Supply Chain & Market Dynamics

• Marketing environment includes all internal and external factors that directly or indirectly influence an organization's marketing decisions.
• Philip Kotler defines a marketing environment as external factors and forces affecting a company’s ability to maintain relationships and transactions with target customers.
• A "Static environment" is a set of unchanging conditions, events, and surroundings, offering no new elements.
• A "Dynamic environment" is a rapidly changing business environment that requires managers to be flexible

Examples of Fast-Changing Environments

• Technological changes in the mobile and computer industry affect the speed and means of marketing.
• Changes in consumer taste and fashion require businesses to adapt their offerings.
• Evolving government policies impact business operations and marketing strategies.
• Uncertain political scenarios create instability and affect business planning.

Environmental Scanning

• Environmental scanning is a constant analysis of an organization's internal and external environment.
• It helps detect opportunities, threats, trends, and weaknesses that affect the business.
• Marketing research is essential before production and launching to understand various aspects of the market.

Nature of Target Customers

• This involves identifying customers' purchasing power, buying habits, and buying motives.

Market Trends

• This involves observing the position of a company's products and services in the market, to project if demand is likely to change.

Economic, Social, and Political Trends

• Scanning these trends affects production via monetary policy, social changes, anti-pollution, or energy conservation laws.

Technology Trends

• This includes the anticipation of technological changes and the popularity of new products.

Competition in the Market

• Analyzing existing/upcoming competitors and knowing their strengths/weaknesses is an important scanning activity.

Importance of Environmental Scanning

• Environmental scanning aids in the optimum use of material and financial resources, reducing waste.
• Scanning leads to identification of opportunities by spotting positive changes and trends
• Scanning helps firms identify early warning signals to prevent threats and weaknesses.
• Constant scanning aids in learning about competitor strategies to tackle competition.
• Sensitivity to the external environment helps a firm build its image by meeting customer requirements with new offerings

Business Environment

• This can be split into Internal and External environments
• Internal environment has factors controlled by the firm like product design and procurement.
• External environment the uncontrollable factors that greatly impact the firm

External Environment

• The external environment is further split into micro and macro environments.

Microenvironment

• Microenvironment includes Suppliers, Intermediaries, Customers, Competitors, and the General public.

Macro environment

• Macro environment includes Demographics, Economic forces, Political/Legal factors, Sociocultural factors, Technological factors, and Natural/Physical factors.

Micro-Environment

• Micro-environment includes internal and external factors acting in the immediate environment of a business enterprise.
• External factors include suppliers, marketing intermediaries, competitors, consumers and the general public

Suppliers

• Suppliers refers to business firms that provide raw components, and semi finished goods to be used in production
• Firms are largely dependent on suppliers as buyers of inputs or as producers

Suppliers' impact on firms' decision making

• Quality: Supplier components affect product quality positively or negatively.
• Timeliness: Accurate supply is crucial.
• Competitiveness: Driven by quality, price, and reliability differences.
• Innovation: Suppliers contribute to new product development.
• Finance: Suppliers provide financial assistance with material on credit.

Marketing Intermediaries

• They enhance product distribution, offer storage/financial solutions, and aid in promotion.

Customers

• Customer may be an individual, household, or organization that purchases a product for use in the production of other products, or for resale at a profit.
• Consumer market: individuals and households buying for consumption
• Industrial market: organizations buying for producing other goods and services for profit or objectives
• Reseller market: organizations buying goods and services to sell them to others for a profit
• Government and other non-profit markets: institutions buying to produce public services
• International market: individuals and organizations of other countries buying for consumption or industrial use

Competitors

• Competitors are rival firms striving to satisfy markets and consumers' demands.
• A firm's marketing strategies impact the others.
• Marketers must continuously monitor rival firms' strategies.
• Competition from similar products occurs amongst marketers of similar goods, like LG, Samsung, Philips in home appliances
• Competition from substitute products involves goods that can be substituted, like Indigo competing with Jet airlines in air transport
• Competition among all firms involves all organizations competing for consumer purchases

