Micro Environment of Business: 6 Factors of Micro Environment of Business (2024)

Most important factors of micro environment of business are as follows: 1. competitors, 2. customers, 3. suppliers, 4. public, 5. marketing intermediaries, 6. workers and their union!

The micro environment of the organisation consists of those elements which are controllable by the management.

Normally the micro environment does not affect all the companies in an industry in the same way, because the size, capacity, capability and strategies are different. For example, the raw material suppliers are giving more concessions to large sized companies. However, they may not give the same concessions to small companies.

Like the same, the competitors do not mind about the rival company if it is compared to the small, but he will be very much conscious if the rival him is large. Sometimes micro environment of the various firms in an industry is almost the same. In such a case, response of these firms to their micro environment may differ as each firm will attempt to achieve a higher success level. The general micro environment factors are discussed below.

1. Competitors:

The competitive environment consists of certain basic things which every firm has to take note of. No company, howsoever large it may be, enjoys monopoly. In the original business world a company encounters various forms of competition. The most common competition which a company’s product now faces is from differentiated products of other companies.

For example, in the Colour Television Market, Philips TV faces competition from other companies like Videocon, Onida, BPL and others. This type of competition is called brand competition. It is found in all durable product markets.

The consumer wants to purchase a two-wheeler, the next question in his mind is with gear or without gear, 100 cc or more than that, self starter or kick starter, etc. This type is otherwise known as ‘Product form competition’.

Philip Kotler is of the opinion that the best way for a company to grasp the full range of its competition is to take the viewpoint of a buyer. What does a buyer thinks about that which eventually leads to purchasing something? So, tracing of the consumer mind set will help to retain the market share for all the firms.

2. Customers:

According to Peter. F. Drucker, “There is only one valid definition of business purpose, that is to create a customer.” The business enterprises aim to earn profit through serving the customer demand. It now thinks more in terms of profitable sale rather than more sales volume for its sake. Today marketing of a firm begins and also ends with the customers.

Now a days, a business firm to be successful, must find customers for its products. This is the reason the customers thus constitute the most important element in the micro environment of business. Products sales depend mainly on the degree of consumer satisfaction.

In fact, this is a reason that gives more importance to customer satisfaction surveys. Now every business firm set-up systems to regularly watch customer attitude and customer satisfaction, because today it is universally accepted that the satisfaction of customers is the base for company’s success. Normally the customers are not in a same group, they are individuals, business enterprises, institutions and government.

From the company’s point of view it is always better to have customer from various groups and legions for that easily sustains demand for the company’s product.

3. Suppliers:

Regarding the suppliers, the organisation can think of availing the required material or labour according to its manufacturing programme. It can adopt such a purchase policy which gives bargaining power to the organisation.

According to Michael Porter, “the relationship between suppliers and the firm epitomises a power equation between them. This equation is based on the industry conditions and the extent to which each of them is dependent on the other.”

Suppliers are either individuals or business houses. They combined together; provide resources that are needed by the company. Now the company necessarily should go for developing specifications, searching for potential suppliers, identifying and analysing the suppliers and thereafter choose those suppliers who offer best mix of quality, delivery reliability, credit, warranties and obviously low cost.

The development in the supplier’s environment has a substantial impact on the operations of the company. In recent trends companies can lower their supply cost and increase their product quality.

4. Public:

Literally word ‘public’ refers to people in general. According to Philip Kotler, “A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives.” The environmentalists, consumer protection groups, media persons and local people are some of the well-known examples of publics.

The company has a duty to satisfy the people at large along with competitors and the consumers. It is an exercise which has a larger impact on the well-being of the company for tomorrow s stay and growth. Create goodwill among public, help to get a favourable response for a company. Kotler in this regard has viewed that.

“Companies must put their primary energy into effectively managing their relationships with their customers, distributors and suppliers. Their overall success will be affected by how other publics in the society view their activity. Companies would be wise to spend time monitoring all their public understanding their needs and opinions and dealing with then constructively.”

In the modern business public have assumed important role and their presence in the micro environment of business.

5. Marketing Intermediaries:

Market intermediaries are either individuals or business houses who come to the aid of the company in promoting, selling and distributing the goods to the ultimate consumers. They are Middlemen (wholesalers, retailers and agents), distributing agencies, market service agencies and financial institutions. Most of the companies find, it is too difficult to reach the consumers. In such a cases the agents and distribution firms help to reach the product to the consumer.

Any type of intermediary the company must take into active consideration, the following aspects:

(i) The company has also to constantly review the performance of both middlemen and others helping its efforts periodically. If necessary, it may take recourse to replacement of those who no longer perform at the expected level.

(ii) Middlemen come into being to help overcome the discrepancies in quantities place, time, assortment and possession that would otherwise exist in a given condition.

(iii) It is advantageous and also efficient to work through the established Marketing channels instead of creating one and thus going for experiments.

(iv) The manufacturer has to decide the most cost-effective method of intermediaries to reach the product to consumer that will help to increase the profit.

6. Workers and Their Union:

As per the production function theory, the labour gets more importance. He is also one of the pillars of the company. The organised labours is highly secured their position compare to unorganised workers So, the workers now prefer to join labour unions which invariably resort to collective bargaining and thereby makes them less vulnerable to employer’s exploitation.

On the other hand, Trade Unions are a major component of a modern business. Trade Union of workers is an organisation formed by workers to protect their interests, improve their working conditions etc.

All Trade Unions have objectives or goals to achieve, which are contained in their constitution, and each has its own strategy to reach those goals Trade Unions are now considered a sub-system, which seeks to serve the specific sub-group’ s interest (i.e. workers’) and also considers itself a part of the organisation.

From the point of view of the company, industrial relation is more important to improve the company, otherwise conflict between labour and management leads to Sick Unit.