The external environment consists of two levels, i.e. micro environment and macro environment.
Producer/Seller: The goals, objectives, policies, strategies, etc. of the organization are the foremost forces which govern the market. Successful companies are those that can recognize and respond profitably to unmet needs and trends in the society.
Customers: Consumer satisfaction is the foundation stone of a successful business. Business has to produce goods according to the needs,taste and preferences of the customers. Enterprises have to take into consideration the following features to create, maintain and retain this force: Tradition, customs, beliefs, values of society, lifestyle, standard of living, consuming, habit, thinking behaviour, income level, demographic characteristics, etc.
Competitors: Competitors are such factors in the micro environment that provide similar offerings for goods and services. To remain competitive, an enterprise must consider who their biggest competitors are. Suppliers: Suppliers are another key component in the core system of market. Any manufacturing unit uses necessary resources for the conversion of input (material,machines labour and funds) into output for that the necessary resources are generally obtained by the supplier. The companies growth depends upon the production and production depends upon the regular supply of resources therefore working of the various supply markets depends upon maintaining good relations with suppliers. Lack or non-availability of suppliers can ruin the market for a product. Marketing Intermediaries: Marketing intermediaries are institutions that facilitate the flow of goods and services between the company and its final markets. They include resellers (i.e. wholesalers, retailers, agents, and brokers), transporters, warehouses, banks and promoting agencies. These all institutions come into being to facilitate the work of consummating exchanges in the market. They perform a great deal of work in bringing about transactions between the buyers and sellers, market cannot survive without these intermediaries.
Macro Environment includes: Political factor:
Political factors: is the outcome of a combination of various ideologies advocated by different political parties. The rules and regulations and the laws that monitor and regulate the market forces are framed and promulgated by the government. This include the political factor. These policies generated aims at improving infrastructural facilities which encourage new business ventures. For example, after relaxation of import-export policies, an entrepreneur who exported textile material used its earning to import heavy industrial machines.
Economic factor: It includes the close study of important variables like supply and demand. Details of consumer trends, economic preference, costing, discounting, etc. are all economic decisions. Economic details will also help the entrepreneur in determining the size of the project and the reasons of finance. Socio-Cultural factor: Business is born and develops in society and in it various social factors exists. It involves a close study of the life styles, beliefs, customs, conventions, practices, etc. Expectations of individuals their preferences on the basis of their family background, age group and education will also form a part of this study. The main aim of an entrepreneur is to satisfy the need of all individuals of a society.For example, an entrepreneur wants to open a showroom of branded footwears. Hence, he will target the high income group of society.
Technological factors: It is influenced by government spending on research, new discoveries and development, government and industry focus of technological effort, speed of technological transfer and rates of obsolescence. Ecological factors: It considers the ways in which the organisation can produce its goods or services with minimum environmental damage.
Legal and finance factors: Legal scanning of the environment demands analyzing the legal requirements in the establishment of a project. Managing of the project and also in getting assistance from different sources. For example, welfare of employees, safety, simple contracts entered into with suppliers of raw materials financer’s, real estate owners, etc. require legal assistance.
