Marketing environment includes all the forces that directly or indirectly influence marketing
operations by affecting an organisation acquisition of inputs/creation of outputs such as human, financial and natural resources and raw material, information, goods, services or ideas. Sometimes a distinction is more between macro and micro factors of environment.
Environment plays a critical role in business, especially in marketing. The marketing environment is constantly changing and thus presenting new opportunities and threats. A marketer's task is to correctly analyse the environment and design a marketing mix, which will fit the environment. The ultimate purpose of the environmental analysis is to facilitate the firm's strategic response to the environmental changes. The firm can attain its objective with strategic planning in order to encash on environmental opportunities.
The Micro and Macro Environment
There are two types of environmental forces, which influence an organization's marketing
activities. Some of these forces are external to the firm and the organization has little
control over them. The other type of forces comes from within the organization and can
be controlled by it. Hence, the marketing environment can be divided into two major
Macro Environment: consists of demographics and economic conditions, sociocultural
factors, political and legal systems, technological developments, etc. These
constitute the general environment, which affects the working of all the firms.
Micro environment : consist of suppliers, consumers, marketing intermediaries, etc.
These are specific to the said business or firm and affect its working on short term basis.
Environmental scanning – also known as Environmental Monitoring – is the process of
gathering information regarding a company's environment, analysing it and forecasting the
impact of all predictable environmental changes. Successful marketing depends largely on
how a company can synchronise its marketing programmes with its environmental changes.
The major components of environmental scanning are:
External Environmental analysis
Customer Analysis
Competitor analysis
Market analysis
Company analysis
Demographic Environment
Factors relating to population, such as size, growth rate, age distribution, religious
composition and literacy levels and aspects like composition of workforce, household
patterns, regional characteristics, population shifts etc., need to be studied as they are all
part of the demographic environment. The points to be considered here are:
What demographic trends will affect the market size of the industry?
What demographic trends represent opportunities or threats?
Economic Environment
Economic environment determines the strength and size of the market. The purchasing
power in an economy depends on current income, prices, savings, circulation of money,
debt and credit availability. Income distribution pattern determines the marketing
possibilities. The important point to consider is to find out the effect of economic prospects
and inflation on the operations of the firms.
Government Environment
Business is highly guided and controlled by government policies. Hence the type of
government running a country is a powerful influence on business and marketing gets
Legal Environment
Firms prefer to operate in a country where there is a sound legal system such as in US.
Marketers must have a good working knowledge of the major laws protecting consumers,
competitions and organizations. Laws like MRTP, Consumer Protection Act, Intellectual
Property Right, FEMA, Labour Laws etc., can considerably affect business operations
Political Environment
Political pressure groups influence and limit organizations e.g., the case of Enron in
Maharastra and KFC in Karnataka. Special interest groups and political action committees
put pressure on business organizations to pay more attention to consumer's rights, minority
rights, and women’s rights.
Cultural Environment
The beliefs, values and norms of a society determine how individuals and organizations
relate to each other. The core beliefs of a particular society tend to be persistent, as the
American value system of work, charity and honesty. It is difficult for marketers to
change these core values, which have a major bearing on marketing operations in as
much as they set the stage for marketing activity and consumer response.
Technological Environment
The most important factor, which is controlling and changing the human society and
even impacting the future, is technology. Technology has literally transformed the way
people think, work and relax. Man could realise his dream of putting an astronaut on the
lunar surface, the moon, going to the other side of the globe within a few hours, and even
exploring the mysteries of the solar system. With the latest developments in genetic
engineering, man is extending the human life span. Technology has changed the way
people communicate with the advent of Internet and telecommunication system, and
with the revolution in communications have come new ways of doing business. This is
opening up new business opportunities while consumers reap the rewards of cutthroat
competition among manufacturers.
Global Environment
The global environment is also rapidly changing. The new concept of global village has
changed how individuals and organizations relate to each other. The advent of worldwide
terrorism has the power to turn a booming economy into a stagnant one within no time.
The new migratory habits of the workforce as well as increased offshore operation are
changing the dynamics of business operation, while in the background, the WTO initiatives
have changed the way nations do business with each other, opening up markets and
heralding the coming of a new global economic order.
This is also known as the task environment and affects business and marketing at the
daily operating level. While the changes in the macro environment affect business in the long run, the effect of micro environmental changes are noticed almost immediately. Organizations have to closely analyse and monitor all the elements of microenvironment in order to adapt to rapid change and stay competitive.
According to Peter Drucker, the aim of business is to create and retain the customer.
Hence consumer occupies the central position in the marketing environment. The marketer
has to closely monitor and analyse changes in consumer tastes and preferences and
cater to (if not try and anticipate) their buying habits.
Competition shapes business. A study of the competitive scenario is essential for the
marketer, particularly threats from competition.
Who are the competitors?
What are their present strategies and business objectives?
Who are the most aggressive and powerful competitors?
Nothing can be as important as self-analysis by the organization itself.
"We have met the enemy, and he is us" - Pogo.
Understanding its own strengths and capabilities in a particular business, that is,
understanding a business in depth should be the goal of a firm's internal analysis. The
objectives, goals and resource availabilities of a firm occupy a critical position in the
microenvironment of marketing. The company with its resources and capabilities surrounds
the consumer in the microenvironment.
The market is to be studied in terms of its actual and potential size, its growth prospect
and also its attractiveness. The marketer should study the trends and development and
the key success factors of the market he is operating. Important issues are :
Cost structure of the market
The price sensitivity of the market
Technological structure of the market
The existing distribution system of the market
Is the market matured?
Suppliers form an important component of the microenvironment. With their own bargaining power they affect the cost structure of the industry. They constitute a major force, which shapes competition in the industry. Also organizations have to take a major Marketing Environment
decision on "outsourcing" or "in-house" production depending on this supplier environment.
Intermediaries exert a considerable influence in the marketing environment. They can also be considered as the major determining force in the business. In many cases the consumers are not aware of the manufacturer and buy the product from the renowned intermediaries as for example Wal-Mart in US, Pantaloons in India.
Public constitute a major force in the micro environment and marketers have to very
carefully study their opinion, values, beliefs and attitudes in order to design a proper
marketing strategy for goods carefully tailored to meet the needs of the target consumer
segment. In a sort of reverse engineering, marketers also use the media to shape consumer
tastes and preferences.

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