Near environment

From CEOpedia | Management online

Near environment otherwise known as a competitive business environment, micro-environment consist of entities (organizations, businesses, banks, government bodies) that affect the functioning of a company and which the company can influence. It is also called marketing environment and consist set of all the factors that affect or potentially affect the activity of the enterprise (e.g., its objectives, strategy, structure). The external environment of the company is divided into macroeconomic and microeconomic (near) environment.

Distinctive feature of the near environment is that there is direct feedback between above mentioned entities and the company. Subset of the near environment is Competitive environment which consist of entities directly affecting (competing with) the company and influencing its actions.

The management of a company should only to examine relationship with entities of near environment, but also shape this relationships by direct activity. Possible effects of this activities on the competitive environment on the company is different and is determined primarily by its competitive position. Near environment consists of all entities with which the company interacts (competitors, customers, stakeholders).

Fig.1. Near and far environment elements

Elements of near environment

Micro environment of business consist of:

  • competitors (local, regional and national),
  • producers of substitute and complementary goods,
  • customers (actual and potential) for the goods,
  • suppliers and subcontractors,
  • financial institutions (banks, insurers, etc.),
  • trade unions (their strength and social support),
  • service companies.

In some cases, i.e. agriculture, tourism, important component of near environment is biosphere.

Analysis of near environment

Analysis of the competitive environment helps to define the conditions of operation and business development in the sector and on a given geographic market. It also provides information on opportunities and risks associated with the dynamics of the sector, the behaviour of suppliers and customers, and above all competitors. Results of analysis allows the company to customize their resources to the requirements of implemented market strategy.

The structure of marketing environment of business

Near environment of business include general marketing environment and marketing support system. Marketing support system are created by near environment entities (e.g. agents, subcontractors, suppliers). The company uses the services of these entities to achieve the goals of marketing.

Companies and their marketing support system form the overall business marketing environment. This environment consist of following factors:

This factors causes various reactions. These reactions, carried out within the framework of marketing activities, determine the success in achieving the fundamental objectives of the company.

Examples of Near environment

  • Customers: Customers have an indirect effect on the functioning of a company as they are the main source of revenue. Companies can influence customer opinion by providing good customer service and carrying out effective marketing campaigns.
  • Suppliers: Suppliers provide the materials and components that are necessary for a company to produce its products. A company can maintain good relations with its suppliers by offering timely payments and consistent orders.
  • Competitors: Competitors are businesses that offer similar products and services as a company. Companies can differentiate their products and services from those of their competitors by offering innovative products and services at competitive prices.
  • Local Government: Local governments can provide incentives to companies that are based in their area. Companies can influence the local government by engaging in community initiatives and lobbying for favorable policies.
  • Media: The media can influence public opinion about a company's products and services. Companies can influence the media by providing accurate information and engaging in public relations activities.

Advantages of Near environment

A near environment is beneficial to businesses as it gives them the ability to influence their surroundings in order to gain an advantage over the competition. Some of the advantages of a near environment include:

  • Enhanced Awareness: By being aware of the immediate environment, businesses can stay up-to-date on what their competition is doing, which can give them an advantage in terms of market trends, product releases and more.
  • Improved Efficiency: By keeping a close eye on their competition, businesses can identify areas for improvement, allowing them to streamline operations and become more efficient.
  • Increased Profitability: A near environment allows businesses to identify opportunities to increase their market share, which can lead to increased profits.
  • Networking Opportunities: By engaging with the near environment, businesses can build relationships with other businesses, which can open up new opportunities for collaboration, sharing of resources and more.

Limitations of Near environment

A near environment, also known as a competitive business environment, is made up of entities (organizations, businesses, banks, government bodies) that affect the functioning of a company and which the company can influence. There are a few limitations of the near environment that businesses should be aware of:

  • The near environment is constantly changing, and it can be difficult for businesses to adapt quickly enough to the changes in order to remain competitive.
  • The near environment is often unpredictable, and businesses may not be able to plan for all the potential scenarios that could arise.
  • Businesses can only influence the near environment to a certain extent, and they may not have enough control to make meaningful changes.
  • The near environment is often complex, and it can be challenging for businesses to understand all the parameters and variables that could affect their operations.

Other approaches related to Near environment

In the near environment, there are various approaches to gain an understanding of the competitive business environment. These include:

  • PESTEL Analysis: PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal factors. It is a framework used to assess the external environment of a business, to identify opportunities and threats that may affect its functioning.
  • Porter's Five Forces: This is a tool developed by Michael Porter which has become an important part of the strategic management process. It is used to measure the intensity of competition in the industry and to identify the potential for profitability.
  • SWOT Analysis: This is a framework used to assess an organization's Strengths, Weaknesses, Opportunities and Threats. It can help an organization to develop strategies and identify areas of improvement.
  • Benchmarking: This is a process of comparing an organization's performance against that of its competitors. It can be used to assess an organization's strengths and weaknesses and identify areas for improvement.

In conclusion, there are various approaches to gain an understanding of the competitive business environment in the near environment. These include PESTEL Analysis, Porter's Five Forces, SWOT Analysis and Benchmarking. Understanding these approaches can help an organization to develop effective strategies.


Near environment — recommended articles
ASTRA analysis — Context of the organization — Macro environment analysis — Factors affecting business — SPACE method — Opportunities and threats — Competitive environment — EFE matrix — Knowledge gap strategy

References

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