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The business environment can be divided into two main categories: the macro-environment and the micro-environment.**Macro-Environment**The macro-environment refers to factors outside of the direct control of the business. These factors include:* Economy* Government policy (e.g., taxation, legislation)* Social change (e.g., changing consumer behavior)These factors can have a significant impact on a firm's success, but the relationship is generally one-way. For example, changes in exchange rates or interest rates can affect a business's ability to operate abroad, while changes in social norms or government policies can influence market demand.The macro-environment can be analyzed using tools such as PESTLE analysis (Political, Economic, Social, Technological, Environmental, and Legal factors).**Micro-Environment**The micro-environment refers to individuals or organizations that a firm interacts with regularly. These stakeholders include:* Suppliers* Distributors* Competitors* Customers* Publics (e.g., community groups, NGOs)* EmployeesThese stakeholder groups have a direct interest in the activities of the business and are clearly affected by its actions. For example, a decision to expand may require increased supplies or labor, while a change in customer tastes may require a rethinking of marketing strategy.At the same time, these stakeholder groups can also have a direct impact on the firm. For instance, labor shortages may affect recruitment costs, competitor launches may take away market share, or changes in customer preferences may affect sales.The micro-environment plays a critical role in the success and behavior of a business. Managers regularly interact with stakeholders in this environment, and their decisions can have a direct effect on these groups.References:* Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.). Singapore: Pearson.* [Chapter 2, pp 60 – 87; Chapter 3, pp88 – 119].