DU SOL B.Com 3rd Year Marketing Management Notes Chapter 2 Marketing Environment
What do you mean by marketing environment ? Describe the micro-environment factors and macro-environment factors of marketing.
How do environmental factors affect marketing policies and strategies ?
Meaning Of Marketing Environment
Marketing activities of a business firm are affected by a large number of environmental factors that surrounds the company. These factors or forces influence the decision making capability of the enterprise. The factors or forces are collectively called marketing environment. It comprises alt-those forces which have an impact on market and marketing efforts of the enterprise. A marketing system, of a company’ thus, must have to operate within the framework of the environmental forces.
For example, the relevant environment for a car tyre manufacturer may be the car manufacturers and – buyers, the tyre manufacturing technology, the tax structure, import-export regulations the distributors, dealers; competitors, etc. In addition to these, the company has to consider its Own manufacturing capabilities in terms of production capacity, technology used, finance, sales force etc.
The environment within which a company works is always changing and is uncertain. Its changing arid uncertain character presents both a threat and opportunity.
Some of these marketing environmental factors may be controllable or uncontrollable.
The environment may be grouped into two parts :
(a) Micro-environment; and (b) Macro-environment.
Micro Environment –
Micro-environment refers to the company’s immediate environment i. e., those environmental factors that are in its proximity. These factors influence the company’s non-capability to produce and serve the market..
These are also the groups of people who affects the company’s prospects directly, These factors are :
(a) Organisation’s internal environment, (b) Suppliers, (c) Market intermediaries, (d) Customers, (e) Competitors and (f) Public.
1, Organisational Internal Environment. Organisation’s own internal environmental factors such as its non-financial, production and human resource capabilities influence its marketing decisions to a great extent. Marketing sales force such as brand managers, marketing reserchers, advertising and sales promotion specialists, sales managers and sales representatives, combinedly prepare marketing plan for all the existing product and also for new product.
The marketing managers in consultation ‘ with the top management and keeping in view the company’s internal environment e.g. its own capacity in terms of production, finance, research, purchase; sales, development should make decisions regarding their market proposals. The marketing managers should get these plans approved from top management before they are implemented. The marketing managers, thus, are ‘ required to see through the potential conflicts within the company and between marketing and other functions. In order to strike a balance, they are required to negotiate between company’s’lntemal groups different functional managers to chalk out an action plan with a view to implement the marketing plans.
2. Suppliers. For production of goods or service, a company requires a variety of inputs. The individuals or firms who supply these imputs are known as suppliers. They combined together, provide resources needed by the company. For this purpose, the company should go for developing specifications, searching the potential suppliers, identifying and analysing the suppliers and thereafter choosing the suppliers who can supply the best mix of quality, quantity, reliability, credit facility, warranties and low price. This will necessarily has impact on company’s production operations and quality and cost of output. These factors can gain a competitive advantage in the market. To manage the supply position successfully and scientifically the price trends need a constant check, store shortage should be carefully monitored to avoid any blockade in production.
3. Market Intermediaries. Normally, every producer has to appoint a number of Intermediaries in assisting him in promoting, selling and distributing the goods and services to ultimate consumers. These intermediaries may be individuals or business firms. These intermediaries are middlemen (wholesalers, retailers, agents etc.), distributing-agencies, market service agencies and financial institutions. In appointing any kind of intermediary, the company should consider the following points :
- Midd’ men may overcome the discrepencies, if any in quantities, place, time, assortment and possession that would other exist in a given condition.
- It is better to appoint an established channel of distribution rather than creating one and go for examination.
- However, it is not easy to select and work with middlemen. The marketing manager must ensure an effective management and satisfaction of marketing channels to enlist their long lasting support on better terms. ,
- The marketing manager should select the most cost-effective mode of transportation andbalancing the considerations of cost, delivery, speed and safety. ,
- The marketing management should constantly review the – performance of different middlemen and other assisting people periodically. An intermediary may be replaced, if it has not been doing at the expected level.
