Differentiate between Micro and Macro Environment of Business.
Environment of business classified into two groups: Micro environment and Macro environment.
Micro environment refers to such actors in the firm’s immediate environment whose decisions and actions have a direct bearing on an enterprise. Since a business broadly has two aspects viz. production and selling, the micro environment includes the following:
- Input suppliers,
- Workers and their unions,
- Market intermediaries,
Generally the players in micro environment do not affect all the companies in an industry in the same way. Their decisions and actions vis-a-vis individual enterprise often differ in accordance with the size, capability and strategies of each enterprise.
Sometimes micro environment of the various enterprises operating in an industry is almost the same. But responses of these enterprises to their micro environment will differ as each enterprise will attempt to achieve a higher success level.
Macro environment on the other hand, consists of larger societal and physical forces which affect the company and also the players in the company’s micro environment. Macro environment of a company refers to all those factors which exercise their influence on the business activity in general. The role of macro environment may be positive and negative. Macro environment of business can be broadly classified into economic and non-economic environment.
Economic environment (including financial environment) includes the following:
- Economic development,
- Income and expenditure pattern,
- Monetary and fiscal policies,
- Balance of payments
Non-economic environment includes the following:
- Political environment,
- Geographic environment,
- Socio-cultural environment,
- Legal environment,
- Ecological environment
Now it may be concluded that micro-environmental factors are more intimately linked with the business firm than the macro environmental factors. Further, micro environment factors need not affect all the firms in a particular industry in the same way but macro environment factors affect all the firms in the same way. Besides, macro environmental forces are more uncontrollable than the micro environmental factors.