Marketing Environment

According to Philip Kotler, “Marketing environment refers to external factors and forces that affect a company’s ability to develop and maintain successful transaction and relationship with its target customers”

Purpose of marketing environment analysis:-

(a) To know where the environment is leading, to observe & size up the relevant events & trends in the environment.

(b) A strategic response to the environment is possible only with proper environmental analysis.

(d) To help secure the right fit between the environment & the business unit which is the crux of marketing.

The marketing environment may be broadly divided into two categories

1)Micro-environment.

2)Macro-environment.

1)Micro-environment- It involves suppliers, customers, intermediaries, competitors, and the general public, the business firm has direct interaction with these forces and is greatly influenced by these in its decision-making. It also attempts to exercise its influence to these forces through its marketing decisions in the area of product, pricing, promotion, place, etc. while dealing with the micro environment forces, the business firm must take care of its social, responsibilities towards customers, suppliers, and society.

2)Macro Environment- It consists of demographic, economic, political-legal, socio-cultural, physical and technological forces which influence marketing policies and operations. These are all uncontrollable as far as the business is concerned. They influence the business both individually and collectively and sometimes, it is very difficult to separately evaluate the impact of each macro environmental force.

The marketing environment consists of the following factors:-

(1) Demographic: Demographic is a major element to be studied in environmental analysis. Several factors relating to population, such as size, growth rate, age distribution, religious composition, need to be studied. Aspects such as the composition of the workforce, household patterns, regional characteristics, population shifts, etc. also need to be studied as they are a part of the demographic environment.

(2) Socio-cultural Environment: Socio-cultural the environment is another important component of the environment. Culture, traditions, beliefs, values & lifestyles of the people in a given society constitute the socio-cultural environment.

Culture : Culture is the combined result of factors like religion, language, education & upbringing. Meaningful, information on the consumption habits, lifestyles & buying behavior can be obtained through a survey of socio-cultural environment. Cultural shifts carry with them marketing opportunities as well as threats.

Social Class: Social class is one important concept in the socio-cultural environment. A social class is determined by income, occupation, location, of residence, etc. Each class has its own standards with respect to lifestyle, behaviors, etc., they are known as class values or class norms. These values have a strong bearing on the consumption pattern & buying behavior.

Economic Environment: The factors to be considered under economic environment are:-

(a) General Economic conditions

(b) Economic conditions of different segments of the population, their disposable income, purchasing power, etc.

(d) Income, prices & consumption expenditure

(e) Credit availability & interest rates

(f) Inflation rate

(g) Foreign exchange reserves

(h) Exchange rates

(i) Tax rates

(j) The behavior of the capital market

Political Environment: Economic environment is a by- product of the political environment, since economic & industrial policies followed by a nation greatly, depends on its political environment. The political environment has several aspects, industrial growth depends to a great extent on the political environment. Legislation regulating business is also a product of the political configuration. Apart from this political stability, the form of govt. elements like social & religious organizations, media & pressure groups & lobbies of various kinds also form the part of the political environment

Natural Environment :

(1) Natural Resources: Business firms depend on natural resources. The raw material is one major part of these resources & firms are concerned with their availability, they need to know whether there will be a shortage in any of the critical raw materials, they also need to know the trends governing their cost. Besides raw materials, they are also concerned about energy, its availability as well as cost.

(2) Ecology: Issues like environmental pollution, protection of wildlife & wealth are the factors concerned with ecology & govt. is becoming active bargainer in environmental issues.

(3) Climate: Firms with products whose demand depends on climate & firms depending on climate-dependent raw materials will be particularly concerned with this factor. These firms have to study the climate in-depth & decide their production location & marketing territories respectively.

Technology Environment: For a firm technology affects not only its final products but also it's raw material processes & operations as well as its customer segments e.g. IT Industry, Telecom industry.

(a) Options Available in Technology: A firm has to assess the relative merits & costs effectiveness of alternate technologies. It has to analyze technological changes taking place in the industry.

(b) Govt’s Approach in Respect of Technology: Regulations by the govt. in matters relating to technology restrict the freedom of operation of the business firm. There may be areas where the technology may support the use of modern technology or they may ban technologies that are potentially unsafe.

(c) Technology Selection: Firms have to scan the technology environment & select technologies that will be appropriate for the firm & the given product – market situation. They have to forecast technological trends, assess current & emergency techniques.