Meaning of Marketing Environment:
The marketing environment refers to all internal and external factors, which directly or indirectly influence the organization’s decisions related to marketing activities. Internal factors are within the control of an organization; whereas, external factors do not fall within its control. The external factors include government, technological, economical, social, and competitive forces; whereas, organization’s strengths, weaknesses, and competencies form the part of internal factors. Marketers try to predict the changes, which might take place in future, by monitoring the marketing environment. These changes may create threats and opportunities for the business. With these changes, marketers continue to modify their strategies and plans.
A marketing environment mostly comprises of the following types of environment:
1. Micro Environment
2. Macro Environment
The discussion of these environments are given below:
1. Micro Environment:
Micro environment refers to the environment, which is closely linked to the organization,
and directly affects organizational activities. It can be divided into supply side and
demand side environment. Supply side environment includes the suppliers, marketing
intermediaries, and competitors who offer raw materials or supply products. On the
other hand, demand side environment includes customers who consume products.
Let us discuss the micro environment forces in the following points:
i. Suppliers:
It provides raw material to produce goods and services. Suppliers can influence the
profit of an organization because the price of raw material determines the final price
of the product. Organizations need to monitor suppliers on a regular basis to know
the supply shortages and change in the price of inputs.
ii. Marketing Intermediaries:
It helps organizations in establishing a link with customers. They help in promoting,
selling, and distributing products.
Marketing intermediaries include the following:
a. Resellers:
It purchases the products from the organizations and sell to the customers.
Examples of resellers are wholesalers and retailers.
b. Distribution Centers:
It helps organizations to store the goods. A warehouse is an example of distribution
center.
c. Marketing Agencies:
It promotes the organization’s products by making the customers aware about
benefits of products. An advertising agency is an example of marketing agency.
d. Financial Intermediaries:
It provides finance for the business transactions. Examples of financial
intermediaries are banks, credit organizations, and insurance organizations.
iii. Customers:
Customers buy the product of the organization for final consumption. The main goal
of an organization is customer satisfaction. The organization undertakes the
research and development activities to analyze the needs of customers and
manufacture products according to those needs.
iv. Competitors:
It helps an organization to differentiate its product to maintain position in the market.
Competition refers to a situation where various organizations offer similar products
and try to gain market share by adopting different marketing strategies.
2. Macro Environment:
Macro environment involves a set of environmental factors that is beyond the control of
an organization. These factors influence the organizational activities to a significant
extent. Macro environment is subject to constant change. The changes in macro
environment bring opportunities and threats in an organization.
Let us discuss these factors in details:
i. Demographic Environment:
Demographic environment is the scientific study of human population in terms of
elements, such as age, gender, education, occupation, income, and location. It also
includes the increasing role of women and technology. These elements are also
called as demographic variables. Before marketing a product, a marketer collects the
information to find the suitable market for the product.
Demographic environment is responsible for the variation in the tastes and
preferences and buying patterns of individuals. The changes in demographic
environment persuade an organization to modify marketing strategies to address the
altering needs of customers.
ii. Economic Environment:
Economic environment affects the organization’s costs structure and customers’
purchasing power. The purchasing power of a customer depends on the current
income, prices of the product, savings, and credit availability.
The factors economic environment is as follows:
a. Inflation:
It influences the customers’ demand for different products. For example, higher petrol
prices lead to a fall in demand for cars.
b. Interest Rates:
It determines the borrowing activities of the organization. For example, increase in
interest rates for loan may lead organizations to cut their important activities.
c. Unemployment:
It leads to a no income state, which affects the purchasing power of an individual.
d. Customer Income:
It regulates the buying behavior of a customer. The change in the customer’s income
leads to changed spending patterns for the products, such as food and clothing.
e. Monetary and Fiscal Policy:
It affects all the organizations. The monetary policy stabilizes the economy by
controlling the interest rates and money supply in an economy; whereas, fiscal policy
regulates the government spending in various areas by collecting the revenue from
the citizens by taxing their income.
iii. Natural Environment:
Natural environment consists of natural resources, which are needed as raw
materials to manufacture products by the organization. The marketing activities affect
these natural resources, such as depletion of ozone layer due to the use of
chemicals. The corrosion of the natural environment is increasing day-by-day and is
becoming a global problem.
Following natural factors affect the marketing activities of an organization in a
great way:
a. Natural Resources:
It serves as raw material for manufacturing various products. Every organization
consumes natural resources for the production of its products. Organizations are
realizing the problem of depletion of resources and trying best to use these resources
judiciously. Thus, some organizations have indulged in de-marketing their products.
For example, Indian Oil Corporation (IOC) tries to reduce the demand for its products
by promoting advertisements, such as Save Oil, Save India.
b. Weather:
It leads to opportunities or threats for the organizations. For example, in summer,
demand for water coolers, air conditioners, cotton clothes, and water increases while
in winter, the demand for woolen clothes and room heaters rises. The marketing
environment is greatly influenced by the weather conditions of a country.
c. Pollution:
It includes air, water, and noise pollution, which lead to environmental degradation.
Now-a-days, organizations tend to promote environment friendly products through its
marketing activities. For example, the organizations promote the usage of jute and
paper bags instead of plastic bags.
iv. Socio-Cultural Environment:
Socio-cultural environment comprises forces, such as society’s basic values,
attitudes, perception, and behavior. These forces help in determining that what type
of products customers prefer, what influences the purchase attitude or decision,
which brand they prefer, and at what time they buy the products. The socio-cultural
environment explains the characteristics of the society in which the organization
exists. The analysis of socio-cultural environment helps an organization in identifying
the threats and opportunities in an organization.
For example, the lifestyles of people are changing day-by-day. Now, the women are
perceived as an active earning member of the family. If all the members of a family
are working then the family has less time to spend for shopping. This has led to the
development of shopping malls and super markets, where individuals could get
everything under one roof to save their time.
v. Technological Environment:
Technology contributes to the economic growth of a country. It has become an
indispensable part of our lives. Organizations that fail to track ongoing technological
changes find it difficult to survive in today’s competitive environment.
Technology acts as a rapidly changing force, which creates new opportunities for the
marketers to acquire the market share. Marketers with the help of technology can
create and deliver products matching the life style of customers. Thus, marketers
should observe the changing trends in technology.
Following points explain the technological trends that affect the marketing
environment:
a. Pace of Technological Change:
It leads to product obsolescence at a rapid pace. If the pace of technological change
is very rapid then organizations need to modify their products as and when required.
On the other hand, if the technology is not changing at a rapid pace then there is no
need for the organization to bring constant changes in the product.
b. Research and Development:
It helps in increasing growth opportunities for an organization. Many organizations
have developed a separate team for R&D to bring innovation in its products.
Pharmaceutical organizations, such as Ranbaxy and Cipla, have started putting
greater force in R&D and these efforts have led to great opportunities in global
market.
c. Increased Regulation:
It refers to government guidelines to ban unsafe products. Marketers should be
aware of these regulations to prevent their violation. Every pharmaceutical
organization takes the approval of the Drugs Controller of India, which lays down the
standards for drugs manufacturing.
vi. Political and Legal Environment:
Political and legal environment consists of legal bodies and government agencies
that influence and limit the organizations and individuals. Every organization should
take care of the fact that marketing activities should not harm the political and legal
environment prevailing in a country. The political and legal environment has a serious
impact on the economic environment of a country. For example, in some regions of
Uttar Pradesh, Reliance Fresh had to shut down its stores because of the lack of
political support.
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