Micro Environment

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This refers to the factors which influence the prospects of a particular firm; the firm can influence them with certain efforts. They are as follows:

 

1 – Customers

 

The type and the nature of the customers influence the rate of growth of any firm if the customers belong to an affluent section of the community; they are very particular about the quality of the commodity. The firm has to be very particular about choosing the inputs and transforming them in to the output. The cost factor is subsidiary if the firm is dealing with such customers.

 

If the customers are more commoners the quality of the commodity if less important than the cost of production. The customers want the commodity at a lower price so the firm will have to conscious about the cost in purchasing the inputs, in employment of labour, in packing and such other factors influencing the cost.

 

2 – Competitors

 

In modern age an absolute monopoly is a very rare thing. Most of the FIRMS have to work in some type of competition such as Monopolistic Competition or Oligopoly. A Firm has to be particular about the intensity of the competition. If the competition is severe the firm will have to be very particular about keeping the costs at the lowest level so that it can sell the commodity at a competitive price.

 

If the Firm is working in monopolistic competition it has to spend substantial amounts of money on marketing the commodity. The firm has to spend on advertisement, promotions the product through brand ambassadors undertaking sports and cultural programmes etc.

If the firm is working under Oligopoly, There is Inter-Dependence of the firms whatever action is taken by a particular firm gets a reaction from the other firms. Therefore a firm has to think of the possible reactions of competitors before taking any action.

 

Now a days the non price competition has become more prominent than price competition,. Instead of selling the commodity at a lower price the firms prefer to offer other incentives to the buyers so that they are attracted to the product. The other incentives are in the form of gifts, providing some complementary commodities, a longer period of guarantee home delivery, after sales service etc.

 

3 – Suppliers

 

The quality of the commodity and the cost of production are considerably influenced by the supplies of the inputs. If the inputs are supplied at economical prices, are of standard quality and if the supply is uninterrupted and timely the firm can produce a standard quality of a commodity and sell it at reasonable prices. Often the firms employ more than one supplier so as to ensure an uninterrupted supply of inputs. Some firms setup their own firms / units for producing or supplying the inputs required. That is helpful in ensuring an uninterrupted supply of inputs at proper time and at proper prices.

 

If the supplies of inputs are regular, consistent and reliable there is no need to keep a larger quantity in stock. The working capital required will be less; the interest on working capital will be less. Interest is a part of the cost of production. If the firm economizes on interest payments it can bring down the cost of production and sell the commodity at a lower price

 

4 – Channel Intermediaries

 

They refer to the different levels in the chain from the production unit to the final customer. The chain incorporates the stockists, the wholesalers, the distributors, the retailer etc. If there is a high level of efficiency maintained at every part of the chain the commodity can reach the final consumer in good condition and at a reasonable price. So the Firm has to select and maintain efficient intermediaries. The firm has to offer them proper terms

 

5 – Society: The prospects of a firm depend upon the society in which it has to work and sell its products. In a homogenous society the job of the firm is easy. The people have almost the same habits likes and dislikes, values and ethical norms. In a heterogeneous society the job of the firm is difficult. A particular product may be acceptable to a particular section of the society but not acceptable to some other sections. In a country like India a firm has to into consideration all types of sections of the community such as the religious sections, the caste, the sect, language, region etc.

 

Conclusion:

 

All these forces influence the chances available to a firm to survive and develop.

 

 

 

 

 

 

 

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