Notes

Program Name- Master of Business Administration (MBA)

Introduction

Several internal and external factors affect a business’s marketing activities. While some of the
factors are in the control of the business, most of these are not and the business has to adapt itself
to avoid being affected by changes in these factors.
These external and internal factors group together to form a marketing environment in which the
business operates.
Marketing environment is the combination of external and internal factors and forces that affect
the company’s ability to establish a relationship and serve its customers. The marketing
environment of a business consists of an internal and an external environment.
Every business, no matter how big or small, operates within the marketing environment. Its
present and future existence, profits, image, and positioning depend on its internal and external
environment.
The business environment is one of the most dynamic aspects of the business. In order to operate
and stay in the market for long, one has to understand and analyse the marketing environment
and its components properly.
An understanding of the external and internal environment is essential for planning for the
future. A marketer needs to be fully aware of the current scenario, dynamism, and future
predictions of the marketing environment if he wants his plans to succeed.

Content

Internal Environment
The internal environment of the business includes all the forces and factors inside the
organisation which affect its marketing operations. These components can be grouped under the
Five Ms of the business, which are:
• Men: The people of the organisation including both skilled and unskilled workers.
• Minutes: Time taken for the processes of the business to complete.
• Machinery: Equipment required by the business to facilitate or complete the processes.
 • Materials: The factors of production or supplies required by the business to complete the
processes or production.
• Money: Money is the financial resource used to purchase machinery, materials, , and pay
the employees.
The internal environment is under the control of the marketer and can be changed with the
changing external environment. Nevertheless, the internal marketing environment is as important
for the business as the external marketing environment. This environment includes the sales
department, the marketing department, the manufacturing unit, the human resource department,
etc.
External Environment
The external environment constitutes factors and forces which are external to the business and on
which the marketer has little or no control. The external environment is of two types:
• Micro marketing environment
• Macro marketing environment

Micro Environment
The micro-component of the external environment is also known as the task environment. It
comprises external forces and factors that are directly related to the business. These include
suppliers, market intermediaries, customers, partners, competitors and the public

• Employees- These are individuals working within the organization and contribute
significantly to derive optimum results. Employees are main component of every
organization whose work quality depends upon the training and motivating session
provided to them. Training session plays a key role in imparting professionalism and
enhancing marketing skills of employees.
• Suppliers include all the parties which provide resources needed by the organisation.
They are crucial for all organization as all resources for making a finished product are
provided by them. Firm should properly analyze the existing suppliers in market to
choose best one that provide quality resources at better price.
• Market intermediaries include parties involved in distributing the product or service of
the organisation. These are the persons which enables business in channelizing its
product to their customers. Retails and distributors determine the success of marketing
 operations of business. They work in close touch with customers can provide details
regarding customer’s feedback and desire about products or services.
• Partners are all the separate entities like advertising agencies, market research
organisations, banking and insurance companies, transportation companies, brokers, etc.
which conduct business with the organisation.
• Customers comprise of the target group of the organisation. Every business makes effort
to fulfill the needs and wants in best possible way of their customers. All strategies
related to market operations are customer oriented that pays attention on better
understanding of customer wants and offering them right product for providing full
satisfaction.
• Shareholders- Shareholders are the real owners of business who contribute their funds in
it for making profits. Each organization set up an objective of maximizing its
shareholder’s wealth. Therefore, all activities related to market should be decided
considering the interest of shareholders.
• Competitors are the players in the same market who targets similar customers as that of
the organisation. Every firm should keep an eye over the activities of their competitors, as
it enables them in formulating all strategies as per the market trends.
• Public is made up of any other group that has an actual or potential interest or affects the
company’s ability to serve its customers. Public refers to a society that has some direct or
hidden interest in business and affects its overall capability to attain its objectives. Every
business should pay attention and serve interest of public at large in addition to its
shareholders and customers. Organizations have some social responsibility toward the
society in which they operate and all activities should be carried out considering the
welfare of society as a whole. Media pubic, local public, citizen public, financial public,
and internal public, government public and internal are different types of public
associated with a business.

