Ans. Micro Environment
The
impact of various components of micro environment can be summarised as follows :
Customers - Customers
hold the key to the success of a business. Therefore understanding t customers
and monitoring their changing tastes and preferences is very important for
every business. The loyalty of customers towards a product or service depends
mainly upon their degree of satisfaction. In order to create and sustain
customers, the management has to set up systems for monitoring customers attitudes,
behaviour and satisfaction on continuing basis.
Competitors - No business
firm, howsoever large it may be, enjoys monopoly in real market situation. It
is always facing some kind of competition. A firm's competitors include not
only the other firms which are in the same kind of business but also the firms
belonging to other industries which are competing for a claim on the
discretionary income of the customers. For example Samsung TV is not only
competing with other brands of televisions in the market but it is also competing
with other firms manufacturing products such as two wheelers, refrigerators,
music systems, cooking ranges, etc. because the customers with discretionary
income may settle for any of these products as the discretionary income
available with the customers may be limited and desire to purchase products
unlimited. This kind of competition is known as desire competition since
primary task of the business firm here is to influence the basic desire of the
customer.
Marketing
Intermediaries
- Marketing intermediaries are the channel members (middlemen) which help the ,
business firm to take its product to the final buyer. Most companies find it
too difficult to reach the final buyer on their own as they do not have the
requisite network to distribute their products. The intermediaries such as
wholesalers, retailers, distribution firms, agents, etc. perform various kinds
of functions to assist the-business firm in promoting, selling and distributing
its goods to the final buyers. These intermediaries help the firm to find
customers and close sales with them, they also assist firms in moving goods
from production point to the consumption point, they also finance some of the
marketing activities and insure business risks.
Suppliers - Suppliers are
those who provide various kind of inputs such as raw materials, fabricated
parts, etc. Every firm strives to operate at a low cost of a production for
which it has to ensure uninterrupted supply of inputs. Any uncertainty in the
supply of inputs will require the firm to maintain a high level of inventories
which may lead to increase in the cost of production. In some cases, the firms
have gone for backward integration, i.e., entering into the business of
suppliers.
Macro
Environment
Economic
Environment
Economic
environment basically consists of the economic conditions such as the nature of
the economy, economic resources, level of income, distribution of income and
wealth, stage of economic development, etc., and the economic system and
policies which the country follows. Thus, the important forces operating in the
economic environment are:
·
the
stage of economic development through which a country is passing at a given
point of time
·
the economic system which a country has
adopted such as capitalism, socialism, or a mixed economy
·
the
nature of economic policies which the country has adopted such as industrial
policy, monetary and fiscal policies
·
the
type of economic planning such as centralised or decentralized planning,
perspective or long term plans, five year plans, annual plans or budgets, etc.
·
the
nature of infrastructure available in the country such as means of
transportation, communication network, banking and financial institutions,
power supply, insurance, etc.
·
the important economic indices such as
national income, per capita income, rate of growth of Gross National Product,
distribution of income, rate of savings and investments, rate of growth of
imports and exports, balance of trade, balance of payments, poverty rates, etc.
Political and
Legal Environment
In
every country irrespective of the nature of the economic system, the government
plays an active role as planner, regulator, and promoter of economic activity.
Only the extent and nature of these roles varies from system to system. In a
capitalist economic system business corporates are very powerful, yet they have
to operate within the parameters which are determined by the board policies of
the government. The ideology of the government also shapes the political
environment of the country. For example, India deliberately opted for mixed
economic system after it became independent. It still continues to be a mixed
economy but its nature has undergone a drastic change. In the first three
decades of its planning the mixed economy had a tilt towards socialism but now
it is increasingly moving towards a market driven economy where free
competitive forces play an active role.
The
nature of political stability has a lots of influence on the economic
activities and willingness of the business to participate in the economy. An
unstable government is likely to shift stances and make frequent changes in the
policies because of political compulsions which may dampen the enthusiasm of
business enterprises of greater
participation in the economy.
