Analysing the Market Environment

This page contains the CBSE entrepreneurship class 11 chapter Entrepreneurship Concept of Market sub-topic Analysing the Market Environment notes. You can find the questions/answers/solutions for the chapter 5 of CBSE class 11 entrepreneurship in this page.
This page covers the section, Analysing the Market Environment, Links for other sections are provided below.

  1. Concept of Market
  2. Researching the Market

Analysing the Market Environment
Which factors govern the micro environment?
Micro environment refers to the elements or factors internal to the organization that can directly influence its ability to provide service to the customers.
The following are the elements or factors or forces that are part of the micro environment.

  1. Suppliers
  2. Producers
  3. Marketing intermediaries (or middlemen like agents or brokers or retailers or wholesalers)
  4. Competitors
  5. Customers





Tabulate the contrasting factors between micro and macro environments.
Micro Environment Macro Environment
These are the primary factors These are the secondary factors
Micro economic factors are internal to the organization. Macro economic factors are external to the organization and part of the larger society.
These factors can be controlled to vary their impact on the performance of the organization. These factors can not be directly controlled to vary their impact on the performance of the organization. The micro economic factors should be adjusted in accordance with the variation in the macro economic factors.
It comprises of the following factors

  1. Suppliers
  2. Producers
  3. Marketing intermediaries (or middlemen like agents or brokers or retailers or wholesalers)
  4. Competitors
  5. Customers
It comprises of the following factors

  1. Cultural
  2. Demographic
  3. Economic
  4. Natural
  5. Political
  6. Technological
Define Producer.
Producer is one who purchases goods and/or services, processes into a final product and markets them to the buyers so as to earn profits.
Define Demographic Forces.
The human population segregated based on

  1. Age
  2. Gender/Sex
  3. Location
  4. Occupation
  5. Size
  6. Density
  7. Race

and help in forming market segments or target markets.

What is market environment?
Market environment is the collective network of key institutions that interact with each other so as to supply the required goods and services to the final markets. It comprises the factors and forces that decide an enterprise’s ability to develop and continue successful business relation with the customers. In otherwords, market enviroment help the buyers and sellers to establish effective relationship between the buyers and the sellers.
What is macro enviroment?
Macro enviroment refers to all the external uncontrollableforces that are part of a larger society. As the companies can not control these forces, they creatively adapt by controlling the controllable factors that have the potential to impact the market. This helps in their survival.
The following are the external forces that are part of the macro environment.

  1. Demograpich forces:They refer to the human population segregated by
    1. Age
    2. Gender/Sex
    3. Location
    4. Occupation
    5. Size
    6. Density
    7. Race
  2. Economic Factors: They refer to the purchasing power and spending behaviour of potential customers.
  3. Technological Forces: They refer to the prevailing rapid growth in technology.
  4. Political Forces: They refer to all the laws, government agencies and groups that have a greater influence on the companies and people in the society.
  5. Natural Factors: They refer to all the natural resources required by the company as inputs. It includes
    1. Scarcity of raw materials
    2. Resulting pollution
    3. Government restrictions/interventions on the use of natural resources
  6. Cultural Forces: They refer to institutions and basic values of a group of people. They are further segregated as
    1. Core Beliefs that can not be changed
    2. Secondary beliefs which can be easily influenced.
Who are customers?
A customer is one who purchases the goods and/or services from an enterprise. For the companies to thrive, it is essential that they satisfy the needs of the customer and ensure that the cutomer is happy.

Customer is the most influential force that rule the market. So, in order to survive in the market, the companies should always try to produce the goods and/or services as per the needs of the customer. They need to pay attention to the following features to create, maintain and retain the customers.

  1. Propensity or tendency to consume and save.
  2. Beliefs, customs, Tradition, values of customers and society
  3. Consuming habits, Lifestyle, standard of living
  4. Demographic parameters
  5. Education Level, thinking behaviour
  6. Income Level

Meeting the consumer demand will help the business in

  1. Expansion plans
  2. Goodwill and reputation
  3. Profitability
In what way ‘Performing Sellers’ sustain and succeed in the market.
A market always consists of unment needs. Companies can succeed if they can recognize and respond profitably to the unmet needs and trends in the society.
Companies success rate depends on how well they

  1. keep themselves aware of the market needs and trends
  2. Provide a solution to the market’s unmet needs and trends.
  3. Recognize the opportunity and threats in the market environment.

