The Role of Macro Environment in the Retail Industry
All retail companies operate within a “macro environment,”
or the sphere of influence outside the company that shapes how companies do
business. Unlike the micro environment of a retail store, companies in the
retail industry usually cannot influence or change the macro environment and
must adapt to changes as they arise. The macro environment includes economic,
technological, societal and governmental influences. A retailer must understand
the role of each to compete within the retail industry.
The Role of
Technology in the Macro Environment
Technology not only creates new products for retail
companies to sell, but also plays a major role in changing the way retail
companies do business. Technological advancements such as the internet offer
retail customers additional shopping options.
Technology also opens new retail markets, with auction
platforms like eBay and web-based retailers such as Amazon.com. Barcoding and computerized billing systems have
improved the retail industry by allowing retailers to develop new processes
that increase efficiency. Point-of-sale systems increase sales by allowing
retailers to process cash, check, credit- and debit-card payments.
The Role of
Government
Laws, regulations and other government policies can have a
number of positive or negative effects on the retail industry. Government
assistance, such as government-backed loans and subsidies, can help retailers
grow or allow an established company to keep costs low for consumers. However,
government policies can also hinder businesses by imposing regulations that
increase costs, such as requiring the development and integration of new
systems or procedures or establishing a minimum wage that small retailers may
not be able to afford. The retail industry also relies heavily on
government-supported road and transportation infrastructure to move goods and
bring customers to retail locations.
The Role of Economic
Factors
Retail sales are driven by the economic environment. A
robust economy correlates to an increase in consumers' disposable income,
increasing sales and allowing retailers to sell more valuable goods, such as
high-end electronics. On the other hand, a sluggish economy decreases consumer
confidence and can cause people to spend less, leading to declining sales and
forcing retailers to lower prices. Economic and governmental factors often
overlap in areas such as corporate taxation, import and export laws, and inflation,
which can decrease consumer purchasing power.
The Role of Social
Factors
Changes in social values and trends impact the goods
retailers sell and how retailers relate to consumers. The retail industry is
often under pressure to develop and implement socially responsible business
practices, such as selling environmentally-friendly products, placing warnings
or restrictions on potentially harmful goods, and removing recalled or
controversial products from the shelves. Again, government and social factors
overlap in many areas including employment discrimination. Retailers that fail
to conform to new social norms often lose business to companies that are
willing to adapt to changing societal values.
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