Micro-environment

    Micro-environment 

        MBA / BBA MARKETING MANAGEMENT 

QUESTION PAPER 2020 

PUNE UNIVERSITY

INTRODUCTION

The market environment is a marketing term and refers to factors and forces that affect a firm’s ability to build and maintain successful relationships with customers Micro environment refers to those individuals, groups & agencies with which the organizations comes into direct and frequent contact in the course of its functioning.

Micro environment consists of the groups in the company’s immediate operating environment which have a stake in the company.

 The micro-environment affects the organization directly.

 It refers to the environment that most closely linked to the firm

This environment is also not under the full control of business.

 The business can influence this environment.

 The company

• Company organization consists of Board of Directors and functional managers.

• Marketing plans are drawn up as per the philosophy of Top management.

• Marketing decisions like new products, expansion, etc depend on the support of top management.

It depends upon finance, managerial skills, organization’s strengths and weaknesses.

In designing marketing plans, marketing management takes other company group into account. - They are top management, finance, R&D, purchasing, operation and accounting. –

All of these interrelated groups from the internal environment. –

Top management sets the company’s mission, objectives, broad strategies and policies for the company. –

Then, marketing managers make decisions within the strategies and plans made by top management. –

Marketing managers must work closely with other company’s departments. –

All the department must works together in order to achieve the company objective – to provide superior customer value & relationships.

Organization

One of the most important aspects of the micro environment of an organization is the self-analysis of the organization itself. It must understand its own strengths and weaknesses, objectives and goals of the business, and resource availability. The following non-specific elements of an organization can affect its performance:

Owners – People who have a major shareholding in the organization and have vested interests in the well-being of the company.

Board of Directors – The board of directors is elected by the shareholders for overseeing the general management of the business and ensuring that the shareholder’s interests are met.

Employees – People who work in the organization are major contributors to its success. It is important that all employees embrace the organization’s goals and objectives.

 Customers

Customers - Customers are the most important factor in the microenvironment because they made up markets. -

There are FIVE

 types of customer market:

a) Consumer markets - Consist of individuals and households that buy goods and services for personal consumption - e.g. End user

b) Business markets - Buy goods and services for further processing to produce their own product - Restaurants, tailors, etc. 

c) Reseller markets - buys goods and services to resell at a profit. - E.g. wholesalers, retailers, etc.

d) Government markets - Consists of government agencies that buy goods to produce public goods or transfer the goods and services to others who need them - E.g. hospitals, bus-stops, etc.

e) International market - Buyers in other countries, including consumers, producers, resellers & governments.

 The people who buy a firm’s products and services are its customers.

A business exists to create and satisfy customers.

A firms may have different types of customers like individual,households,Govt. depts., commercial establishments e.t.c

Purchase requirements vary from customer to customer

• influenced by cultural, social and psychological factors

• They are large in number

 In order to be successful a company must understand and meet the needs and expectations of its customers.

   Customers are theactual buyer of our goodsand services.

 The company muststudy its customermarkets closely since eachmarket has its own specialcharacteristics.

 • individuals and households that buy goods and services Consumer Market for personal consumption

• buy goods and services for further processing or for use Business Market in their production process Reseller Market

• buy goods and services in order to resell them at a profit

• agencies that buy goods and services in order to produce Government Market public services or transfer them to those that need them International Market

• buyers of all types in foreign countries

CONSUMER MARKET- individuals and households that buy goods and services for personal consumption •

Business Market  -  buy goods and services for further processing or for use in their production process•

Reseller Market - buy goods and services in order to resell them at a profit•

Government Market - agencies that buy goods and services in order to produce public services or transfer them to those that need them •

International Market - buyers of all types in foreign countries

 

Customers are people who buy an organization’s products/services. In simple words, an organization cannot survive without customers. A consumer, on the other hand, is the ultimate user of the product/service.

 For example, a husband might purchase a product for his wife. In this case, the husband is the customer and the wife is the consumer.

 A successful business keeps a close watch on both customers and consumers of its products/services. It must monitor and track any changes in tastes and preferences of the consumer along with changes in the buying habits of the customer.

 COMPETITORS:-

A company may have both direct and indirect competitors.

Direct competitors are the firms which offer the same or similar products and services.

 Indirect competition is the conflict between vendors whose product & services are not the same but that could satisfy the same consumer need.

In order to understand the full range of its competition, the co. must look at from buyers viewpoint.

• To be successful, a company must satisfy needs and wants of consumers better than competitors

 • A company should monitor three variables when analyzing each of its competitors 1. Share of Market 2. Share of Mind 3. Share of Heart

One Must understand competitor’s strengths Must differentiate firm’s products and offerings from those of competitors.

Those who sell the same or similar products and services as your organisation is your market competition, and the way they sell needs to be taken into account.

How do their prices and product differentiation impact you? How can you leverage this to reap better results and get ahead of them?

Competitors are companies with similar offerings in the same marketplace.

To be successful, a company must provide greater customer value and satisfaction than its competitors do.

Company must gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers. 

Every business has competition. Competitors are other organizations that compete with each other for both resources and markets. Hence, it is important that an organization is aware of its competitors and in a position to analyze threats from its competition. A business must be aware of its competitors, their strengths and weaknesses, and the most aggressive and powerful competitors at all times.

 Further, an organization can have direct or indirect competitors. When organizations are involved in the same business activity, they compete for both resources and markets. This is Direct Competition.

