What is Marketing Environment?
The marketing environment is an entire set of events, circumstances, and objects that have an impact on the marketing practices of an organisation. There are several environmental factors that have a direct impact on the organisation’s marketing operations and decision-making ability. For instance, A car tyre manufacturer’s marketing environment can consist of external factors such as import-export laws, tax systems, technological changes, etc., and the internal environment such as competitors, marketing intermediaries, suppliers, the company itself, etc.
According to Philip Kotler, “A company’s Marketing environment consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers.”
Generally, marketers attempt to predict future changes by analysing the marketing environment. These changes could present both challenges and opportunities for the firm. With the help of these changes, marketers keep changing their strategies and plans. Besides, the marketing team of an organisation has to stay informed about the marketing activities of the competitors as it is essential for the long-term success of the firm.
Features of Marketing Environment
The following are the features of the marketing environment:
1. Complexity: The marketing environment is composed of several factors that are interrelated and interdependent. This makes the environment complex to understand. Even a small change in one aspect has an immediate impact on the other. The interdependence between these components varies depending on the situation. Therefore, it becomes extremely difficult to predict the environment.
2. Dynamic: The marketing environment has a dynamic and ever-changing nature. Environmental factors influence the operation of a company, as a result, the organisation’s form and character continue to keep changing.
3. Relevance: The marketing environment of a business has an impact on its marketing decisions. Thus, every element of the marketing environment must be taken into account by a marketer when making an ideal choice. Simply put, a marketing programme cannot be developed or successfully implemented without considering the marketing environment.
4. Uncertainty: The nature of market factors is uncertain, so they can not be predicted accurately. A good marketer is continually working to predict various factors and develop effective strategies over time. But since they change fast, certain factors are difficult to predict in advance. This is also because of the fact, that technology and fashion have changed more often recently than ever before.
5. Storehouse of Opportunity: Marketing not only offers a threat to the company, but it also provides new opportunities. Discovering these opportunities is challenging. Only a skilled and effective marketer can appropriately spot these opportunities. The marketing manager should continuously watch and study the environment to uncover these opportunities. Successful businesses take opportunities and get rid of threats.
6. Sensitive to a Variety of Factors: The marketing environment is highly sensitive to a variety of factors. These factors may include the mindset or preferences of the consumer, the rising market demand for goods or services, changing marketing trends, etc. This atmosphere is highly sensitive to these aspects in the marketing field. The success of marketing primarily depends on the satisfaction of customers. For this, marketers need to know how consumer needs, tastes, and preferences change constantly. As a result, marketing organisations must be highly sensitive to consumer needs, desires, and demands.
Types of Marketing Environment
The marketing environment can be divided into two categories: (I) Microenvironment and (II) Macroenvironment
The microenvironment is the environment in which the company survives or the set of factors that surround the company. These factors are responsible for managing an organisation’s capacity to create products and services and fulfil market needs. It also includes those activities that have a direct impact on the growth of the business. Microenvironment of a business includes:
The marketing manager usually considers various departments while designing marketing plans, including accounting, operations, purchasing, research and development, and finance. The internal environment is created by the relationships between these departments. Marketing managers must collaborate closely with them in order to make decisions based on broader strategies and plans. The production, financial, legal, and human resources teams, along with the marketing department are in the role of identifying customer needs and delivering customer value.
The suppliers play a significant role in an organisation’s overall network for delivering value to its customers. Suppliers provide a business with raw materials, services, or products. The cost and condition of the products that consumers purchase can be influenced by the prices, services that are available, and product quality that a supplier offers. Suppliers are those parts of an organisation that have an impact on its marketing potential and level of competitiveness. According to Michael Porter, the relationship between an organisation and its suppliers is strong and stable. This relationship represents the interdependence of the organisation and the supplier upon each other and their respective industrial requirements.
Companies usually consider their suppliers as partners and may demand that they make a commitment to supply customers with high-quality products. The organisation can decide which supplier can provide the product quality and prices your consumers have been looking for by researching for a range of prospective suppliers.