The company’s performance and success can be distinguished from its competitors depends on how well it reacted and responded to these factors. There by we can say that the performing sellers sustain and succeed in the market.

Distinguish between competitors and sellers as primary forces in the market.


Competitors Sellers
The provide similar offerings for goods and services. They provide necessary resources like materials, machines and labour required by the company to offer the goods and services.
Competitors work towards developing a strategic advantage over the company so that the company’s market share is reduced. The suppliers benefit from the strategic advantages of the company as it creates more business for them.
Their presense reduces the market share. Lack of their presence can ruin the market.
The companies will not have good dealings with the competitors. The companies maintain good relations with the suppliers.
When a company grows, the competitors’s business declines. When a company grows, the suppliers will also grow, as the company can provide more business to them.
When competitors reduce the prices, the resulting loss of market for the company results in a reduced revenue and declined profits. When a supplier reduces the prices, the expenses of a company reduce and it increases the profits.
Give your argument in favour of the statement Customer is the King>.
As customer is the most influential primary force that rule the it is justifiable to say that the Customer is the king. Only those businesses that keep the customer happy will succeed in the market.
Businesses produce goods/provide services to cater to the needs of the customers. Understanding consumer behaviour is very complex activity. They need to pay attention to the following features to create, maintain and retain the customers.

  1. Propensity or tendency to consume and save.
  2. Beliefs, customs, Tradition, values of customers and society
  3. Consuming habits, Lifestyle, standard of living
  4. Demographic parameters
  5. Education Level, thinking behaviour
  6. Income Level

Meeting the consumer demand will help the business in

  1. Expansion plans
  2. Goodwill and reputation
  3. Profitability
Give an account of the primary forces that comprise the internal environment of the market.
The internal environment also known as micro enviroment refers to the forces influencing the market and are within or close to the organization. They have potential to directly influence the organization’s ability to cater to the needs of its customers. It consists of the following factors.

  1. Producer/selller: Producer is one who purchases goods and/or services, processes into a final product and markets them to the buyers so as to earn profits. Companies can succeed if they can recognize and respond profitably to the unmet needs and trends in the society.
    Companies success rate depends on how well they

    1. keep themselves aware of the market needs and trends
    2. Provide a solution to the market’s unmet needs and trends.
    3. Recognize the opportunity and threats in the market environment.

    The company’s performance and success can be distinguished from its competitors depends on how well it reacted and responded to these factors. The ethics, values, principles, creativity, innovativeness of the seller helps the company to create trends in the market. The producers and their abilities can create new markets.

  2. Customers: A customer is one who purchases the goods and/or services from an enterprise. For the companies to thrive, it is essential that they satisfy the needs of the customer and ensure that the cutomer is happy.

    Customer is the most influential force that rule the market. So, in order to survive in the market, the companies should always try to produce the goods and/or services as per the needs of the customer. They need to pay attention to the following features to create, maintain and retain the customers.

    1. Propensity or tendency to consume and save.
    2. Beliefs, customs, Tradition, values of customers and society
    3. Consuming habits, Lifestyle, standard of living
    4. Demographic parameters
    5. Education Level, thinking behaviour
    6. Income Level

    Meeting the consumer demand will help the business in

    1. Expansion plans
    2. Goodwill and reputation
    3. Profitability
  3. Competitors: Competetors are the forces that provide similar offerings for the goods and services. For a firm to remain competitive it is essential to identify the biggest competitor. With LPG, the companies have their competitors not just locally, but also at national and international levels.
    When the competitor analysis is done correctly, the following facts are determined.

    1. Competitors
    2. Their level/size
    3. Their areas of strengths/weaknesses
    4. Their financial standing
    5. The images of their products in the market
    6. Their operational capacity.

    To survive in the market, the companies should develop a strategic advantage over their competitors.

