Marketing environment
A company's marketing environment
consists of the factors and forces that affect the company's ability to develop
and maintain successful transactions and relationships with its target
customers. Every business enterprise is confronted with a set of internal
factors and a set of external factor.
The internal factors are generally
regarded as controllable factors because the company has a fair amount of
control over these factors, it can alter or modify such factors as its
personnel, physical facilities, marketing-mix etc. to suit the environment.
The external factors are by and
large, beyond the control of a company. The external environmental factors such
as the economic factors, socio-cultural factors, government and legal factors,
demographic factors, geo-physical factors etc.
As
the environmental factors are beyond the control of a firm, its success will
depend to a very large extent on its adaptability to the environment, i.e. its
ability to properly design and adjust internal variables to take advantages of
the opportunities and to combat the threats in the environment.
2.6.1
The micro environment
The
micro environment consists of the actors in the company's immediate environment
that affects the ability of the marketers to serve their customers. These
include the suppliers, marketing intermediaries, competitors, customers and
publics.
1.
Suppliers:
Suppliers are those who supply the
inputs like raw materials and components etc. to the company.
Uncertainty regarding the supply or other supply constraints often compels
companies to maintain high inventories causing cost increases. It has been
pointed out that factories in India maintain indigenous stocks of 3-4 months
and imported stocks of 9 months as against on average of a few hours to two
weeks in Japan.
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, multiple sources of supply often
help reduce such risks.
2.
Customers:
The major task of a business is to
create and sustain customers. A business exists only because of its
customers and hence monitoring the customer sensitivity is a prerequisite for
the business to succeed. A
company may have different categories of consumers like individuals,
households, industries, commercial establishments, governmental and other
institutions etc. Depending on a single customer is often too risky because it
may place the company in a poor bargaining position. Thus, the choice of the
customer segments should be made by considering a number of factors like
relative profitability, dependability, growth prospects, demand stability,
degree of competition etc.
3.
Competitors:
A firm's competitors include not only
the other firms which market the same or similar products but also all
those who compete for the discretionary income of the consumers. For example,
the competition for a company making televisions may come not only from other
TV manufacturers but also from refrigerators, stereo sets, two-wheelers, etc.
This competition among these products may be described as desire competition as the
primary task here is to influence the basic desire of the consumer. If
the consumer decides to spend his disposable income on recreation, he will
still be confronted with a number of alternatives to choose from like T.V.,
stereo, radio, C.D. player etc. the competition among such alternatives which
satisfy a particular category of desire is called generic competition. If
the consumer decides to go in for a T.V. the next question is which form of
T.V. - black and white, color, with remote or without etc. this is called
'product form competition'. Finally, the consumer encounters brand competition,
i.e. competition between different brands like Philips, B.P.L., Onida,
Videocon, Coldstar etc.
An
implication of these different brands is that a marketer should strive to
create primary and selective demand for his products.
4.
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. The
marketing intermediaries include middlemen such as agents and merchants, who
help the company find customers or close sales with them; physical distribution
firms which assist the company
in stocking and moving goods from their origin to their destination such as
warehouses and transportation firms; marketing service agencies which assist
the company in targeting and promoting its products to the right markets such
as advertising agencies; consulting firms, and finally financial intermediaries
which finance marketing activities and insure business risks. Marketing
intermediaries are vital link between the company and final consumers. A
dislocation or disturbance of this link, or a wrong choice of the link, may
cost the company very heavily.
5.
Public:
A company may encounter certain
publics in its environment. "A public is any group that has actual
or potential interest in or impact on an organisation's ability to achieve its
interests". Media, citizens, action publics and local publics are some
examples.
Some
companies are seriously affected by such publics, e.g. one of the leading daily
that was allegedly bent on bringing down the share price of the company by
tarnishing its image. Many companies are also affected by local publics.
Environmental pollution is an issue often taken up by a number of local
publics. Action by local publics on this issue has caused some companies to
suspend operations and/or take pollution control measures. However,
it is wrong to think that all publics are threats to business. Some publics are
opportunity for business. Some businessmen e.g. regard consumerism as an
opportunity for their business. The media public may be used to disseminate
useful information. Similarly, fruitful symbiotic cooperation between a company
and the local publics may be established for the benefit of the company and the
local community.
Macro environment
A
company and the forces in its micro environment operate in larger macro
environment of forces that shape opportunities and pose threats to the company.
The macro forces are, generally, more uncontrollable than the micro forces. The
macro environmental forces are given below:
1.
Economic
environment: Economic
conditions, economic policies and the economic system are the important
external factors that constitute the economic environment of a business.
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 among the very important
determinants of business strategies.
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, the
priority sector and the small-scale sector get a number of incentives and
positive support from the government, whereas those industries which are
regarded as inessential may find the odds against them.
The monetary and fiscal policies by
way of incentives and disincentives they offer and by their neutrality, also
affect the business in different ways. The scope of private business depends,
to a large extent, on the economic system. At one end, there are the free market
economies, or capitalist economies, and at the other are the centrally planned
economies or communist economies. In between these two extremes are the mixed
economies. A completely free economy is an
abstract rather than a real system because some amount of government
regulations always exist. Countries
like the United States, Japan, Canada, Australia etc. are regarded as free
market economies. The
communist countries have, by and large, a centrally planned economic system.