Publics

• 'Public' is any group with an actual/potential interest or impact on a company's ability to achieve its goals.
• Publics can contribute through word-of-mouth or hinder through negative activities.
• Financial publics influence a company's ability to obtain funds.
• Media publics consist of mechanisms that carry news and editorial opinion, like newspapers and TV.
• Government publics require management to consider government developments, such as product safety regulations.
• Citizen-action publics may question marketing decisions, requiring PR to stay in touch with customers
• Local publics include neighborhood residents and community organizations.
• General public firms need concern about the general public's attitude towards its products and activities
• Internal publics include workers, managers, and directors; a positive attitude spills over to external publics.

MACRO ENVIRONMENT FACTORS

Demographic factors

• Demography studies human population size, density, location, age, gender, race, literacy, and occupation.
• Changing habits, tastes, and lifestyles guide marketers.
• Firms gather demographic info to realize the potential market and divide the population into segments

Political and legal forces

• Political and legal forces include laws, agencies, and provisions affecting business organizations.
• Marketers must be aware of policies and government attitudes, like import/export policies, consumer protection, and environmental regulations

Economic environment

• Economic environment includes systems, policies, and conditions of a country.
• Economic news affects business depending on optimism or anxiety in the market
• Favorable economic environment includes improvement in growth rate, higher demand, low interest rates and declining unemployment
• Negative economic environments include recession, inflation, increase in taxation, declining employment, and demand

Socio-cultural environment

• Socio-cultural refers to the characteristics of the society in which the organization exists.
• It determines the code of conduct the business should follow.
• If a business follows unethical practices, various social groups and Government will intervene to discipline it.
• It determines the value system of the society which in turn affects the marketing of products.
• Sociological factors like caste, labor mobility, customs have an impact on business.
• The nature of goods and services in demand depends upon people's attitudes, customs, socio-cultural values, etc.
• India's changing attitudes on food/clothing, education and women's employment has led to growth of food processing and garment units.
• Potential influencing socio-cultural factors include, caste/occupation, family structure, women in the workforce, rural/urban shifts etc.
• Changing consumption habits of the population for enhancement of quality of life

Technological environment

• Technological refers to the state of technology in manufacturing, materials handling, transportation, and information technology.
• Advances in technology often increase capital investment and may lead to unemployment by replacing machine with men.
• The state of technology determines the type and quality of goods/services, plants, and equipment used.
• Marketers must watch tech changes to keep track of competition and customer wants.
• Early adoption of new technology helps in new improved products and increases the competitive advantage of the business firm.

Natural/Physical environment

• Natural environment includes a company's natural resources used as inputs that affect their marketing activities.
• Shortage of raw materials and pollution negatively affect business.
• Marketers should calculate the social net profitability of their business activity
• One should consider physical environmental factors (forest wealth, artificial rain possibility, pollution hazards)
• The Indian government introduced 'corporate social responsibility' and 'Eco mark' for ecofriendly products.
• To maintain 'ecological balance', one must control the environment through green skills and bio-degradable packaging.
• One must follow environmental criteria (product ingredients, designs, packaging), and respond to issues raised by environmentalists

Different techniques of environment analysis

• ETOP (Environmental Threat Opportunity Profile) helps analyze the impact of the environment based on threats and opportunities.
• Threats: New firms and substitute products.
• Opportunities: New technology reducing costs and improving product quality.
• SWOT Analysis: A strategic technique for an organization to learn about its internal strengths and weaknesses.
• SWOT helps to identify internal and external factors for an organization.
• PEST analysis (political, economic, social, technological): These impact the organization and require tracking.
• QUEST Analysis: A quick scanning technique to address critical issues.
• Labor unrest occurs when employees are treated unfairly, leading to poor productivity.