Are you looking for a simple definition of externally oriented planning? Here, we will explain what externally oriented planning is, the meaning of the macro environment, and its main factors.
🗓️ What Does Externally Oriented Planning Mean?
Externally oriented planning focuses on opportunities, trends, and target markets outside a business. Managers responsible for it evaluate competitors’ product offerings and compare them to their own.
Externally oriented planning is the third phase in strategic management. It studies external factors, also known as the macro environment. With its help, companies find new ways to develop within the current business climate, creating new business capabilities, redefining the market, or implementing other improvements.
🌐 Assessing the External Environment
The external environment includes various factors and forces that can affect a business positively or negatively. When a company sets its goals and objectives, it should consider the outside influences on the industry. External environment assessment also helps identify a business’s strengths and weaknesses compared to its competitors.
What Is Macro Environment?
A macro-environment combines characteristics and processes that define a country’s economy. They include economic balance, inflation, financial literacy, political gains, monetary policy, etc.
The macro-environment affects all businesses in all sectors of the domestic market. A company can depend more or less on macroeconomic factors when choosing its product range and target market.
What Are the Opportunities and Threats in the External Environment?
The external environment is out of a company’s control, so a business can only adapt to the existing conditions. External planning aims to predict how multiple factors might change and how a business can adapt to them.
The main factors in external strategic planning that pose threats and opportunities to a business include the following:
- Demographic factors. They include age, lifestyle, income, marital status, the density of the population, and more. Demographic characteristics also incorporate financial literacy.
- Economic factors. Consumer behavior heavily depends on inflation, demand, supply, interest rates, taxes, and exchange rates.
- Natural factors. Natural resource availability, weather conditions, natural disasters, and climate change impact the business environment. Some of these circumstances are hard to predict, so they become substantial risk factors.
- Cultural factors. Education, social status, life expectancy, religion, buying habits, and many more elements influence consumers’ choices. They are significant for global companies and firms that plan to globalize.
- Political factors. Regulations imposed by the government can influence a business directly or indirectly. Labor laws, import and export laws, copyright laws, and employment laws are the most important in the business environment.
- Technological factors. Technological progress and the availability of the latest technologies influence the production cycle and sales. Consumers’ online habits depend on technological advancements too.
❓ Externally Oriented Planning FAQ
What Are the Challenges of Externally Oriented Planning?
A company cannot influence its external environment as much as the internal one. Prediction of future trends and possibilities is not always accurate. In addition, the result of analyzing macro factors can be different depending on major political events.
How Does Macro Environment Affect Business?
The macro environment is the ecosystem of a business. It influences its profitability and ability to stay competitive in the market. A business needs to predict external opportunities and threats to survive long-term.
What Are External Macro Factors?
External macro factors incorporate multiple economic and non-economic external forces. For example, the most important ones include the economy, laws, demographics, ecology and nature, and socio-cultural aspects.