Marketing Environment

Marketing Environment
Dr. Pooja
Assistant Professor
Dept. of Commerce
AMPGC, BHU, Varanasi


 Market is facing changes every day. Many new things develop over
time and the whole scenario can alter in only a few seconds.
 There are some factors that are beyond your control. But, you can
control a lot of these things. Businesses are greatly influenced by their
environment.
 All the situational factors which determine day to day circumstances
impact the firms. So, businesses must constantly analyse the trade
environment and the market.
Introduction


 Environment plays a critical role in business, especially in marketing.
The marketing environment is constantly changing and thus presenting
new opportunities and threats. A marketer’s task is to correctly analyse
the environment and design a marketing mix, which will fit the
environment.
 The ultimate purpose of the environmental analysis is to facilitate the
firm’s strategic response to the environmental changes. The firm can
attain its objective with strategic planning in order to cash in on
environmental opportunities.
Why Environmental Analysis in
Marketing


 Environmental analysis is a strategic tool. It is a process to identify all
the external and internal elements, which can affect the organization’s
performance.
 The analysis entails assessing the level of threat or opportunity the
factors might present. These evaluations are later translated into the
decision-making process. The analysis helps align strategies with the
firm’s environment
Why Environmental Analysis in
Marketing


 The marketing environment surrounds and impacts upon the
organization. There are three key perspectives on the marketing
environment, namely the external environment- 'macro-environment,' the
'micro-environment' and the internal environment.
 “Marketing Environment can be defined as various internal and
external factors under which marketing functions take place.”
Marketing Environment


 “A company’s marketing environment consists of the internal
factors and forces, which affect the company’s ability to develop and
maintain successful transactions and relationships with the company’s
target customers”. – ‘Philip Kotler’
 “The environment of business consists of all those external things
to which it is exposed and by which it may be influenced directly or
indirectly.” – Reinecke & Schoell
 “In environment there are external factors which constantly spin
out opportunities and threats to the business firm.” – William Glueck
and Jouch
Definitions


 There are lots of pressures and controls which are mostly out-side
the control of individual firm and its managers.” – Richman and Copen
 “Environment consists of atoms and molecules, agglomeration of
things in motion, alive of men and emotions of physical and social law,
social ideas, norms of action of forces and resistance. Their number is
infinite and they are always present – they are always changing.” –
Chester I. Barnard
Definitions


Characteristics of
Environment
Environmental
Complexity
Environmental
Variability
Environment is
Dynamic
Environment influenced
different Firm
Long-term impact on
business organisation
Characteristics of Environment


Marketing
Environment
External
Environment
Micro
Environment
Macro
Environment
Internal
Environment
All the Factors &
Forces within
Organisation
Components of Marketing
Environment


A. External Marketing
Environment
 External environment is infinite and includes everything outside the
organisation. Organisation has no control over these factors. These
factors have the potential to affect all or part of the organisation. It is of
two types:
1. Micro Marketing Environment
2. Macro Marketing Environment


Micro
Marketing
Environment
Consumer
Competitors
Market Suppliers
Intermediaries
Public
1. Micro Marketing Environment


According to Peter Drucker, the aim of business is to create and retain the
customer. Hence consumer occupies the central position in the marketing
environment. The marketer has to closely monitor and analyse changes in
consumer tastes and preferences and cater to (if not try and anticipate) their
buying habits. All marketing activities revolve around identification of the needs of
the customer and fulfilling with the product. It includes:
a) Customer’s taste and preference
b) Customers bargaining power
c) Purchasing power of the customer
d) Customer’s attitude, interest and opinion about the product
Micro Marketing Environment-
Consumer


Competition shapes business. A study of the competitive scenario is essential
for the marketer, particularly threats from competition. Competitors are also
considered as micro factors as it affects the business directly. It includes:
a) Competitor’s market share
b) Competitor’s hold on the resources
c) Competitor’s marketing strategies
Moreover, it is also a duty of management to know that:
1. Who are the competitors?
2. What are their present strategies and business objectives?
Competitors


The market is to be studied in terms of its actual and potential size, its growth
prospect and also its attractiveness. The marketer should study the trends and
development and the key success factors of the market he is operating.
Important issues are:
 Cost structure of the market
 The price sensitivity of the market
 Technological structure of the market
 The existing distribution system of the market
 Is the market matured?
Market


Suppliers form an important component of the microenvironment. With their own
bargaining power they affect the cost structure of the industry. They constitute a
major force, which shapes competition in the industry. Also organisations have to
take a major decision on “outsourcing” or “in-house” production depending on
this supplier environment. Suppliers play an important role in business thus
affects the business directly. It includes:
a) The bargaining power of the supplier
b) Attitude towards risk
c) Purchasing power of the supplier
d) Scope of operations of the suppliers.
Suppliers


Intermediaries exert a considerable influence in the marketing environment. They
can also be considered as the major determining force in the business. In many
cases the consumers are not aware of the manufacturer and buy the product from
the renowned intermediaries as for example Wal-Mart in US, Pantaloons in India.
Intermediaries are also called as the members of the channel of distribution. The
main task of the intermediaries is to make the product available to the customers
at the right time as per the demand. It includes:
a) Wholesaler
b) Retailer
c) Agents
Intermediaries


