Marketing Environment Class 11
Marketing environment refers to numerous internal and external factors and forces affecting the decisions of the company which further affect the satisfaction of its customers.
The company can make the best of positive factors and prepare for the impact of negative factors in its marketing environment.
According to Philip Kotler, “A company's marketing environment consists of the factors and forces outside marketing that affect its management's ability to build and maintain successful relationships with target customers."
Examples of external forces:
Fast technological changes
Political changes
Changes in government's economic policies
Social changes
Changes in fashion and tastes of consumers
Industrial conflicts
Globalization and Liberalization
Features of Marketing Environment:
- Dynamic
- Unpredictable
- Controllable or uncontrollable
- Internal or External
- Micro environment: influences marketing and business directly and includes suppliers, customers, intermediaries, competitors and the general public.
- Macro environment: includes demographics, economic forces, political and legal forces, socio-cultural and technological forces, affect business indirectly.
Marketing Environment Class 11
Environmental Scanning
Environmental scanning is the process of scrutinizing and evaluating changes and trends in marketing environment by the firm. It is done after preparing an Environmental Threat and Opportunity Profile (ETOP) which gauges the impact of various environmental forces on the firm.
Threat is expectation of some negative force or event like strong competition in the market.
Opportunity is expectation of some positive event or force.
Before production a business firm must study the following as part of its marketing environment:
- Nature of target customers: Identifying the size of family, job profile, purchasing power and buying motive of the customer etc.
- The market trends: Whether demand is likely to remain static, decrease or increase.
- Economic, social and political trends: like monetary policy, social changes, anti-pollution or energy conservation laws.
- Technology trends: Changes in the method of production, distribution etc.
- Competition in the market: Upcoming or existing competitors and their strengths and weaknesses.
Importance of Environmental Scanning
- Determining Opportunities:
Identification of opportunities help the business in getting 'First Mover Advantage'. Opportunity is expectation of some positive or favourable event or force. For example, Maruti Udyog, was the first company to identify a demand for small, economic cars in India in the 1980s.
- Identification of Threats:
Threat is expectation of some negative force or event like strong competition in the market.
Environmental scanning helps to identify possible threats in future and give warning signals to the firms. Business firm can prepare itself in advance to face the negative situations.
- Sensitization of Management to Cope with Rapid Changes:
Environmental scanning helps the firm's management to take timely actions in times of the changing technology, competition, government policies and changing needs of the customers.
- Formulation of Strategies and Policies:
Threats and opportunities coming to light after analysing the market forces can serve as the basis of formulation of strategies to counter threats and capitalise on opportunities in the market.
- Image Building:
A company which is quick in taking actions and giving maximum consumer satisfaction is definitely going to cultivate good public image. Ultimately leading to long term benefits.
- Continuous Learning
Continuous search of alternatives and choice of strategy as a result of environmental scanning is helpful to the managers for their continuous learning process.
7. Giving Direction for Growth
The environment scanning leads to opening up new avenues of growth for the business firms.
- Identifying Firm’s Strength and Weakness
Business environment helps to identify strength and weakness of a particular company and thus helps in making improvements and maintaining the market position.
- Basis of strategy: Planning staff can collect qualitative information regarding business
environment and utilize it in formulating effective plans.
- Intellectual stimulation
Handling new and unexpected situations provide the managers with opportunities to think more and result in intellectual stimulation to perform better than before.
Marketing Environment Class 11
Macro Environment
The macro-environment are external forces as part of larger society and are beyond the control of firm’s management.
The macro environmental factors:
- Demographic forces:
Demography means studying human population in terms of size, density, location, age, gender, race, literacy and occupation.
The study of demographic factors is important as it affects the nature and type of goods required by different groups of population e.g. more infant population means more requirement of baby food, more young population causes more requirement of cosmetics etc.
- Political and Legal forces:
Important components of the politico-legal environment, which must be are:
- The constitutional framework - directive principles, fundamental rights , centre-state powers.
- Political institutions like government and related agencies.
- The extent and nature of government intervention in business.
- Commercial and economic laws and government policies relating to business.
- Government policies related to imports and exports
- Government policies related to various industries.