3. Market Intermediaries:
The marketing intermediaries play a significant role in the network used by an organisation to provide value to customers. Market intermediaries are individuals or businesses that help an organisation deliver products and services to its target market. They are individuals or firms who help the business in the promotion, sales, and distribution of goods to end buyers. It is usually a basic requirement of all organisations. Market intermediates include distribution organisations, financial institutions, and middlemen such as wholesalers, retailers, agents, etc.
Examples include middlemen (agents or merchants) who assist the business in finding customers, physical distribution businesses like warehouses or transportation businesses that assist the business in stocking and transporting goods from their point of origin to their destination, and marketing service businesses like market research and advertising firms.
Customers have a significant impact on a business’ marketing environment. Businesses may gather information regarding consumer attitudes and behaviour in order to depict their future business choices. An organisation can keep track of changes in consumer preference and behaviour and modify its product or service offerings. For instance, a business might change its methods for product development if it gets bad feedback about a product.
An organisation’s main priority is its customers. They can be divided into five categories:
- Ultimate Customers: These can be individuals or groups of people who use or consume the company’s goods and services.
- Industrial Customers: These clients are primarily small and large businesses that make purchases of goods and services in order to produce other useful products. Their primary aim is to achieve organisational goals and make profit.
- Resellers: These include distributors, wholesalers, and retailers. They purchase goods and services from one location and resell them for profit at various locations.
- Government and other Non-profit Organisations: They purchase goods and services, mainly for the consumption of others. These people may be end users or final customers.
- International Customers: These are consumers across national borders who purchase goods and services for further business or their own consumption. They can be individuals, businesses, resellers, or even governments.
These are the businesses that manufacture and sell identical goods and services in the same market. Competitors are part of a company’s microenvironment since they have a direct impact on day-to-day business operations. The competition is primarily based on pricing and product variation. A business might change its strategies to help it outperform its competition after assessing its position in the market. Since competitors sometimes share customers, it is useful to keep an eye on how they are doing in order to identify ways in which the company can work for improvement. Hence, marketing managers must also carefully consider and note various basic aspects of the competitor’s environment. The adoption of a marketing system allows for better results and self-reliance within the firm. It’s crucial to recognise and carefully evaluate existing competitors to become competent.
The general public is a crucial factor in the microenvironment. The satisfaction of the general public should be an organisation’s top priority, as competitors and customers are all a part of the general public. It includes any person that interacts with the company. Further, potential investors and others who recommend prospective customers to the company might also be considered as a part of the public. One can expand their target market and raise brand awareness by having a better understanding of the public as a possible customer. The policies and activities of an organisation have a significant influence on other segments of the general public. Public relations is, therefore essential for an organisation’s long-term survival and expansion.
Public refers to “any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives”.
The factors that do not directly affect an organisation’s environment together constitute the macroenvironment. An organisation has no influence over these external factors. Following are some examples of macroenvironmental factors that indirectly affect marketing decisions of business but have no effect on marketing strategies:
1. Political Environment:
Political environment is described as governmental actions that have an impact on the functioning of an organisation. This environment is directly related to the economic situations surrounding the organisation and includes acts, policies, laws, rules, and regulations related to business and economy. The political environments of different countries are different.
For instance, the majority of countries with socialist systems have a centrally planned economy. In addition to financial and technical problems, there are other regulations that govern business activities. The business laws include requirements and guidelines for different products, their packaging, and marketing campaigns.
India has a stable political system with a democratic government that actively participates in planning, regulating, and promoting economic activities. Hence, businessmen are well informed of the political environment in which their organisations work. All business decisions made by the government depend on political considerations and philosophies followed by political parties governing at the state and central levels. There are many different business policies, including industrial licensing for selecting a location, method of production and process, import licensing for buying raw materials and machinery, loan financing, pricing policies, development and expansion strategies, etc. Thus Indian government has a significant restraint effect on several aspects of the business.
