Micro Environment The microenvironment is also called the operating, competitive or task environment.

It consists of sets of forces and conditions that originate with suppliers, distributors, customers, creditors, competitors, and shareholders, as well as trade unions, and the community in which the business operates. These forces, on a daily basis, impact the organisations ability to obtain inputs and discharge of its outputs. Factors in the microenvironment are largely within the control of the managers. In this way, organisations can be much more proactive in dealing with the task environment than in dealing with themacro environment. Forces in the microenvironment result from the actions of four main elements or groups, namely suppliers, distributors, customers, and competitors. These groups affect the managers or firms ability to produce on a daily, weekly and monthly basis, and thus significantly impact short-term decision making. Lets examine these main actors. Suppliers Suppliers are individuals or organisations that provide (supply) an enterprise with the various inputs (such as raw materials, component parts, or employees) required for production. It is important that the manager ensures a reliable supply of input resources. The effectiveness of the supply system determines the organisations long-term survival and growth. Changes in the nature, numbers, or types of any supplier result in forces that produce opportunities and threats to which the managers must respond if their organisation is to prosper. Another major supplier-related threat that confronts managers pertains to prices of inputs. When supplies bargaining position with an organisation is so strong, they can raise the prices of inputs that they supply the organisation. A suppliers bargaining position is especially strong if: (1) The supplier is the source of an input, and (2) The input is vital to the organisation In addition to raising prices, suppliers can make operations difficult for an organisation by restricting its access to important inputs. For example, a reduction in government funding in terms of financial resources impact universities. In the same vain, a cut in quota of the supply of crude oil by OPEC member countries affect global consumption of unrefined or refined petroleum.

Distributors In the microenvironment of business, another group of actors are distributors. Distributors are organisations that help other organisations sell their goods and services to customers. The decisions that managers make on how to distribute products to customers can have an important effect on organisational performance. The changing nature of distributors and distribution methods can also bring opportunities and threats for managers. If distributors are so large and powerful that they can threaten the organization by demanding that it reduces the prices of its goods and services, then, the manager becomes constrained and challenged. In contrast, the power of the distribution may be weakened if there are many options or alternatives. Customers

Customers are another group of actors in the operating environment of business. Customers are the individuals and groups that buy the goods and services that an enterprise produces, changes in the numbers and types of customers or changes in customers tastes and needs result in opportunities and threats. A forward looking organisation must meet the needs and wants of its customers or exceed the customers expectations. The organisation must have a customer orientation to succeed in this competitive, unpredictable and challenging business environment. Competitors Competitors are businesses that produce goods and services that are similar to a particular organisations goods and services. Put differently, they are organisations that are vying for same customers. Rivalry between competitors is potentially the most threatening force that managers must deal with. A high level of rivalry often results in price competition, and falling prices reduce access to resources and lower profit. Macro Environment This environment refers to the wide ranging economic, socio-cultural, political and legal, and technological forces that affect the organisation and its operating environment. These forces originate beyond the firms operating situation. The macroenvironment is also called the external or remote environment. The macroenvironment presents threats and opportunities that are often difficult to grapple with (that is, identify and respond to), than with events in the microenvironment.

Economic Forces The economic forces have significant impact on the success of any organisation. These forces on factors affect the conditions of procurement (buying) and sales market. For example, in Nigeria ( as elsewhere) where the Naira is so devalued relative to foreign currencies (e.g. the dollar and pound), importation of required inputs of production constitutes a major threat to the corporate managers. In the same vein, during periods of unhealthy economic growth occasioned by such factors as inflation, rising unemployment, high interest rates, and high taxes, among others, individuals as well as businesses have problems. This is more serious in the case of emerging enterprises, or new entrants.

