THE

MICROENVIRONMENT
The microenvironment is also
called the internal
environment.
It includes forces affecting
operations that are within the
control of the company, that
is, the company is able to
manipulate these forces
towards the firm's advantage.

The internal environment consists
of 5 equally powerful forces:
I. MANAGEMENT
- This pertains to the
organizational setup, including
goals and objectives,
organizational structure,
managerial composition,
company philosophy, vision-
mission, policies, programs, plans,
strategies, tactics, etc.
II. MARKETING
- This includes the marketing program
of the company covering the basic
marketing mix- product, price, place,
and promotion.
- Specific items falling under this force
are product quality, packaging, pricing
strategies, intermediaries used,
advertising efforts, public relations,
company image and reputation,
distribution channels, "green
marketing" campaigns, warehousing,
discounts and other sales promotion
tools, market segmentation and a lot
more.
III. FINANCE
- This includes the company's
resources.
- Items covered under this force
are profitability indices,
financial performance, balance
sheet and income statement
results, assets, liabilities, net
worth, investments, capital
expenditures, and operating
expenses, among others.
IV. PRODUCTION AND
OPERATIONS
- This includes all aspects of
manufacturing(pertaining to
industries) or operations (for
commercial and service
enterprises).
V. HUMAN RESOURCES
- This aspect pertains to the
people in the organization.
- Specifically, it includes
motivation, compensation,
training and development,
promotion, recruitment,
selection, placement, hiring
policies and procedures, fringe
benefits, performance
appraisal, grievance-handling
mechanisms, management-
labor relations, etc.
THE
MACROENVIRONMENT
This is also known as the
external environment, consisting
of the forces that are beyond a
company's control.
The marcoenvironment includes
the economic, the sociocultural,
the politico-legal, the
technological, and the natural
environment.
Economic Environment
- This environment includes such
forces as balance of trade,
balance of payments, foreign
exchange, import-export
situations, competitive situation,
taxation, energy and oil prices,
employment, GNP, GDP, per
capita income, and other
measures of economic
performance.
Sociocultural Environment
- This environment pertains to
people and their culture.
- Examples of forces under this
type of external environment
are education, customs and
traditions, religious
affiliations, perception,
cultural values, demography,
ethnic and racial diversity, etc.
Politico-legal Environment
- Politico pertains to
government while legal
pertains to law.
- This environment includes
legislation regulating
business, legal restrictions,
elections, political stability,
presidency, peace and
order situation, armed
forces, etc.
Technological Environment
- This refers to the
advancement of science
and technology and
includes new inventions or
discoveries, technological
breakthroughs, research
and development,
information technology,
scientific experiments, etc.
Natural Environment
- This includes typhoons,
earthquakes, the El Nino,
and La Nina phenomena,
pollution, ozone
depletion, deforestation,
preservation, and
extinction of animal
species, etc.
Assessing a firm's internal environment
gives a company an idea of what it is
doing poorly, and how it can improve its
operations.
Though the external environment cannot
be manipulated, the company can
prepare for external forces and eventually
make these forces work to the company's
competitive advantage.
The SWOT Analysis
A very powerful tool in
marketing.
SWOT stands for
Strengths, Weakness,
Opportunities and
Threats.

- Is something that a company
is good at doing. - - It is a
quality that produces a
competitive advantage for the
company.
- A characteristic is said to be
a strength if it belongs to the
internal environment and is
expected to affect company
operations in a positive
manner.
STRENGTH
- Is something that a
company lacks.
- It is a quality that puts the
company at a disadvantage.
- A quality is said to be a
weakness if it belongs to the
internal environment and has
a detrimental effect on
company operations.
WEAKNESS
- Is a factor in the external
environment that is expected to
work favorably towards company
operations.
- Improvements in the economy,
high barriers to entry, high
population growth rate, increase
in purchasing power, stable
political leadership, and strong
confidence of investors are some
examples of opportunities.
OPPORTUNITY
- Is a factor in the external
environment that is expected to
have a negative effect on
company operations.
- Political unrest, presence of
substitute products, dumping of
low-priced items from Asian
neighbors, piracy, and a pending
oil price hike are examples of
threats.

THREAT
- It is important to note that a factor can sometimes
be viewed as both a strength and a weakness.
- It is also possible that a factor may work as an
opportunity for one company and a threat for
another.
- It is not possible for a factor to be a strength and
an opportunity to one company at the same time,
nor it is possible for a factor to at once be a
weakness and a threat to one company
simultaneously.
- The real challenge of marketing, then, is to
maintain (if not improve) a company's strength
and find ways on how to turn weaknesses into
strengths.
- It is also a challenge to take advantage of
opportunities with the amount of resources that
a company has and to turn threats into
opportunities or exhaust all possible means to
be unaffected by these threats.
The Two-Part Questions for
SWOT Analysis
1. Is the factor within the control of the company
or is it beyond the company's control? If your
answer is within, then it belongs to the internal
environment. If beyond, it is part of the external
environment.

2. Is the factor expected to affect company
operations positively or negatively? If positively, it
may be either a strength or an opportunity. If
negatively, it can be a threat or a weakness.