- The marketing management should also manage the funds effectively and if it feels any shortage, it should weigh different sources in the light of credit costs and then develop its plans accordingly.
4. Customers. The customers of a company may be of five kinds –
- Ultimate Consumers. They may be individuals and householders.
- Industrial Consumers. Industrial consumers are organisations which buy goods and services for producing another goods and services for the purpose of either earning profits or fulfilling other objectives.
- Resells. These arc intermediaries who purchase goods and goods with a view to resell them at a profit. They may be wholesalers, retailors, distributors etc.
- Government and other Non-profit Customers. These customers purchase goods and services in order to produce public utility services. They transfer these goods and services to those for whom they are produced, for their consumption in most of the cases.
- International Customers. These are individuals and organisations of other countries who buy goods and services either for consumption or for industrial use. Such buyers may be consumers, “’roducers, resellers and governments.
It must not- be forgotten that the satisfaction of customer and consumer is the main motte of every business firm.
The population also contains the prospective consumers of company’s products and the company has to identify them which is not easy. Goodwill built up by the company sometimes influence the consumers to become the customer of the company.
5. Competitors. Competitors are those who sell the goods and service of the same and similar description, in the same market. Apart from competition on price factor, there are other forms of competition like product differentiation. If is therefore, necessary to build an effecient system of marketing. This will arouse confidence and with better results. For this. purpose, first of aH, competitors are to be identified and closely monitered. But, this is not all. The company, in order to come out successfully, has to adopt means to outmaneuver the competitors and then, capturing the consumers’ loyalty. Such loyalty has also to be maintained.
The competitive environment consists of certain. baric things which every marketing manager must take note of. Philip Kotler is of the opinion that, “the best way for a company to. grasp the full range of its competition is to take the viewpoint of a buyer. What does a buyer think about that which eventually leads to purchasing something”’ Koltcr has also explained for basic type of competition (Desire. Generic, Form and Brand Competition). He also pointed out four-basic dimensions which a company must have in mind. These may be called the four C’s of marketing positioning. The company must consider the nature of. customers, channels, competitors and its own characteristics.
6. Public. It is the duty of the company to satisfy the people at large alongwith its competitors and the consumers. It is necessary for future stay and growth. The actions of the company do influence the others groups forming the general public for the company. A public is defined as, “any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives.” Public relations is certainly a broad marketing operation which must be fuily taken care of.
The company expects some reactions from public as well. Goodwill, favourable reactions, donation of time and money and hidden potential future buyers are few of the responses which a company expects from the public. To build such a goodwill and to seek favourable response, it is very necessary to satisfy the public as well.
Macro environment refer to those factors which are not concerned to the immediate environment. These factors are external to the company and are quite uncontrollable. These factors do not affect the marketing ability of the concern directly but it indirectly they influence marketing decisions of the v company. As against this, micro-environmental factors directly affect the company marketing activities and these forces are internal and controllable to some extent.
The following are the macro environmental factors that affect the v company’s marketing decisions :
- Demographic Forces.
- Economic Forces.
- Physical Forces.
- Technological Forces.
- Political and Legal Forces
- Social and Cultural Forces
1. Demographic Forces. Every marketer is interested in population data because people make the market. For marketing decisions, various factors like size of the World’s population, its geographical distribution, density mobility trends, age-distribution, birth, death and marriage rates, and racial, ethnic and religious structure etc. are of marketers interest. These factors have a larger impact on marketing decisions of a company. Demographic data helps marketers in preparing their sectoral plans. Theory on market segmentation is totally based on demographic data.
It is true that a marketer is capable of developing substantial control over a target market (a group of consumers), but he does not have any control over the population characteristics e.g. age, income, maintal status, occupation, education etc. The demographic structure is seldom state in the long run. Changes take place. These changes influence the behaviour of consumers which in turn will have a direct impact on the marketing activities of the firm. The firm has to alter its existing marketing policies, practices and strategies. In short, marketing firm should have a continuous watch on the changes in population structure – qualitatively and quantitatively. To avoid negative * • consequences brought on by active consumer groups, a marketer must communicate with consumers, anticipate problems, respond to complaints, and make sure that the firm is operating properly.
