Marketing environment

Marketing environment

Marketing environment includes all the forces that directly or indirectly influence marketing operations by affecting an organisation acquisition of inputs/creation of outputs such as human, financial and natural resources and raw material, information, goods, services or ideas. The market environment is a marketing term and refers to all of the forces outside of marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. It is important to understand Marketing environment in order to comprehend the consumers concerns, motivations and to adjust the product according to the consumer’s needs. 

Marketers use the process of marketing environmental scans, which continually acquires information on events occurring outside the organization to identify trends, opportunities and threats to a business. 

The six key elements of a marketing scan are the 

1. Demographic forces, 

2. Socio-cultural forces, 

3. Economic forces, 

4. Regulatory forces, 

5. Competitive forces, and 

6. Technological forces.

In simple terms Marketing Environment, the forces that directly and indirectly influence an organization’s capability to undertake its business. The trading forces operating in a market place over which a business has no direct control, but which shape the manner in which the business function and is able to satisfy its customers.

Philip Kotler, “A company’s marketing environment consists of the internal factors & forces, which affect the company’s ability to develop & maintain successful transactions & relationships with the company’s target customers”.

Nature of Marketing environment

The marketing environment of a business firm may be static or dynamic when the environment forces do not show a significant change, it is termed as stable or static environment. And when significant changes are seen in the environment forces it is termed as dynamic environment. But the degree and nature of change is predictable. There are some other forces in the environment which have considerable influences on the marketing strategies of a firm are listed below;

1. Increased Competition
2. Labor unrest
3. Social changes
4. Technological changes
5. Change in fashion

Features of Marketing Environment

Today’s marketing environment is characterized by numerous features, which are mentioned as follows: 

1. Specific and General Forces: It refers to different forces that affect the marketing environment. Specific forces include those forces, which directly affect the activities of the organization. Examples of specific forces are customers and investors. General forces are those forces, which indirectly affect the organization. Examples of general forces are social, political, legal, and technological factors. 
2. Complexity: It implies that a marketing environment includes number of factors, conditions and influences. The interaction among all these elements makes the marketing environment complex in nature. 
3. Vibrancy: Vibrancy implies the dynamic nature of the marketing environment. A large number of forces outline the marketing environment, which does not remain stable and changes over time. Marketers may have the ability to control some of the forces; however, they fail to control all the forces. However, understanding the vibrant nature of marketing environment may give an opportunity to marketers to gain edge over competitors. 
4. Uncertainty: It implies that market forces are unpredictable in nature. Every marketer tries to predict market forces to make strategies and update their plans. It may be difficult to predict some of the changes, which occurs frequently. For example, customer tastes for clothes change frequently. Thus, fashion industry suffers a great uncertainty. The fashion may live for few days or may be years. 
5. Relativity: It explains the reasons for differences in demand in different countries. The product demand of any particular industry, organization, or product may vary depending upon the country, region, or culture. 

Components or Factor Affecting Marketing Environment

These forces are either internal or external to the firm. The components of marketing environment or the forces or factors affecting the marketing environment can be grouped in two broad categories:

1. Controllable or Internal Marketing Environment

2. Uncontrollable or External Marketing Environment

Controllable or Internal marketing environment

Marketing environment includes all factors that affect marketing policies, decisions and operations of a company. The internal environment of a firm includes controllable factors or variables such as product design, branding packaging, pricing, advertising and distribution policies of the firm. A firm or a company can achieve its marketing objectives by selecting a balanced Marketing Mix.

Marketing Mix The policies adopted by manufacturers to attain success in the marketing constitute the marketing mix. Marketing Mix is considered as an important part of marketing system of the company. It is controllable factor of marketing environment.

Uncontrollable or External Marketing environment.

The external forces or factors which constitute uncontrollable environment are divided into two parts for the study purpose:

1. Micro factor such as: Suppliers, Intermediaries, Competitors, Customers and General public
2. Macro Factors such as: demographic, economic, political, Legal, Technological, Social and Cultural.