Political and Legal Forces The political and legal forces are paralleled to the social environment. This is because, laws are ordinarily passed following social pressures and problems. In Nigeria, as else where, laws regulating the macro environment include legislations on monetary and fiscal policies, percentage of industrial emission, into the air, safety and health at work, wage and price control. Others are equal employment opportunity, contract of employment, and law of collective bargaining, among others. These regulations influence business operations either positively or negatively. Legislation on fiscal and monetary policies, for example, might encourage favourable tax reliefs and financial assistance for small-scale industry. The challenge, though, is that considering the nature of our political climate, legislations change at the whims and caprices of political and government leaders. There is political instability in Nigeria, this way, existing legislations change as new political and government leaders emerge. In this light, corporate managers should consider regulations both as threats and opportunities. Besides, political and government leaders, the actions or political activities by pressure groups and lobbying groups should be taken into consideration, when

considering investments or projects. Technological Forces Technological forces or factors could be said to be the most pervasive in the environment. Technology refers to the application of knowledge base which science provides. It is a well established fact that information and communication technology has revolutionized business operations. Consequently, organisations that apply knowledge that is rapidly changing and complex are highly vulnerable. These changes bring about new inventions and gradual improvements in methods, in design, in materials, in application, in efficiency, and diffusion into new industries. Corporate managers must adapt or adjust to these changes, in order to survive and prosper in this competitive and challenging business environment. The changes constitute threats and opportunities for any manager. Socio-cultural Forces Socio-cultural forces have to do with the attitudes and values of the society, and these to a great extent, shape behaviour. For example, in certain parts of Northern Nigeria (where Sharia Penal Code is strictly observed), there are restrictions on the sales and consumption of tobacco, alcoholic liquors and others. A manager in these parts faces unique challenges. He has to undertake deliberate and planned strategy of market segmentation. Similarly, in Southern Nigeria, there are changes in attitude to the issue of environmental degradation or pollution. This has led to frequent restiveness or unrest in the Niger Delta. The challenges before the managers of the multinational oil companies are unimaginable. Changes in socio-cultural factors also impact the business enterprise in its internal relations with employees within the context of changes in attitude to work changes in political awareness, and cultural norms, among others. In sum, the impact of the social forces is felt in changing needs, tastes, and preferences of consumers, in relation with employees, and in expectations of society form the company with regard to its social responsibility.

The Macro Environment

The Macro Environment includes the major forces that act not only on the firm itself, but also on its competitors and on elements in the micro-environment. The macroenvironment tends to be harder to influence than does the micro-environment, but this does not mean that firms must simply remain passive; the inability to control does not imply an inability to influence. Often the macro-environment can be influenced by good public relations activities. The main elements of the macro-environment are:

Demographic factors; Economic factors; Political factors; Legal factors; Socio-cultural factors; Ecological and geographical factors; Technological factors. Demographic factors Demographics is the study of population factors such as the proportion of the population who are of a given race, gender, location or occupation, and also of such general factors as population density, size of population and location.

Demographic changes can have major effects on companies: the declining birth rate in most Western countries has an obvious effect on sales of baby products, but will eventually have an effect on the provision of state pensions as the retired have to be supported by an ever-shrinking number of people of working age. Likewise, changes in the ethnic composition of cities, or in the population concentration (with few people living in the city centres of large cities) cause changes in the demand for local services and retailers, and (more subtly) changes in the type of goods and services demanded. Economic factors - Economic factors encopass such areas as the boom/bust cycle, and the growth in unemployment in some parts of the country as a result of the closing of traditional industries. Macro-economic factors deal with the management of demand in the economy; the main mechanisms governments use for this are interest rate controls, taxation policy and government expenditure. If the government increases expenditure (or reduces taxation), there will be more money in the economy and demand will rise; if taxation is increased (or expenditure cut), there will be less money for consumers to spend, so demand will shrink. Rises in interest rates tend to reduce demand, as home loans become more expensive and credit card charges rise.

Micro-economic factors are to do with the way people spend their incomes. As incomes have risen over the past 40 years or so, the average standard of living has risen, and spending patterns have altered drastically. The proportion of income spent on food and housing has fallen, whereas the proportion spent on entertainment and clothing has risen. Information on the economy is widely publicised, and marketers make use of this information to predict what is likely to happen to their customers and to demand for their products. Political factors - Political factors often impact on business: recent examples are the worldwide movement towards privatisation of former government-owned utilities and businesses, and the shift away from protection of workers rights. Firms need to be able to respond to the prevailing political climate, and adjust the marketing policy accordingly. For example, British Telecom, Deutsche Telekom and Telstra of Australia have all had to make major readjustments to their marketing approaches since being privatised, and in particular since seeing an upswing in competitive levels. Almost all the firms activities have been affected, from cutting the lead time between ordering and obtaining a new telephone, through to price competition in response to competit ors cut-price long-distance and international calls. British Telecom was the UKs fifth biggest spender on advertising during 2003. Legal factors - Legal factors follow on from political factors, in that governments often pass laws which affect business. For example, Table 2.4 shows some of the legislation on marketing issues currently in force in various countries.