2, Economic Forces. The economic forces which affect the marketing environment are as follows :
- Trends hi gross national product and real income growth.
- Pattern of income distribution.
- Variation in geographical income distribution and its trends.
- Expenditure pattern and trends ‘
- Trends in consumer savings and forms of their holdings i.e., either
in the form of bank account, investment in bonds and securities, purchase of real estate, insurance policies or any other asset.
- Borrowing pattern trends and governmental and legal restrictions
- Major economic variables—cost of living, interest rates, repayment terms, disposable income etc.
These factors determine the purchasing power of the consumers along „ with their savings and credit availability. These forces have impact on the marketing plans. Before preparing an effective marketing plan, the marketer must study and having knowledge of these economic forces although some, forces are more vulnerable than others. Anticipation of future economic conditions will enable the firm to devise appropriate marketing strategies.
Marketing organisations are susceptible to economic conditions, both directly and the medium of market place (consumers). For instance, the cost of all inputs positively respond to upward swing of economic conditions. This will affect the cost of output and consequently affect the sales. Effect of economic conditions on consumers will also influence the marketing through change in their behaviour. This is an indirect influence.
3. Physical Forces. Components of physical forces are earth’s natural renewal and non-renewal resources. Natural renewal forces are forest, food products from agriculture or sea etc. Non-renewable natural resources are finite such as oil, coal, minerals etc. Both these components quite often changes the level and type of resource avalable to a marketer for his production. The governments of most of the countries are trying to conserve and recycling their natural resources through legislation and vigorous compaign.
It is because the world is about to face a crisis if the current rate of consumption is not checked. Ecological balance may also be disturbed. All_ “these will have an impact on marketing decisions. For example India does not have enough petroleum reserves and imports petrol and other products. Recently the gulf war has drastically affected the supply of petrol, diesel and other petroleum products in our country. This had a lot of implications for the companies consuming petro-products.
The marketing management of a concern should take various steps to protect the environment. These steps may be –
- Check into the environmental consequences of the product, its – packaging and above all its production processes.
- Raise prices to cover environmental cost. (It will create a problem in selling the product).
- Recognise the validity of respecting the environment.
- Introduce the environmental criteria while deciding on production ingredients, design and packing.
- Direct its Research and Development living to develop ecologically ‘ superior products, so as to make it a major selling point of the product.
4. Technological. Factors. Technological developments are uncontrollable environmental factors and important for marketers. They affect the market plans in two ways – Firstly, they are quite unpredictable, and secondly, the adoption of new technology is prevented by many internal and external constraints. It is also true that technical progress creates new avenues for progress and at the same it poses threat to individual companies. As an opportunity, technology is a source of new and improved product. It is an easy way to gain a differential gain over competitors with a technologically superior product. As a threat, technological development by competitors may result in loss of markets For example, technology development has contributed shifts from black and white T.V. sets to colour T.V. sets and now the three dimensional T.V. sets,
The technology is a major force in business and industry. Its consequent stresses on marketing cannot be denied. A new development may bring a new v industry into existence or makes an existing profitable product quite obsolete. It reduces the life cycle of an existing product.
Technological development poses another problem of pollution. There were, instances where factories were compelled to close down their organisations on account of pollution problems like sewage, smoke etc. Obviously, firms have to make more capital expenditure on installing pollution control devices which ultimately raise the cost of production resulting in loss of markets.
Pollution problem is an uncontrollable force for the individual business firm but at the same time, it creates three kinds of opportunities: First, it opens new markets for improved methods of waste treatment and methods for- recycling. Second, a marketing challenge to I device alternative ways of developing inexpensive packaging methods and materials. Third, an opportunity to find productive and socially beneficial uses for industrial, animal and human wastes. The technologies viz. micro-electronics, computers, robotes, telecommunications, are all destined to s affect future of many marketing organisations.
