The environment consists of various forces that affect the company’s ability to deliver products and services to its customers. The microenvironment of the company consists of various forces in its immediate environment that affect its ability to operate effectively in its chosen markets. This includes the company’s suppliers, distributors, customers and competitors. The microenvironment consists of broader forces that not only affect the company and the industry, but also other actors in the microenvironment. These shape the characteristics of the opportunities and threats facing a company. These factors are largely uncontrollable by the company.
The environment can affect the company in dynamic ways. The company can have the best technologies, the best employees, and the best of suppliers but it can fail miserably if any of the factors like exchange rate, policies of the host government, or changing needs of customers, start to act against it. Similarly, a mediocre company can be spectacularly successful if the factors in the external environment start favouring its strategies and policies. It is imperative that companies keep a close watch at the environment factors that may affect them, and prepare themselves adequately to face the emerging challenges.