Marketing Environment is a wide scope which covers all the outside factors, forces which affects marketing management’s decisions and their relationship with target customers. Companies must constantly adopt and change to the changing environment.
Marketing Environment is a study of all the external atmosphere of the organization affecting all the internal factors within the organization which ultimately requires attention of the Marketing management for sound decision making in the long run as well as short period.
Marketing environment encompasses the marketing team within an organization and includes all of the outside factors of marketing that affect the team’s ability to develop and maintain successful customer relationships with their targeted customer group.
Some of the types of marketing environment are:-
A. Micro Environment- 1. Company 2. Suppliers 3. Marketing Intermediaries 4. Competitors 5. Public 6. Customers
B. Macro Environment- 1. Demographic Environment 2. Economic Environment 3. Natural Environment 4. Technological Environment 5. Political and Social Environment 6. Cultural Environment 7. Legal Environment.
Types of Marketing Environment: Micro and Macro Environment
Types of Marketing Environment – 2 Major Types: Company’s Micro Environment and Macro Environment
There are basically two types of environment which affects marketing decisions namely:
1. Company’s micro environment
2. Company’s macro environment
Type # 1. Micro Environment:
Philip Kotler explains this environment in his definition as, “The micro environment includes all the actors close to the company that affect, positively or negatively, its ability to create value for and relationship with its customers”
Thus, Customer satisfaction and communication should be developed for healthy relationship.
Marketing managers cannot make this relationship working because of several factors affecting at the same time.
The factors are as follows:
a. The Company:
The company is a hierarchical entity consists of different departments like purchasing, production, top management, research and development, finance etc. All these interrelated groups forms the internal environment of organization.
Top management is responsible for companies’ mission, objectives, and broad strategies, policies. Marketing management make decisions within the actions and decisions of top management. Other departments also have impact on marketing department. Harmony must be established with all the departments.
b. Suppliers:
Suppliers are important part of the overall link of customer to company. Suppliers supplies goods and resources needed to produce goods and services to the company.
Their problems must be studied because they can seriously affect marketing. Cost and supply availability must be checked by marketing department.
In current scenario marketers treat suppliers as their partners in creating and delivering customer value.
Many suppliers provides valuable information on their web portals about their marketers and give important feed back to them about customer responses.
Supply shortages, delays, labor strikes and other events can cost sales in the short run and affect customer satisfaction in the long run.
c. Marketing Intermediaries:
Intermediaries helps the company to promote, sell and distribute its products to final buyers. Marketing intermediaries includes resellers, physical distribution firms, marketing services agencies and other intermediaries including financial intermediaries.
Reseller includes distribution channel firms that help the company to find customers or make sales to them.
In India it is a growing trend that in near future manufacturers will now be facing competition of large and powerful intermediaries. Some resale organizations in India have emerged and troubled the manufacturers. For example Big Bazaar, Shoppers Stop. Pantaloons retail. Like suppliers, intermediaries form an important component of the company’s overall marketing strategic management.
For optimizing customer satisfaction company must become partner with these intermediaries to balance the performance of whole system.
d. Competitors:
Marketing Management must takes into account the activities of its competitors because of their similar aim of satisfying customer. Marketers must take strategic advantage by performing more efficiency in this modern age of cut throat competition.
Every organization must study its own nature and structure and implement marketing strategy accordingly. All policies are not suitable for every organization so choice must be made and policies must be planned accordingly.
e. Public:
Public is any group that has an actual or potential interest in or impact on organization’s ability to achieve its objectives.
Noted marketing author and thinker Philip Kotler identifies seven types of public which attracted and which affects organization’s decisions which are:
i. Financial Public – Banks, Investment Agencies, Stockholders, Debenture holders etc. are included in this type.
ii. Media public – Newspaper, Magazine, reporters, editors etc.
iii. Government Public – Lawyers, Tax consultant, Government Personnel etc.
iv. Citizen- Action public – minority groups, social groups, RTI activists, other social activists etc.
v. Local public – Neighborhood residents, community organization etc.
vi. General Public – General public in the country
vii. Internal Public – Leaders, Board of Directors, Volunteers, Managers etc.
Each class of public have different agenda and needs to be treated differently.
Type # 2. Macro Environment:
There are number of factors which influences the marketing decisions.
Hence it is very important to understand each parameter. Macro environment generic in nature, impacts the whole business environment, while micro environment specific to the industry affects industrial decisions on personal level.
The macro environment includes all the factors which are external to the firm and which cannot be controlled by the organization. Macro environment influence is not specific to any particular industry but influence all the firms on a different level. Marketing management must have knowledge of different factors which influences the marketing decision of a firm. Since they are not controllable, one must adjust the decisions as per the changes in the environment.
“The macro environment consists broader forces that affects the actors in the micro environment.”
The conditions that exist in the economy as a whole, rather than in a particular part of a region affects organization very much rather than micro economic forces. Macro Environment generally includes trends in gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro environment is closely linked to the normal business cycle, as opposed to the performance of an individual business sector.
