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.