Management Principles - Factors Affecting

There are numerous factors that affect an organization or the management. Managers can monitor these factors/environments through boundary spanning — a process of gathering information about developments that could impact the future of the organization.

Following types of factor/environment affect management −

Microeconomic factors
Macroeconomic factors

To lead an organization efficiently, every organization must know where it is situated, what are its external and internal influences.

Microeconomic Factors	Macroeconomic Factors
Company-specific influences that have a direct impact on its business operations and success. Components within the control of an organization can be managed and altered.	Broad economic forces and global events are out of control of any business or company. Forces indirectly affect company objectives. Volatile and risky, and a savvy manager must be agile to sidestep a cascading macroeconomic crisis to keep the company intact.
For example, a company’s revenue, earnings and margin. The employees, Stakeholders, the production volume of the products and the advertising campaigns can also be called microfactors.	For example, the country’s economic output, inflation, its political environment, unemployment, etc.

Microeconomic Factors

Macroeconomic Factors

Company-specific influences that have a direct impact on its business operations and success.

Components within the control of an organization can be managed and altered.

Broad economic forces and global events are out of control of any business or company.

Forces indirectly affect company objectives.

Volatile and risky, and a savvy manager must be agile to sidestep a cascading macroeconomic crisis to keep the company intact.

For example, a company’s revenue, earnings and margin.

The employees, Stakeholders, the production volume of the products and the advertising campaigns can also be called microfactors.

For example, the country’s economic output, inflation, its political environment, unemployment, etc.

Macro (Outer Environment)

Factors that indirectly impact the organization, its operation and working condition is known as the outer environment or macro environment. These external factors cannot be controlled by the organization.

Following are some of the macro environment factors −

Political-legal environment

The country’s unique political and legal landscape within which organizations function.

The effects of this are quite visible. For e.g.: the effect of changing taxes or raising interest rates.

Technology

Companies have to carefully evaluate the technological developments that it wishes to embrace as it is a cost intensive factor and provide millions in return to one company and take millions from another.

Socio-cultural environment

The means of communication, the country’s infrastructure, its education system, the purchasing power of the citizens, family values, work ethics and preferences, etc.

Micro (Inner Environment)

These are the factors within an organization that can be controlled and affect the immediate area of an organization’s operations.

Though not all factors can be effectively controlled, but relative to the macro environment factors, a visible control can be exercised in this case.

Following are some of the micro environment factors −

Employees	Employees exert great influence on the oorganization. It is imperative to find the right people for each job. Organizations need to motivate employees positively and retain specialized talent.
Owners and the Management	Investors are major influencers on a company’s revenue and operations. It is important that the owners are satisfied with the company. It is the manager's job to balance the aims of the company and the owners.
Consumers	Competition and consumerism has rendered multiple alternatives for the same product in different brands. Organizations recognize that it is in their own interest to keep consumers happy.
Suppliers	The suppliers or contractors manage the inputs of organizations and provide products or services that a company needs directly or need it to add value to the company’s own products or services. It is important to keep suppliers happy to ensure a smooth input supply system.
Competition	Competitors affect profits by trying to divert business. A capable manager will need to constantly study and analyze its competition if the company wants to maintain its position in the market.