Micro and Macro Environment Essay Sample
Micro and macro environment are the two elements within the external marketing environment that surrounds and affects organization’s operations. However, these factors are out of control of the marketing company but still influence the decision-making process while creating the strategic marketing plan.
In this essay sample, we are going to discuss the definition of both the environment, the difference between them, and their factors that affect the organizational goals with an example of Nestle and McDonald and how they improve their products and services considering some factors as the vital part of their success.
Definition of Microenvironment
Microenvironment is defined as the collection of factors that are in direct contact with the business organization which affects the routine activities and practices of the business. These forces have a major impact on the performance of the company and are associated with the company functions and day to day operations but for the short period of time.
Its elements include suppliers, competitors, marketing intermediaries, customers and the firm itself. Thus, the company’s ability to provide services to its customers is managed by controlling or regulating micro environmental factors to some extent.
Porter’s five forces is the tool that can help to analyse the external micro environment. Now, let’s discuss briefly about the micro environmental factors that affects as the external influence on the potential competition within the industry that determines how much profit a firm can earn.
Micro Environment Factors
- Suppliers: Suppliers can hold the power to decide the success and the failure of the business. They can control supply of the products that influence the revenue of the business company. However, suppliers have the power if they are the largest supplier of the goods. The supplier’s products are the vital part of the buyer’s finished product. Lack of supply can harm the consumer’s loyalty and rise in the supply expenses can change the organizational deals.
- Intermediaries: If the products of the company are given in the hands of 3rd party or resellers or market intermediaries such as retailers, wholesalers etc, they can circulate and offer the products to the purchasers. The performance of the intermediaries can impact the overall success of the business. Thus, intermediaries or resellers must help the organization to deliver their products from its starting point to the destination.
- Customers: Knowing the customers and their needs can play a major role in impacting the growth of the business. The reasons of the customers for buying your products must be evaluated to create the best marketing strategy based on the products and services.
- Competitors: The competitors who sell the similar products and services as your must be considered as the micro environment factor that can influence the business. The market value and competition should be analyzed and the way your competitors sell their products must be taken into account. You as a business should ask how your prices and products can differ from others in order to reap the better results. Also, how your services can satisfy the needs of the public in the market with many options.
Define Macro Environment
Macro environment is defined as the general environment within the economy that impacts the decision making, performance, strategy and working of all the business organizations at the same time. This environment is considered as the dynamic in nature and therefore constantly changing.
This comprises some of the external forces that are outside the control of the business but can have a powerful impact on the company’s functions. It encompasses the individuals, groups, organizations, agencies and others with which a company have a connection and deals.
The study of macro environment can be done with the help of Pestle Analysis. Now, let’s dive into the factors of macro environment that plays huge role in the success of the business if handled precisely.
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Macro Environment Factors
- Demographic forces: The demographic factors include the factors such as country, age, household lifestyle, cultural characteristics, ethnicity and education level that impacts different market segments.
- Economic factors: The economic environment factors can influence both company’s production and consumer’s decision making process. Let’s take an example of McDonald where nature of economic system of the country and economic policies of their government can make a big difference in the performance of the company.
- Natural/physical forces: Natural forces includes both renewable and non-renewable resources that may also impact the organization production and growth. Thus, factors like forests, agricultural products, oil, coal, minerals and more must be taken into account.
- Technological factors: To make the organization production and operations run smoothly, the technology, skills and materials must be taken into account that have a huge impact of the success of thee company. For example, McDonald also offers some technological services in some countries where customers can make their own burgers.
The food industries like nestle, dominos etc has incorporated more advance technologies in order to make their products more healthier, fresher and of different varieties. Technology has also enabled companies to make better packaging to increase the efficiency and reduce the costs of the products.
- Political forces: The political factors include political stability and foreign policies created by political organizations of the country which have a huge influence on the business. Thus, sound marketing strategies and decisions always include political forces for the constant development of the organizations.
Globalization is also one of the major political factors that can have an influence on the global companies. For example, Nestle is a global company in the food and beverage industry. Nestle vice president explained how globalization has impacted their business initially until they made global marketing strategy to react for their global market in different countries. Also, another impact was the impact of regulations. Therefore, nestle had to face multiple tiers of regulations which affected their production of the products.
- Social and cultural forces: The impact of your services and products on the society must be observed and examined. Any element that is taken as harmful for the society must be eliminated to create responsible organization with their mentioned goals and visions. Thus, company’s now bring the review or feedback system in their services to ensure they are providing environmentally friendly services in the society.
Now, customers are more interested in the addictive free products that are made up of natural ingredients. Thus, for example, Nestle is aware of this change and started to make their products like magi soups more natural and in accordance with the specific countries flavours and textures to meet local taste in their products.
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Difference between Micro ad Macro Environment
|Basis of comparison||Micro environment||Macro environment|
|Meaning||It is close environment under which company operates their operations||It is general environment that can affect the working and production of the business.|
|Elements||COSMIC, i.e. Competitors, Organization itself, Suppliers, Market, Intermediaries and Customers.||PESTLE, i.e. Political, Economic, Socio-cultural, Technological, Legal and Environmental.|
|Controllability||These factors can be controlled but some extent only||These factors cannot be controlled|
|Influence||This environment has direct and regular impact on the business.||This environment indirectly and distantly influence the business|
Role of SWOT analysis to measure the impact of micro and macro environment
The SWOT analysis method is helpful in understanding and measuring the micro and macro environmental factors effectively. The SWOT stands for Strength, Weakness, Opportunity and Threats. The former two are internal factors while the latter two are the external factors and not under the company’s control.
The Strengths can be evaluated by asking yourself what you are good at, what value your service or products can bring into market, how difference you can make and so on. However, Weaknesses can assess by evaluating the dependency on the services on outside vendors which needs to be improved.
Opportunities can be related to the extent of the favourable conditions that company have to make use of in order to improve their position in the competitive market. Whereas, Threats includes political, economic, customer trends, debts and costs as the external factors that cannot be controlled but can be accepted.
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