These factors or forces influencing marketing decision making are collectively called as Marketing Environment.

The Environmental Factors may be classified as: 1.Internal Factor 2.External Factor

1. Internal Environmental Factors - A Company’s marketing system is influenced by its capabilities regarding production, financial & other factors. Hence, the marketing management/manager must take into consideration these departments before finalizing marketing decisions. The Research & Development Department, the Personnel Department, the Accounting Department also has an impact on the Marketing Department. It is the responsibility of a manager to company-ordinate all department by setting up unified objectives.

2. External Environment Factors may be further classified into: External Micro Factors & External Macro Factors

• External Micro Factors:
• Suppliers: They are the people who provide necessary resources needed to produce goods & services. A company must build cordial & long-term relationship with suppliers.
• Marketing Intermediaries: They are the people who assist the flow of products from the producers to the consumers; they include wholesalers, retailers, agents, etc. These people create place & time utility. A company must select an effective chain of middlemen, so as to make the goods reach the market in time. The middlemen give necessary information to the manufacturers about the market. If a company does not satisfy the middlemen, they neglect its products & may push the competitor’s product.
• Consumers: The main aim of production is to meet the demands of the consumers. Hence, the consumers are the center point of all marketing activities. If they are not taken into consideration, before taking the decisions, the company is bound to fail in achieving its objectives. A company’s marketing strategy is influenced by its target consumer. E.g.: If a manufacturer wants to sell to the wholesaler, he may directly sell to them, if he wants to sell to another manufacturer, he may sell through his agent or if he wants to sell to ultimate consumer he may sell through wholesalers or retailers. Hence each type of consumer has a unique feature, which influences a company’s marketing decision.
• Competitors: A prudent marketing manager has to be in constant touch regarding the information relating to the competitor’s strategies. He has to identify his competitor’s strategies, build his plans to overtake them in the market to attract competitor’s consumers towards his products. Any company faces three types of competition:
• Brand Competition: It is a competition between various companies producing similar products. E.g.: The competition between BPL & VU companies.
• The Product Form Competition: It is a competition between companies manufacturing products, which are substitutes to each other E.g.: Competition between coffee & Tea.
• The Desire Competition: It is the competition with all other companies to attract consumers towards the company. E.g.: The competition between the manufacturers of TV sets & all other companies manufacturing various products like automobiles, washing machines, etc.

To understand the competitive situation, a company must understand the nature of market & the nature of customers. Nature of the market may be as follows: Perfect Market, Oligopoly, Monopoly, Monopolistic Market, and Duopoly

• Public: A Company’s obligation is not only to meet the requirements of its customers, but also to satisfy the various groups. A public is defined as “any group that has an actual or potential ability to achieve its objectives”. The significance of the influence of the public on the company can be understood by the fact that almost all companies maintain a public relation department. A positive interaction with the public increases its goodwill irrespective of the nature of the public. A company has to maintain cordial relation with all groups, public may or may not be interested in the company, but the company must be interested in the views of the public. Public may be various types. They are:
• Press: This is one of the most important groups, which may make or break a company. It includes journalists, radio, television, etc. Press people are often referred to as unwelcome public. A marketing manager must always strive to get a positive coverage from the press people.
• Financial Public: These are the institutions, which supply money to the company. E.g.: Banks, insurance companies, stock exchange, etc. A company cannot work without the assistance of these institutions. It has to give necessary information to these public whenever demanded to ensure that timely finance is supplied.
• Government: Politicians often interfere in the business for the welfare of the society & for other reasons. A prudent manager has to maintain good relation with all politicians irrespective of their party affiliations. If any law is to be passed, which is against the interest of the company, he may get their support to stop that law from being passed in the parliament or legislature.
• General Public: This includes organizations such as consumer councils, environmentalists, etc. as the present day concept of marketing deals with social welfare; a company must satisfy these groups to be successful.

