The micro-environment, or the task environment or operating environment, is the immediate environment that directly influences a business. It includes factors closely linked to the business operations and directly impacts its performance and decision-making.

The critical components of a micro-environment are:

• Customers: They are the most crucial part of any business's micro-environment. Their needs, preferences, and behavior significantly impact a company's strategies and operations.
• Suppliers: They provide the necessary inputs for the business. The relationship with suppliers, their reliability, and the cost of supplies can directly influence a business's operational efficiency and service delivery.
• Competitors: Other businesses offering similar products or services in the same market segment constitute the competitive environment. To remain competitive, the organization must understand its competitors' strategies, strengths, and weaknesses.

The micro-environment is significant because it directly influences a company's ability to serve its customers effectively. Understanding the micro-environment helps a company identify opportunities and threats, formulate strategies, make informed decisions, and maintain a competitive edge.