Marketing Environment PDF

UNIT 2: MARKETING ENVIRONMENT Marketing environment Meaning: refers to all internal and external factors which directly or indirectly influence the organization’s decisions related to marketing activities. Definition: External factors and forces that affect the company's ability to develop and ma...

UNIT 2: MARKETING ENVIRONMENT Marketing environment Meaning: refers to all internal and external factors which directly or indirectly influence the organization’s decisions related to marketing activities. Definition: External factors and forces that affect the company's ability to develop and maintain successful transactions and relationships with its target customers”. -Philip Kotler. Static environment: A set of conditions, events and surroundings that don’t change. This environment does not offer new or surprising elements. Dynamic environment: a business environment that is rapidly changing. Business has no control over it. Managers should react quickly and be flexible to respond and adapt to those changes. Examples of fast changing environment: Technological changes in mobile and computer industry, Change in taste and fashion of consumers, Government policy changes, Uncertain political scenarios etc. Environmental scanning: is a constant and careful analysis of the internal and external environment of an organization to detect opportunities, threats, trends, and weaknesses that affect the business directly or indirectly. Before production and launching the product in the market the management must make a good market research to explore various aspects like: Nature of target customers-identifying the purchasing power, buying habits, and buying motives of the customer. The market trends- Observing the position of company's previous products and services in the market, whether demand is likely to remain static, decrease or increase. 1  Economic, social, and political trends- scanning these trends that affect production namely, monetary policy, social changes, anti-pollution, or energy conservation laws. Technology trends- Anticipation of technological changes, i.e., whether new products may become popular or what type of technological advancements are about to take place. Competition in the market- Analyzing the upcoming or existing competitors and knowing their strengths and weaknesses. Importance of environment scanning: 1. Optimum utilization of resources: Environmental scanning helps to utilize all the resources (material and financial) in the most efficient manner. It also helps in reducing the wastage of resources. 2. Identification of opportunities: it enables the firms to identify the opportunities (positive changes and trends) and take the advantage. 3. Identification of threats and weaknesses: Environment scanning helps the firms to identify the early warning signals and threats and take appropriate preventive measures. 4. Competitor Strategy: constant scanning helps to learn about the business strategies of competitors which helps in forming strategies to tackle competition. 5. Image building: If a firm is sensitive to the external environment, it will come up with new products and services to meet the requirements of the customers. This would build the image or reputation of the firm in the eyes of the customers and the public. Business environment Internal environment External environment Controlled by firms. Uncontrollable factors which Includes product design, production, have a great impact on the firms. procurement of raw materials etc. 2  EXTERNAL ENVIRONMENT Microenvironment Macro environment Suppliers Demographics Intermediaries Economic forces Customers Political and Legal Competitors Socio cultural General public Technological Natural or physical Micro-Environment It includes both internal and external factors, which act and react in the immediate environment of the business enterprise. External factors include: 1. Suppliers 2. Marketing intermediaries 3. Competitors 4. Customers 5. General public 1. Suppliers: It comprises all the business firms or individuals who provide raw materials, components, and semi-finished goods to be used in production or even sell finished products of the organization. A Firm largely depends on the suppliers either as a buyer of inputs or a producer. Suppliers influence firms’ decision making: Suppliers can impact the business in the following way: Quality: supplier components can positively or negatively affect the quality of the product. Timeliness: timely and accurate supply is crucial Competitiveness: competition between suppliers in terms of quality, price, reliability. 3 Innovation: contributing to the development of a new product. Finance: suppliers can help financially by providing material on credit. A business firm has to be loyal, treat them fairly and pay on time. 2. Marketing intermediaries: these are the middlemen in the form of retailer and wholesalers who assist in smooth/free flow of business. Each intermediary can potentially increase or decrease production and customer satisfaction. Help in distribution of products by providing storage facilities, financial facilities and help in promotion of a product. 3. Customers: A customer may be an individual/household/an organization that purchases a product for use in the production of other products, or an organization that purchases a product for resale at a profit. i. Consumer market: individuals and households buying the product for consumption. ii. Industrial market: organizations buying for producing other goods and services for the purpose of either earning profits or fulfilling other objectives or both. iii. Reseller market-organizations: buying goods and services with a view to selling them to others for a profit. These may be selling intermediaries and retailers. iv. Government and other non-profit markets: the institutions buying goods and services to produce public services. They transfer these goods and services to those who need them for consumption in most cases. v. international market- individuals and organizations of other countries buying for their consumption or industrial use or both. They may be foreign consumers, producers, resellers, and the government. 4. Competitors: These are the rival business firms in the effort to satisfy the markets and consumers’ demand. The marketing strategies of a firm will have an impact on the others too. So, marketers must continuously monitor the rival firm’s strategies. There are three types of competition: 4 a) Competition from similar products- competition that occurs amongst marketers of similar products. Ex: competitors in electronic home appliances are LG, Samsung, or Philips etc. b) Competition from substitute products- Involves products that can be substituted for one another. Ex: in the air transport industry, Indigo competes with Jet airlines. The increase in fares of one airline increases demand for other airline services. c) Competition amongst all firms: competition occurs among all organizations that compete for the consumer's purchases. 