Micro environment or task environment refers to those individuals, groups and agencies with which the organizations comes into direct and frequent contact in the course of its functioning. Micro environmental factors exercise a direct influence on the operations of the enterprise. Therefore, it is also known as Direct Action Environment or Stakeholders. Micro environment consists of the groups in the company’s immediate operating environment which have a stake in the company. However, the micro forces may not influence all the firms in a particular industry in the same manner. For example, one firm’s supplier environment may be entirely different from that of another firm which has in-house supplies. Even when all the competing firms in an industry have similar micro environment, their relative success depends on how effectively they face the micro forces.
Micro environment consists of the following elements:
1. Customers: The people who buy a firm’s products and services are its customers. A business exists to create and satisfy customers. A firm may have different types of customers like individuals, households, Government departments, commercial establishments, etc. For example, the customers like individuals, households, Government departments, commercial establishments, etc. For example, the customers of a paper company may include students, teachers, educational institutions, business firms and other users of stationery.
In order to be successful a company must understand and meet the needs and expectations of its customers. A firm can select the target customer group or market segment on the basis of factors like profitability, elasticity of demand, dependability, degree of competition and growth prospects. It is generally risky to depend upon a single customer group. The customer environment is becoming global due to increasing globalization and liberalization of the economy. With the opening up of Indian market and foreign markets, the customer is becoming more global in the matter of shopping.
2. Competitors: A company may have both direct and direct competitors. Direct competitors are the other firms which offer the same or similar product and services. For example, Sony TV faces direct competition from other brands like LG, Samsung, Onida, Videocon, BPL, etc. Indirect competition comes from firms vying for discretionary income. For example, a cinema house, faces indirect competition from Casino, and other firms marketing entertainment. Due to economic liberalization and globalization, Indian companies are now facing competition from both domestic firms and multinational corporations.
Further details on the competitive environment are given in the next chapter.
3. Suppliers: Suppliers refer to the people and groups who supply raw materials and components to the company. Reliable sources of supply enable the company to carry on uninterrupted operations and to minimize inventory carrying costs. Suppliers also influence quality levels and costs of manufacturing. It is very risky to depend on a single supplier. A strike or any other production problem of the supplier may cause interruptions in manufacturing. Therefore, it is advisable to develop and sustain multiple sources of supply. Some companies like Maruti Udyog undertake vendor development to ensure timely and regular supply of materials and parts.
4. Marketing intermediaries: Several marketing intermediaries help a company in promoting, selling and distributing its products to consumers. Middlemen like agents, wholesalers, and retailers serve as a link between the company and its customers. Transportation firms and warehouses assist in the physical distribution companies are other types of marketing intermediaries. Countrywide retail distribution network has contributed significantly to the success of companies like Hindustan Unilever and Dabur India.
5. Financiers: The shareholders, financial institutions, debenture holders and banks provide financiers are important factors for the company. Financial capacity, policies and attitudes of financiers are important factors for the company. For example, the company cannot raise funds through shares if the financiers are not risk taking.
6. Publics: Publics include all those groups who have an actual or potential, interest in the company or who influence the company’s ability to achieve its objectives. Media groups, environmentalists, non-government organizations (NGOs) and local community are examples of publics. These publics can have both positive and negative impact on a business firm. For example, media groups can be used to disseminate useful information. A company can cooperate with the local people to improve its image as well as to provide some benefit to the people. On the negative side, local community concerned with public health can force a company to suspend operations or to take pollution control measures. Non-government organizations often organize protests against firms suspected of being guilty for child labour, cruelty against animals and damage to nature. For example, one of the leading companies in India was attacked by the media for writing advertisements on rocks near a famous hill station. Such activities of public can tarnish the image of business.