To understand the environment where a firm or a company works we need a market analysis. To do that first it is important to separate the environment into two major parts: First is microenvironment and the second is microenvironment. Let us discuss and analyze them separately.
The microenvironment is an environment where Company directly relates to several factors, subjects and as that factors are external it has no control over them (this statement is also true for microenvironment). The subjects with whom company interacts in microenvironment are:
Costumer (consumer) can be an individual household, business or state. These costumers have different strength and consequently different influence on a company. They also buy different products from the company for different purposes: Businesses to continue their production or resale, government to serve public needs, a consumer buys for final consumption. Firms actually act to satisfy their consumers’ needs and apparently, this microenvironmental factor is too important for a company and should be examined.
Suppliers are mainly other companies or households. Suppliers provide essential input for a company to process their production and satisfy customer’s needs. This relation is vital for a company and needs to be analyzed to understand opportunities of diversification in order to have more power and less risk.
Competitors are the other major subjects in microenvironment who affect companies’ everyday decisions. Their behavior is very important for the company to set specific strategy for future development.
Business intermediators like banks, insurance companies, transportation service providers, warhorses are the other important factor in the microenvironment of a company. They have a supportive function and can heavily affect the company.
There are different methods and tools to examine microenvironment of a company some of which are Industry analysis, competitor analysis, Porter five forces and so on. Also, we need to analyze companies strength and weaknesses in order to understand how it fits its environment.
The macro environment is an environment where several external factors affect companies but in an indirect manner and are also uncontrollable for firms management. That kind of factors are:
Demographics is a major macroeconomic factor because it is deciding the size of a market where the company acts. By saying Demographics, marketing specialists mean changes in population size, Income, Education, gender proportion, a proportion of age groups and so on.
The Economic condition in a country or in the world is another important macro factor. When a company wants to act, it should examine what kind of trends are there in the economy. There are some economic indexes which company must discuss. That indexes are GDP, GDP per capita, unemployment rate, net export and of course forecasts related with this indexes.
The political-legal environment has a major impact on company’s development because changes in political conditions can bring new legislation, new regulations. Moreover, the external political situation is also important, is there any threat of war, or is a country in some union or not.
Social Cultural, Technological, Ecological factors are also important and have a big impact on a company. Every company, which wants to act in a specific region, should examine what kind of culture there exists, what kind of traditions. Technology develops dramatically and it changes the “rules of game” in business. Ecology is an important aspect of human weal fear and should be discussed by a company before and during processing.
There are different tools to investigate or explore macro environment some of which are: Environmental scanning, PESTEL analysis, trend spotting and so on.
