The Internet Macro-environment
Introduction
Several factors influence how an organization runs. For example, an organization’s activities may be affected by factors such as customers, suppliers, among others.
But these are just some of the microenvironment factors. There are also other macro-environmental factors such as government, economics, taxes, technology, and several other factors.
This post will be walking you through the macro internet environment and how different factors influence it.
The Internet Macro-environment
Macro Environment has a broad standpoint on the factors that may influence how an organization is run. Therefore, it is right to say that emerging macro-environment trends can present opportunities or threats to an existing business or organization.
That is why we must discuss some of the macroenvironment trends in different dimensions, such as technological, political, economic, social, and legal.
1. Social Factors
There is a lot to celebrate about the coming of the internet, but we must also accept that it comes with many challenges and patterns. For example, the internet affects the buying patterns or behavior of consumers.
In other words, the internet has also posed some risks such as trust, security, cost, among other things. Today, customers will have to go to the internet and check reviews before choosing to buy.
Likewise, consumers will not be willing to buy from a website without various security features, such as the Security Socket Layer (SSL). This means that purchasing decisions can either be slower or faster, depending on how consumers perceive specific things.
The elites and most millennials can use the internet. And because of this, there are lots of differences that the internet has brought. In most developed countries, the internet has become a necessity, and this will spread across various countries.
2. Legal and Ethical Issues
There are specific behaviors accepted by the people living around us (the society), and we can refer to these behaviors as ethical standards. Ethical standards guide how we operate and how we present ourselves around people.
Different countries are now coming up with laws and policies to dictate the correct usage of the internet. This is to ensure that no risks are resulting from the use of the internet. And as an organization, you must know these laws.
The biggest concern about internet usage is privacy. Privacy can be explained as a person’s right to enjoy their personal affairs without any other person intruding. For example, consumers have profiles online, and they mostly use these profiles to carry out transactions. It is, therefore, important that their identity and information remain private.
An effective e-commerce website is one that can protect the personal information of customers. In other words, the site must be secure through a Security Socket Layer. And as a customer, you must be cautious about buying from any site without a padlocked sign before the URL.
3. Technological Factors
Technological advancements are also very disruptive, and they make businesses go back to the drawing board to readdress various issues if they have to remain relevant and competitive. The coming of the internet has seen many retailers hamper stores.
The biggest nightmare for most organizations today is to understand the new technological trends and see how best they can leverage them. As an organization, below are some of the courses worth adopting:
- First mover approach
- Fast follower approach
- Cautious approach
Apart from home internet access, we now have mobile connectivity. This can be through smartphones, digital TVs, digital radios, among other devices. We can only say the internet is on the horizon.
And besides, privacy, security is also a big concern with the advancement of the internet. Some of the security features that an organization should look into include:
- Users authenticity
- Confidentiality and privacy of consumers
- Complete transactions
- Uninterrupted continuity.
4. Economic Factors
The economic prosperity of any country lies in the e-commerce activities in that specific country. Organizations will, therefore, be looking forward to targeting developed countries through e-transactions than in developing countries.
Globalization has changed how people interact and how people perceive things. It has led the international trade and commerce and enhanced a standardization culture, kicking away the cultural difference we had initially.
And language is still a bit of an issue because organizations are finding it hard to develop country-specific e-commerce. This can either affect many customers’ purchasing potential, and it will only be wise if companies found a solution to this.
5. Political Factors
The government must come up with policies and laws to guide the usage of the internet. And because the internet allows governments to collaborate, they must come together and help create laws that enforce the internet’s right use.
It is also essential that the governments consider the taxation on e-commerce businesses so that there is no reduction in taxes to the local governments. And above all, organizations need to be wary of these changes and see a way of remaining competitive and relevant.
e-business Market Segmentation Matrix
Now that you understand the internet macroenvironment factors, it is essential that I now walk you through the different market segmentation matrices, which include government agencies, consumers, and businesses.
E-business gives an overview of the different players in the e-commerce space – consumers, the government, and the businesses, who can also come in as suppliers or buyers.
1. The Consumer
Through the internet, consumers can as well act as vendors. A relationship where the consumers act as suppliers and buy at the same time is called a consumer-to-consumer relationship (C2C). An excellent example of a C2C platform is eBay, where customers can purchase used items while also selling new items at the same time.
In cases where the interactions between consumers are not commercial, that relationship may be referred to as peer-to-peer (P2P) interactions. This kind of relationship is voluntary and free. Examples of platforms with such a relationship include Gnutella and Kazaa that are music-sharing platforms.
The second relationship is consumer-to-business (C2B). In this kind of relationship, consumers supply businesses with relevant information through the different products the business offers. An excellent example of a platform that practices this kind of relationship is Amazon or Ciao.com.
The third tier of segmentation is the consumer-to-government (C2G). This is the relationship between consumers and the government. For example, it is considered a C2G business when consumers file their tax returns online.
2. The Business as a Supplier
One of the most common forms of interaction is where the business acts as the supplier. This kind of relationship is called business-to-business (B2C). It involves different companies selling different products and services to consumers.
B2B interactions consist of platforms where different businesses sell manufacturing inputs required by other firms to create their products and services. An excellent example of a B2B platform is Covisint, serving car manufacturers and suppliers as sellers.
3. The Government as a Supplier
There is not much with the government compared to what we have seen from the consumers and business relationships. However, we can project that this will change, and governments will have more interactions with consumers soon.
Impact of the Internet on the Five Forces Industry Framework
According to Porter, five forces influence an organization’s ability to maximize the value it has. In other words, these forces are responsible for providing a guideline to help understand profit sustainability against consumer bargaining power and competition. According to Porter, below are the five forces that determine an organization’s attractiveness:
- Buyers’ bargaining power.
- Barriers to entry
- Substitute products
- Industry rivalry
- Supplier bargaining power
Industry rivalry often occurs when different first want to explore an opportunity to remain competitive or relevant.
With the internet coming, we see more geographical boundaries reduced, and people are getting connected via the internet. Companies are merging in the e-commerce space while others are acquiring other companies to realign themselves for competition.
The rivalry between Netflix and Verizon is an excellent example of the internet rivalry we are experiencing today. The rivalry results from the speed at which Netflix offers streaming speeds and how the videos are delivered to customers.
Barriers to entry simply refer to the threat of new competitors entering the market. When the internet came to light, many people thought this was the time to wipe out any barriers. But from what is happening now, we can confirm that even the brick and mortar businesses are doing quite well because they have managed to invest in the internet.
Out of the many internet companies that came to light, only a few still survive. eBay, Alibaba, and Amazon remain some of the surviving internet retail stores still alive. This tells you that it is not as easy as most people thought it would be.
Frequently Asked Questions
1. What is the macro-environment?
This is a condition existing in an economy entirely and not in one particular region or sector. In other words, macro-environment refers to any trends that have to do with the Gross Domestic Product (GDP), individuals’ spending habits, fiscal policies, inflation, and employment.
2. What are the six macro environments?
There are six macro environments: economic, socio-cultural, technological, demographic, ecological, and political. You can remember all these in a simple formula, DESTEP. DESTEP is a model that can help you remember the six macro environments.
3. What is a macro factor?
This is a natural, influential, and geopolitical circumstance that directly or indirectly affects a country or a region’s economy. Some good examples of macroeconomic factors include inflation, economic outputs, unemployment rates, salaries, income, etc.
