Business External Environment – Micro and Macro Factors

A set of question-and-answer flashcards covering definitions and key points about the micro and macro environments affecting business organizations.

What is meant by the external environment of a business?

All factors outside the firm that are beyond its control and to which it must adapt for success.

Into which two broad parts is the external environment divided?

Micro environment and macro environment.

What is the micro environment of a business?

The set of close factors—such as suppliers, customers, competitors, intermediaries, and publics—that directly affect a company’s ability to operate.

Who are ‘suppliers’ in the micro environment?

Parties that provide inputs like raw materials and components to the company.

Why can uncertainties about suppliers raise costs for a firm?

They force the company to hold high inventories, increasing carrying costs.

Why are customers crucial in the micro environment?

Business success hinges on identifying customer needs and sustaining customer satisfaction.

Who are considered ‘competitors’ for a business?

Other firms producing or marketing similar products or close substitutes.

What role do marketing intermediaries play?

They assist the company in promoting, selling, and distributing goods to final buyers.

In the context of micro environment, what is a ‘public’?

Any group with an actual or potential interest in, or impact on, an organization’s ability to achieve its objectives (e.g., media).

What is the macro environment?

The broader, uncontrollable general environment in which a business operates, requiring adaptability for survival.

Name the two major categories of the macro environment discussed.

Economic environment and non-economic environment.

What elements constitute the economic environment?

Economic conditions, economic policies (industrial, monetary, fiscal), and the economic system of the nation.

What does the socio-cultural environment include?

People’s relationships, buying habits, languages, beliefs, values, customs, and traditions that affect business.

How does the legal environment influence business operations?

National laws and regulations shape day-to-day business activities, especially for firms operating globally.

Why is the international environment important?

It affects industries reliant on imports or exports through policies of various countries.

What constitutes the political environment?

Factors related to public affairs management that influence legislation and government regulations impacting business.

Define the technological environment.

The level of hard (machines) and soft (scientific thinking) technology used to solve problems and advance goods and services.

Which factors are included in the natural environment for business?

Geographical aspects like resource endowments, climate, location, and port facilities relevant to operations.