The macro environment affects micro environment and therefore business.
The macro environment in which an organization is operating will be influenced by its forces and in return is affected by organization’s performance as well.
This macro environment forces are so influential that can result in a major changes in organization’s outlook to a large extent. Service sector have contributed largely towards economic growth of a country, this macro environment change affects every organization in respect of providing services and fulfillment of consumer needs.
All the departments and people in the organization work under the bigger impactful macro environment.
Following are the elements of macro environment:
i. Demographic Environment
ii. Economic Environment
iii. Natural Environment
iv. Technological Environment
v. Political and Social Environment
vi. Cultural Environment
Changes in demography’s in the nature of human population means ultimate changes in markets. Demographic environment is study of human population in terms of size, density, location, age, gender, race, occupation and other statistics. It is the study of people who are nothing but market. People are responsible for demand for a product and some other people contribute towards the supply of the product. So people and people mix are the most important factor of macro environment.
Thus as a marketer, one must understand the demographics of the nation and the also due to globalization, global population also influences the marketing decisions.
a. Population Mix:
Population study is very important because it is very dynamic and rapidly changing. Not only growth of population should be considered but also composition of population is equally important.
In India where youth is the largest denominator, promotion must be made accordingly.
b. Population Growth:
India is the second largest populated country after china. According to 2011 census report Indian population reached 1.21 billion constituting 17.5 % of the world population. India is projected to be the World’s most populous country by 2025, surpassing china. This provides an exceptional opportunity for business. Many foreign companies got attracted with this market because of its dynamism and power to increase sale with very high percentage.
c. Geographical Shift:
Very diversified culture is present on Indian soil with changes spotted every 100 kilometers including change languages and traditions. Marketer must have this knowledge of different culture where he wants to sale his product.
d. A Changing Family System:
India had a tradition of joint family system in which all the parents, grandparents and sometimes great grandparents would live together under one shelter. The eldest man being the Head or Chief of the family and the able bodied men would work for daily bread and butter and women were responsible for kitchen and other household responsibilities.
Modern India parted with this traditional joint family system. In a present world, both husband and wife work. They may not live with their parents. This duel income source and single kid family has created a big dent in the social fabric of our society.
Because of more regular income, demand and consumption increased which resulted in a compulsion for increase in manufacturing and production.
e. Changing Role of Women in India:
Women in India were basically engaged in household activities and took responsibility of kitchen and other work including maintenance, cleaning of house, raising kids etc. Today more and more women, even from rural area, are completing graduation and even post-graduation. Women are working shoulder to shoulder with men in every sphere of activity, be it in education, organization, hospital, or a science research Institute.
The entry of women into the corporate world has changed the economy in many ways. Their earnings have increased the disposable income of the family. Many products are developed specially for these women. They have become an active member in a family.
f. Rural Population:
The MGI India consumer Demand Model forecasted that the population in rural India will be 900 million by 2015. Which will result in rising demand at a compounding rate. Such demographic factors affects marketing decisions.
g. Middle Class Factor:
India is showing tremendous growth in middle class with their own set of nature, features, likes, dislikes and demands. It is a study subject for marketing managers because it changes product requirements, demands for services etc. It is predicted that middle class will dominate the urban consumption in near future.
ii. Economic Environment:
The economic environment can offer both opportunities and threats. It refers to the factors that affects consumer buying power and spending patterns.
To attract the India’s growing middle class, Tata motors introduced the small, affordable Tata Nano car designed to be the Indian model T- the car that puts the developing nation on wheel.
Economic considerations includes, inflation, GDP, bank policies, market trends, union budget. Fiscal policies, credit issues, financial crisis or progress, and global economic situation.
All these environmental factors must be studied in depth because they affect buyer’s demands and hence product’s demand. Consumer spending pattern and income distribution must also be looked for so as to have a bulls eye view about economic environment.
Credit availability and saving trends in economy has an influence on the purchasing ability of the consumer. The availability of installment schemes and EMI options has boosted service sector, reality sector and consumer durable products.
Following are some of the factors of economic environment:
a. Recession or Boom:
If the economy is going through a recession it is obvious that businesses generally will not be doing well due to low aggregate demand in the economy. On the other hand, a boom period will lead to higher business profits and revenue for most of the businesses in the economy. Recent global recession brought software industry in country to perform at very lower profit levels.
b. Inflation:
High rate of inflation leads to lower purchasing power for consumers resulting in lower demand for goods and services. Moreover, a higher inflation rate will make business uncompetitive in the international market leading to lower sales for the business.
c. Tax Structure in Country:
High level of taxes will lead to low disposable income and contraction of demand in the economy. Business will find it difficult to attract consumers. Moreover, taxes affects overall spending pattern. Debit card swapping sometimes attracts 2 percent tax hence many consumer purchase products with cash only.
d. Unemployment:
High level of unemployment in the country can also adversely affect a business. People will not have enough money to purchase a firm’s product. With the rising per capita income in India as a result of increase in job opportunities, spending increased rapidly in a last decade
e. Labor Costs:
High labor cost will result higher production costs. This will make a firm’s product more expensive as compared to other firms affecting its sales and profit margin.
f. Prevailing Rates of Interest:
Higher Interest rates will lead to a fall in the aggregate demand in the economy thus leading to difficulty for business to find customers willing to buy its product. Lower interest rates will lead to an increase in demand in the economy.
g. Income Distribution:
High level of disposable income is good for business producing luxury goods. A large disparity in income distribution will promote businesses dealing in luxury goods as well as inferior goods.
