Micro environmental factors directly influence a business and include internal factors like employees, management, and organizational structure as well as external factors like customers, suppliers, competitors and shareholders. The internal environment also encompasses a business's vision, mission, values, image and physical resources. The external environment consists of competitors seeking the same customers, suppliers providing materials, and shareholders investing capital and expecting returns. Together, micro environmental factors have significant short-term effects on a business's operations and performance.

1. Micro Environmental Factors

2. Meaning and Concept
 Collection of all internal and external factors which
affect the Business.
 Such as:- Employees, Customers needs and
expectations, supply and demand, management,
clients, suppliers, owners, activities by government,
innovation in technology, social trends, market trends,
economic changes, etc.

3. Definition
 “The sum total of all individuals, institutions and
other forces that are outside the control of a business
enterprise but the business still depends upon them as
they affect the overall performance and sustainability
of the business.”

4. Types of Business Environment
 Micro Environment (which casts a direct and an
immediate effect on the business)
 Macro Environment

5. Micro Environment

6. Micro Environment
 Internal Environment
 External Environment

7. Internal Environment
 Value system: The value system of an organization
means the ethical beliefs that guide the organization
in achieving its mission and objective.
 The value system of a business organization also
determines its behavior towards its employees,
customers and society at large.

8.  Vision- A vision statement defines at what position
the business wishes to be in future. The main purpose
of the Vision Statement is to communicate the
aspirations and ambitions of the company.
 (For example, vision statement of Accenture is “To
become one of the world’s leading companies,
bringing innovations to improve the way the world
works and lives.”)

9.  Mission statement tells us about the company’s objectives,
goals, and how will they achieve it.
 It defines the purpose of the organization.
 It covers some or all of the following points
1. Business of the company
2. Who the company serves
3. Their reason for existence
4. How they go about their day to day work
The mission statement of NIKE is “to bring inspiration
and innovation to every athlete in the world” (*If you
have a body, you are an athlete.)

10. Organization Structure
 It comprises of Board of directors, the number of
independent directors, the extent of professional
management and share -holding pattern.
 The nature of organizational structure has a
significant influence over decision making process in
an organization.
 An efficient working of a business organization
requires a conducive structure which enables quick
decision making.

11. Company Image and Brand Equity
 It matters while raising finance , forming joint
ventures ,engaging with the market intermediaries,
entering into purchase and sale contracts , launching
new products etc.

12. Employees
 Human resource is the most significant factor in the
success (or failure) of a firm.
 Employing the correct people in the firm is of crucial
importance.
 Training and development of these employees is also
essential in uplifting the standards of the
organization.

13. Labor Unions
Unions collectively bargain with top managers regarding
wages, working conditions of different categories of
employees.
Smooth working of a business organization requires that
there should be good relations between management and
labor union.

14. Physical Resources
 Physical resources such as plant and equipment, and
technological capabilities of a firm determine its
competitive strength which is an important factor
determining its efficiency and unit cost of production.
 R and D capabilities of a company determine its ability
to introduce innovations which enhance productivity
of workers.

15. External Environment
Competitors
 Every organization, whether big or small, has
competition and competitors. So the company has to
keep a constant check on the competitors.
 It must be ensured that the products of the company
have a USP that makes them different and unique in
the market.
 The products offered must also be better and
Economical than those of the competition.

16. Customers
 The main aim of any business is to provide the best
quality goods or services to the customer at the best
possible prices.
 Failure to do so may result in failure of the business.
 It has become increasingly important to listen to
customers and value their feedback.
 This is why customer consumer surveys have
increasing importance in today’s scenario.

17. Shareholders
 Shareholders are the real owners who provide capital
to the business for a long term.
 It is the company’s duty to earn profits and pass on this
benefits to the shareholders. They have to
create WEALTH for these shareholders.
 The company must find the right balance between the
RESERVES to be maintained and the dividends to be
paid to the shareholders.

18. Suppliers
 They are the ones who supply goods to the company on
a regular basis.
 It is very important to maintain good relations with
the suppliers to ensure the regular supply of raw
material to the business.

19. Macro Environment
 Macro environment is the external environment .
 This environment is not controllable by the business,
it is too huge and too unpredictable to control.
 The success of the business, to a large extent will
depend on the company’s ability to adapt and react to
the changes in the macro environment.