External Micro- Environment
Micro environment includes those players whose decisions and actions have a direct impact on the company. Production and selling of commodities are the two important aspects of modern business. Accordingly, the micro environment of business can be divided. The various constituents of micro environment are as under:
Suppliers of inputs: An important factor in the external micro environment of a firm is the supplier of its inputs such as raw materials and components. Normally, most firms do not depend on a single supplier of inputs. To reduce risk and uncertainty business firms prefer to keep multiple suppliers of inputs.
Customers: The people who buy and ...view middle of the document...
Now, Indian firms have to compete not only with each other but also with foreign firms whose products can be imported. In America, American firms faced a lot of competition from the Japanese firms producing electronic goods and automobiles.
Publics: Finally, publics are an important force in external micro environment. Environmentalists, media groups, women’s associations, consumer protection groups, local groups, Citizens Association are some important examples of publics which have an important bearing on the business decisions of the firm. The existence of various types of publics influences the working of business firms and compels them to be socially responsible.
External Macro Environment
Apart from micro environment, business firms face large external environmental forces. An important fact about external macro environmental forces is that they are uncontrollable by the management. Because of the uncontrollable nature of macro forces a firm has to adjust or adapt it to these external forces. These factors are:
Economic Environment: Economic environment includes all those forces which have an economic impact on business. Accordingly, total economic environment consists of agriculture, industrial production, infrastructure, planning, basic economic philosophy, stages of economic development, trade cycles, national income, per capita income, savings, money supply, price level and population. Business and economic environment is closely related. Business usually collect all its required inputs from the economic environment available and also absorbs the output of business units.
Political-legal Environment: Business firms are closely related to the government. The political- legal environment includes the activities of three political institutions, namely, legislature, executive and judiciary which usually play a useful role in shaping, directing, developing and controlling business activities. The legislature takes decisions on a particular course of action, the executive implements those decisions through government agencies and the judiciary serves as a watch-dog for ensuring public interest in all the activities of legislature and executive. In order to attain a meaningful business growth, a stable and dynamic political-legal environment is very important.
Technological Environment: Technological environment is exercising considerable influence on business. Technology implies systematic application of scientific or other organised knowledge to practical tasks or activities. Business makes it possible for technology to reach the people in proper format. As technology is changing fast, businessmen should keep a close look on those technological changes for its adaptation in their business activities.
Global or International Environment : Global environment plays an important role in shaping business activity. With the liberalisation and globalisation of the economy, business environment of an economy has become...