Topic 5 The interrelationship micro, market + macro environments Flashcards
Relationship between the features/components of the micro-environment
**The interrelationship between
the functions **
**The eight functions within the business depend on each to achieve their goals and objectives.
**
For example, the general management function consults the administration function to obtain the relevant information that it requires to run the affairs of the business.
The general management function coordinates all the other functions in the business in an efficient and effective way to achieve the mission and vision of the business.
It constantly seeks information and advice from all
the departmental heads to make decisions and develop strategies for the business.
Relationship between the features/components of the micro-environment
The interrelationship between departments
The departments within the business depend on and
influence each other when they perform their duties and
responsibilities.
For example, the production department will have to inform the purchasing department about the type, quality and quantity of resources they need to purchase or order
for them to produce the goods or services required.
The marketing department also provides the production department with feedback from customers so that the production department could produce goods and services that will meet consumers expectations.
The human resources department will consult the other department to determine the type of skills and experience that they need in their department before recruiting employees into the business.
All the other departments in the business are also interrelated in one way or another.
**Some departments depend on other departments in the same business for their resources, to complete their final products. **
For example, in a car manufacturing company, the different parts of the car are created by different departments before it is combined to become a complete car.
Relationship between the features/components of the micro-environment
The interrelationship between
**employer and employee **
The employer (business) depends on the employees (workers) to perform certain duties and responsibilities
for the business and the employers also remunerate employee for offering their services to the business.
Employers also consult their employees when
it comes to devising strategies to achieve the goals and objectives of the business.
Some employers provide their employees with education and training resources to improve the skills of their workers.
The interrelationship between micro and market environment
The interrelationship between
Micro and Market environment
The businesses and consumers
The business and suppliers
The business and intermediaries
The business and competitors
The interrelationship between micro and market environment
The businesses and consumers
The businesses and consumers
Consumers depend on businesses for their goods and services to satisfy their needs and wants and businesses also depend on consumers for their income when they buy from them.
Without consumers a business cannot survive, businesses need to ensure that they produce goods of consistently high quality to maintain or increase their customer base.
The public relations department must ensure that the business always maintains a positive image so that its customers remain loyal.
The marketing department must constantly conduct market research to identify the needs of their target market so that they are able to always satisfy the changing needs of their consumers.
The interrelationship between micro and market environment
The business and suppliers
The business and suppliers
Businesses depend on suppliers for their raw materials ** and other inputs. Without raw materials from suppliers a business cannot produce its goods **or services.
Businesses need to identify reliable suppliers so that they can be assured of constant supplies. Reliable suppliers are those suppliers that offer raw materials of the right quality, the right quantity, the right prices and deliver them at the right time.
Supply shortage is one of the challenges in the market environment. Businesses need to honor their commitments to their suppliers by paying for their supplies on time, so that they maintain a good relationship with their suppliers.
Businesses can also maintain a good relationship with their suppliers by signing** long-term contracts** for their raw materials at fixed prices or buy in **bulk **to get discount on their raw materials.
The interrelationship between micro and market environment
The business and intermediaries
The business and intermediaries
- Intermediaries distribute and sell the goods or services of a business: they are the link between the business and the consumers.
- Businesses need to maintain a good relationship with their intermediaries so that they could check their activities. Intermediaries need to be reliable
and efficient, as their activities affect the quality and price of the goods and services. - Intermediaries are also the customers of the business and so businesses need to always treat them with care. Examples of intermediaries are wholesales, retailers, agents, transport services and brokers.
- Agents are individuals or businesses that distribute and sell the goods or services of another business for a commission.
- Some agents depend on other agents to perform their functions. For example, a delivery agent may look for another agent in a particular destination where accessibility is restricted to assist its company to deliver its goods in that destination so that its services will not be limited.
- Some agents may network to share ideas and information to deliver efficient services to their customers.
The interrelationship between micro and market environment
The business and competitors
Competitors refer to businesses that sell more or less the same goods or services. Increased competition will lead to lower prices of goods and services hence, lower profits for the businesses.
- Some businesses may form alliances to control the prices of goods and services. Businesses in an alliance sometimes share information or join their resources to undertake projects or programmes that will benefit all their members.
- Businesses will normally study the activities of their competitors before determining their
pricing strategies. For example, if a one cell phone company offers promotional sales in the market, the other cell phone companies in the market will also try to react by offering something similar or else they might risk losing their consumers. - The business needs to study the activities of its competitors and be able to devise strategies to provide goods or services that are better than those offered by their competitors.
- Increased competition will lead to lower prices of goods and services. Businesses that offer the best quality and sell at the right prices will attract and maintain loyal customers.
- Businesses must be up to date with the current
trends and the latest technology to remain competitive in the market.
The interrelationship between micro and market environment
5 Reasons why competition poses a challenge to businesses
- Competition as one of the components of the market environment poses a challenge to businesses because it is not within the control of the business.
- Consumers could choose the competitor if the believe they get the most value for money.
- Business could find that they are unable to make sufficient profit when the demand is not high enough.
- Businesses could find it hard to differentiate itself from its competitors to gain a competitive advantage.
- New entrants with better products can also enter the market and divide the market even more thus decreasing the businesses market share.
Relationship between
Micro, Market and Macro environments
Changes in the macro environment may affect the micro environment which may then affect the market environment.
- For example; an increase in the interest rate may lead to an increase in the production cost, hence increase in the prices of goods/services, which will in turn decease consumer spending.
- Businesses (the micro environment) are in constant interaction with components of the market and macro environment.
- Businesses are challenged by changes in the market and macro environment which cannot be controlled by the business.
- Changes in the market environment may affect the micro environment. E.g., new competitors entering the market might force businesses to decrease their prices.
- Businesses must adapt to challenges from the macro-environment by formulating strategies to cope with these challenges.
*The diagram illustrates the relationship between the three business environments.
*
A change in the macro environment may cause a change in the micro environment which may in turn, create a change in the market environment e.g. an increase in the rate of interest may lead to an increase in the production cost which may reduce consumer spending.
