Each business is affected by many factors. An organization cannot exist or function “in a vacuum”. It is part of a larger entity called the business environment. This environment can be broadly divided into two types. The micro-environment is the first. This category affects the functionality of a business. This macro-environment affects all business entities.

Although the two categories might be different, they are both essential for understanding your business’s context. To understand how different factors impact your business, you must be familiar with the business environment.

What is the micro-environment?

The micro-environment refers to the environment that directly affects your business. It is a specific area in which your company operates, and can have a direct impact on all your business processes. It includes all factors that have an impact on your business. They can have an impact on your day-to-day activities and overall performance. They do not have a lasting effect.

Customers, suppliers, resellers and competitors are all part of the micro-environment.

What is the macro-environment?

The macro-environment refers to the overall economic environment. It affects how businesses operate, perform, make decisions and formulate strategies simultaneously. It is dynamic and businesses must constantly monitor its changes. External factors are outside factors that the company cannot control, but can be affected by.

The macro-environment is made up of economic, demographic, technological, and natural factors.

Micro-environment factors:

Customers

Marketing campaigns will be influenced by the type of customers your company attracts and the reasons they choose to purchase your product. You can have B2C, B2B or local customers.

Customers are concerned about the following:

• Stability in demand
• Potential for sale growth
• Relative profitability
• Intensity and intensity of competition

Suppliers

Your business’ success will depend on whether a supplier is the biggest or the most important.

Suppliers are very important as:

• The key link in the value delivery chain
• Make sure your company has enough insurance
• Price increase or decrease are key determinants

Resellers

Your marketing success will depend on whether you sell your product through a third-party reseller or middlemen like wholesalers and retailers. A strong reputation will transfer to your product, let’s take for example, a particular retailer.

They are an important link between you, the customer and these factors:

• Promotion
• Sale
• Distribution
• Marketing
• Financial mediation

Competitors

Logically, any business selling the same product or a similar product to you is your competitor on the market. You need to pay attention to their sales and marketing strategies. To gain an advantage over them, you will need to answer questions such as what their product is and how it affects yours.

These are the three most important factors in this case:

• Desire competition
• Product form competition
• Brand competition

The general public

Every business has the best interests of appeasing the public. You must consider the perspective of others when you make any decision. You must consider how others view your actions. Their opinion could be what propels you to success or down the hill.

The general public is extremely important when it comes to:

• Public opinion
• Media
• Environmental pollution

Macro-environment factors

Economic factors

The economic environment can impact two key aspects of your business’s production levels and your customers’ decision-making processes.

Examples of economic factors that affect business:

• Interest rates
• Exchange rates
• Recession
• Inflation
• Taxes
• Demand vs. Supply

Demographic forces

Universal Demographic Forces affect every market segment. These include age, education level and cultural characteristics as well as country and regional lifestyle.

These are the most important variables:

• What income variables impact business
• Business variables that are affected by age
• Variables by Geographic Region
• Education Level is a Variable

Technological factors

These factors relate to the skills and abilities that are used in production as well as the technology and materials that are required to make a specific product. These factors are crucial and can make a huge difference in how your business runs. It all boils down to the type of maintenance trolley that you use to keep your tools and equipment in good condition.

The most popular technological factors are:

• Automation
• Internet connectivity
• 3D technology
• Computer calculation speed/power
• Performance and efficiency of the engine
• Cryptography is a security measure
• Wireless charging

Both natural and physical forces

Every business should also consider the environment and its resources. There are some resources that can be restored, like forests and agricultural products. But there are also those that cannot. Both are closely related to production. Natural and physical forces can both be:

• Climate change
• Pollution
• Weather
• Both renewable and non-renewable resources are available
• Environment regulation laws
• Survival of a particular biological species

Legal and political forces

Market development is influenced by the legal and political environment in different areas. To be able to make the right decisions, every business must be aware of these forces around the world.

This refers to legal factors like

• Copyright law
• Employment law
• Fraud law
• Discrimination law
• Safety and Health law
• Laws governing import/export

Cultural and social forces

It is important to realize that your product can have a significant impact on society. Your production must demonstrate social responsibility and eliminate any practices that are harmful to society. There are many social and cultural factors that can affect your production.

• Shopping habits
• Education level
• Religion and belief
• Health awareness
• Social classes
• Family structure and size
• The population is growing at a rapid pace
• Immigration and emigration rates
• Life expectancy rates and age distribution
• Different lifestyles

SWOT analysis

The SWOT analysis is useful for both understanding the micro and macro factors. While the former two are internal factors that affect the business, the latter are external and are not under the control of the organization.

You should think about your strengths. What are you good at? What value do you bring? What impact can you make? You should also evaluate your dependence on external vendors and identify areas that can be improved.

Possibilities are related to favorable conditions that the company must make use of to improve its market position. These are uncontrollable factors, but they must be recognized. This includes customer, political, and economic trends as well as debts, costs, and other factors.

In Summation

Your business’s success is influenced by both micro and macro factors. These two factors must be considered in every decision you make. If you want your marketing strategies to be successful and to maintain a good reputation on the market, they must be based on these two environments.