The macro environment comprises of those forces which influence all business firms operating in an economy. They can be studied under the following categories
1 – The Demographic Environment
The demographic features of an economy are highly influential in determining the prospects of a business firm. The following dimensions of the demographic environment can be particularly mentioned
a Size of the population;
A large size provides a large market. In a country like India, the producer of any commodity can hope to have an adequately large market.
b the financial status of the population
Mere size of population is no guarantee of a market for a commodity except in bare necessaries of life. Even a small but an affluent community can provide a larger market for durable consumer goods like Automobiles, Personal Computers and TV’s. The market for these commodities in a small country like france or germany is much larger than in a larger country like India.
The following table shows the demand for certain commodities in India and China
Particulars India China
Electricity Con per Capita (kWh) 435 1,379
Air Passengers (‘000) 23,797 119,797
PC (per 1000 persons) 12 41
Mobile Subscribers (per 1000 persons) 44 258
c – Rural Urban Distribution
Normally the demand for most of the costly durable consumer’s goods is higher in urban areas. Therefore if the share of the urban population in the total population is larger, the market for costly durable consumer goods is larger.
d – The rate of Growth
If the population is growing at am faster rate the share of infants and children in the total population would be larger. Consequently the demand for goods required by infants and children will be higher.
If the population is more or less stable the share of the population occupied by senior citizens will grow and that will increase the demand for goods entering in to their consumption eg: Medicines.
e – Labour Supply
A large size of the population will create a large supply of labour. Consequently the firms will have to use labour intensive technologies as far as possible. If the firms use capital intensive technology the problem of unemployment will be aggravated. The society will have to spend large amounts of money on giving relief to the unemployed persons. The government may be forced to increase taxed which will also put a burden on the higher income groups.
f – Level of Education and technical training
If the educated class occupies a larger share of the population, the demand for newspapers books and notebooks will be relatively higher. The following table shows the sale of newspapers per 1000 persons in certain countries
Thus every aspect of the demographic structure of the population provides an opportunity and also a challenge to a Firm. It has to convert the challenge into the opportunity and sell its products.