The
government also sets the legal and
regulatory framework within which the business operates. The constitutional
framework provides Directive Principles of State Policy, Fundamental Rights and
division of legislative powers between the central and the state governments.
Legislations such as Contracts Act, Companies Act, Industries (Development
& Regulation) Act, Foreign Exchange Management Act, Securities Exchange
Board of India Act, the various labour laws and host of other legislations
jointly create the framework of legal environment in the country. Through these
enactments, the activities of the business enterprises are regulated at each
stage of their working.
Socio-Cultural
Environment
The
social structure and the culture of a society has a great influence on the
functioning of its business activities. Each society has its own culture which
consists of the customs, values, attitudes, beliefs, habits, languages and
other forms of interaction between members of the society. Any business firm
which aims at entering any markets for its products and services has to be
extremely careful about the cultural sensitivities of the society involved.
The
social system can also be influenced by the way the business functions. The
innovations which take place in business, the transmission of information and
diffusion of information about new ideas etc. may also bring socio-cultural
changes in the society.
The
consumption patterns, the dressing and living styles of the people belonging to
different social structures and cultures vary significantly. The perception of
role of women in society also varies significantly in different societies. All
these aspects must be considered by the business organizations not only while
designing the products but also while finalizing its advertising and other
promotional mechanisms.
Demographic
Environment
Demographic
features deal with the size and composition of population. Normally the
absolute size of the population in a country is an important factor determining
the size of the domestic market. But the real size of any market is determined
on the basis of nature of composition of population. Therefore demographic
factors, such as size and growth rate of population, life expectancy, age
composition, sex composition, ethnic composition, rural-urban distribution of
population, income distinction levels, educational levels, family size, family
life cycle, occupation, religion, nationality etc. are all relevant to business.
Demographic environment differs from country to country and also from place to
place within the same country or region.
Technological
Environment
No
country, and for that matter, no business firm can afford to persist with the
outdated technology. The overall scenario of business operations has undergone
a tremendous change all over the world due to fast track developments in
information technology, computer technology and the communication sector.
Because of these developments, the whole world has now shrunk in size and is
considered to be a "Global Village." Now you can talk to anyone
anywhere in the world with a click of button. Everyone now has an access to
information about the developments taking place in any comer of the world. With
the internet and cable TV it is possible now for the buyers in India to know
what people in other countries are consuming or using. These technological
developments have taken place not only in the manufacturing sector but also
very significantly in the service sector. For example, with the high quality
financial and banking services provided by foreign and private sector banks,
the public sector banks in India have started feeling the heat of competition
and have resorted to computerization and automation in a big way in order to
ensure that they are able to provide world class financial services to their
customers and succeed in retaining them. The industrial units which lag behind
the other countries in technological changes will lose competitiveness in
national as well as international market.
International
Environment
International
environment comprises all those factors - economic, political, technological,
sociological etc. that operate at transnational, cross-cultural and across the
border level which also have an impact on the business operations of an
enterprise. The developments which take place at the global level determines
the course of change in the international environment. With the collapse of
Eastern Europe and USSR, the USA has established its supremacy all over the
world. At the global scenario, the world has become a Unipolar World. The way
USA has invaded Iraq in 2003 has clearly demonstrated its hegemony.
The
factors such as the process of globalization and the pace at which it is taking
place, formation of regional trading blocks like EU (European Union), OECD
(Organization of Economic Cooperation and Development), ASEAN (Association of
South East Asian Nations) etc., trends in global trade, demographic patterns
and shifts taking place at global level, global financial systems,
technological developments at global level, global markets, global legal
systems, and host of other factors determine the nature of global business
opportunities or threats which the international environment provides.
Natural Environment
Business
is also affected by the quality of natural environment in a particular country.
'There are some businesses which can be established only at a source where raw
material is available. For example, a sugar industry is possible only at those
places where sugarcane can be grown because of suitable climatic and soil
conditions. The industries which get raw material and inputs from the natural
resources can similarly be also established near the source of availability of
inputs otherwise increased transportation cost of raw materials and inputs will
make the industrial unit uncompetitive.
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