The technological changes result in changes in consumption pattern and marketing systems. A market may find out new challenges and opportunities by appropriating more budgets for Research and Development activities.
5. Political and Legal Forces. Developments in political and legal field greatly affect the marketing decisions. Sound marketing decision cannot be taken without taking into account, the government agencies, political party in power and in opposition and their ideologies, pressure groups, and laws of the land. These variables create tremendous pressures on marketing management. Laws affect production capacity, capability, product designs, pricing and promotion Government in almost all the nations intervene in marketing process irrespective of their political ideologies: The Governments v in every country have enacted laws (a) to prevent monopoly and restrictive trade practices and promote competition, (bj to protect consumers, and (c) to protect the society.
The Government of India has enacted a number of laws, rules, regulations, policy decisions, and legislative procedures which have varied impact on marketing policies and strategies of business and industrial enterprises. For example MRTP Act restricts monopolistic and restrictive trade practices in marketing. Similarly, Consumer Protection Act and other laws protecting the consumers and the society from the anti-people or anti consumer policy of the businessman affect the marketing activities of an enterprise. (See last chapter on Consumer Protection in India for different laws protecting consumers).
The marketing management must be vigilant to legal environment to avoid constraints arising out of thfc public policy implementation.
6. Social and Cultural Forces. Social responsibility concept has crept into marketing literature as an alternative to the marketing concept. The social forces attempt to make the marketing socially responsible. It means the business firms should take a lead in eliminating socially harmful products (e.g. cigaretts or wine) and produce only what is beneficial to the society. There are innumericai number of pressure groups in the society (like activist consumers, social workers, mass media, professional groups, politicians’ government, consuming public, social organisadons etc.) who impose restrictions on the marketing process.
There are some core-cultural values which are found in our society deep rooted and stable and hence change very little. There are also secondary cultural values which are susceptible to fast changes. Some of them like hair styles, clothing etc, just fade. Even in a given culture, the entire population does not adopt the changes. There are different degrees with which people adopt them. Religion is also an important element of culture which has implication on marketing. For example, Hindus worship the cow and do not eat beef. Products made out of beef meat do not have market among Hindus.
In other words, it puts a restriction on demand of beef products. Thus, the culture of the society influences the consumption or demand pattern to a certain extent.
Thus, the study of a number of micro and macro environmental factors (most of them are external to the company and are uncontrol lable reveal that the marketing system of a company is to operate within the framework of these ever-changing environmental forces. These forces after both opportunities and threats. The marketing management must have a close vigil on these changes environmental factors and improve the product accordingly if it wants to survive but it responds to these factors according to its own. ^ capabilities e.g. finance, sales force, and technical facilities,
Marketing environment can be classified into controllable and uncontrollableTdrces. What are these forces ? Explain.
Controllable And Uncontrollable Forces
Marketing environment can also be classified into controllable and uncontrollable forces. Controllable forces are those which are well within ‘ control of the company. There are marketing policies and strategies uncontrollable forces are external forces which influence the marketing policies and strategies of the company. These, forces are independent over’
which company has no control. We shall discuss these two forces in the following lines :
1. Controllable Forces. Controlling forces consist of marketing policies and strategies framed by the company. Marketing policies are framed by the firm depending upon its marketing philosophy. Marketing policies are framed by the top management integrating all business functions (production, finance, personnel etc. and taking into account the line of business, overall objectives of the business and its own culture.
Marketing strategies are developed by middle level management considering the following factors selection of target market, marketing objectives, marketing organisation, marketing mix elements and marketing control.
Selection of target market involves two considerations – whether, the production is intended for mass marketing or for a selected market only. The marketer-should also be familiar with the problems posed by the changing qualitative factors of target market viz. children grown-ups, male-female, affluent middle class etc. All these factors create impact on all controllable marketing factors and a firm must be adaptive to such factors.
Marketing objectives should aim at creating a differential advantage over competing products. Similarly, marketing organisation should be designed in such a way that objectives of the firm are met satisfactorily. Marketing mix elements viz. product, price, placement and promotion are the tools often used to harmonize the internal variables with that of external variable For instance, shampoos in sachet for one time use proves this point.
