Marketing environment: Internal and External

The company’s marketing environment consists of micro environment and macro environment. The micro environment consists of the actors in the company’s immediate environment that affects its ability to serve the markets: the company, suppliers, market intermediaries, customers, competitors and publics. The macro environment consists of the larger societal forces that affect all of the actors in the company’s micro environment the demographic, economic, physical, technological, political, legal and socio-cultural forces.

MICRO ENVIRONMENT

Every company’s primary goal is to serve and satisfy a specified set of needs of a chosen target market. To carry out this task, the company links itself with a set of suppliers and a set of marketing intermediaries to reach its target customers. The suppliers – company – marketing intermediaries – customers chain comprises the core marketing system of the company. The company’s success will be affected by two additional groups namely, a set of competitors and a set of publics. Company management has to watch and plan for all these factors.

SUPPLIERS

Suppliers are business firms who provide the needed resource to the company and its competitors to produce the particular goods and services. For example Bakery Desotta must obtain sugar, wheat, cellophane paper and other materials to produce and package its breads. Labour, equipment, fuel electricity and other factors of production are also to be obtained. Now the company must decide whether to purchase or make its own. When the company decides to buy some of the inputs, it must make certain specification call for tender etc. and then it segregates the list of suppliers. Usually company choose the suppliers who offer the best mix of quality, delivery schedule credit, guarantee and low cost.

Any sudden change in the ‘suppliers’ environment will have a substance impact on the company’s marketing operations. Sometimes some of the inputs to the company might cost more and hence managers have continuously monitored the fluctuations in the suppliers side. Marketing manager is equally concerned with supply availability. Sudden supply shortage labour strikes and other events can interfere with the fulfillment of delivery promise customers and lose sales in the short run and damage customer goodwill in long run. Hence many companies prefer to buy from multiple sources to avoid overdependence on any one supplier. Some times even for the appendage services to marketing like marketing research, advertising, sales training etc. the company use service from outside. This dependency may also create some bottlenecks, at times, due to the behaviour of these agencies and consequently affect the marketing operations of the company.

COMPANY

Marketing management at any organisation, while formulating marketing plans have to take into consideration other groups in the company, such as top management, finance, R&D, purchasing, manufacturing and accounting. Finance department has to be consulted for the funds available for carrying out the marketing plan apart from others. R&D has to be continuously doing new product development. Manufacturing has to be coordinated based on the market demand and supply of the products. According has to measure revenues and costs to help marketing in achieving its objectives. Usually marketing department has to face the bottlenecks put up by the sister departments while designing and implementing their marketing plans.

MARKETING INTERMEDIARIES

Channel members are the vanguard of the marketing implementation part. They are the people who connect the company with the customers. There are number of middle men who operate in this cycle. Agent middle men like brokers and agents find customers and establish contacts, merchant middlemen are the wholesalers, retailers, who take title to and resell the merchandise. Apart from these channel members, there are physical distribution firms who assist in stocking and moving goods from the original locations to their destinations. Warehouse firms store and protect goods before they move to the next destinations. There are number of transporting firms consists of rail, road, truckers, ship, airline etc. that mover goods from one location to another. Every company has to decide on the most cost – effective means of transport considering the costs, delivery, safety and speed. There are financial intermediaries like banks, insurance companies, who support the company by providing finance insurance cover etc.

The behaviour and performance of all these intermediaries will affect the marketing operations of the company and the marketing executives have to prudently deal with them.

COMPETITORS

If one company plans a marketing strategy at one side, there are number of other companies in the same industry doing such other calculations. Coke has competitors in Pepsi. Maruti has competitions from Tata Indica, Santro etc. Not only that the competition comes from the branded segment but also from the generic market, where there are only few branded products of rice but there are numerous generic variety of rice according to the local tastes in each region the country. Sometimes competition comes from different forms. Airlines have to

overcome competitions not only from the other Airlines but also from Railways and Ships. Basically every company has to identify the competitor, monitor their activities and capture their moves and maintain customer loyalty. Hence every company comes out with their own marketing strategies.

PUBLICS

A public can facilitate or seriously affect the functioning of the company, Philip Kotler defines public as any group that has an actual or potential interest or impact on a company’s ability to achieve its objectives. Kotler notes that there are different types of publics, Government publics, citizen action publics, local publics, general public and internal publics. Since, the success of the company will be affected by how various publics view their activity, the companies have to monitor these publics, anticipate their moves dealing with them in constructive ways.

CUSTOMERS

Customers are the fulcrum around whom the marketing activities of the organisation revolve. The marketer has to face the following types of customers.

• Customer Markets: Markets for personal consumption.
• Industrial Markets: Goods and services that could become the part of a product in those industry.
• Institutional Buyers: Institutions like schools, hospital, which buy in bulk.
• Reseller Markets: The organizations buy goods for reselling their products.
• Government Markets: They purchase the products to provide public services.
• International Markets: Consists of Foreign buyers and Governments.

MACRO ENVIRONMENT

Macro environment consists of six major forces viz, demographic, economic, physical, technological, political/ legal and socio-cultural. The trends in each macro environment components and their implications on marketing are discussed below:

DEMOGRAPHIC ENVIRONMENT

Demography is the study of human population in terms of size, density, location, age, gender, occupation etc. The demographic environment is of major interest to marketers because it involves people the people make up markets.

The world population and the Indian population in particular is growing at an explosive rate. This has major implications for business. A growing population means growing human needs. Depending onpurchasing powers, it may also mean growing market opportunities. On the other hand, decline in population is a threat so some industrial and the boon to others. The marketing executives of toy-making industry spend a lot of energy and efforts and developed fashionable toys, and even advertise “Babies are our business-our only business”, but quietly dropped this slogan when children population gone down due to declining birth rate and later shifted their business to life insurance for old people and changed their advertisement slogan as “the company has not babies the over 50s”.

