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The market environment is a term that is used to collectively identify all the elements that have some impact on the actual performance of a market. This includes events and factors that occur within the context of the market itself and also any elements that are based outside the market. The idea behind defining the market environment is to understand what forces are exerting some amount of influence in the marketplace and understand why and how a market reacts to those forces in certain ways.
In understanding the market environment, it is important to consider varying factors that shape the actual movement of the market. Typically, these factors are identified as being either microenvironment or macroenvironment in type and nature. While considering each factor in turn, the process also calls for understanding how all factors work in tandem to create the end effect on the marketplace.
The microenvironment aspects of the market environment typically focus on internal elements related to companies and how they perform in the marketplace. Factors like the corporate structure and organization, the distribution of resources in the operation, and even the policies and procedures that govern interaction between owners, managers and employees are considered as part of this assessment. Along with the characteristics and day-to-asspociated with the pday operational processes of the company, factors such as the working relationships with vendor partners, comparisons with competitors, and the general public perception of the company and its products will all play a role in the current status of the market environment.
Along with microenvironment factors to consider, there are also factors that are classified as macroenvironment. Here, the focus is on such issues as the political climate in which the products are produced and offered for sale, governmental legislation that affects how goods are produced and sold, and even the impact of current economic conditions on the ability of the company to remain competitive. The concept of a macroenvironmental factor also has to do with the level of consumer confidence that the products enjoy and how that confidence translates into sales.
Understanding the market environment as it relates to a given company requires not only identifying all known factors but also having some sense of how those factors blend together to create the setting in which the company must operate. By having an idea of how all known factors come together to create today’s business climate, it is easier to consider the potential for different market movements in the future, based on the ebb and flow of the influence of different elements. By accurately assessing where the market environment stands today and using that information to project where the market is going tomorrow, the business can make changes in procedures, production levels, or even marketing strategies in order to meet those future challenges and ultimately continue to generate an acceptable level of revenue.