Understanding of Micro and Macro Factors That Affect Your Business Every business is affected by a myriad of factors. In other words, an organisation as such can never exist and operate in a vacuum. It is a part of a larger entity known as the business environment. In broad terms, this environment can be divided into two categories. The first one is the micro-environment. This category influences the functionality of a particular business itself. The latter one is the macro-environment which affects the operation of all existing business entities out there. The two categories may be different, but both are essential to understand in order to truly see your business in its full context. You have to be knowledgeable about the business environment in order to be able to track and comprehend how various factors affect your company. The micro-environment is basically the environment that has a direct impact on your business. It is related to the particular area where a company operates and can directly affect all of its business processes. In other words, it consists of all the factors that particularly affect a business. They have the ability to influence the daily proceedings and general performance of the company. Still, the effect that they have is not a long-lasting one. The micro-environment includes customers, suppliers, resellers, competitors, and the general public. The macro-environment is more general - it is the environment in the economy itself. It has an effect on how all business groups operate, perform, make decisions, and form startegies simultaneously. It is quite dynamic, which means that a business has to constantly track its changes. It consists of external factors that the company itself does not control but is certainly affected by. The factors that make up the macroenvironment are economic factors, demographic forces, technological factors, natural and physical forces, political and legal forces, and social and cultural forces. The SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) is useful both for understanding the micro and the macro factors. The former two are internal and affect the very business, while the latter are external and not under the organisations control. In terms of strengths, one should ask questions about values brought in, difference made, and so on. On the other hand, when it comes to weaknesses, one needs to evaluate dependency on outside vendors, aspects that need to be improved, and so on. Opportunities are related to favourable circumstances that the company needs to make use of in order to improve its position on the market. Threats are factors that cannot be controlled but need to be acknowledged. This includes political, economic, and customer trends, as well as debts and costs. Both micro and macro factors have a strong influence on how successful your business is. Every decision that you make needs to take these two environments into consideration. Your marketing strategies have to be based on them as well, if you truly want them to be lucrative. 3.2 With reference to the extract, provide a brief explanation of the micro environment of an organisation. (5 marks)