Chapter 2

Marketing Environment
 BACKGROUND - MARKETING
ENVIRONMENT
• The political and economic changes in 1991,
resulted in sea changes in the marketing
environment through liberalization. In the field of
cellular phone industry, many companies entered
India. Rapid technological changes have taken place
in the computer hardware/software industry.
• The marketing team has the responsibility to
increase sales and profit of the company through
effective use of marketing mix. The demand for the
products and profitability of the operations depend
upon the marketing environment.
 BACKGROUND - MARKETING
ENVIRONMENT
• Therefore, marketing environment influences and
shapes the marketing strategy. A marketer has to
design his marketing strategies based on the
marketing environment.
 WHAT IS MARKETING
ENVIRONMENT
• Marketing envt. means market situation/ atmosphere
within which a business enterprise has to operate.
• According to Philip Kotler, “Company’s marketing
environment is made up of the sectors and forces
outside the firm’s marketing function which infringe
upon the ability of marketing management to
develop and maintain a successful relationship with
the firm’s target audience.”
• Marketing environment is the sum total of political,
economic, social, technological and other forces
which move around the business enterprise.
TYPES OF MARKETING ENVT.
• A firm is exposed to both external and internal
environments. The internal environment consists of
company’s resources such as production, finance,
HR, research and development, location and image.
External environment has two distinct components:
• Micro-environment: It affects a particular firm and
consists of Consumers, Marketing intermediaries
like Distributors, Wholesalers, Dealers, etc…
• Macro-environment: It affects all the firms and
include Demographic factors, Economic conditions,
Social, cultural , Political Legal ,Technology and
Ecological factors.
MARKETING ENVIRONMENT
MACRO-ENVIRONMENT

ECONOMIC CONDITIONS

MICRO-ENVIRONMENT
DEMOGRAPHIC
SUPPLIERS

SOCIAL & INTERNAL

CULTURAL ENVIRONMENT
FORCES COMPANY’S
RESOURCES –
PRODUCTION,
FINANCE, HR,
MARKETING
R&D, CONSUMERS
INTERMEDIARIES
LOCATION, POLITICAL &
IMAGE LEGAL
ECOLOGICAL FORCES
FACTORS COMPETITION

TECHNOLOGY
 IMPORTANCE OF
ENVIRONMENTAL ANALYSIS
• It creates an increased general awareness of
environmental changes on the part of management
• It guides with greater effectiveness in matters
relating to Government.
• It helps in Marketing Analysis
• It suggests improvements in diversification and
resource allocations
• It helps firms to identify and capitalize upon
opportunities rather than losing out to competitors.
 IMPORTANCE OF
ENVIRONMENTAL ANALYSIS
• It provides base of qualitative information about the
business environment that can subsequently be of
value in designing the strategies.
• It provides a continuing broad-based education for
executives in general, and the strategists in
particular.
 MARKETING MANAGEMENT &
ITS ENVIRONMENT
• It is sum of all the factors outside the control of a
company’s management, which can change & when
changing, carry with them sizable monetary impacts
on the markets for particular products and services.
• Management should first establish a programme for
consistently monitoring the market environment like
an early-warning radar system.
• Second strategies have to be developed for fulfilling
a growing need or ways to seize the opportunities
and avoid the threats.
 MARKETING MANAGEMENT &
ITS ENVIRONMENT
• According to William J. Stanton “Successful
marketing depends largely on a company’s ability to
manage its marketing programme within its
environmental framework.”
• The essential point is that the business organization
must constantly monitor its environment.
• The heart of the marketing system of a company is
its marketing-mix. Marketing Management evolves
the marketing mix in relation to its external
environment.
 MARKETING MANAGEMENT &
ITS ENVIRONMENT
• Hence, it must respond in time to changes in the
marketing environment and it must adopt intelligent
forecasting devices to anticipate the trend and
intensity of environmental changes.
MARKETING SYSTEM OPERATING
WITHIN DYNAMIC ENVIRONMENT
DYNAMIC ENVIRONMENTAL FORCES
EXTERNAL FACTORS UNCONTROLLABLE BY BUSINESS
ENTERPRISES: DEMOGRAPHIC, ECONOMIC, POLITICAL, SOCIAL, LEGAL, CULTURAL
AND TECHNOLOGICAL FORCES, ECOLOGY AND COMPETITION IN THE MARKET

MARKETING SYSTEM

MARKETING –
MIX OFFERED BY
SUPPLIERS MARKET THE MARKETING MARKET THE
MIDDLEMEN ORGANISATION TO MIDDLEMEN MARKET
THE MARKET
1. PRODUCT
SUPPLY SIDE OF THE 2. PRICE DEMAND SIDE OF THE
EXCHANGE 3. DISTRIBUTION EXCHANGE
4. PROMOTION

