Question

1. Compare and contrast microeconomics and macroeconomics.

2. How does the rest of the world effect you and your business?

Answer 1

1. Key points of comparison between micro and macro economics is as follows:

1. Microeconomics studies the particular market segment of the economy, whereas Macroeconomics studies the whole economy, that covers several market segments.
2. Microeconomics applied to operational or internal issues, Macroeconomics applied to environment and external issues.
3. Microeconomics deals with an individual product, firm, household, industry, wages, prices, etc., while Macroeconomics deals with aggregates like national income, national output, price level, etc.
4. Microeconomics covers issues like how the price of a particular commodity will affect its quantity demanded and quantity supplied and vice versa while Macroeconomics covers major issues of an economy like unemployment, monetary/ fiscal policies, poverty, international trade, etc.
5. Microeconomics determine the price of a particular commodity along with the prices of complementary and the substitute goods, whereas the Macroeconomics is helpful in maintaining the general price level.
6. While analysing any economy, micro economics takes a bottom-up approach, whereas the macroeconomics takes a top-down approach into consideration

2. Changes in government, technology, customer needs and how competitors do business are among the external forces affecting your company. Countless external events can impact your company.

PEST Analysis

One approach taken by companies to assess the macro-environment and its impact on their businesses is the PEST Analysis. PEST stands for political, economic, social and technological. An analysis of how these four broad areas affect your company can be crucial in helping you position your business to capitalize on change. A PEST Analysis focuses on assessing the state of forces outside of your company that you cannot control.

Customers' Lives

Your customers are part of the social force in the macro-environment affecting your company. Customers feel the impact of a turn in the economy, different world events and their own life transitions. The world’s impact on your customers' lives can require maneuvering on your company’s part in order to keep current customers returning and new customers coming to you. Your competitors won’t let you rest. New competitor products, services and special offers can regularly challenge your company to respond in order to satisfy customers.

Government Decisions

With every changing White House administration and Congress comes the possibility of changing industry regulations, tax laws, interest rates, policies and even military actions that can directly affect your company’s bottom line. Companies that operate in multiple countries are challenged to also analyze and adjust to the political, economic, social and technological changes in each country of operation.

Technological Developments

Advancement in technology is relentless in every direction. Companies have to be nimble enough to keep up with changing trends regarding how customers communicate and conduct business online. For example, according to Insight Express, a digital marketing-research firm, retail customers use their smartphones to take photos and compare real-time prices, deals and reviews on products as they shop. If your retail store doesn't have a website designed for mobile devices or a downloadable smartphone application, your competitors can win over your customers even as those customers walk your store's aisles. Conversely, this technology also gives you the opportunity to sell to customers even as they shop at a competitor's location. New and emerging technology can also affect your company’s suppliers, distributors, internal systems of operation and overall costs.