With duel income sources per home, spending and distribution pattern have changed significantly.
iii. Natural Environment:
Marketers need to be aware of the threats and opportunities associated with the four trends associated in the natural environment which are stated below:
a. Shortage of raw material
b. Increased cost of energy
c. Increase in pollution
d. Government policies
Natural environment consists of natural resources that are required as inputs by marketers or that are affected by marketing activities.
All corporates are now looking for eco-friendly approach because of showing respect towards Mother Nature and trying to act more pollution free in an effort to save environment.
First cause of concern for marketer is the shortage of raw material is growing because of increase in consumption. Second is government intervention in natural resource management. So companies should accept social responsibility and less expensive devices can be found to control and reduce pollution.
It is a common practice in the scenario of pollution and social natural awareness. Companies are making Eco- friendly strategies to deal with problems of pollution and short resources.
Many companies are using handmade papers for internal use and promoting save paper campaign.
Idea launched this concept of paper saving on a broad scale. Aircel introduced save tiger campaign for saving tigers all over the country.
iv. Technological Environment:
Technology is the most influential force that is shaping marketing environment which includes forces that are the new technologies affecting new product and market opportunities. Technology has created miracles in the area of robotic surgery, antibiotics, laptop computers, which affect every organization’s marketing environment.
The technology is a synonym for change. It changes rapidly with destroying all the previous researches, like invention of handy sub devices demolished floppy from the market. Android based smart phones have destroyed all the other previous platforms like java based and Symbian based operating system compelling mobile manufacturers to use new android based operating system. Even school going kids are well aware of the latest smart phone product and features of that.
Internet usage have increased very drastically, so because of increase in the usage of smart phones with the availability of internet in a fingertip, number of internet cafes have reduced. Such is a power of technology.
There are approximately 700 million mobile users in India in 2012 rising up to 900 million in 2016 shows the technological advancement and factor needs attention of marketers.
New technologies create new markets and opportunities. However every new technology replaces an older technology. Thus marketers should watch the technological environment closely. Companies that do not keep up will soon find their products outdated.
v. Political and Social Environment:
Markets works best under some regulative forces. Well-conceived regulation can encourage competition and ensue fair markets for goods and services.
Thus, governments sets up public policies to guide businesses that also limit business for the good of society as a whole. Almost every business activity including marketing activities are subject to laws and regulations.
Every company operates under some obligation and without that chaos will rule the corporate sector with competition running the top management. Social sector is keeping corporate sector to work under some obligatory forces which show some responsibility towards society and country.
Many organizations are now engaged in social work for showing their concern for problems of economy and providing some assistance to the government and other social agencies for overcoming them.
Many corporate sector companies are initiating Fund raising campaigns, portals for child education, drought management, water purity education, save girl child campaign etc. showing social responsibilities.
India’s top most software company’s CEO took project named ‘AADHAR’ to give unique identification number to every citizen of the country. This project got praised by government and corporate sector.
This cause related marketing have been criticized because of intention of increase in sale rather than tendency of giving.
vi. Cultural Environment:
Cultural factors affects how people think and how they consume. So marketers are keenly interested in the cultural environment.
The cultural environment generally includes people’s thinking about following:
a. People’s view of themselves – It includes people view about themselves which vary in their emphasis than their view of outer world
b. People’s view of others – People are becoming more and more introvert and so their views of others are changing
c. People’s view of organization – People vary in their attitudes toward corporations, government agencies, trade unions, universities and other organization.
d. People’s view of society – People vary in their attitudes toward their society based on their culture, opinions, character etc.
e. People’s view of nature – Recently people in general have recognized that nature is fragile and can be destroyed by human activities.
f. People’s view of universe – Finally, people differ in their beliefs about the origin of the universe and their place in it.
Religion plays an important role in every human being even if in life of a staunch atheist.
The cultural environment includes institutions and other forces that affects society’s basic values, perceptions, preferences and behaviors etc.
Cultural core beliefs are so strong that it affects buyers’ demands to that respect greatly. So company must take that environment into consideration before making marketing strategies. Because of software sector development in India, sale of consumer durable goods increased widely. So marketing department must have studied nature and culture of this software sector employees before even their introduction in India.
