Components of business environment



A company's success largely depends on the understanding of micro as well as macro environment and tapping it to the fullest. In order to get the marketing strategies right, it is imperative to analyze the environments on which a business is based.


The Microenvironment consists of the players that are close to company. They play a huge role in affecting the performance of the company with respect to its customers. The microenvironment consists of:

  • company/business

  • suppliers

  • marketing and financial intermediaries like distribution firms, marketing services agencies, banks, credit companies, insurance companies, etc.

  • customer markets

  • competitors

  • public and its reviews

The above mentioned players of microenvironment are generally known to all, therefore, let us understand about macroenvironment.


The Macroenvironment comprises of the players that affect the actors in microenvironment. They are the larger societal forces which consist of:

  • Demographic environment

  • Economic environment

  • Natural environment

  • Technological environment

  • Socio-political environment

  • Cultural environment

Companies that understand and adapt well to the macroenvironment have the potential of becoming market leaders in the marketplace. Let us understand the above components of the macroenvironment succinctly.


Demographic Environment

Demography is the study of human populations in terms of size, density, location, age , gender, race, occupations, etc. The demographic environment is of paramount interest because, it gives us the larger scope of understanding the behavioral tendencies of inhabitants of an area. Demographic environments also gives us an understanding of rising population, changing preferences, educational characteristics and diversity in population.


Economic Environment

The economic environment consists of the economic factors that drive the purchasing power and spending patterns, which in turn influence the buying behavior of the consumers. Marketers may also want to pay attention to income distribution as well as the change in major economic variables, such as cost of living, interest rates, saving and borrowing patterns.


Natural Environment

The natural environment consists of the assets that are derived from natural surrounding that are needed as inputs for the business. It is in the best interest of the business to take care of the native environment that it is set up on. This is because a lot of businesses depend on the raw materials that are exclusively available in that native environment. Hence, the concern for the natural environment has triggered an environment sustainable movement. Therefore, in order to create a win-win situation, businesses must make sure that they come up with environs-feasible solution


Technological Environment

For a business to be sustainable and relevant to the modern times, it is imperative that the business uses the most recent technologies and upgrades itself with most relevant automation processes. But, it should be bore in mind that technology has its own pros and cons and the business world should certainly move in the direction wherein, we only magnify the positives related to technology, thereby mitigating the cons of it.


Socio-political Environment

Socio-politics consists of two terms-social and political. Political environment consists of the laws, judicial system, rules and regulations. It is very important that the business abides by the guidelines of the law pertinent to the location it is set up on. There are also international laws that are to be taken into account, pertinent to the business.

Whereas the political environment is governed by the legalities of the business, the social environment is based on the ethics of the business.

Social Environment guides us how socially responsible that a business can be. Business these days exercise cause-related marketing, which in turn becomes a way of acknowledging the society for all its cooperation and contributing to the society in return.


Cultural Environment

Cultural environment consists of institutions and other forces that affect society's fundamental values, beliefs,views and perceptions. The central beliefs and perceptions of the public in general have a high degree of power to accept or reject the ideas. Therefore, the very core of the business should be synchronous to the the core belief of the population.




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