 For example, Pantene and Sunsilk shampoo companies are direct competitors. On the other hand, a five-star holiday resort and a luxury car company are Indirect competitors since they offer different products but vie for the same market.

 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.

Provide resources needed to produce goods and services.

• Important link in the “value delivery system.”

• Most marketers treat suppliers like partners.

• Marketers must watch supply availability and pricing

They also influence in quality level and manufacturing costs. A strike may cause interruptions in manufacturing.

  Suppliers are firms andindividuals that providethe resources needed bythe company.

 They are an importantlink in the company’soverall customer “valuedelivery system.”

RightTimely Price Quality Product

Suppliers can control the success of the business when they hold power.

The supplier holds the power when they are the only or the largest supplier of their goods;

the buyer is not vital to the supplier’s business;

the supplier’s product is a core part of the buyer’s finished product and/or business.

Suppliers - Suppliers provide the resources needed in producing goods and services. -

 Marketing managers must watch supply availability and costs. - Supply shortages or delays, will seriously affect marketing. -

Most marketers nowadays treat their suppliers as partners in creating & delivering customer value.

Suppliers are another important component of the micro environment. Organizations depend on many suppliers for equipment, raw material, etc. to maintain their production. Suppliers can influence the cost structure of the industry and are hence a major force.

 Availability

 Competitor analysis

 Conducting competitor analysis is critical for success of the firm

 A marketer must monitor its competitors’ offerings to create strategic advantage

 Marketing Intermediaries

intermediaries are firms that help the company to Reseller promote, sell, and distribute its goods to Physical distribution final buyers.

firms Marketing service agencies

Financial intermediaries

Marketing Intermediaries - Intermediaries are firms that help the company to promote, sell and distribute its goods to final buyers. They include:

a) Resellers - They are distribution channel firms that help the company find customers & make sales to them.

 - These include wholesalers and retailers who buy and resell merchandise. 9

b) Physical Distribution Firms - Help the company to stock and move goods from their points of origin to their destinations.

 - E.g. warehouses.

c) Marketing Services Agencies - Marketing research firms, advertising agencies, media firms

 & marketing consulting firms that help the company target

& promote its products to the right markets.

d) Financial Intermediaries - Financial intermediaries are institutions such as bank, credit companies and insurance companies.

 - These institutions helps finance transactions or insure against the risks associated with the buying and selling of goods.

 Intermediaries are also a major determining force in business. Most customers are unaware of the manufacturer of the products they buy since they approach retailers, departmental store, chain stores or online stores for their purchases.

 RESELLER

They are those who hold and sell company’s product.

Wholesaler and retailer.Physical Distribution Firm

They help the company to stock and move goods from their points of origin to their destinations.• Transportation and warehousing.

Marketing Service Agencies•

They help the company target and promote its products.

Advertising agencies. Media agency, marketing research firms, etc.Financial Intermediaries

They help finance transactions and insure against risks.• Banks, credit companies, insurance company, ect.

If the product the organisation produces is taken to market by 3rd party resellers or market intermediaries such as retailers, wholesalers, etc. then the marketing success is impacted by those 3rd party resellers.

For example, if a retail seller is a reputable name then this reputation can be leveraged in the marketing of the product.

 Public:-

it include all those groups which have an actual or potential interest company.

These publics can have both +ve and –ve impact on a business firm.

Public is any group that has an actual or potential interest in or impact in an organization’s ability to achieve its objectives. -

There are seven types of publics:

a) Financial public - Influence the company’s ability to obtain fund. - E.g. banks, investment houses.

b) Government public - Affect the company by passing legislations and laws that put restriction on the company’s actions. - Public municipality, FINAS, and other government bodies.

c) Media public - This group carries news, feature and editorial opinion that may influence customers’ opinion towards the business. - E.g. Newspapers, magazines and television station

d) Citizen-action public - Include environmental group and minority group that can questioned the actions of the company and put them in the public spotlight. - E.g. Consumer organizations.

e) Local public - neighborhood and community organizations that will question a company impact on the local area and the level of responsibility of their action.

 f) - - General public Can greatly affect the company as any changes in their attitude will affect the company. Its consists population at large

g) Internal public - Consists of those who employed within the organization and deal with the organization and construction of the company’s product. -

When employees feel good about their company, this positive attitude spills over to external public.

A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieveits objectives.

 A company should prepare a marketing plan for all of their major publics.

Financial Internal Government Public Citizen Group Media General Local

• A group that has an actual or potential interest in or impact on an organization

• Seven publics include: 1. Financial 2. Media 3. Government 4. Citizen-action 5. Local 6. General 7. Internal

Your organisation has a duty to satisfy the public.

 Any actions of your company must be considered from the angle of the general public and how they are affected.

The public has the power to help you reach your goals; just as they can also prevent you from achieving them.

 Market

The market is much more than the sum of all the customers. The organization must study the market in terms of its actual size, the potential for growth, and its attractiveness. Some important issues are:

 The cost structure of the market

Price Sensitivity of the market

Technological structure of the market

The existing distribution system of the market

The maturity of the market

 Workers and Trade Union:-

Workers and their union are an important component of micro environment.

A firm’s relations with its workers & trade union have a significant impact on its functioning and performance.

Company’s work environment & industrial relations system must be conducive to efficient functioning.