Hence, cultural environment can affect production and marketing decisions deeply which must be studied in depth.
Types of Marketing Environment – 2 Important Types: Macro Environment and Micro Environment
Type # 1. Macro-Environment:
1. Demographic Environment:
Demography is the study of human population in terms of size, density, location, age, gender, race, occupation, and other statistics. Changes in the demographic environment would include changes in the forces. If the gender mix changes it would mean people will buy different type of products.
Better education, increased life expectancy, geographic shift in population, etc. will all have effect on the market behavior. Awareness of such changes is necessary to be prepared for them and to design appropriate strategy for such changes.
2. Economic Environment:
Economic environment may be defined as those factors that affect consumer buying power and spending patterns. Change in income will change the consumer spending pattern, more is per head income more will be potential for spending. An analysis of such forces will be of great help to a firm in deciding its marketing strategy.
3. Natural Environment:
The natural environment involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities.
4. Technical Environment:
Technological environment constitutes those factors that create new technologies to create new products and market opportunities. Technology affects not only the finished products but also the raw materials, processes, operations and customer segments. In today’s time rapid changes are happening in the technological environment. IT Sector, for example, has to cope with a change, which is extremely rapid. Telecom industry is another example of rapid technological changes.
5. Political Environment:
Political environment is another very important component of the macro-environment that the firm must live in. Infact economic and technological environments may be a by-product of the political environment. Developments in the political front keep affecting the economy all the time. Industrial growth is highly dependent on the political environment, legislative regulations are formulated based on the political ideologies of the ruling political party.
Ours is a democracy and we have since independence worked on a five-year plan system. Also we have had political consensus on the emphasis that must be laid on economic growth. The country has also started moving towards market controlled economy. Today the government provides a lot of support to consumers, changing the attitude of the marketer’s altogether.
6. Cultural Environment:
Culture is a combination of religion, language, education and upbringing. In every society some cultural values are deep rooted; they are termed as core cultural values. They are very difficult to change. There are other cultural values, which may change more easily. Meaningful inputs on such forces can be of great help to the firm in designing their marketing strategies.
The marketer must very closely watch any shift in the cultural values and adapt accordingly. In recent times there has been a marked change in how people view themselves, others, organizations, society, nature, universe etc. Such changes have also affected their buying behaviour.
7. Legal Environment:
Businesses have to operate within the bounds of the law of the land. They must clearly understand the provisions of law and abide by them. In the last few years much new legislation has entered the statute books. Some of them are to abide by the international laws. Recently, though, we have seen a sharp reversal of trends to the reforms and liberalisation.
Type # 2. Micro-Environments:
Micro-environment is the composite of those factors that are specific to the business concerned.
1. The Company:
The marketing people must work very closely with all other departments in the organization. Also marketing manager must abide by the objectives set by the top-level management.
2. Suppliers:
Suppliers form a very important link in the company’s value delivery system. Supplier development is a very important activity for a firm and can seriously affect its marketing. Shortage in the supply of raw material, labour or other events may cause serious damage to the firm’s sales in the short term as well as in long term. Price trends of key inputs must be monitored closely.
3. Customers:
A successful marketing strategy involves designing products and marketing programs to provide value to customers according to their perception. Studying and analyzing customer related factors could help the firm design a customer oriented marketing strategy. In many industries customer preferences change. Such changes, if left unmonitored can lead to major problems for the firm.
4. Competitors:
Competition is another force that is specific to the firm. Knowledge about competition can help the company decide about the competitive strategies. No single competitive strategy is best for all companies. Each firm should consider its own size and industry position and based on that information design its strategy.
5. Public:
Public is any group that has an actual or potential interest in, or impact on a firm’s ability to achieve its objectives.
Types of Marketing Environment – According to Famous Author Philip Kotler
Marketing activities are always based on the through study of marketing environment. Marketers should be very attentive to the trends and the changes in the environment so that timely adjustments can be made in marketing strategies. The firm has to know where the environment is heading, what trends are emerging therein and what should be its response to the environmental changes. Only by analyzing the environment, can the firm grapple with these issues.
According to Philip Kotler, Marketing environment may be defined as, “the totality of all those forces and institutions those are external and potentially relevant to the marketing of a firm.”
The marketing environment can be divided into two parts:
1. The Macro-environment
2. The Micro-environment
1. Macro Environment:
Activities of a company have an impact on environment and also environment has an impact on company’s activities. The macro environment comprises of many factors, such as demographic, economic, natural, technological, political, legal and social cultural environment, all of which modify and alter the opportunities and at the same time pose threats to the company. The micro forces are in general better controlled than the macro forces.
The macro environmental forces are given below:
i. Economic Environment:
In case of a developing economy, the very low demand for a product may be due to low incomes. However, in those countries where there is a rapid and steady rise in investment and income, business prospects are generally bright and further investments are well encouraged.
