WHAT ARE THE MICRO AND MACRO ENVIRONMENT AFFECTING MARKETING
A Business principally is the organized effort by individuals in an organization to produce goods and services and to sell these goods and services in a market place to earn a good profit margin. The operating environment for all organizations whether they are commercial, charitable, governmental, or in the public sector more generally, is never static and seldom entirely predictable, and can therefore profoundly affect a company’s course of action. An organization can influence the various environmental forces acting on it.
COMPONENTS OF THE MARKETING ENVIRONMENT
The Internal Environment concerns the resources, processes and policies an organization manages in order to achieve its goals. These elements can be influenced directly by an organization. The External Environment consists of the Micro Environment and the Macro Environment. The Macro Environment consists of the political, social, economical, legal and technological influences, and organizations usually have very limited influence on each of these. The Micro Environment consists of competitors, suppliers and indirect service providers, who shape the way an organization achieves its objectives. In this environment, organizations have a much stronger level of influence.
Micro environment consists of those organizations that either directly or indirectly influence an organization’s operational performance. There are three main types: 1. Those companies that compete against the organisation in the pursuit of its objectives. 2. Those companies that supply raw materials, goods and services and those that add value as distributors, dealers, and retailers in the marketing channel. 3. Those companies that have the potential to indirectly influence the performance of the organisation in the pursuit of its objectives. Analysis of the performance environment is undertaken so that organisations can adapt to better positions, relative to those of their stakeholders and competitors. An Industry consists of various firms that market similar products and services. According to Porter, a leading Professor on Competitive Strategy in the Harvard Business School in his work on “How Competitive Forces Shape Strategy”, we should review the ‘competitive’ environment within an industry to identify the major competitive forces, as this can help assess their impact on an organisation’s present and future competitive positions. Porter suggests that competition in an industry is a composite of five main competitive forces. These are the level of threat that new competitors will enter the market, the threat posed by substitute products, and the bargaining power of both buyers and suppliers. These, in turn, affect the fifth force, the intensity of current competitors.
When examining an industry, we should consider whether economies of scale are required to operate successfully within it. Economies of scale are the cost advantages that enterprises obtain due to size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. New entrants may be restricted through government and regulatory policy, or they may well be frozen out of an industry because of the capital requirements necessary to set up business. For example, in the oil and gas industry because of the capital required for the extraction and refining operations. Companies may be out of a market because companies within that market are operating using proprietary products or services or technologies for example, the pharmaceutical industry where patents protect companies’ investments in new medicines. Substitutes
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