Micro Environment of Business: 6 Factors of Micro Environment of Business

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Micro Environment of Business: 6 Factors of Micro Environment of Business

U.S. Current Account or Trade Deficit: Dollars and % GDP

Micro Environment of Business: 6 Factors of Micro Environment of Business

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.

Micro Environment of Business

The Political and Regulatory Environment

Federal, state, and local bodies can set rules or restrictions on the conduct of businesses. The purpose of regulation is to protect both consumers and businesses. Businesses favor some regulations (such as patent laws) while chafing under others (such as restrictions on advertising). The tobacco industry, for example, has had to learn to live with a federal ban on TV and radio advertising. More recently, many companies in the food industry have expressed unhappiness over regulations requiring the labeling of trans-fat content. The broadcasting industry is increasingly concerned about fines being imposed by the Federal Communications Commission for offenses against “standards of decency.” The loudest outcry probably came from telemarketers in response to the establishment of “do-not-call” registries.

All these actions occasioned changes in the marketing strategies of affected companies. Tobacco companies rerouted advertising dollars from TV to print media. Food companies reduced trans-fat levels and began targeting health-conscious consumers. Talent coordinators posted red flags next to the names of Janet Jackson (of the now-famous malfunctioning costume) and other performers. The telemarketing industry fired workers and scrambled to reinvent its entire business model.

The Economic Environment

Every day, marketing managers face a barrage of economic news. They must digest it, assess its impact, and alter marketing plans accordingly. Sometimes (but not recently), the news is cause for optimism—the economy’s improving, unemployment’s declining, consumer confidence is up. At other times (like today), the news makes them nervous—our economy is weak, industrial production is down, jobless claims are rising, consumer confidence has plummeted, credit is hard to get. Naturally, business thrives when the economy is growing, employment is full, and prices are stable. Marketing products is easier because consumers are willing to buy. On the other hand, when the economy is slowing (or stalled) and unemployment is rising, people have less money to spend, and the marketer’s job is harder.

Then there’s inflation, which pushes interest rates upward. If you’re trying to sell cars, you know that people facing higher interest rates aren’t so anxious to take out car loans. Sales will slip, and to counteract the anticipated slowdown, you might have to add generous rebates to your promotional plans.

Moreover, if you operate in foreign markets, you can’t focus on solely domestic economic conditions: you have to monitor the economy in every region where you do business. For example, if you’re the marketing director for a U.S. company whose goods are manufactured in China and sold in Brazil, you’ll need to know as much as you can about the economies in three countries: the United States, China, and Brazil. For one thing, you’ll have to pay particular attention to fluctuations in exchange rates, because changes will affect both your sales and your profits.


As a product of the technology revolution and other factors, business plans have become less predictable. This is expected to continue with further waves of technological disruption like AI washing through the corporate economy. Furthermore, it seems likely that climate-based technologies and business models will have at least as great an effect.

The consequence for corporate strategy is an entirely new logic for scale advantage. In yesterday’s more stable environment, scale conferred advantage through creating efficiencies, but in environments with high rates of change, scale can potentially help companies manage risk through superior access to information, to maintain operational and financial buffers, and to conduct rapid experimentation. These capabilities combine to create a new dynamic type of advantage: resilience, which delivers long-term performance through uncertain periods.

4. Technological environment

Technological factors affect business concerning technological investment, technological application and the effect of technology on markets. Therefore, any technological advancement highly affects the business in a country. The type and quality of goods and services to be produced and the type and quality of plant and equipment to be used in a company, is determined by the kind of technology employed by that company (Mühlbacher, Dahringer & Leihs 2006). Burberry is extending its web reach so that its customers worldwide can view its brands. For example, the company is targeting Chinese shoppers directly by launching a site in China. This is because this target market accounts for 30% of sales in its London stores (Burberry, 2012).

The legal environment affects the business and its managers greatly. Legal factors involve how flexible and adaptable the law and legal rules that govern the business are. It also includes the exact rulings and court decisions. Legal provisions may also contribute to more or less income depending on the environment of operation. For example, Burberry Limited makes a considerable portion of its income from licensing, which amounts to about £109 million pounds. This is made possible as portrayed by the graph below because of laws and regulations in its foreign destinations of operations, which allow it to charge licensing fees.

Revenue by Channel Retail Wholesale Licensing



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