Firms are affected by lots of different things; a firm's marketing environment is made up of all of the things that affect the way it operates. Some of the factor's in a firm's marketing environment can be controlled by the firm but some are uncontrollable. Firms need to understand their marketing environment so that they can make the most of positive factors and manage the impact of negative factors. A firm's marketing environment can be split into three parts: internal environment, macro environment and micro environment.
The internal environment is made up of factors within the firm itself. Examples include employees, company policy, capital assets, the firm's structure and the firm's products (materials). These factors can be controlled by the firm.
The micro environment is made up of factors that are close to the firm and affect it on a 'day to day' basis; usually these factors interact with the firm or are involved in the same industry. Micro environment examples include customers, banks and trade unions as they all interact with the firm. Competitors are also part of the micro environment because they are selling competing products, their activity could have a direct impact on the firm's daily business. Some of the factors within the micro environment can be controlled whilst other's can not. For more information about the micro environment and how to analyse a firm's micro environment through a stakeholder analysis, click here.
The macro environment is made up of factors that affect the firm on a long term basis. In general macro environment factors are not close to the firm. Micro environment factors could be national or global measures and affect many industries and groups. Macro environment examples include legislation, the economy (e.g. recession, inflation, VAT changes), and technological change such as the internet. Macro environment factors are uncontrollable factors but still influence company strategy. For more information about the macro environment including how to analyse a firm's macro environment through a PEST Analysis, click here.
One factor can be part of a firm's micro environment and macro environment. The media can be used to illustrate this:
- A one off media story about the firm may affect daily operations and will therefore be part of the firm's micro environment;
- Whilst a general desire to avoid a negative media story may influence a firm's long term business operations and therefore make up the firm's macro environment.
Firms should not concern themselves too much about which of the three categories a factor fits into. Instead firms should ensure that they have correctly identified all of the factors which make up their marketing environment and plan how to manage them for the firm's benefit.