- Government policies related to pricing and distribution of essential commodities.
- Court decisions for the protection of consumers, environment and ecological balance.
3. Economic Forces:
Economic forces must be studied in detail. These forces are: demand, supply, national income, per capita income, imports, exports, taxation, price level, capital formation, consumption pattern, savings, investment, cost of production, revenue etc.
All these are inter-dependent and must by analysed before carrying on marketing activities.
- Natural or physical forces
The natural environment includes the natural resources that a company uses as inputs that affect their marketing activities. The shortages of raw materials, increased air pollution, noise pollution, land pollution, water pollution, and so on.
Because of growing concern for the natural environment, business must be very cautious of these forces. The Indian government has introduced the concept of ‘corporate social responsibility of business’ as well as ‘Eco mark’ for marketing ecofriendly products.
- Technological forces:
Technological environment means the state of technology in the areas of manufacturing, mining, construction, materials handling, transportation and information technology.
It is fast changing now a days and is the major source of labour unrest. While introducing new technology, the benefits and losses must be properly weighed.
- Socio-cultural forces:
The socio-cultural forces consist of institutions and basic values and beliefs of a group of people which in turn affects the marketing of products.
Caste structure, occupational structure, educational system, literacy rate, mobility of labour, customs, cultural heritage, view towards scientific methods, festivals, traditions etc. affect the working of business enterprises and the demand pattern of various goods.
SUMMARY
PESTEL: Political Environment, Economic Environment, Social Environment, Technological Environment, Environmental forces (Natural) and Legal Environmental study by an organization.
Micro Environment
Micro environmental factors affect the business firm directly in influencing its marketing activities. These can be internal as well as external.
Internal forces are company's top management and its various departments like purchasing department, research and development (R&D) department, production department, finance Department and personnel department.
These factors are generally under control of the firm as these have to co-ordinate with each other, but external factors cannot be governed by the firm. External micro-environment includes:
- Suppliers:
The suppliers include all the business firms or individuals who provide raw materials, components and semi-finished goods to be used in production or even sell finished products of the organization. Firm should monitor potential changes in the supplier environment and should have contingency plans ready to deal with adverse situations affecting production activity.
- Marketing Intermediaries:
Marketing intermediaries are the independent individuals or organisations that directly help in the free flow of goods and services to the customers.
Marketing Intermediaries are of two types, namely 'merchant' and 'agent'. Merchant middlemen can be wholesalers and retailers.
Agent middlemen are part of the distribution network rendering important services. Business largely depends on banks, venture capitalists and other sources to finance their operations; warehouses and transportation companies to distribute goods; and advertising, market research firms and public-relations firms to market their products.
- Customers:
A customer may be an individual or household or an organisation purchasing goods for its own use or for resale. Target customers are grouped as under:
- Consumer market: individuals and households buying the product for consumption.
- Industrial market: organizations buying for producing or any other use.
- Reseller market: Intermediaries and retailers, buying goods and services for resale.
- Government and other non-profit market: buying goods and services for public utilities.
- International market: individuals and organizations of other countries buying for their consumption or industrial use or both.
4.Competitors:
Competitors are the rival business firms that can capture a marketer’s market share.
Competitor’s marketing activities, their products, distribution channels, prices and promotional efforts to design its marketing strategy etc. all must be monitored carefully.
There are three types of competition:
- Competition from similar products
- Competition from substitute products
- Competition amongst all firms
5. Public:
The company's micro environment also includes various groups of people. ‘Public' means any group that can affect the company's ability to achieve its objectives.
A public can affect by positive word of mouth or through negative word-of-mouth.
According to Kotler and Armstrong there are seven types of publics:
- Financial publics: Like banks, investment houses and shareholders.
- Media publics: Like newspapers, magazines, radio and television stations, social media channels.
- Government public: Government departments and agencies.
- Citizen-action publics: Consumer organizations, environmental groups, minority groups and others.
- Local publics: Like neighbourhood residents and community organizations.
- General publics: It’s the public image.
- Internal publics: Like its workers, managers, and board of directors.
Introduction to Marketing Class 11