MARKETING ENVIRONMENT Samir K Mahajan PURPOSE OF MARKETING ENVIRONMENT ANALYSIS o To observe and know where the environment is heading (such as relevant events and their trends etc) , and to project where each factor of the environment will be at a future point of time. o To discern which events and trends are favourable from the standpoint of the firm, and which are unfavourable; to figure out the opportunities ( and shortlist those that have favourable impact on the business), and trace out the threats hidden in the environmental events and trends. o To help secure the right fit between the environment and the business unit, which is the crux of marketing; to help the business unit respond to environment o To facilitate formulation of a marketing strategy in the right way— in line with the trends in the environment and the opportunities emerging therein. MARKET ENVIRONMENT: MEANING The market environment refers to factors and forces that affect a firm’s ability to build and maintain successful relationships with customers. Two levels of marketing environment are Micro environment Macro environment MICRO ENVIRONMENT The micro environment refers to the small forces that are close to the company and affect its ability to serve its customers. It includes the company itself, its suppliers, marketing intermediaries, customer markets and public. Micro- environment may be internal and external. Internal Micro Environment : Internal micro environment or company aspect of micro-environment refers to the internal environment of the company. This includes all departments, such as management, finance, research and development, purchasing, operations and accounting, personnel. Each of these departments has an impact on marketing decisions. For example, research and development have input as to the features a product can perform and accounting approves the financial side of marketing plans and budget in customer dissatisfaction. External Micro-environment/ Meso-Environment : External Micro-environment or also called meso-environment refer to the industry in which a company operates and the industry’s market(s). Meso-environment includes: o Marketing Intermediaries o Customers o Suppliers o Competitors o Public MICRO ENVIRONMENT contd. o Marketing Intermediaries:Marketing intermediaries refers to resellers, physical distribution firms, marketing services agencies, and financial intermediaries. These are the people that help the company promote, sell, and distribute its products to final buyers. Resellers are those that hold and sell the company’s product. They match the distribution to the customers and include places. Physical distribution firms are places such as warehouses that store and transport the company’s product from its origin to its destination. Marketing services agencies are companies that offer services such as conducting marketing research, advertising, and consulting. Financial intermediaries are institutions such as banks, credit companies and insurance companies. o Customers: There are different types of customer markets including consumer markets, business markets, government markets, international markets, and reseller markets. The consumer market is made up of individuals who buy goods and services for their own personal use or use in their household. Business markets include those that buy goods and services for use in producing their own products to sell. This is different from the reseller market which includes businesses that purchase goods to resell as is for a profit. These are the same companies mentioned as market intermediaries. The government market consists of government agencies that buy goods to produce public services or transfer goods to others who need them. International markets include buyers in other countries. o Suppliers: Suppliers are the people who provide necessary resources (raw materials, intermediate goods and services) needed to produce goods & services. Policies of the suppliers have a significant influence over the marketing manager’s decisions. A company must build cordial & long-term relationship with suppliers. E.g. A company that provides microprocessors to a major computer business is an example of a supplier. MICRO ENVIRONMENT contd. o Competitors : Competitors include rival companies with similar offerings for goods and services and substitutes that a buyer might consider. A prudent marketing manager ha 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 four types of competition: Brand Competition i.e. competition between various companies producing similar products. e.g. competition between LG and Samsung companies Product Form Competition: i.e. competition between companies manufacturing products, which are similar offerings and substitutes to each other e.g. competition between coke and Pepsi (similar offerings) , cold rinks and ice-cream ( substitutes) Desire Competition: i.e. Competition with other companies producing diverse products . e.g: 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. Nature of the market may be as follows: Perfect Market Monopolistic Market Oligopoly Monopoly Duopoly MICRO ENVIRONMENT contd. o 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 increase 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 group, 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. Eg: 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. MACRO-ENVIRONMENT Macro-environment refers to the larger/ broad societal forces that affect the microenvironment and shape the activities of every business and non-profit marketer. Macro-environment consist of external forces such as Socio- cultural forces, demographic factors, economic factors, scientific and technical knowledge, and political and legal factors at work in the marketing world. These are the forces over which marketers have much less control. are the forces that make up a company’s external marketing environment. These factors—and changes in them—present both threats and opportunities that require shifts in marketing plans. To spot trends and other signals , marketers must continually monitor the environment in which their companies operate. Macro-environment can be divided into o physical environment o socio-cultural forces o demographic factors o economic factors o scientific and technical knowledge, o political and legal factors MACRO-ENVIRONMENT contd. Physical Environment: Natural resources and other aspect of the natural world influence marketing activities. The analysis of the mega environment must cover aspects like extent of endowment of natural resources in the country , ecology , climate, etc. These constitute the natural environment. o Natural resources: The availability of natural resources may have a direct and far-reaching impact on marketing activities of a firm in a geographic region. Areas rich in petroleum, for example, may concentrate on the production and marketing of petro products. The extent to which a country/region is endowed with these resources has an impact on the functioning of the firms. Raw materials and energy are major part of these resources, and firms are concerned with their availability as well as their cost. o Climate : Climate also greatly influences the timing of marketing activities. Production as well as sale of output of firms greatly depends on climate. These firms have to study the climate in-depth and decide their production locations and marketing territories appropriately. It is not difficult to understand why umbrella sales are greater in rainy Meghalaya than in desert-like Rajasthan or why more winter clothing is sold in Himachal