Answer to Question #156668 in Macroeconomics for EMMANUEL DOKYI

Question

·        explain the importance of the micro-environment to business organizations

Answer 1

The micro-environment is the operating environment of the firm. This is because the functioning of the micro-environment has a direct and immediate bearing on the company. They are more interlinked with the company than macro-environmental factors.

Let us take a look at some of the most important and common elements of the micro-environment.

1. Customers

The main purpose for the existence of most organizations is to satisfy the needs and wants of the customers. The enterprise aims to please the customer and earn a profit in return. So, the ultimate aim is to provide the best products/services to the customer at the best prices. Failure to do so may result in the failure of the business.

2. Competitors

There are no pure monopolies in the world. Every organization, whether big or small, has competition and competitors. So the company has to keep a constant check on their competitors. The company must ensure that its products have a USP that makes them different and unique in the market.

3. Employees

Employees or labor is one of the most important factors of production for a company. Human resources are a significant factor in the success of a firm. Hence employing the correct people, best suited to your firm is of vital importance. And training and development of these employees are also essential.

4. Shareholders

Shareholders invest in the company, but they are not merely investors. They own shares of the company, so they are actually owners of the company in a way. This means they get a say in the running of a company. Shareholders will also demand a return on their investment. So it is the company’s duty to earn profits and pass on these benefits to the shareholders. They have to create wealth for these shareholders.

5. Suppliers

Suppliers provide the firm with the materials and factors of production they need to run the business. The relation between the company and the suppliers is a power equation. Both depend on each other for their survival. So, it is necessary for the company to have healthy and amenable relations with their suppliers. This is essential to the smooth running of the organization.

6. Media

Every company is going to need media to promote their brand and market their products. So it is necessary that the company maintain its relationship and its status quo with the media. Any negative coverage in the media can lead to huge losses for the company.