 
 
Mass media
Mass media keeps degrading McDonald's prestige
High
Move mass media to McDonald's side; lose war against mass media - lose lots of clients
Overcome mass media with our commercials or try to put to silence controversial mass media
Technological
New heating system
A very new and highly improved heating system will soon be available to buy
Medium
Test the new system, start using it as soon as posible; new system will be worse or harder to work with
Buy new heating system for testis upfront
Enviromental
Average temperature in country
Average temperature has higly risen
Low
More people will order cold soda drinks; more people won't come to McDonalds because of increased temperature
Prepare more ice cubes and soda drinks in restaurants
Legal
 
 
 
 
 
This table has lots of gaps, incomplete bars, to little information. It is only a template of what you should create.

More about research

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