Business Environment

1. MICRO AND MACRO ENVIRONMENT
OF BUSINESS
L. PRAKASH KANNAN, M.COM., M.PHIL., (PH.D.), ASSISTANT PROFESSOR,
S. J. MONISHA, III B.COM.,

2. Meaning
Business Environment is sum or collection of all internal and external
factors such as employees, customers needs and expectations, supply and
demand, management, clients, suppliers, owners, activities by
government, innovation in technology, social trends, market trends,
economic changes etc.
These factors affect the function of the company and how a company
works directly of indirectly. Sum of these factors influences the
companies or business organisations environment and situation.

3. Meaning
✘ Micro environment
- The forces close to the company that affects its ability to serve its
customers include-the internal environment, suppliers
customers, marketing intermediaries, competitors and publics.
✘ Macro environment
- The larger societal forces that affects the whole micro
environment include-the demographic environment, the political
environment, the cultural environment, the natural environment,
the technological environment and the economic environment.
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4. 4
Micro
Suppliers
Resellers
Customers
The
Competition
The General
Public
Macro
Economic
Factors
Demograph
ic forces
Natural/
physical
forces
Social and
Cultural
forces
Technologic
al Factors
Political
and Legal
Forces

5. Micro environment
Suppliers
 Suppliers can control the success of the business when they hold power.
 The supplier holds the power when they are the only or the largest supplier of their goods; the
buyer is not vital to the supplier’s business; the supplier's product is a core part of the buyer’s
finished product and/or business.
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6. Resellers
 If the product the organisation produces is taken to market by 3rd party resellers or market
intermediaries such as retailers, wholesalers, etc. then the marketing success is impacted
by those 3rd party resellers. For example, if a retail seller is a reputable name then this
reputation can be leveraged in the marketing of the product.
Customers
 Today with the advancement of technology and because of foreign collaborations, it has
become easy to manufacture any product, but it is still very difficult to sell i.e., to create,
increase and sustain the customers.
 Every day we watch a new advertisement e.g., buy one tooth paste tube and take another
free along with it or take two shampoo bottles at the price of one etc., to attracting the
customers.

7. The Competition
 Logically, every business that sells the same or a similar kind of product as you do is your
competition on the market. So, their sale and marketing tactics matter to you a lot. You
need to answer various questions, such as how their product and its price affects yours and
how you can make use of that in order to gain an edge over them.
 The three factor that matter in this case are:
 Desire Competition
 Product form Competition
 Brand Competition
The General Public
 Every Business organisation has in its best interest to appease to the general public. Every
step that you take needs to be viewed from their perspective as well. It is extremely
important how your actions affect others because their opinion can be the one thing that
either pushes you towards success or pulls you down from the pedestal.
 So the general public is very important in terms of:
 Public opinion
 Media
 Environmental pollution

8. Macro environment factors
Economic Factors
 Economic environment refers to all those economic factors which have a bearing on the functioning
of a business unit.
 The environment of the economy can have an effect on two essential aspects – your company’s levels
of production and the decision-making process of your customers.
Demographic forces
 Different market segments are typically impacted by common demographic forces, including
country/region; age; ethnicity; education level; household lifestyle; cultural characteristics and
movements.
Natural/physical forces
 The Earth’s renewal of its natural resources such as forests, agricultural products, marine products,
etc. must be taken into account. There are also natural non-renewable resources such as oil, coal,
minerals, etc that may also impact the organisation’s production.

9. Technological Factors
 The skills and knowledge applied to the production, and the technology and materials
needed for the production of products and services can also impact the smooth running
of the business and must be considered.
 Technology changes very fast and a firm which is unable to cope with the
technological changes may not survive.
Political and Legal Forces
 Sound marketing decisions should always take into account political and/or legal
developments relating to the organisation and its markets.
 Political environment is another important constituent of the business environment
which can bring any business enterprise to the ground.
 The political environment that is stable, honest, efficient and dynamic and which
ensures political participation of the people, and assures personal security to the
citizens, is a primary factor for economic development.

10. Social and Cultural forces
 The impact the products and services your organisations brings to market have on society must be
considered.
 Any elements of the production process or any products/servies that are harmful to society
should be eliminated to show your organisation is taking social responsibility.
 A recent example of this is the environment and how many sector are being forced to review
their products and services in order to become more environmentally friendly.
 Social factors include
 Attitude of people to work
 Attitude to wealth
 Desires and expectations
 Intelligence and education

11. Thank you
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