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Macro Environment Toyota. how the macro environment impacts upon industries
1. Introduction To answer this question, I will use Toyota ...
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Submitted by lindak on March 24, 2008
Category: Business
Words: 949 | Pages: 4
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how the macro environment impacts upon industries
1. Introduction
To answer this question, I will use Toyota as an example of an automotible industry within South Africa. An industry can be defined as a group of companies that satisfies a specific customer need.
2. Economic forces
Since economic forces can change the health of the economy, they also have a direct impact on the broader industrial competitive environment. The four most important of these forces are:
• the growth rate of the economy
• interest rates
• currency exchange rates
• inflation.
The growth rate of the economy leads to increased expenditure and, by increasing demand, reduces competitive pressures in industry.
• Lower interest rates determine a company’s cost of capital, and thereby its fixed cost structure, stimulating investment, but also lowering barriers to entry by potential competitors.
• Currency exchange rates directly impact on a company’s competitive position in the global marketplace, making its products more or less competitive in foreign markets, depending on the rate of exchange.
• Price inflation, in turn, will produce slower economic growth, higher interest rates and volatile currency movements. Planning under such conditions becomes hazardous.
• Price deflation on the other hand, increases the price of fixed payments.
• Companies with a high level of debt have to service this debt with a steady fixed amount, which will become more expensive under these conditions.
3. Technological forces
Technological forces can be seen as being both a threat as well as creating opportunities. New products become obsolete overnight by being replaced by a host of new and innovative products. This rate of change has been accelerating steadily since the early 1950s. Its most important effect is to reduce barriers to...
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