The State, under this system, owns all the means of production, 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, both public and private sectors co-exist, as in India. The
extent of state participation varies widely across different mixed economies.
However, in many mixed economies, the strategic and other nationally very
important industries are fully owned or dominated by the state. The
economic system, thus, is a very important determinant of the scope of
business.
2.
Political
and Government environment: Political and government environment has a close
relationship with the economic system and economic policy. In most countries,
there are a number of laws that regulate the conduct of the business. These
laws cover such matters as standards of product, packaging, promotion
etc. In many countries, with a view to protecting consumer interests,
regulations have become stronger. Regulations to protect the purity of the
environment and preserve the ecological balance have assumed great importance
in many countries. In
most nations, promotional activities are subject to various types of controls.
Media advertising is not permitted in Libya. In India too, till recently
advertisements of liquor, cigarettes, gold, silver etc. were prohibited. There
is a host of statutory control on business in India. MRTP commission,
industrial licensing, FEMA regulations etc. kept a strict check on the
expansion of private enterprises till recently. Recent changes in the statutes
and policies have had a profound and positive impact on business. Thus,
marketing policies are definitely influenced by government policies and
controls throughout the world.
3.
Socio-cultural
environment: The
socio-cultural environment includes the customs, traditions, taboos,
tastes, preferences etc. of the members of the society, which cannot be ignored
at any cost by any business unit. For a business to be successful, its strategy
should be the one that is appropriate in the socio-cultural environment. The
marketing-mix will have to be so designed as to suit the environmental
characteristics of the market. Nestle, a Swiss
multinational company, today brews more than forty varieties of instant coffee
to satisfy different national tastes.
Even
when people of different cultures use the same basic product, the mode of
consumption, conditions of use, purpose of use or the perceptions of the
product attributes may vary so much so that the product attributes, method of
presentation, or promotion etc. may have to be varied to suit the
characteristics of different markets. The
differences in language sometimes pose a serious challenge and even necessitate
a change in the brand name. The values and beliefs associated with color vary
significantly across different cultures e.g. white is a color which indicates
death and mourning in countries like China, Korea and India but in many
countries it is a color expressing happiness and often used as a wedding dress
color. While
dealing with the social environment, it is important to remember that the
social environment of business also encompasses its social responsibility,
alertness or vigilance of the consumers and the society's interests and
well-being at large.
4.
Demographic
environment: Demographic
factors like the size, growth rate, age composition, sex composition,
family size, economic stratification of the population, educational levels, language,
caste, religion etc. are all factors relevant to business. All these
demographic variables affect the demand for goods and services. Markets with
growing population and income are growth markets. But the decline in birth
rates in countries like United States, etc. has affected the demand for baby
products. Johnson and Johnson had to overcome this problem by repositioning
their products like baby shampoo and baby soaps, and promoting them to the
adult segment particularly females.
A
rapidly increasing population indicates a growing demand for many products.
High population growth rates also indicate an enormous increase in labor
supply. Cheap labor and a growing market have encouraged many multinational
corporations to invest in developing countries like India.
5. Natural
environment: Geographical
and ecological factors such as natural resources endowments, weather and
climate conditions, topographical factors, location aspects in the global
context, port facilities etc. are all relevant to business. Geographical
and ecological factors also influence the location of certain industries, e.g.
industries with high material index tend to be located near the raw material
sources. Climate and weather conditions affect the location of certain
industries like the cotton textile industry. Topographical factors may affect
the demand pattern,
e.g. in hilly areas with a difficult terrain, jeeps may be in greater demand
than cars.
Ecological
factors have recently assumed greater importance. The depletion of natural
resources, environmental pollution and the disturbance of the ecological
balance has caused great concern. Government policies aimed at the preservation
of environmental purity and ecological balance, conservation of
non-replenishable resources etc. have resulted in additional responsibilities
and problems for business, and some of these have the effect of increasing the
cost of production and marketing.
6.
Physical
facilities and technological environment: Business prospects depend on the availability of
certain physical facilities. The sale of television sets e.g. is limited by the
extent of coverage of telecasting. Similarly, the demand for refrigerators and
other electrical appliances is affected by the extent of electrification and
the reliability of power supply.
Technological
factors sometimes pose problems. A firm which is unable to cope with the
technological changes may not survive. Further, the different technological
environment of different markets or countries may call for product
modifications, e.g. many appliances and instruments in the U.S.A. are designed
for 110 volts
but this needs to be converted into 240 volts in countries
which
have that power system.
7. International
environment: The
international environment is very important from the point of view of
certain categories of business. It is particularly important for industries
directly depending on exports or imports. E.g. a recession in foreign markets
or the adoption of protectionist policies may help the export-oriented
industries. Similarly, liberalization of imports may help some industries which
use imported items, but may adversely affect import-competing industries.
Similarly,
international bodies like WTO, IMF, WHO, ILO etc. have had a major impact on
influencing the policies and trade of many countries, especially India.
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