Macro Environment
The macro component of the marketing environment is also known as the broad environment. It
constitutes the external factors and forces which affect the industry as a whole but don’t have a
direct effect on the business. The macro-environment can be divided into 6 parts.
• Demographic Environment
The demographic environment is made up of the people who constitute the market. It is
characterized as the factual investigation and segregation of the population according to
their size, density, location, age, gender, race, and occupation.
• Economic Environment
The economic environment constitutes factors that influence customers’ purchasing
power and spending patterns. These factors include the GDP, GNP, interest rates,
inflation, income distribution, government funding and subsidies, and other major
economic variables.
• Physical Environment
The physical environment includes the natural environment in which the business
operates. This includes the climatic conditions, environmental change, accessibility to
water and raw materials, natural disasters, pollution etc.
• Technological Environment
The technological environment constitutes innovation, research and development in
technology, technological alternatives, innovation inducements also technological
barriers to smooth operation. Technology is one of the biggest sources of threats and
opportunities for the organisation and it is very dynamic.
• Political-Legal Environment
The political & legal environment includes laws and government’s policies prevailing in
the country. It also includes other pressure groups and agencies which influence or limit
the working of the industry and/or the business in the society.
• Social-Cultural Environment
The social-cultural aspect of the macro-environment is made up of the lifestyle, values,
culture, prejudice and beliefs of the people. This differs in different regions.

Closing Remark
Marketing managers must work closely with other company departments. With marketing taking
the lead, all departments— from manufacturing and finance to legal and human resources—share
the responsibility for understanding customer needs and creating customer value.
Most marketers today treat their suppliers as partners in creating and delivering customer value.
For example, cosmetics maker L’Oréal knows the importance of building close relationships
with its extensive network of suppliers, who supply everything from polymers and fats to spray
cans and packaging to production equipment and office supplies
Like suppliers, marketing intermediaries form an important component of the company’s overall
value delivery network. In its quest to create satisfying customer relationships, the company
must do more than just optimize its own performance. It must partner effectively with marketing
intermediaries to optimize the performance of the entire system.
Thus, today’s marketers recognize the importance of working with their intermediaries as
partners rather than simply as channels through which they sell their products. For example,
when Coca-Cola signs on as the exclusive beverage provider for a fast-food chain, such as
McDonald’s, Wendy’s, or Subway, it provides much more than just soft drinks. It also pledges
powerful marketing support:
Marketing Insight: Relationship with suppliers and intermediaries
L’Oréal is the world’s largest cosmetics maker, with 34 global brands ranging from Maybelline
and Kiehl’s to Lancôme and The Body Shop. The company’s supplier network is crucial to its
success. As a result, L’Oréal treats suppliers as respected partners. On the one hand, it expects a
lot from suppliers in terms of design innovation, quality, and sustainability. On the other hand,
L’Oréal works closely with suppliers to help them meet its exacting standards. According to the
company’s supplier Web site, L’Oréal treats suppliers with “fundamental respect for their
business, their culture, their growth, and the individuals who work there.” Each relationship is
based on “dialogue and joint efforts. L’Oréal seeks not only to help its suppliers meet its
expectations but also to contribute to their growth, through opportunities for innovation and
competitiveness.” As a result, more than 75 percent of L’Oréal’s supplier partners have been
working with the company for 10 years or more, and the majority of them for several decades.
Says the company’s head of purchasing, “The CEO wants to make L’Oréal a top performer and
one of the world’s most respected companies, being respected also means being respected by our
suppliers”
Coca-Cola assigns cross-functional teams dedicated to understanding the finer points of each
retail partner’s business. It conducts a staggering amount of research on beverage consumers and
shares these insights with its partners. It analyzes the demographics of U.S. zip code areas and
helps partners determine which Coke brands are preferred in their areas.
Coca-Cola has even studied the design of drive-through menu boards to better understand which
layouts, fonts, letter sizes, colors, and visuals induce consumers to order more food and drink.
Based on such insights, the Coca-Cola Food Service group develops marketing programs and
merchandising tools that help its retail partners improve their beverage sales and profits. Its Web
site, www.CokeSolutions.com, provides retailers with a wealth of information, business
solutions, merchandising tips, and techniques on how to go green. We’re “working together to
make your business better,” says Coca-Cola to its retail partners. Such intense partnering has
made Coca-Cola a runaway leader in the U.S. fountain-soft-drink market.

Summary
• The internal environment is company-specific and includes owners, workers, machines,
materials etc.
• Marketing success requires building relationships with other company departments,
suppliers, marketing intermediaries, competitors, various publics, and customers, which
combine to make up the company’s value delivery network.
• The external environment is further divided into two components: micro & macro.
• The micro or the task environment is also specific to the business but is external. It
consists of factors engaged in producing, distributing, and promoting the offering.
• The macro or the broad environment includes larger societal forces which affect society
as a whole. It is made up of six components: demographic, economic, physical,
technological, political-legal, and social-cultural environment.
Self-Assessment Questions
1. Describe the environmental forces that affect the company’s ability to serve its
customers?
2. Name and briefly describe the elements of an organization’s macro environment and
discuss how they affect marketing?
3. What are the 5 M’s of business?
4. Discuss the statement, micro environment actors can be influenced by the company but
macro environmental factors the company has to adjust?
5. In today’s competitive scenario relationship with suppliers and intermediaries play a very
important role? Justify with suitable examples