Micro Environment Definition, Factors & Example

Definition

The micro environment in marketing includes all those micro factors that affect business strategy, decision making and performance. It is vital for business success to conduct macro environment and micro environment analysis before decision-making process. Macro environment factors include political, economic, social, technological, and legal factors. On the other hand, company micro environment factors include customers, suppliers, competitors, employees, shareholders and media.

How Micro Environment Affect Business Decisions

Mostly, in the marketing environment, micro factors do not affect all the businesses in the industry in the same manner. The reason is that every business is different in size, capacity, financial resources, human resources and overall strategies.

For example, competitors affect the business decision-making process. MacBook Pro is a well-known brand of Apple Inc. Dell XPS 13 and HP Spectre 13 Laptops are giving Apple Inc. a tough time and certainly affect its decision making. Apple is already introduced a functional keys touch bar. It is possible that Apple Inc. introduces MacBook Pro with Intel Coffee Lake Processor in mid 2018 to compete with its rivals and sustain the customer base.

Examples of Micro Environment Factors Affect Business

Customers

The customers are the central part of any business as they tend to attract and retain most of the customers to generate revenue. Therefore, organizations must adopt a marketing strategy that attracts the potential customers and retains the existing customers by taking into consideration the wants and needs of customers and by providing the after sales services and value-added services.

Competitors

The competitors of an organization can have a direct impact on business strategies. The organization must know how to do a competitive analysis of competitors and have a competitive advantage.  An organization must understand, what value added services their competitor is providing or the unique selling point of their competitors. How they can differentiate from their competitors. What benefits a company can offer to the customers which competitors does not offer.

In other words, understand competitors marketing mix strategy i.e. product, price, placement, promotion, people, process and physical evidence. Other approaches for market competitive analysis is PEST Analysis, PESTLE Analysis and SWOT Analysis as well.

An organization must understand that unawareness of competitors can make it difficult beat the competitors and lead the market. It must know how competitors react when there is a change in market environment such as political and legal changes, technological change, change in consumers behaviours can impact their business. They should also analyze how their competitors are responding to market changes and what tactics they are using to come up with better planning to these changes.

Example

For Instance, Videocon, BPL, Onida and others are competitors of Philip Television in Television Market. The other form of competition is “Product Form” in which customer seeks different features and functions in a product. For example, a customer is willing to purchase a two-wheeler car which can come with gears and without gear, automatic or manual. These are the features of product and services which customer would be considered during the purchase process.

Employees

Skilled employees can help an organization to achieve organizational goals and objectives. As skilled and experienced employees has expertise to support organization to get success. This begins with the hiring process and continues through regular and timely training and development sessions. The training and development process helps the employees to work effectively and efficiently in order to achieve the organizational goals, specifically in service sector.

Example

To some extent employees affect business environment. If there is low motivation and low skilled employees, business would suffer as the employees would be least motivated towards sales.

Suppliers

Actions of a supplier can influence the business strategy, as they provide the materials for production. For instance, if their services will not reasonable and timely that will affect the production time and the sales due to delayed process of production.

Example

If the supplier increases the prices of raw material they provide to the company, it will impact the marketing mix strategy of an organization, which will end-up with the increase in price of finished goods. Therefore keeping a strong relation with supplier can help a company in getting an edge over competitors.

Shareholders

Shareholders of an organization have an influence as the company want investors to increase for this they might make a decision to increase money by buoyant on stock market, i.e. shifting to public from private ownership. This change will pressure the company as the public shareholders seek returns on their investment.

Example

The shareholders' demand for raise in profit can influence the business success in longer-run. Therefore, it is important for top management to keep strong and better relations with shareholders to have a successful business on long-term basis.

Media and Social Media

The way media acts can make or break an organization. Organization should manage to keep a good relationship with media as whatever it shows will directly influence the organization business. If media will show positive aspect, this will increase the business of organization and vice-versa. In order to maintain good relations with media some organization do maintain a public relation department who manage events and deal with media on behalf of company

Organizations must understand the ways which they can reach their customers and have positive company and brand image in their mind. For this, some organization approaches newspapers to let people know about their business and some approach consumer television programs to have the attention of a large number of direct audience. These days social media applications are a good idea to reach customers in a more appropriate way i.e. Facebook, Youtube, Twitter and Instagram etc.

Example

A story that has been done by the media on a one-off, could impact on a firms’ daily operations thus becoming that firms micro environment. However, a firm could be influenced to have long term operational decisions in a bid to avoid negative media stories.

It is not necessary that business will control microenvironment factors all the time. Since micro and macro environment affect marketing campaigns, companies should conduct environmental analysis before developing marketing strategy.

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