Question: Explain Microenvironment in Marketing.
Answers: The microenvironment in marketing consists of five components. The first is the organization’s internal environment—its several departments and management levels—as it affects marketing management’s decision making. The second component includes the marketing channel firms that cooperate to create value: the suppliers and marketing intermediaries (middlemen, physical distribution firms, marketing-service agencies, financial intermediaries). The third component consists of the five types of markets in which the organization can sell: the consumer, producer, reseller, government, and international markets.
The fourth component consists of the competitors facing the organization. The fifth component consists of all the public that has an actual or potential interest in or impacts on the organization’s ability to achieve its objectives: financial, media, government, citizen action, and local, general, and internal publics. So the microenvironment consists of six forces close to the company that affects its ability to serve its customers:
- The company itself (including departments).
- Marketing channel firms (intermediaries).
- Customer markets.
The Company’s Microenvironment
As discussed earlier the company’s microenvironment consists of six forces that affect its ability to serve its customers. Let’s discuss these forces in detail:
The first force is the company itself and the role it plays in the microenvironment. This could be deemed the internal environment.
- Top management is responsible for setting the company’s mission, objectives, broad strategies, and policies.
- Marketing managers must make decisions within the parameters established by top management.
- Marketing managers must also work closely with other company departments. Areas such as finance, R & D, purchasing, manufacturing, and accounting all produce better results when aligned with common objectives and goals.
- All departments must “think consumer” if the firm is to be successful. The goal is to provide superior customer value and satisfaction.
Suppliers are firms and individuals that provide the resources needed by the company and its competitors to produce goods and services. They are an important link in the company’s overall customer “value delivery system.”
- One consideration is to watch supply availability (such as supply shortages).
- Another point of concern is the monitoring of price trends of key inputs. Rising supply costs must be carefully monitored.
Marketing intermediaries are firms that help the company to promote, sell, and distribute its goods to final buyers.
- Resellers are distribution channel firms that help the company find customers or make sales to them. These include wholesalers and retailers who buy and resell merchandise. Resellers often perform important functions more cheaply than the company can perform itself. However, seeking and working with resellers is not easy because of the power that some demand and use.
- Physical distribution firms help the company to stock and move goods from their points of origin to their destinations. Examples would be warehouses (that store and protect goods before they move to the next destination).
- Marketing service agencies (such as marketing research firms, advertising agencies, media firms, etc.) help the company target and promote its products.
- Financial intermediaries (such as banks, credit companies, insurance companies, etc.) help finance transactions and insure against risks.
The company must study its customer markets closely since each market has its own special characteristics.
These markets normally include:
- Consumer markets (individuals and households that buy goods and services for personal consumption).
- Business markets (buy goods and services for further processing or for use in their production process).
- Reseller markets (buy goods and services in order to resell them at a profit).
- Government markets (agencies that buy goods and services in order to produce public services or transfer them to those that need them).
- International markets (buyers of all types in foreign countries).
Every company faces a wide range of competitors. A company must secure a strategic advantage over competitors by positioning their offerings to be successful in the marketplace. No single competitive strategy is best for all companies.
A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. A company should prepare a marketing plan for all of their major public as well as their customer markets. Generally, the public can be identified as being:
- Financial publics: influence the company’s ability to obtain funds.
- Media publics: carry news, features, and editorial opinion.
- Government publics: take developments into account.
- Citizen-action publics: a company’s decisions are often questioned by consumer organizations.
- Local publics: includes neighborhood residents and community organizations.
- General publics: a company must be concerned about the general public’s attitude toward its products and services.
- Internal publics: workers, managers, volunteers, and the board of directors.