Q.
Elaborate on all the micro environment elements (internal and external) that may affect the ability of a property development company to serve its clients.
(25 marks, 2015 Q3)
(25.09.2015)
A.
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Firstly, we need to differentiate what are micro and macro environment in Marketing.
See below:
The micro environment of the organisation consists of those elements which are controllable by the management.
The key point of the question is what elements affect the ability of a property development company to serve its clients. Therefore, the element must be affecting the clients.
Internal - Sales force
The sales force or employee of a property developer would very much affect the ability of the company in offering the products to its clients. A good sales team would deliver a good presentation to the client and ensure target customers are buying into the features and benefits of the property. At the reverse, if the sales team is poor and defective in presenting the property products, clients will be angry with wrong expectations. This may cause disaster in sales and legal implication of failed promise may occur.
Trade union of the workers may also affect the working condition of the sales team. Although the real estate negotiators and agents are not strong unions, they may disagree with working during weekends and public holidays. And, it is usually during this time that public are free to visit the sales office for potential sales.
Internal - Media
This is about the ways how the management profile itself and present itself to the public.
Largely, it is by the marketing or advertising arm of the firm. The marketing person (director or whatever name) will strategise the direction of the sales force to carry out promotion of its brand and products. In this part, it needs to study the market to come out with its niche, and position in the most effective manner.
For example, using advertising media to reach the public. The marketing department may come out with video clips and post on its corporate website. Another way is to develop a partnership with major agency firms (for property products) to showcase the projects in their respective trade shows or by cold-calling of their negotiators and agents. Using different mode of promotion will reach different target customer groups. Thus, serves the clients in different ways.
Internal - Shareholders
The makeup of shareholders of the company have certain impact on the direction of the strategy of the company to serve its clients. This is usually the case when the founder shareholder maintains dominant position in the company.
Take for example, a founder shareholder who is stubborn at the way of running of business may restrict innovation or improvement. On the other hand, a founder shareholder would have more hands-on and walk the talk compared to a silent shareholder. This will in turn, affect the response time to a client's complaint or demand. A shareholder who is more of an agent, rather than an owner would response to complaints in a protective defensive way rather than choosing to admit the mistake and improve on the outcome. This definitely affects how customers feel when dealing with the company.
This is especially so when there is substitute for the service or product in the market. See below for the external micro-environment. In fact, response of firms to their micro environment may differ as each firm will attempt to achieve a higher success level. The general micro environment factors are discussed below.
External - Competitors
The competitive environment consists of certain basic things which every firm has to take note of. No company, howsoever large it may be, enjoys monopoly. In the original business world a company encounters various forms of competition. The most common competition which a company’s product now faces is from differentiated products of other companies.
For example, in the Colour Television Market, Philips TV faces competition from other companies like Videocon, Onida, BPL and others. This type of competition is called brand competition. It is found in all durable product markets.
The consumer wants to purchase a two-wheeler, the next question in his mind is with gear or without gear, 100 cc or more than that, self starter or kick starter, etc. This type is otherwise known as ‘Product form competition’.
Philip Kotler is of the opinion that the best way for a company to grasp the full range of its competition is to take the viewpoint of a buyer. What does a buyer thinks about that which eventually leads to purchasing something? So, tracing of the consumer mind set will help to retain the market share for all the firms.
Therefore, how the company looks at competitors will affect how it response to clients. When a client compares the product to competition, the response by the company would either be matching the competitor or ignore the competitor. Of course, if the company chooses to ignore the competitor, clients will feel discouraged and eventually move away.
External - Customers
The business enterprises aim to earn profit through serving the customer's needs, wants and demand. It now thinks more in terms of profitable sale rather than more sales volume for its sake. Today marketing of a firm begins and also ends with the customers.
Now a days, a business firm to be successful, must find customers for its products. This is the reason the customers thus constitute the most important element in the micro environment of business. Products sales depend mainly on the degree of consumer satisfaction.
In fact, this is a reason that gives more importance to customer satisfaction surveys. Now every business firm set-up systems to regularly watch customer attitude and customer satisfaction, because today it is universally accepted that the satisfaction of customers is the base for company’s success. Normally the customers are not in a same group, they are individuals, business enterprises, institutions and government.
From the company’s point of view it is always better to have customer from various groups and regions for that easily sustains demand for the company’s product.
External - Suppliers
Regarding the suppliers, the organisation can think of availing the required material or labour according to its manufacturing programme. It can adopt such a purchase policy which gives bargaining power to the organisation.
According to Michael Porter, “the relationship between suppliers and the firm epitomises a power equation between them. This equation is based on the industry conditions and the extent to which each of them is dependent on the other.”
Suppliers are either individuals or business houses. They combined together; provide resources that are needed by the company. Now the company necessarily should go for developing specifications, searching for potential suppliers, identifying and analysing the suppliers and thereafter choose those suppliers who offer best mix of quality, delivery reliability, credit, warranties and obviously low cost.
The development in the supplier’s environment has a substantial impact on the operations of the company. In recent trends companies can lower their supply cost and increase their product quality, and serve their clients better.
Summary
The basis of existence for the private entity (e.g. limited company) is to make a profit and of going concern - to keep going on making money.
Its most important objective is to sell its products to its customers. The internal factors which position the firm is how it organizes itself in management of sales force, shareholder expectations and the media portraying its mission and purpose of serving the clients.
The external factors are the competitions that the company have to deal with, the customers who compares the company to its competition, and the suppliers who determine indirectly the cost of the products.
Ref:
Smriti Chand. Micro Environment of Business: 6 Factors of Micro Environment of Business. Available at,