Micro environment of the firm working to innovate

Natia Kakulia

International Black Sea University

The factors or elements in a firm’s immediate environment which affect its performance and decision-making is its micro environment. Most important factors of micro environment of business are employees, competitors, customers, suppliers, public and marketing intermediaries. These` elements are controllable by the management.

The micro environment relates to the immediate periphery of an organization and directly influences the organization on a regular basis. It is important for an organization to monitor and analyze all the elements of its micro environment.

Normally the micro environment does not affect all the companies in an industry in the same way, because the size, capacity, capability and strategies are different.

We define innovation as the adoption of new ideas and methods to enable organizational survival and success. Organizational innovation is the creation and the implementation of new ideas by an organization in response to the environment change. Innovation comes from R&D (research and development) that is mainly organization knowledge accumulation and imitating the innovations of other firms. For innovation to be successful there must be the interaction between both external and internal knowledge integration and technological capabilities.

Innovation is often associated with the introduction of new products or services in your business. But it can also be about changing the way you do business.

If the focus is developed on innovation in business, everyone in the business will be working towards better business practices and improving business efficiency and performance. Some other benefits of innovation include: increased competitiveness, efficient use of all resources, proactive approach of business and greater attraction of new customers.

Employees are one of the most productive assets in business. By creating an environment within business that encourages to innovative thinking and action, employees will be inspired to share their knowledge, experience, skills, suggestions and recommendations.

Businesses can stimulate innovation by acting on and rewarding successful ideas. It is important to show employees that the firm act on their ideas, so they do not lose interest. When people see their action, actively improving the workplace, they will feel more integrated into the team. In addition, businesses can also stimulate innovation through anonymity and diversity. These are another pair of aspects important to boosting team’s creative efforts. Unfortunately, many employees are too shy to openly share their ideas in public.

Customers are an important part of firm’s micro environment. Every company tries to give customers what they ask for. Businesses are connecting with their customers and seeking their input earlier than ever in the product development cycle. Consumer feedback is available during the idea generation and design stages, rather than during product testing. Collaborating in this way allows companies to develop new products and services more quickly and cost-effectively. At the same time, it minimizes the risk that products will underperform or fail.

Next integral part of business micro environment is competitors. One important benefit of competition is a boost to innovation. Competition among companies can spur the invention of new or better products, or more efficient processes. Firms may race to be the first to market a new or different technology.

To accelerate innovation, more companies are turning to outsiders for help, especially their suppliers. Getting supplier innovation to work means rethink incentives, relationships and managements. When it comes to innovation, there’s too much to do and too little time to act. Suppliers can offer value that companies might find difficult or impossible to generate in-house.

Market intermediaries are independent firms which assist in the flow of goods and services. They include agents, wholesalers and retailers, marketing services agencies and financial institutions. Innovation intermediaries are people who bring buyers and sellers together, these intermediaries address and resolve information asymmetries in the knowledge market as a result of incomplete understanding of availability, source, quality, and efficiency of the products and services, on the part of the buyer and incomplete understanding of buyer needs and requirements on the part of the seller.

Innovation is becoming a key competitive battleground in nearly every sector. Companies are under mounting pressure to continuously innovate and introduce new products and services ever faster.