• External Macro Environment:
• Demography: It is defined as the statistical study of the human population & its distribution. This is one of the most influencing factors because it deals with the people who form the market. A company should study the population, its distribution, age composition, etc. before deciding the marketing strategies. Each group of population behaves differently depending upon various factors such as age, status, etc. if these factors are considered, a company can produce only those products which suits the requirement of the consumers. In this regard, it is said that “to understand the market you must understand its demography”.
• Economic Environment: A company can successfully sell its products only when people have enough money to spend. The economic environment affects a consumer’s purchasing behavior either by increasing his disposable income or by reducing it. E.g.: During the time of inflation, the value of money comes down. Hence, it is difficult for them to purchase more products. Income of the consumer must also be taken into account. E.g.: In a market where both husband & wife work, their purchasing power will be more. Hence, companies may sell their products quite easily.
• Physical Environment or Natural Forces: A company has to adopt its policies within the limits set by nature. A man can improve the nature but cannot find an alternative for it. Nature offers resources, but in a limited manner. A product manager utilizes it efficiently. Companies must find the best combination of production for the sake of efficient utilization of the available resources. Otherwise, they may face acute shortage of resources. E.g.: Petroleum products, power, water, etc.
• Technological Factors: From customer’s point of view, improvement in technology means improvement in the standard of living. In this regard, it is said that “Technologies shape a Person’s Life”. Every new invention builds a new market & a new group of customers. A new technology improves our lifestyle & at the same time creates many problems. E.g.: Invention of various consumer comforts like washing machines, mixers, etc. have resulted in improving our lifestyle but it has created severe problems like power shortage. E.g.: Introduction to automobiles has improved transportation but it has resulted in the problems like air & noise pollution, increased accidents, etc. In simple words, following are the impacts of technological factors on the market:
• They create new wants
• They create new industries
• They may destroy old industries
• They may increase the cost of Research & Development.
• Social & Cultural Factors: Most of us purchase because of the influence of social & cultural factors. The lifestyle, values, believes etc. is determined among other things by the society in which we live. Each society has its own culture. Culture is a combination of various factors which are transferred from older generations & which are acquired. Our behaviour is guided by our culture, family, educational institutions, languages, etc. The society is a combination of various groups with different cultures & subcultures. Each society has its own behavior. A marketing manager must study the society in which he operates. Consumer’s attitude is also affected by their society within a society; there will be various small groups, each having its own culture. Eg: In India, we have different cultural groups such as Assamese, Punjabis, and Kashmiris etc. The marketing manager should take note of these differences before finalizing the marketing strategies. Culture changes over a period of time. He must try to anticipate the changes new marketing opportunities.

The difference between macro environments and micro environments may be relevant to identify in the following table:

Conclusion 

Thus, when a marketing manager is considering putting forward a marketing plan, then he has to consider both the internal and external marketing environments and see both opportunities and threats to the business; only then he/she would be able to take the correct decisions regarding the business.

FAQ's

Meaning of Marketing Environment?

Marketing environment consists of all those internal and external forces which affect the marketing strategies. Modern marketer realizes that environmental scanning would provide them with continuous interaction between the customers and the business they are in.

Impact of environment on marketing

The marketing environment consists a number of forces which influence the marketing activities of a business firm. Some of these forces/elements influence the business directly, while others indirectly. The impact of environment on marketing is studied in two parts: 1. Direct- action Forces 2. Indirect-action Forces

Scanning of Marketing Environment

Though, future is unpredictable, but marketer can obtain appraisals of what is ‘most probable’. To monitor changes in the marketing environment effectively, marketer must engage himself in the scanning and analysis of marketing environment. Advantages of scanning of marketing environment 1. There are several benefits that accrue to a marketer by scanning of marketing environment, such as; Trendy products can be brought out in the market. 2. Competitor moves can be anticipated and countered. 3. Marketing mix strategy can be properly formulated. 4. Adapting to the uncontrollable environment become easy.