For a business to thrive well in a particular country or place, the economic conditions, economic policies and the economic systems existing in that country are very important external factors that constitute the economic environment for the business.
In particular, the economic conditions of a country e.g., the nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets etc. are very critical determinants of economic strategies for the business.
The economic policy of the government, needless to say, has a very strong impact on business. Some types of businesses are favorably affected by government policy, some adversely affected, while it is neutral in respect of others, e.g. in case of India, a lot of importance is given to small, medium and micro enterprises and these kind of enterprises get a number of incentives and positive support from the government. On the contrary, industries which are regarded as inessential find it difficult to survive and keep afloat.
Businesses in a given place are also affected by the monetary and fiscal policies such as incentives and disincentives that they offer and the neutrality of the policies. The economic system that is put in to force in a particular place drives the scope of the private business in that place. On one of the spectrum are the free market economies, or capitalist economies, and at the other end are the centrally planned economies or communist/socialistic economies. Existing in between these two ends of the spectrum are the mixed economies.
There is nothing called a completely free economy since it is an abstract rather than a real system and some amount of government is always bound to exist. Country such as Dubai is tax free nation, whereas, U.S.A has regressive tax system and India has a progressive tax system.
Centrally planned economic systems exist in many communist countries such as China, Hungary and Poland. In these governments, the state owns all means of production. The state even determines the goals of production and controls the economy. China, Hungary, Poland etc. had centrally planned economies. However, recently, several of these countries have discarded communist system and have moved towards the market economy.
In a mixed economy, as in India, both public and private sectors co-exist. However, the extent of state participation varies widely across different mixed economies. Despite this fact, in many of the mixed economies, the state fully owns the strategic and other nationally very important industries.
The economic environment thus, is a very vital determinant of the scope of business.
ii. Political and Government Environment:
Political and government environment and economic environment go hand in hand. Political environment are the sets of norms made by ruling party for the functioning of economy.
These norms change from party to party. For example, Bhartiya Janta Party (BJP) is ruling Gujarat and they have a very strict policy that nobody should sale liquor in the state but in other states it is a legalized business. Political ideology shapes the policies of country and so do have impact on marketing activities.
Legal environment are the set of rules and regulation which are embedded in the constitution of a country and every entity within the geographical boundary of that country has to abide by that legal environment. For example in India it is banned to advertise or to market tobacco and liquor irrespective of the state, company not following this rule will be legally penalized. Political and legal environment are to protect the interest of both buyer and seller.
iii. Socio-Cultural Environment:
Social environment refers to the various members interacting within the society The radius of socio-cultural environment covers the culture, sub culture, customs, traditions, beliefs, norms and values of a society. All this factors cannot be ignored at any cost by any business unit. Culture plays a very important role in shaping an individual personality, the way they react, the way they act, buying behaviour, consumption.
The marketing-mix will have to be so designed as to suit the environmental characteristics of the market. Mc Donald, a multinational company, today sells a burger costing twenty five rupees (Mc aloo tikki) just to cater to the needs of people of different social class.
Every society has some basic core value which is very tough for a marketer to change. The right strategy over here is to respect that core strategy and modify the product and services according to the needs of the society. For example it took a very long time for Indian consumers to get acquainted with ‘Self-Service’ concept.
In India serving food is taken as respect to the customer. Many companies who have entered India have changed their product attributes, method of presentation or the promotional strategies to suit the need of Indian customers. Sometime even the differences in languages pose a serious challenge and even necessitate a change in the brand name.
For example, if you look at some of the product attributes like color, the significance associated with color vary across different cultures e.g. while white is a color indicates death and mourning in countries like China, Korea and India, in many other countries it is a color expressing happiness and prosperity and is even used as a wedding dress color.
Social environment also helps a company to be more responsible for the society and fulfilling their Corporate Social Responsibility (C.S.R)
iv. Demographic Environment:
Demographic environment refers to the information and characteristics of population. Demographic factors comprise of a host of factors such as size, growth rate, age composition, gender composition, family size, economic stratification of the population, educational levels, language, caste, religion etc. all of which are extremely relevant to business.
It must be remembered that all these factors affect the demand for goods and services. For example Indian market with booming population and income is one of the best growing markets. On the other hand, due to the governmental policies, the reduction in birth rates in countries like China has very strongly affected the demand for baby products in general.
As a result of this change in demographic factor, Johnson and Johnson circumvented this issue by repositioning many of its highly popular baby products like baby shampoo and baby soaps, and positioning them in the adult segment particularly female segment.
A fast growing population is an indicator of a rising demand for many products. Increase in growth rates of population also point towards large increase in labor supply. In a country like India where there is availability of cheap labor and a growing market, many multinational corporations have been encouraged to invest in businesses.
v. Natural Environment:
Geographical and ecological factors such as weather and climate conditions, topographical factors, location aspects in the global context, port facilities etc. are all very important for the growth of business. Infact, the location of many industries is influenced by geographical and ecological factors e.g. industries with high material index which tend to be located near raw material sources.
