What is the difference between a micro and macro environment?
A micro and macro environment have two distinct meanings in business. In economics, the microenvironment is the study of problems at the individual level. Known as microeconomics, this field focuses on the choices made by individuals, as opposed to the entire market group. Micro in business terms indicates elements that a company can control, often internal processes. Macroeconomics, the opposite of microeconomics, is the study of large-scale theories related to consumer spending, inflation, and the money supply. In business, the macro represents elements outside the company's control.
When studying economic data, economists look at microeconomics because individuals often behave differently under alternative economic conditions. An important difference between studying a micro and macro environment is the opportunity cost. Opportunity cost represents the potential return lost when an individual selects one option over another. This is important in microeconomics because people often have limited income when making decisions. By studying individual consumer choices and movements, economists can make determinations for an entire group. This results in the study of macroeconomics, which looks at general issues that affect all consumers in each group defined by economists.
Companies separate problems into the micro and macro environment to help owners and managers complete tasks and make the most profit available in the market. Micro-issues can be the amount of skilled labor within the company, the production processes used to manufacture goods, the company's facilities, internal policies that govern employee actions, and other related issues. All these issues are under the direct control of the company. Therefore, the management team can change these items, issues or policies to improve the company's operating environment. Companies can study the differences between the micro and macro environments to determine which elements can be changed to maximize productivity and profits.
Macro business issues can represent any item or issue not directly controlled by the business. The availability of raw materials, government laws and regulations, the number of qualified employees available for hire, and the threat of competition may be just some of the main forces separating the micro and macro environment. Companies often identify these factors and create policies that help them deal with the potential issues that can arise with each of them. Studying the macroenvironment may also require the help of external consultants more attuned to changes in that environment.