The increased divorce rate shall also have the impact on marketing decisions. The higher divorce rate results in additional housing units, furniture, appliances and other house-hold appliances. Similarly, when spouses work at two different places, that also results in additional requirement for housing, furniture, better clothing, and so on. Thus, marketers keep close tract of demographic trends developments in their markets and accordingly evolve a suitable marketing programme.

ECONOMIC ENVIRONMENT

Markets require purchasing power as well as people. Total purchasing power is functions of current income, prices, savings and credit availability. Marketers should be aware of four main trends in the economic environment.

(i) Decrease in Real Income Growth

Although money incomer per capita keeps raising, real income per capita has decreased due to higher inflation rate exceeding the money income growth rate, unemployment rate and increase in the tax burden.

These developments had reduced disposable personal income; which is the amount people have left after taxes. Further, many people have found their discretionary income reduced after meeting the expenditure for necessaries. Availability of discretionary income shall have the impact on purchasing behaviour of the people.

(ii)Continued Inflationary Pressure

The continued inflationary pressure brought about a substantial increase in the prices of several commodities. Inflation leads consumers to research for opportunities to save money, including buying cheaper brands, economy sizes, etc.

(iii) Low Savings and High Debt

Consumer expenditures are also affected by consumers savings and debt patterns. The level of savings and borrowings among consumers affect the marketing. When marketers make available high consumer credit, it increases market opportunities.

(iv) Changing Consumer Expenditure Patterns

Consumption expenditure patters in major goods and services categories have been changing over the years. For instance, when family income rises, the percentage spent on food declines, the percentage spent on housing and house hold operations remain constant, and the percentage spent on other categories such as transportation and education increase.

These changing consumer expenditure patterns has an impact on marketing and the marketing executives need to know such changes in economic environment for their marketing decisions.

PHYSICAL ENVIRONMENT OR NATURAL Environment

There are certain finite renewable resources such as wood and other forest materials which are now dearth in certain parts of world.

Similarly there are finite non-renewable resources like oil coal and various minerals, which are also not short in supply. In such cases, the marketers have to find out some alternative resources. For instance, the marketers of wooden chairs, due to shortage and high cost of wood shifted to steel and later on fiber chairs. Similarly scientists all over the world are constantly trying to find out alternative sources of energy for oil due to dearth in supply.

There has been increase in the pollution levels in the country due to certain chemicals. In Mumbai-Surat-Ahemedabed area, are facing increased pollution due to the presence of different industries. Marketers should be aware of the threats and opportunities associated with the physical environment and have to find our alternative sources of physical resources.

SOCIO CULTURAL ENVIRONMENT

The socio-cultural environment comprises of the basic beliefs, values and norms which shapes the people. Some of the main cultural characteristics and trends which are of interest to the marketers are:

(i) Core Cultural Values

People in a given society hold many core beliefs and values, that will tend to persist. People’s secondary beliefs and values are more open to change. Marketers have more chances of changing secondary values but little chance of changing core values.

(ii)Each Culture Consists of Sub-Cultures

Each society contains sub-cultures, i.e. groups of people with shared value systems emerging out of their common life experiences, beliefs, preferences and behaviors. To the extent that sub-cultural groups exhibit different wants and consumption behaviour, marketers can choose sub-cultures as their target markets.

Secondary cultural values undergo changes over time. For example ‘video-games’, ‘playboy magazines’ and other cultural phenomena have a major impact on children hobbies, clothing and life goals. Marketers have a keen interest in anticipating cultural shifts in order to identify new marketing opportunities and threats.

TECHNOLOGICAL ENVIRONMENT

Technology advancement has benefited the society and also caused damages. Open heart surgery, satellites all were marvels of technology, but hydrogen bomb was on the bitter side of technology. Technology is accelerating at a pace the many products seen yester-years have become obsolete now. Alvin Toffler in his book ‘The Future Shock’ has made a remark on the accelerative thrust in the invention, exploitation and diffusion of new technologies. There could be a new range of products and systems due to the innovations in technology.

This technology developments has tremendous impact on marketing and unless the marketing manager cope up with this development be cannot survive in the competitive market.

POLITICAL AND LEGAL ENVIRONMENT

Marketing decisions are highly affected by changes in the political/ legal environment. The environment is made up of laws and government agencies that influence and constraint various organizations and individuals in society.

Legislations affecting business has steadily increased over the years. The product the consumes and the society against unethical business behaviour and regulates the functioning of the business organizations. Removal of restrictions to the existing capabilities, enlargement of the spheres open to MRTP and FEMA companies and broad banding of industrial licenses were some of the schemes evolved by the government. The legal enactments and rules and regulations exercise a specific impact on the marketing practices, systems and institutions in the country. Some of the acts which have direct bearing on the marketing of the company include, the Prevention of Food Adulteration Act (1954), The Drugs and Cosmetics Act (1940), The Standard Weights and Measures Act (1956) etc. The Packaged Commodities (Regulative) Order (1975) provides for clearly making the prices on all packaged goods sold in retail excluding certain items.

Similarly, when the government changes, the policy relating to commerce, trade, economy and finance also changes resulting in changes in business. Very often it becomes a political decisions. For instance, one Government introduce prohibition, and another government lifts the prohibition. Also, one Government adopts restrictive policy and another Government adopts liberal economic policies. All these will have impact on business.

Hence, the marketing executives needs a good working knowledge of the major laws affecting business and have to adapt themselves to changing legal and political decisions.

All the above micro environmental actors and macro environmental forces affect the marketing systems individually and collectively. The marketing executives need to understand the opportunities and threats caused by these forces and accordingly they must be able to evolve appropriate marketing strategies.