A micro and macro environment has two separate meanings in business. In economics, the micro environment is the study of issues at an individual level. Known as microeconomics, this field focuses on the choices made by individuals, as opposed to the whole market group. Micro in terms of business indicates the items a company can control, often internal processes. Macroeconomics — the opposite of microeconomics — is the study of large-scale theories relating to consumer spending, inflation and money supply. In business, the macro represents items outside of the company’s control.
When studying economic information, economists look at microeconomics because individuals often behave differently under alternate economic conditions. A major difference between the study of a micro and macro environment is opportunity cost. Opportunity cost represents the potential return lost when an individual selects one choice over another. This is important in microeconomics because individuals often have limited income when making decisions. By studying the individual choices and movements of a consumer, economists can then make determinations for an entire group. This results in the study of macroeconomics, which looks at overarching issues that affect all consumers in each group defined by economists.
Businesses separate issues in the micro and macro environment to aid owners and managers with completing tasks and earning the highest profit available in the market. Micro issues can be the amount of skilled labor within the company, production processes used to manufacture goods, facilities owned by the company, internal policies that dictate employee actions and other related issues. All these issues fall under the direct control of the firm. The management team can therefore change these items, issues or policies to improve the operating environment of the company. Companies may study the differences between the environments in order to determine which items they can change to maximize productivity and profit.
Macro issues in business can represent any item or issue not directly controlled by the company. Availability of raw materials, government laws and regulations, number of eligible employees available to hire and the threat of competition can be just a few major forces that separate the micro and macro environment. Companies will often identify these factors and create policies that help them cope with the potential problems that may arise with each one. Studying the macro environment may also require the help of outside consultants more in tune with the changes of this environment.