In case of other industries like cotton textile industry, climate and weather has a large bearing. The demand patterns for certain products may be affected by topographical factors. For example, jeeps may be in greater demand than cars in hilly areas with a difficult terrain.
Ecology is a study of relationship which is shared by all the living organisms because of which there is balance on the earth. But recently it is been noticed by all he ecologist the natural resources are depleting owing to pollution in the environment and disturbance in the balance of ecological systems has caused great concern.
Many government policies have been brought in to force to protect the environment and maintain ecological balance and this has in turn affected the cost of production of goods and the marketing of these goods in businesses.
vi. Technological Environment:
Technology has transformed the way we live from morning alarm to using microwave for dinner each and every aspect of life is touched by technology. If technology has changed the way an individual live a life it has also changed the way a market functions. For example previously newspaper was the only mode of advertisement and now with the help of customized e-mail a company can reach to a particular customer the way the customer is. Communication process is just an example, technology has changed the way a product is processed, made and delivered.
Apart from opportunities, technological factors also have risk and uncertainties. However, if a firm is not able to cope up with the changes in technology with time, then it stands the risk of losing out to competitors and may ultimately perish. Moreover, the technological in different countries may call for alteration or modification of products.
For example, many appliances and electrical instruments in the USA are designed to suit 110 volts. However, they will need to be converted in to 240 volts in countries like India, which have this power capacity.
vii. International Environment:
After 1992 many multi-national companies started their operations in India and also many Indian companies went abroad. This import and export of goods and services between two countries are only possible if the international environment is peaceful. There are international bodies such as World Bank, International Monetary Fund who looks after the smooth functioning of international trade.
International business poses a great threat to local business and to safeguard the interest of local player countries make strategies such as tariffs on import goods by doing country is restricting the sale of that foreign good in bulk. The delay of Wall Mart in Indian retail market is a classic example of impact of international environment.
2. The Micro Environment:
Micro environment consists of those factors which are partially or completely controlled by organization itself components such as suppliers, customers, competitors marketing intermediaries and public. All this components are in the reach of the firm and it should be closely analyzed and scrutinized in order to have a competitive edge in market.
i. Suppliers:
After the idea of making a product or to innovate existing product, the next big task infront of the company is to find the right supplier for the raw materials which are required to make the final product. Suppliers are the providers of raw material of also the providers of finished goods which are used as work-in- progress for some other product. For example MRF sells tyre to TATA Motors which Tata motors uses to make their cars.
It is very risky to depend on a single supplier because a strike, lock out or any other production problem with that supplier may seriously affect the company. Hence, before selecting a suppliers all the aspects such as time of delivery, quality, quantity, and payment cycle should be kept in mind or multiple sources of suppliers should be kept.
ii. Customers:
One of the most critical objectives of a business is to be able to create a customer base and retain them over a period of time. The business is able to survive only because there are customers for its products and hence constantly monitoring customer sensitivity is absolutely critical for a business to succeed.
The consumer base of a business may be categorized into different types such as individuals, households, industries, commercial establishments, governmental and other institutions. It may be very risky for the business to depend on just one customer which might put the company in a bargaining situation.
Hence, the business needs to categorize ifs customer base depending on various factors like relative profitability, dependability, growth prospects, demand stability, degree of competition etc.
iii. Competitors:
The competitors for a firm come in many forms. They not only include those who market the same or similar products but also those firms who grab a share of discretionary income of the customers.
For example, if a company markets television, its competitors will not only be those who are the manufacturers of other TVs but also those who will sell refrigerators, stereo sets and even two wheelers. This type of competition among different products can be termed as “Desire Competition” because the basic objective in such cases is to influence or bring about a desire in the customer to buy a product.
Even if the consumer decides to buy a good of entertainment, he still will be confronted with many choices amongst this sub-category of entertainment goods like TV, Stereo, CD players, radio etc. Such a completion among a sub-category of alternatives, which satisfy a particular category of desire, is known as “Generic Competition”.
Now, let us come to the next level of competition. In this case, if the consumer decides to buy TV, then he is confronted with the question as to what kind of TV- black and white, color with remote or without remote or 24 or 48 inches and such a competition is termed “product form competition”.
In the end comes the “Brand Competition” where the consumer has to choose between different brands like Philips, B.P.L., Onida, Videocon, Coldstar etc. The outcome of this type of competition between different brands is that a marketer should aim at creating primary and selective demand for his goods.
iv. Marketing Intermediaries:
The immediate environment of a company may consist of a number of marketing intermediaries which are “firms that aid the company in promoting, selling and distributing its goods to final buyers”.
There are many types of marketing intermediaries who include middlemen such as agents and merchants, who said the company in looking for customers or close the sales with customers; physical distribution firms, which help the company to stock and move the goods from the place where they are produced to the end places like warehouses and transportation firms; marketing service agencies which help the company to target and promote the products to the right segment of customers such as advertising agencies; consulting firms and finally, financial intermediaries which provide finance for the various marketing activities undertaken by the company and insure business risks.