Sometimes judges decide cases in a way that re-interprets legislation, however, and this in itself can affect the business position. A further complication within Europe arises as a result of EU legislation, which takes precedence over national law, and which can seriously affect the way firms do business in Europe. Case law and EU law are not dependent on the politics of the national governments, and are therefore less easy to predict. Clearly businesses must stay within the law, but it is increasingly difficult to be sure what the law says, and to know what changes in the law might be imminent. Socio-cultural factors - Socio-cultural factors are those areas that involve the shared beliefs and attitudes of the population. People learn to behave in particular ways as a result of feedback from the rest of society; behaviour and attitudes that are regarded as inappropriate or rude are quickly modified, and also people develop expectations about how other people should behave. In the marketing context, people come to believe (for example) that shop assistants should be polite and helpful, that fastfood restaurants should be brightly lit and clean, that shops should have advertised items in stock. These beliefs are not laws of nature, but merely a consensus view of what should happen. There have certainly been many times (and many countries) where these standards have not applied. These prevailing beliefs and attitudes change over a period of time owing to changes in the world environment, changes in ethnic mix and changes in technology. These changes usually happen over fairly long periods of time. Since 1970 in most Western countries there has been a development towards a more diverse, individualistic society; a large increase in the number of couples living together without being married; and a marked increase in the acceptance (and frequency)of single-parent families.

Cultural changes over the same period include a major change in eating habits due to an increase in tourism and world travel, and greater globalisation of food markets. A very few cultural changes come about as the result of marketing activities: a recent example in the UK is the gradual replacement of Guy Fawkes night (at least as a family occasion) with Halloween, an American import which has children dressing up in costumes and going from house to house trick or treat -ing. Part of the thrust for this change has come about because Guy Fawkes celebrations involve letting off fireworks, which is a dangerous activity for amateurs, but much of the change has been driven by a desire by marketers to sell costumes, and by the influx of US-made films and TV programmes which show Halloween celebrations. Ecological and geographical factors - Ecological and geographical factors have come to the forefront of thinking in the past fifteen years or so. The increasing scarcity of raw materials, the problems of disposing of waste materials, and the difficulty of finding appropriate locations for industrial complexes (particularly those with a major environmental impact) are all factors that are seriously affecting the business decision-making framework. In a marketing context, firms are having to take account of public views on these issues and are often subjected to pressure from organized groups as well as individuals. Often the most effective way to deal with these issues is to begin by consulting the pressure groups concerned, so that disagreements can be resolved before the company has committed too many resources; firms adopting the societal marketing concept would do this as a matter of course. Technological factors - Technological advances in recent years have been rapid, and have affected almost all areas of life. Whole new industries have appeared: for example, satellite TV stations, cable networks, the Internet, CD recordings and virtual reality, and computer- aided design systems. All of these industries were unknown even twenty years ago. It seems likely that technological change will continue to increase, and that more new industries will appear in future. The corollary, of course, is that some old industries will

disappear, or at the very least will face competition from entirely unexpected directions. Identifying these trends in advance is extremely difficult, but not impossible. The macro-environment also contains the remainder of the organisations publics. Governmental publics are the local, national and international agencies that restrict the companys activities by passing legislation, setting interest rates, and fixing exchange rates. Governmental publics can be influenced by lobbying and by trade associations. Media publics: Press, television, and radio services carry news, features and advertising that can aid the firms marketing, or conversely can damage a firms reputation. Public relations departments go to great lengths to ensure that positive images of the firm are conveyed to (and by) the media publics. For example, a company might issue a press release to publicise its sponsorship of a major sporting event. This could generate positive responses from the public, and a positive image of the company when the sporting event is broadcast. Citizen action publics are the pressure groups such as Greenpeace or consumers rights groups who lobby manufacturers and others in order to improve life for the public at large. Some pressure groups are informally organised; recent years have seen an upsurge in local pressure groups and protesters.

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