How Some Large Company Is Affected By Macro Environment?


1 Answers

d ds Profile
d ds answered
There are various factors in the macro environment that can affect a large company. First one is the economy, if inflation is high, economic growth low and high unemployment levels then it means that inflation will drive the prices of raw materials up and increase costs but a lot of people are unemployed and those who are employed buy less because the prices are high. This can result in lower profits for the firm. If your currency depreciates then your goods exported to other countries will become cheaper in that country and you will have gains but your imports for raw material will become expensive as now you have to pay more due to a weak currency. If the government comes up with new mandatory safety requirements or taxes then it will considerably affect the performance even though demand remains the same. If you have a subsidiary and the government of that country changes its laws and tells you to repatriate a lesser amount then profits will go down. If there is a technological change and your competitor does not have that technology as yet then you can use this advantage to become more efficient and get more market share. If your competitor finds a better supplier then it will lower his costs and make him more profitable. Then if there are certain stringent rules about environment protection imposed in the area where you produce then you will have to allocate extra bucks there. Most importantly if there is a major change in the lifestyle of your customers then demand will go down. For example people shift from carbonated drinks to juices and flavored water as they become more health conscious.

Answer Question