The controllable factors are well within the reach of the firm and comparably easy to adjust them to suit the changes. These factors are included in marketing mix. For example, if the price of the product appears to be an higher side, a decision to reduce them temporarily or for a long time may be taken considering all other relevant factors.
2. Uncontrollable Forces. Uncontrollable forces are those forces which are beyond control. These all are external factors and the firm has no control over them. These factors arc technological factors, demographic factors, economic forces, political and legal forces, social and cultural forces etc. They have great impact on the marketing efforts of the firm. Even a well conceived plan may fail if adversely influenced by the uncontrollable forces. Therefore, the external environment (uncontrollable factors) must be continuously, and closely monitored and its effects must be incorporated into marketing plans. This may call for preparing contingency plan.
The uncontrollable factors are not that vulnerable to easy adjustment. It is because that there are annum-able factors that press for changes m the marketing decisions. Secondly, the controllable variables (marketing mix elements) will have to be filtered through various uncontrollable environmental factors before they reach the consumers.
Thus, controllable and uncontrollable forces both affect the marketing decisions and the firm must understand these variables Weil and incorporate their impact in preparing marketing plans.
Write short notes on :
(A) Environmental Scanning and Analysis.
(B) Mapping the Marketing Environment
A. Environmental Scanning And Analysis
Future is unpredictable, but marketer can obtain appraisals of what is ‘ most probable ’. To monitor changes in the marketing environment effectively, marketers must engage in the scaning and analysis of the environment. Environment scanning is a process of collecting information about the forces in the marketing environment. Scanning involves observation, perusal of secondary source of information such as business and trade journals and magazines and government publications, reports and marketing research efforts.
Environmental Analysis, on the oilier hand, may be taken as the process of assessing and interpreting the information gathered under scanning, through analysis, a marketing manager attempts to define current environmental changes. Knowledge of current and predicted environmental change helps a marketing manager to assess the performance of current market efforts and develop marketing strategies for the future.
B. Mapping The Marketing Environment
Mapping is an attempt to make the marketing environment more understandable and for better guidance to marketing efforts. For this purpose, first of all, the whole marketing system in a consumer industry should be divided into six major elements. These elements are –
- Environment /. e. macro-environment.
- Marketing strategies of the company as well as of the competitors.
- Variables in marketing decisions.
- Channels in marketing.
- Sales and cost.
After these six divisions, each of the division may further be sub-divided in order to make the map clearer and more comprehensive. For example, macro-environment is sub-divided into company’s marketing strategy and competitors marketing strategy. Both can again be sub-divided into five elements – (i) Product characteristics, (ii) price, (iii) sales forces, (iv) physical distribution and service, (v) advertising and sales promotion product characteristics and sales promotion may be directly linked with – (i) industry sale, (ii) market share. Similarly, advertising and sales promotion may first be linked with consumers’ behaviour and later with: (i) company’s sales, (ii) company’s profit, (iii) company’s cost. To put it more candidly, we may say that—
1. The Environment here is macro environment. It directly affects company’s demand and supply. Precisely these forces are—(i) population growth, (ii) per capita income, (iii) attitude of customers towards company’s product and the company, (iv) availability of raw materials, (v) costs involved.
2. Company’s and competitors’ marketing strategies call for lucid, clearer, tactful and meaningful strategic plans and programmes.
3. The major variables in marketing decisions in consumers’ markets are – (i) Product characteristics, (ii) price, (iii) sales force, (iv) physical distribution and service, and above all, (v) the advertising and sales promotion policies and programmes.
4. The major channels in marketing the products of a consumer industry may be one which is most suitable in the given circumstances.
5. Consumers’ behaviour may be studied with reference to customers’ responses to the marketing efforts and strategies adopted , including that of distribution channels and the environments.
6. The cost and sales analysis of the total industry and company should be evaluated and strategies planned accordingly.