2. Economic Environment
The terms ‘economic environment’ and ‘wealth distribution system’ relate to the economic production process and system. The economic environment also has an impact on an organisation’s marketing activities. The size of the market and the ability of consumers to spend also play a vital role in the economic environment. Additional economic factors include interest rates, inflation, disposable income, society savings, etc. The purchasing power of customers is influenced by all of these environmental factors. Besides, economic development causes changes in customers’ tastes and preferences.
For instance, people now prefer investing in the stock market over opening a bank savings account due to the decline in bank interest rates.
Marketing managers should thoroughly examine the following factors to deal with the economic environment.
- Gross National Product,
- Per Capita Income,
- Balance of Payments situation,
- The phases of the industry lifecycle and the present stage of the business. The four stages of the industry lifecycle are recovery, boom, recession, and depression,
- Pricing trends of products and services; i.e., inflation or deflation,
- Interest rates in banks and fiscal policies, as these directly influence the business investment in banks and indirectly the demands of customers, and
- Fluctuations in exchange rates, where in the case of rising exports there is a fall in the exchange rate; on the other hand, with imports becoming more expensive leads to cost-push inflation.
3. Social and Cultural Environment:
The socio-cultural environment generally refers to societal institutions and influences that have an impact on business or its marketing activity. These socio-cultural elements include stratification, social preferences, practices, and ethical standards, as well as conflict and cohesiveness.
All of these factors influence the type of interactions between society and the organisation. The ethics, beliefs, and standards of society govern the relationship between the organisation and individuals. It is difficult for the marketer to modify these factors. Marketers need to be educated and skilled enough to determine the effect of these factors on their company.
Following is the list of some factors and influences:
- Social themes which include consumerism, corruption, role of business in society, utilisation of mass media, and environmental pollution.
- Social values and attitudes, like social norm ideologies, expectations of society from business, practice and rituals, materialism, and changing lifestyle trends.
- Changing family arrangement, family values attitudes towards the family and within the family.
- Role of children and grown-ups in the household and society as well as the part of women in society.
- Level of education, rights, and work principles, and
- Members of the society.
In addition to the presence of basic social principles and rigid cultural norms, the cultures also contain some flexible cultural values that are open to change, such as clothing, hairstyles, etc. A significant portion of society is unable to accept these developments. Age groups and social classes differ in their perspectives on and attitudes toward socio-cultural changes. The religion of various cultures additionally influences the marketing strategies adopted by corporate enterprises.
4. Technological Environment:
Technological environment is a macroenvironment that consists of elements including tools, supplies, and knowledge used to produce a variety of goods and services. These factors have a huge impact on the functioning of business organisation. The technological environment refers to the development in technologies that are used to create innovative products and services that improve business processes and have an impact on the company.
Recent technical advancements include smartphones, laptops, metros, cars, and production methods, among others. These advancements are also focused on providing a variety of goods and services based on tried-and-tested manufacturing processes. It is not only responsible for economic growth but also influences the production policies of various organisations. Different marketers alter their products and production methods in accordance with the technological environment to remain competitive in the market. For instance, technical advancements made it possible for typewriters to be converted into keyboards and computers.
5. Demographic Environment:
A key component of the macroenvironment is the demographic environment. Marketers focus on population because individuals come together to form markets. The population growth rate, population size, ethnic diversity, age distribution, household structure, level of education, regional features, and movements are the factors that affect business organisations.
The corporate planners must do a demographic analysis and identify all significant facets of the population that have an impact on the business. If the management pays close attention, it will be able to detect any potential changes in the demographic factor and search for markets and product lines that are more attractive.
6. Natural Environment:
The natural environment is an aggregate of natural resources that can be used by businesses. It covers everything from a company’s current location to weather factors that have an impact on production and sales. Natural environment is unpredictable in nature. The business’s entire functioning is impacted by natural causes. It is crucial for marketing managers to recognise these factors and modify their business practices. The ecological balance is impacted by the irresponsible and widespread use of natural resources, which eventually has an impact on corporate decisions and strategies.
For instance, petroleum is imported from Gulf nations because India’s petroleum reserves are not sufficient. In such circumstances, businesses that use petroleum products adopt crucial production strategies to produce their products.