A micro-environmental analysis evaluates a company’s internal climate, including products, operations, marketing, and leadership. It is often used to plan changes for efficiency and profitability, and may involve consultants and outside firms. Marketing research and customer relationships are important focuses. It differs from a macro-environmental analysis, which examines external threats.
A micro-environmental analysis is a review of a company’s internal climate. The audit typically covers all aspects that are under the operational control of the business. The services or products that a company produces or supplies, operational decisions and marketing activities are evaluated and analyzed in this type of analysis. The personal attributes and experience of the founders and the company’s leadership exert an influence on a company’s microenvironment. This is why it is typical to include the company’s key personnel and their managerial assets and liabilities in the micro-environmental analysis.
Typically, microenvironmental analysis will be performed in periods of low performance, but it can also be performed on a regular schedule. Operational efficiency is typically measured and compared to past performance. All operational decisions under the company’s control will likely be evaluated. These include manufacturing and supply chain operations. A comparison with historical data can be used to measure the company’s progress or loss of productivity.
An analysis of this type is often performed to plan a change to a more efficient production model or a retooling of the physical capabilities of the plant. Efficiency or production experts may be called in as consultants to make recommendations for changes based on investigative findings. The company’s human resources will typically be reviewed to ensure that they are adequately staffed to meet anticipated manufacturing and marketing needs. The company’s board of directors will often hire an outside firm to conduct the analysis, to ensure objectivity in the review. This increases the likelihood that such a report is accurate and unbiased.
Marketing research is typically a primary focus of a micro-environmental analysis, as sales drive revenue. Product or service pricing may be revised to ensure pricing strategies remain competitive and profitable. Since customer relationship strategies are an important driver of revenue, the analysis can focus heavily on the functioning of the company’s customer relationships. Sometimes, a company’s internal culture can come from a focused focus on customer service.
Company leadership can be assessed in terms of an individual’s performance according to the company’s governance mandates. For example, in a micro-environmental analysis, the board may conclude that a talented and valuable member of the leadership team is being underutilized in their current capacity. Or, further career development may be deemed necessary to groom a rising star, who is expected to take on more leadership responsibilities as part of a leadership succession plan.
An external macro-environmental analysis differs from a micro-environmental analysis in that it examines the climate outside the business. Typically a macro-environmental analysis would take inventory and address the threats posed by the rise of new competitors. These may include new products from existing competitors or dangers posed by emerging competition.
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