All these marketing intermediaries are very important links between the company and the end buyers. Any disturbance in this link or let us say, a wrong choice can prove to be fatal to the company’s survival.
v. Public:
Every company, while doing its business comes across certain public in its environment. What is this public? “A public is any group that has actual or, potential interest in or impact on an organization’s ability to achieve its interests”. Examples of public include media, citizens, action public and local public.
Companies are seriously affected by such public. For example, one of the leading dailies which were bent on reducing the share price of the company did it by tarnishing the image of that company. Many companies are also affected by local publics. One of the serious causes that public link a company with is environmental pollution. If the company causes environmental pollution, then public generally is against buying its products.
Action against environmental pollution has been such a strong issue that it has caused many companies to either stop their operations totally and/or to take up pollution control measures. While these may be incidences where the public action has resulted in closure of some companies, public is not always a threat to business.
Some people are actually opportunity for business. Many businessmen have actually used consumerism to help their businesses by building fruitful symbiotic relationship with the local community, and thus using the community not only in favor of their business but also in disseminating useful information about their products.
Types of Marketing Environment – Top 2 Types: Micro Environment and Macro Environment
Type # 1. Micro Environment:
The following are the components of micro environment:
1. Internal Factors:
The organisations internal environment consists of policies, financial and human resources, production technology, and capacity etc. The decisions related to product planning, branding, packing, pricing, promotional budgets etc., are influenced by the policies and attitude of top management. Any decision in relation to marketing is also based on the availability of financial and human resources.
The adequate supply of capital, continuous flow of resources, and availability of skilled, qualified and talented employees will influence the decisions in the field of marketing. The use of technology (traditional and modern) and the capacity installed and use of the plant and machinery will have a considerable influence on the marketing decisions. The marketing managers should take the appropriate decisions on the basis of overall objectives of the organisation and the objectives of marketing department.
2. Influence of Other Groups:
The influence of other groups as a component of micro environment can be analysed as under:
(i) Suppliers:
The organisations require a variety of raw materials, inputs, and finance for a continuous flow of their activities. The services of suppliers are of great significance as they affect the company’s flow of production, delivery plans, production cost and marketing efforts. A co-operative environment is to be created between the suppliers and the organisation. The agencies which supply raw material, banks and other financial institutions which supply necessary flow of credit to the organisation play a vital role in the marketing decisions of any organisation.
(ii) Intermediaries:
Much of the marketing activity in being influenced by the intermediaries in the marketing. The intermediaries include firms and people involved in physical distribution of products and services (agents, distributors, stockists etc.,) who provide time, place and ownership utility for the products and services. The other types of intermediaries are wholesalers, retailers etc., who provide the necessary link between organisations and consumers.
The marketing activities are also undertaken by transport firms, warehousing organisations. Transport firms include rail, road, air, water transport agencies which are owned by Government and private organisations. Other service organisations including advertising agencies, insurance companies etc., are also involved as intermediaries in marketing. These intermediaries provide qualitative service in an efficient and effective manner.
(iii) Customers:
Another important group in the micro environment is customers. The customers constitute a very important aspect in the micro environment of an organisation as they are the central point for the marketing activity. The customers may be classified into final users or consumers, industrial users, Government, resellers etc.
The needs, requirements and expectations of each of the groups are different and hence the organisations have to implement different marketing policies to satisfy these different groups. The marketing concept emphasises that consumer satisfaction is the key for the success of any marketing activity.
(iv) Competition:
The marketing decisions of any organisation are influenced by the competition existing in the market. The competition may be in the form of perfect competition, monopolistic competition etc. Today many of the organisations force oligopolistic competition. The features of this type of competition are no different in the case of products, services; same price for all products of same category.
Advertising and sales promotion play an important role in influencing consumers. For example – in case of tooth pastes, soaps, TV’s, refrigerators, automobiles etc., and the type of competition existing is oligopoly. The competition for attracting consumers’ money also exists between non-similar products and services.
(v) Other Public Organisations:
The marketing decisions are also influenced by a number of public organisations. These include Government departments, consumer councils, stock exchanges, media, etc. These different groups always watch the decisions of the organisations and interpret them from the view point of providing societal welfare. The reports which appear in the newspapers and TV on the progress of each industry provide frame work for improving their functioning.
Type # 2. Macro Environment:
The variables of Macro environment may be classified as:
1. Economic Environment.
2. Demographic Environment.
3. Socio-Cultural Environment.
4. Political and Legal Environment.
5. Technological Environment.
These can be analysed as under:
1. Economic Environment:
Economic environment is the most significant component of the marketing environment. The economic factors can be subdivided into economic conditions prevailing in a country, industrial conditions and availability of resources for production.
i. Economic Conditions – The economic conditions prevailing in a country are related to the different components like economic system, per capita income trends, pattern of income distribution, pattern of savings and expenditure price levels, employment trends, agricultural and industrial output trends, impact of Government policies etc.
ii. Industrial conditions – The organisations have to understand the influence of industrial conditions which include market growth of the industry, demand patterns of the industry, and stage in product life cycle.
iii. Availability of resources for production – Supply of resources is required for production determine inputs which are available for production. The most important resources required for production are land, labour, capital, machinery and managers.