Public constitute a major force in the micro environment and marketers
have to very carefully study their opinion, values, beliefs and attitudes in
order to design a proper marketing strategy for goods carefully tailored
to meet the needs of the target consumer segment. In sort of reverse
engineering, marketers also use the media to shape consumer tastes
and preferences.
Public


Macro
Marketing
Environment
Demographic
Environment
Economic
Environment
Regulatory
Environment
Legal -
Political
Environment Social &
Cultural
Environment
Technological
Environment
Natural
Environment
2. Macro Marketing
Environment


Factors relating to population, such as size, growth rate, age distribution, religious
composition and literacy levels and aspects like composition of workforce, household
patterns, regional characteristics, population shifts etc., need to be studied as they are all
part of the demographic environment. The demographic factors monitor the population. It
includes:
a) Market size
b) Growth rate
c) Education status
d) Gender
e) Age
f) Marital status
g) Family members
h) Geographic location etc.
Macro Marketing Environment-
Demographic Environment


Economic environment determines the strength and size of the market. The
purchasing power in an economy depends on current income, prices, savings,
circulation of money, debt and credit availability. Income distribution pattern
determines the marketing possibilities. The important point to consider is to find
out the effect of economic prospects and inflation on the operations of the firms.
The economic factors monitor the purchasing power of the customers. It
includes:
a) Income distribution pattern
b) Prices
c) Availability of debt, credit and savings.
Economic Environment


Business is highly guided and controlled by government policies. Hence the
type of government running a country is a powerful influence on business
and marketing gets affected.
a) What changes and regulations are possible and what will be their
impact?
b) What are the political risks of operating in a governmental jurisdiction?
c) What are the incentives the government may offer that might affect
business?
d) What are the taxes and duties that may be levied and might affect
business?
Regulatory Environment


Firms prefer to operate in a country where there is a sound legal system such as in US.
Marketers must have a good working knowledge of the major laws protecting consumers,
competitions and organisations. Laws like MRTP, Consumer Protection Act, Intellectual
Property Right, FEMA, Labour Laws etc., can considerably affect business operations.
Political pressure groups influence and limit organisations e.g., the case of Enron in
Maharastra and KFC in Karnataka. Special interest groups and political action committees
put pressure on business organisations to pay more attention to consumer’s rights, minority
rights, and women’s rights. The political – legal factors include:
a) Government policy
b) Stability of Government
c) Trade policy
d) Tax policy
Legal - Political Environment


The beliefs, values and norms of a society determine how individuals and
organisations relate to each other. The core beliefs of a particular society tend to be
persistent, as the American value system of work, charity and honesty. It is difficult for
marketers to change these core values, which have a major bearing on marketing
operations in as much as they set the stage for marketing activity and consumer
response. It includes:
 Beliefs
 Values
 Norms
 Attitude
 Interest
 Opinion
Macro Marketing Environment-Social
& Cultural Environment


The most important factor, which is controlling and changing the human society and even
impacting the future, is technology. Technology has literally transformed the way people
think, work and relax. With the latest developments in genetic engineering, man is
extending the human life span.
Technology has changed the way people communicate with the advent of Internet and
telecommunication system, and with the revolution in communications have come new
ways of doing business. The following factors are to be considered for the technological
environment:
a) The pull of technological change
b) Opportunities arising out of technological innovation
c) Risk and uncertainty of technological development
d) Role of R&D in a country and government’s R&D budget.
Technological Environment


The global environment is also rapidly changing. The new concept of
global village has changed how individuals and organisations relate to
each other. The advent of worldwide terrorism has the power to turn a
booming economy into a stagnant one within no time.
The new migratory habits of the workforce as well as increased offshore
operation are changing the dynamics of business operation, while in the
background, the WTO initiatives have changed the way nations do
business with each other, opening up markets and heralding the coming of
a new global economic order.
Global Environment


 These factors primarily concern with ecological (natural) environment. They are closely
related to protection of ecological environment and pollutions – air, water, noise, and land
pollutions. At present, the global-level efforts are made to protect environment.
 Such efforts can lay down certain restrictions in terms of use of natural resources, cost
of raw material, quality of products, production process and technology, disposal of wastes,
pollution control measures, and so on. These factors affect to the several aspects of
production, distribution, and disposal of products. A firm must understand that people want
better quality products at low price, but not at a cost of quality of life. Analysis of ecological
environment involves:
 Availability and use of natural resources
 Pollution and pollution control measures
 Contemporary legal provisions
 Ecological awareness and use of eco-friendly products
Ecological Environment


There are various internal factors which influence the decisions of
marketing and which are present within the business itself. These
factors are usually under the control of marketing. Here we are
concerned with external factors/environment.
a) Business and managerial Policies
b) Business Targets and Objectives
c) Business Concepts, Managerial Philosophy and outlook
d) Availability of business resources
e) Business capacity and its scope of expansion
B. Internal Marketing Environment


f) Production System, Layout of Machines and Techniques
g) Level of efficiency of labour and Management
h) Business Organisation Structure, Decentralisations,
Departmentation and Responsibility
i) Business Plans and Strategy
j) Business Management Information System and
communication arrangements
B. Internal Marketing Environment

Marketing Environment

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