5.Publics: ‘public’ means any group that has an actual or potential interest in or impact on the company's ability to achieve its objectives. A public can contribute to a marketing program through positive word of mouth or may hinder marketing activities through negative word-of-mouth. Types of publics: Financial publics- these groups influence the company's ability to obtain funds. Media publics- They consist of those mechanisms or devices that carry news, features, and editorial opinion. It includes newspapers, magazines, radio, and television stations. Government publics: Management must take government developments into account. Managers should consult the lawyers for product safety, advertisements etc. Citizen-action publics- A company's marketing decisions may be questioned by consumer organizations, environmental groups, minority groups and others.PR dept can help by staying in touch with customers. Local publics- Every company has local publics, such as neighborhood residents and community organizations. General public- A company needs to be concerned about the general public's attitude towards its products and activities. 5 Internal publics- it includes its workers, managers, and board of directors. When employees feel good about their company, this positive attitude spills over to external publics. MACRO ENVIRONMENT FACTORS Demographic factors: Demography refers to studying human population in terms of size, density, location, age, gender, race, literacy, and occupation. The changing habits, tastes and lifestyles of the population also give directions to the marketers. Ex: in metropolitan cities there is more demand for fast foods, electronic home appliances and crèches etc Hence a firm must gather demographic information before setting up the business as it helps to realize the potential market for the company’s product and divides the population into market segments and target markets. Political and legal forces: This includes all laws, government agencies and constitutional provisions affecting or limiting business organizations within a society. It is essential for marketers to be aware of such provisions, incentives, Government's attitude towards the policies has a great impact on business. Some of the components of political and legal environment are Government policies related to imports and exports, small scale industries, sick industries, consumer protection, control of environmental pollution, pricing and distribution of essential commodities, court decisions for the protection of consumers, environment, and ecological balance. Economic environment: it consists of economic systems, policies, and economic conditions of a country. All these have a great influence on business to a large extent. Economic news spreads optimism in case of favorable environment, (improvement in growth rate, higher demand, low interest rates and declining unemployment) and nervousness in case of recession, inflation, increase in taxation, declining employment, and demand etc. Hence, managers must timely scan the forces of the economic environment so that threats may be avoided and opportunities maybe encashed. Socio cultural: It refers to the combination of all the characteristics of the society in which the organization exists. It determines the code of conduct the business 6 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 such as caste structure, mobility of labor, customs, cultural heritage, view towards scientific methods etc. might have a far-reaching impact on business. For instance, the nature of goods and services in demand depends upon people's attitudes, customs, socio-cultural values, etc. In India, the attitudes of people have changed with respect to food and clothing. Also increase in education level and employment of women have led to the growth of food processing and garment manufacturing units. Some of the socio-cultural factors which have the potential of influencing marketing decisions include the following: Caste and occupational structure Family structure- joint v/s nuclear family Increasing number of women in the workforce Population shifts from rural to urban areas Educational system and literacy rates Changing consumption habits of the population for enhancement of quality of life. Technological: It refers to the state of technology in the areas of manufacturing, mining, construction, materials handling, transportation, and information technology. Advancements in technology on one hand leads to greater productivity, higher quality, and lower cost of production for the business and on the other hand requires high capital investment and may lead to unemployment by replacing machine with men. In any country, the state of technology plays an important role in determining the type and quality of goods and services to be produced and the type of plants and equipment to be used. The marketers must constantly watch changes in technology for keeping 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. 7 Ex: Use of Automatic machines though requires high capital investment but will also lead to less labor. Natural or physical: This includes the natural resources that a company uses as inputs that affect their marketing activities. Shortage of raw materials, pollution negatively affects the business. A marketer should calculate social net profitability (social benefit minus social cost) of its business activity. He must consider the physical environmental factors such as the quantity and quality of existing forest wealth, possibility of artificial rain, the exploitation of sea products like fish, the health hazards due to pollution, etc. The Indian government has introduced the concept of ‘corporate social responsibility of business’ as well as “Eco mark" for marketing ecofriendly products. To maintain ‘ecological balance’ the marketing managers are expected to: i. Control the environment by adopting green skills and bio-degradable packaging. ii. Follow the environmental criteria while deciding on product ingredients, design, and packaging. iii. Respond to the issues raised by the environmentalists and consumerists. Different techniques of environment analysis ETOP stands for the Environmental Threat Opportunity Profile. It helps an organization to analyze the impact of the environment based on threats & opportunities. Threats - like emergence of strong competition in the market by new firms and substitute products. Opportunities: new technology that may help to reduce costs and improve product quality for the firm. SWOT Analysis: strength, weakness, opportunities, and threats. This is a strategic technique opted by an organization to learn about its internal strengths and weaknesses. It is a technique to learn to identify internal and external factors which can be helpful in achieving the goal of an organization. 8 PEST analysis: (political, economic, social, technological) These external macro environmental factors put an impact on the business of the organization, and it is important for an organization to keep track of them. QUEST Analysis: Quick Environmental Scanning Technique. This technique is designed to analyze the environment quickly & inexpensively so that business can focus on critical issues that have to be addressed in a short span. INDUSTRIAL CONFLICT CAUSED BY LABOUR UNREST AFFECT A FIRM‟S PRODUCTIVITY Labor is one of the major production factors. Without labor there is no production. Labor unrest occurs when employees believe that they are treated unfairly by the management of the company. It leads to poor productivity and revenues and damages the image of the firm. 9