Six Microenvironmental Factors That Affect Businesses

In economics, macroeconomics encompasses societal perspective on resource allocation. Microeconomics involves factors of resources availability and usage that impact individuals and businesses. As a company operator, understanding the core microeconomic factors affecting your business helps in planning and preparation, as well as long-term business strategy development. Six microeconomic business factors that affect almost any business are customers, employees, competitors, media, shareholders and suppliers.

The Impact of Customers

Customers have the most direct microeconomic impact on a business. The simple fact is that you can't successfully operate a for-profit company without attracting targeted customers. Knowing your ideal customer types and developing and presenting effective marketing campaigns are integral to building a customer base and generating revenue streams.

Availability of Employees

Your workers produce, sell or service the goods and service that drive your business. The availability of qualified, motivated employees for your business type is vital to economic success. If you operate a highly technical business, for instance, you might have to pay more in salary to attract a limited number of available, specialized workers.

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Distribution Channels and Suppliers

Sourcing goods used in production or resale and distributing your inventory to customers are important as well. Manufacturers rely on materials suppliers and resale companies rely on manufacturers or wholesalers to transport goods. To operate profitably, you need to get good value on products and supplies and, in turn, offer good value to your customers with accessible solutions.

Level of Competition

The level of competition also impacts your economic livelihood. In theory, more competitors means your share of dollars customers spend diminishes. However, a large number of competitors in an industry usually signifies lots of demand for the products or services provided. If an industry lacks competition, you might not find enough demand to succeed in the long run.

Availability of Investors

Shareholders and investors may help fund your company at start-up or as you look to grow. Without funds to build and expand, you likely can't operate a business. You could look to creditors, but you have to repay loans with interest. By taking on investors, you share the risks of operating and often gain support and expertise. You do give up some control, though.

Media and the General Public

Your local community and media also affect your ongoing business image. Communities often support companies that provide jobs, pay taxes and operate with social and environmental responsibility. If you don't do these things, you may run into negative public backlash. Local media often help your story proliferate, for better or worse.


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