The economic environment describes the overall economic situation in a country and helps in analysing GNP per Capita, rate of economic growth, inflation rate, interest rates, unemployment etc. Therefore it is necessary to examine the economic environment carefully before taking any decision.
This environment explains the pattern and changes in economy based on population, city size, nationality, age, sex, education, marital status, family size, religion, family life style etc. The variables of demographic environment are useful for market segmentations targeting and positioning. The environment also provides quantitative and qualitative aspects of the population.
The demographic features of Indian environment can be presented as under- (2001 census):
i. Population – 102.70 crores
ii. Male -53.1 crores; Female – 49.6 crores
iii. The heavily populated cities are Calcutta, Chennai, Mumbai, Hyderabad, Delhi, Chandigarh, Howrah, Kanpur and Bangalore etc.
iv. Literacy rate – 65.38%
v. People living in urban areas – 25.7%, and rural areas 74.3%
vi. The division of population according to education is on the basis of Primary, Secondary, College, Post-Graduation and Professional courses.
vii. Religion wise India has many religions including Hinduism, Islam, Christianity, Buddhism, Jainism etc.
viii. Age wise, people belong to different age groups viz., 0-4, 5-14,15- 59,60 plus etc.
The other variables like family size like people with one child, two children and more than two children etc., life style in terms of attitudes, interests, opinions etc., will also play a significant influence on marketing environment.
3. Socio-Cultural Environment:
The social environment of a country influences the value system of the country which affects the marketing of products. The social factors which influence the marketing environment are caste, customs, conventions, cultural heritage, etc.
In the Indian social environment, the changes that took place are as under:
i. Breakup of the joint family system.
ii. Women employment.
iii. Changes in the attitude towards physical fitness.
iv. Increase in the attitude towards education.
The change in the quality of life of the people also brought about many changes in the purchase of goods and services. For example: The people are preferring various automobile products like Motor Cycle, Car etc., products like washing machines have also become very popular nowadays.
The social environment has the following directions:
i. Change in life style of people.
ii. Increasing concept for social problems.
iii. Growth of consumerism.
The marketing decisions are based on recognition of needs and wants of the customers. These help in understanding of lifestyles and behaviour patterns as they have grown in the society in which the individuals have been groomed. Each society contains sub-cultures, various groups with shared values emerging from their special life experience or circumstances. There are some core cultural values which are found in the society deep rooted and stable and hence change very little.
4. Political and Legal Environment:
Marketing decisions are also affected by the forces of political and legal environment.
The political changes may take the following forms:
i. Stability of tenure of Government.
ii. Political parties and their philosophies.
Political factors play a major role in shaping the environment in which business organisations operate. Thus a marketer has to study and analyse risks and opportunities involved in political changes.
The political factors which are to be considered are:
i. Role of public and private sector in the economy.
ii. Changes in Government policy.
iii. Importance of small scale industry.
iv. Growth of service sector in the economy.
Marketing decisions are strongly influenced by laws relating to competition, price, advertising etc. It is necessary for a marketer to understand the legal environment in the country.
The following laws are important:
i. Essential Commodities Act 1955.
ii. Weights and Measures Act.
iii. Drugs and Cosmetics Act.
iv. Trade and Merchandise Marks Act 1958.
v. Monopolies and Restrictive Trade Practices Act 1969.
vi. Environment Protection Act 1986.
vii. Consumer Protection Act 1986.
viii. Tax Laws (Direct and Indirect taxes Acts).
ix. The water (Prevention and Control of Pollution) 1974.
The legislations and judicial rulings given by the courts influence the marketing environment of any organisation.
The technological environment provides on opportunity and a threat for the growth of the organisation.
The factors to be considered in technological environment include:
i. Expenditure on research and Development.
ii. Concentration on product improvements.
iii. Unlimited innovations in technology.
iv. Emphasis on regulation of technological change.
The technological environment in India is influenced by the technology policy which is formed by the Government of India and updated from time to time.
The new economic policy covers the following aspects:
i. Selecting the few areas where research is to be concentrated.
ii. Open systems are required to assimilate the advances achieved.
iii. Technology is an area of planning initiatives that India cannot afford to neglect.
Advances in technology are however difficult to predict. However, the marketer should consider potential, technological developments determined from resources committed by major industries or the Government. Being in a market, that is rapidly changing due to technological development, will require the marketer to make careful short-term marketing decisions as well as being prepared with contingency plans given, any new technological developments that may affect product or services.