Components of Micro, Market, and Macro Environments

Unit 1.1 Revising the Components of Micro, Market, and Macro Environments

TERM 1

The Market Environment

• Definition: The market environment is identified as the immediate external environment of a business.

• Control: A business has limited or little control over its market environment.

Activity 1.1

QUESTION 1

1.1 Elaborate on the meaning of the micro environment.

• The micro environment refers to the internal forces that directly influence the operations and outcomes of a business. It encompasses elements that are closely related to the business such as:

  • Customers/Consumers

  • Suppliers

  • Intermediaries (such as wholesalers and retailers)

  • Competitors

  • Other organizations/civil society (including Community-Based Organizations (CBOs), Non-Governmental Organizations (NGOs), regulators, strategic allies, and unions).

1.2 Read the scenario below and answer the questions that follow.

Scenario: Joe's Supermarket (JS)

• Joe's Supermarket employed a manager who lacked management skills, indicating an internal challenge.

• An increase in the minimum wage of employees, enforced by legislation, is imposing a financial challenge, affecting profitability.

• The emergence of a new 24-hour supermarket directly across the street creates competition, which is another challenge for JS.

Use the table below as a guide to answer QUESTIONS 1.2.1 and 1.2.2 that follow.

Challenges

1.2.1 Quote ONE challenge in each business environment from the scenario above that JS has to deal with.

• Micro Environment Challenge: Lack of management skills of the manager.

• Market Environment Challenge: Competition from the new 24-hour supermarket.

• Macro Environment Challenge: Increased minimum wage legislation affecting profitability.

1.2.2 State the extent of control JS has over EACH business environment.

• Micro Environment Control: JS has full control over its internal environment, including its management practices and employee performance.

• Market Environment Control: JS has limited control over factors such as competition and supplier actions;

• Macro Environment Control: JS has little to no control over macro environment factors such as legislation regarding minimum wage and economic factors.

For Business Success

• A business must be able to influence the components within its environments to be successful. Influencing components includes

  • Working with customers,

  • Negotiating with suppliers,

  • Monitoring competitor actions.

• Businesses may also seek to influence government regulations that they perceive as hindering their operations or profitability.

Factors Affecting Business Environment

• Not all factors within the micro, market, and macro environments can be controlled or influenced by a business.

  • Example of Control: A business has full control over the pricing of its goods and services.

  • Example of Limited Control: Businesses have less control over suppliers and competitor actions.

  • Example of No Control: Most macro environment factors present no control to businesses.

Components of the Macro Environment

• Definition: The macro environment is the broader external environment affecting the business as a whole,

• Control: Businesses have no control over the macro environment and must adapt to challenges to succeed.

• The major components of the macro environment include:

  • Social environment

  • Political environment

  • Legal environment

  • Economic environment

  • Technological environment

  • Physical environment

  • Global/International environment

Internal vs External Environments

• Internal Environment: Comprised of the micro environment of the business, focusing on the business itself and its internal dynamics.

• External Environment: Encompasses both the market and macro environments, which include external factors that influence business decisions and operations.