  4. Suppliers: These are the key factors that supply the machines materials, labour and funds so that the company can use these resources to produce the goods and/or services. The companies should carefully study the working of the various supply markets and apply the business principles to carry out business transactions with the suppliers. If the suppliers are not available, the raw materials can not be supplied and hence the firm can not produce goods and/or services, thereby losing the market share for the product.
  5. Marketing Intermediaries: These are the various institutions that facilitate the movement of goods and services from the company to the markets. They comprise banks, marketing and promoting agencies, resellers (i.e. agents, brokers, retailers, wholesalers), transporters, transporters, warehouses etc. All these institutions should lend their offerings so that the product is consummated in the market. They play a crucial role to facilitate the transactions between the buyers and sellers and are critical to the market.
What is meant by Secondary Forces?
All the forces that comprise a larger society and are Uncontrollable are known as secondary forces. As companies can not control these forces, they respond by adapting through setting the Controllable factors.
Explain the constituends of external environment with suitable examples.
The following are the contituents of external environment.

  1. Demographic Forces: These forces refer to the human population segregated based on
    1. Age
    2. Gender/Sex
    3. Location
    4. Occupation
    5. Size
    6. Density
    7. Race

    and help in forming market segments or target markets. Companies find these classifications very importang as each of these classifications have different characteristics and causes. For instance, a company that sells muscle building products find it very useful that based on gender and age segmentation they can target male population who are 14 years or older.

  2. Economic factors These factors refer to the purchasing power of potential customers and the ways people spend their money. The customers try to spend liberally during economic growth and try to be consere during the times of depresssion. This in turn will have an impact on the market. For instance, when the economic conditions are good luxury product manufacturers can lure customers into purchasing their products. One the other hand during the times of depression, the banks can attract customers to deposit their money into the savings accounts.
  3. Technological Forces: Technological environment is the fastest changing factor. Technical advancement will open up new opportunities to new products, new ways of selling, new markets and trends. Amazon is the company that has caught the e-commerce trend earlier and has become dominating e-commerce company in many companies.
  4. Political Forces: The comprise of all the prevailing laws, government agencies and groups. These forces limit or influence the organizations and individual. These restrictions will intern regulate the markets. It changes from time to time and from one place to another. Companies survival depends on these factors to a great extent. As these forces change rapidly, it is crucial for the marketer to keep a close watch on these forces. For instance, when the government imposes strict regulations on protection of environment, the companies need to adapt accordingly.
  5. Natural Factors: They comprise of all the natural resources that the company is using as inputs. Increased pollution, shortage of raw materials and increased governmental intervention are the primary concerns related to this area. When any of the raw material becomes scrarce, it impacts the production of the productions. Pollution might have an adverse impact on the company’s reputation if it is realized that the company is spoiling the enviornment. When there is government intervention, it becomes more harder for a company to reach their goals as the requirements will become more stringent. Companies that are manufacturing products based on petroleum finds it increaingly difficult as the petroleum reserves are becoming lesser day by day.
  6. Cultural Forces: It comprises the institutions and basic values and beliefs of a group of people. Values are of two types:
    1. Core Beliefs: These are passed on from generation to generation and very dificult to change.
    2. Secondary Beliefs: These can be easily influenced.

    The markets consider the values of the targeted audience. Luxury items like exotic cars were assumed to items that only the upper class can afford. Financial institutions started offering loans even to middle class people so that they can own these expensive gadgets.






How do you differentiate between micro environment and macro environment?
Basis Micro Environment Macro Environment
Definition Micro environment refers to the elements or factors internal to the organization that can directly influence its ability to provide service to the customers. Macro enviroment refers to all the external uncontrollableforces that are part of a larger society. As the companies can not control these forces, they creatively adapt by controlling the controllable factors that have the potential to impact the market.
Elements The following are the elements or factors or forces that are part of the micro environment.

  1. Suppliers
  2. Producers
  3. Marketing intermediaries (or middlemen like agents or brokers or retailers or wholesalers)
  4. Competitors
  5. Customers
The following are the external forces that are part of the macro environment.

  1. Demograpich forces
  2. Economic Factors
  3. Technological Forces
  4. Political Forces
  5. Natural Factors
  6. Cultural Forces
Controllability Companies can easily control the micro environment forces Companies can not directly control the macro environment factors as these are uncontrollable. However, they react to the changes in the macro environment factors by changing the controllable micro environment factors.
Nature of influence Micro environment factors influence the firm directly and regularly Macro environment factors influence the firm indirectly and occassionally.
Impact Can only impact the firm. Can impact Other firms too. Based on the nature of the factor, the impact can on local enterprises, national or even international.