What is the environment of the downstream enterprise?

Marketing strategy

Many entrepreneurs make a big mistake by focusing only on their immediate environment, which directly affects their functioning on the market. However, factors that indirectly affect the company are no less important. In business, it is called the micro-environment, or the further environment. What is the environment of the downstream enterprise? And why is it worth analyzing?

The environment of the further enterprise, or what?

The organization's environment - an example? No company operates in a vacuum. Each business entity operates in a certain environment that affects them to a greater or lesser extent. The further environment of the company, otherwise known as the macro-environment, is all external factors, i.e. conditions and systems with which the company has indirect relations and which result from its operation in a specific territory. Among them we will mention:

  • country and region,
  • climatic zone,
  • political arrangement, 
  • legal system. 

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Dimensions of the downstream environment

The downstream environment of the enterprise is divided into several dimensions:

  • natural - e.g. climate, raw materials; for a software development company, environmental factors will not be of great importance, while the activity of a coal mining company depends on natural conditions,
  • economic - e.g. the level of inflation, exchange rates, economic growth; economic factors affect the development of the company, 
  • legal - e.g. the labor code, tax law; the law regulates the relationship between the employer and employees, or has an impact on the amount of taxation, 
  • political - e.g. economic system, state system, political system; sometimes changes in acts may affect the operation of the enterprise,
  • sociocultural - e.g. culture, traditions, norms, values; the socio-cultural dimension may determine the behavior of employees,
  • demographic - e.g. a demographic pyramid; an important point when introducing new products or services to the market (checking the market potential),
  • technical and technological - e.g. technological innovations, new methods of production, new devices; the operation of many companies (especially electronics manufacturers) is heavily dependent on technological development, if they do not adapt to innovation, they can quickly lose their stable positions,
  • international - e.g. pandemics, supply shocks; negative global events and phenomena may significantly hinder the normal functioning of the company, even the one operating locally.

Why analyze the macro-environment?

The macro-environment is of key importance when deciding whether to enter a given market, because it strongly influences the functioning of the enterprise. Further marketing environment it dictates certain phenomena and behaviors that are beyond the company's control. However, it is worth being aware of them and assessing them in terms of opportunities and threats. The awareness of the threats resulting from the macro-environment enables proper preparation for possible crisis situations. On the other hand, the knowledge of market opportunities opens the door to great success on the market. 

In order to take full advantage of the opportunities and learn about all risks, the macro-environment should be carefully analyzed. A proper study of the environment is the basis for creating a thoughtful one development strategy.

Ways of examining the macro-environment of the enterprise?

The analysis of the company's downstream environment is a complicated and demanding process. There are a number of factors that need to be taken into account that create a complete picture of the macro-environment. 

Research can be done in several different ways. One of the basic methods is the so-called PEST analysis. The name of the study is an acronym for four factors:

  1. P - political, political factors; monitoring of changes in tax policy, labor law, etc.,
  2. E - economical, economic and economic factors; knowledge of GDP trends, tracking inflation, exchange rates, average costs of energy or water,
  3. S - social, social and demographic factors; observation of consumer habits and lifestyle, analysis of demographic data,
  4. T - technological, factors and technological trends; constant monitoring of changes in the digital world. 

Sometimes the PEST analysis is extended by two additional variants: E, environmental, i.e. environmental factors, e.g. related to the impact of climate, and L, legal, i.e. legal factors related to regulations and bans that may affect the company . This is how it arises PESTEL analysis.

Another way of analyzing the environment of the further enterprise is the scenario method. Its idea is to identify the most important factors that may affect the company in the coming years of its operation. Then, the two most important, most probable variants are selected and the positive and negative scenarios of their development are created. The company should prepare for any scenario.

We can also analyze the macro-environment using the Delphi method. Delphi analysis uses the knowledge and experience of various experts. Its purpose is to confront various opinions regarding the impact of various social, economic and other factors on the functioning of the company. The analysis using the Delphi method should lead to one position, defining the company's potential as well as the opportunities and threats resulting from the environment.

Worth knowing types of business environment. Everything that is outside the organization and can affect it is external environment. Knowledge of the environment of the further enterprise is crucial for its development. Therefore, macro-environment analysis should be one of the inseparable elements of preparations for entering a specific market.

Worth knowing:

What is the environment of the downstream enterprise?

The further environment of the company - also known as the macro environment - is the totality of external factors affecting the functioning of the company. Each of these factors affects the company's operations to a greater or lesser extent.

What are the benefits of macro-environment analysis?

A detailed analysis of the macro-environment allows you to know the risk threatening a given company, as well as to fully use the opportunities and possibilities offered to it. Such awareness of these factors allows for earlier reactions and proper preparation for efficient functioning on the market.

What are the methods of macro-environment research?

There are several effective ways to conduct such an analysis. The basic and most frequently chosen is the PEST analysis, often extended with additional factors (PESTEL variant). Other possibilities are scenario analysis and Delphi analysis.

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