Macro Environment of Business

The six basic macro environment of business are: Natural Environment, Demographic Environment, Social and Cultural Environment, Political Environment, Legal Environment, and Technological Environment. As stated earlier macro factors are generally more uncontrollable than the micro factors. It will be better to discuss these factors in detail:

(1) Natural Environment: The geographical and ecological factors, such as natural resource endowments, weather, and climatic conditions, air, water, and all natural resources found on the surface of the earth and in its bowels, topographical factors, location aspects in global context, port facilities etc., are included in natural environment and relevant to business. Much of the success of business in the future will depend upon how it responds to differences in geographical conditions. Geographical and ecological factors also influence the location of certain industries. For example, industries, which require large quantities of water, tend to be located near water bodies or rivers. Similarly, industries with high material index finds place near the raw material sources. Climate and weather conditions affect the location of certain industries. Topography affects demand pattern. For example, in hilly areas with a difficult terrain jeeps may be in greater demand than cars.

Ecological factors like depletion of natural resources, pollution have caused great concern with rapid growth in population and industrialisation, large quantities of water began to be needed for domestic and industrial purposes, transportation, and production of energy and power. The rapid growth of industries have disturbed the ecological balance and polluted the environment. The government policies aimed at the preservation of environmental pollution have resulted in additional responsibilities and problems for business. Boulding says, “Planet earth was like a spaceship in danger of running out of fuel if it failed to recycle its material.” The land resource that is the total geographical area of India is 329 m. ha. of which 42 m. ha. (14%) of the total reporting area in India is classified as Barren Land and area under non-agricultural uses.

Forests: Forests are important natural resource of India. Forests play an important role in control floods; protect soil erosion supply of timber, fuel, fodder and many more products. They are the natural habitat for biodiversity and repository of genetic wealth. India has forests on 68 million hectares of land that is the 22 per cent of the total geographical area. As per the Forest Policy of 1952, it should be 33 per cent of the land resource. The Forest Policy declared in 1952 failed to save forests in India. In the year 1988 government of India announced its new Forest Policy. The important features of this policy are:

Role of Tribal: The role of tribal in protection, regeneration, and development of forests was recognised and emphasised. The new policy enunciates that all agencies responsible for forest management should cooperate and associate tribal people in conservation of forest wealth.

Discouragement of Forest based Industries: The new forest policy states that no forest-based enterprises except at the village and cottage level will be set-up in future, unless it is first cleared, after careful study of the availability of raw materials.

End the system of private forest contractors: The new forest policy puts a ban on private forest contractors and replaces the system by tribal cooperative institutions and government corporations, and other such institutions.

Forest land not to be diverted to non-forest uses: In this policy it was decided that the government will not accept the land diversion for non-forest uses.

Participatory forests management system: This new system involves rural people particularly women and tribal community in the forest work.

Mineral Resource:

The development and management of mineral resources play a major role in the industrial growth of a nation. Coal, Iron, Mica, Copper, Lead, Zinc, manganese, Petroleum, Uranium, etc., are the vital resources for the development of a country. Thorium and Uranium the autonomic energy minerals are very important. The government of India passed an amendment in the act with passing of new mines and minerals Act in 1994, which opens the mining, sector for the FDI. The new policy also empowers states to grant prospecting licenses /mines leases with prior approval of the central government except in few cases. It also removes restrictions on equity holding by foreign nationals in a mining company. The major objective of this amendment was to minimise the adverse effects of mineral development on forests, environment, and ecology through appropriate protective measures.

The main source of energy is Coal and Oil. But oil has created serious threats for future growth. The need of the time therefore is, that business person should be aware of the threats and opportunities associated with the environment:

a.       shortages of strategic resources;

b.      increased cost  of energy;

c.       increased level of pollution; and

d.      government intervention in natural resource management

Ecologist and environmentalists believe that one of the principal reasons for the existence of the environmental problems stems from too much emphasis on growthby-industrialised nations. They claim that economic growth has been made possible only at the expanse of environment. Fast growth has resulted in fantastic growth in population and demands of the society. Increased production and consumption   had unscrupulously released waste and pollutants in air, water, seas, rivers, lakes, etc. These externalities were not the part of their cost structure and perhaps this was due to the wrong emphasis on GNP as a measure of growth. Countries feel highly satisfied if their GNP is increasing year after year. On this basis, they claim that they are developing fast. Although economists like Samuelson has attempted to give an alternative measure of growth namely, Net Economic Welfare (NEW) but much has not been done in this direction. The growing consciousness and the blame put on the activities of businesspersons led them to adopt new standards. In some cases, government introduced fresh legislative measures penalty, fine, and punishment for misuse of resources. Now, businesspersons are following the new guidelines but there is a tendency to adopt short cuts and ignore environmental measures.

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