RESOURCES IN THE ENTERPRISE

(1) HUMAN RESOURCES (2) PRODUCTION (3) FINANCE (4) MACHINERY
EQUIPMENT (5) LOCATION (6) COMPANY IMAGE (7) RESEARCH AND
DEVELOPMENT

INTERNAL CONTROLLABLE VARIABLES OF THE MARKETING SYSTEM

 MACRO ENVIRONMENT
• External forces have considerable influence on
company’s marketing activities. They are
dynamic, ever-changing and are largely
uncontrollable by management.
3. Social &
1. 2. Economic
Cultural
Demography Environment
Environment

4. Political & 6. Ecology

5. Technology
Legal Forces (Nature)
 MACRO ENVIRONMENT
1. Demography

• Marketing Management is directly interested in

demography, i.e., scientific study of human
population and its distribution structure.
• Demographic analysis deals with quantitative
elements such as age, gender, education, occupation,
income, geographic concentration and dispersion,
urban and rural population, etc.
• Thus, demography offers consumer profile, which is
very necessary in market segmentation and
determination of target markets.
 MACRO ENVIRONMENT
1. Demography

• Quantitative aspect of consumer demand is provided

by demography, e.g., census of population, whereas
qualitative aspect of consumer demand such as
personality, attitudes, motivation, perception, etc., is
provided by behavioral analysis.
• Good demographic analysis combines several
factors such as population rate of growth or
decrease, income or economic power, life-cycle
analysis of consumer, occupation, education, and
geographic segmentation.
 MACRO ENVIRONMENT
1. Demography

• Both demographic and behavioral analyses enable

marketing executives to understand the bases of
market segmentation and to determine marketing
reaction to a new product or consumer reaction to an
advertising campaign.
 MACRO ENVIRONMENT
2. Economic Environment

• People constitute only one element of a market. The

second essential element of a market is purchasing
power and willingness to spend. Then only we have
effective demand.
• Hence, economic conditions play a significant role
in the marketing system. High economic growth
assures higher level of employment and income, and
this leads to marketing boom in many industries.
• Marketing plans/programmes are also influenced by
many other economic factors such as interest rates,
money supply, price level, consumer credit, etc.
 MACRO ENVIRONMENT
2. Economic Environment

• Higher interest rates adversely influence real-estate,

markets for consumer durables sold on installments.
• Exchange fluctuations, currency devaluation,
changes in political and legal set-up influence
international marketing.
• Economic conditions leading to recession can
influence product planning, price fixing, promotion
policies of a business enterprise. Energy crisis and
inflation are the two factors hindering accelerated
economic growth inspite of liberalization.
 MACRO ENVIRONMENT
3. Social & Cultural Environment

• Social class is determined by income, occupation,

location of residence of members. Broadly, we have
three social classes i.e., upper, middle and lower and
each class has its own standards with respect to
lifestyle, behavior, etc.
• Culture provides people with a sense of identify and
understanding of acceptable behavior in a society.
• Example: In our country, the younger generation is
moving ahead with the times, but the traditional
population is not comfortable with the
westernization of our culture
 MACRO ENVIRONMENT
3. Social & Cultural Environment

• There are three aspects of social and cultural

environment i.e.,
1. Changes in our life-styles and social values, e.g.,
changing role of women, emphasis on quality of
goods instead of quantity of goods, greater
preference to recreational activities and demand for
readymade food, beauty parlor, etc.,
2. Major social problems, e.g., concern for pollution
of our environment, socially responsible marketing
policies, need for safety in occupations and
products, etc.,
 MACRO ENVIRONMENT
3. Social & Cultural Environment

3. Consumerism is becoming increasingly important

to marketing decision process. Social environment
in many countries is responsible for emphasizing
social responsibility of business and customer-
oriented marketing approach. Marketers are now
called upon not only to deliver higher material
standard of living, but also assure quality of life, i.e.,
environment free from pollution.
 MACRO ENVIRONMENT
4. Political & Legal Forces

• Political & legal force gain considerable importance

in marketing activity & operation of business.
• Marketing systems are affected by government’s
monetary and fiscal policies, import-export policies,
customs duties. Legislation controlling physical
environment, e.g., anti-pollution laws also influence
marketing plans and policies.
• We have also legislation to control & regulate
monopoly & unfair trade practices in many
countries. Management cannot ignore legislation
regulating competition and protecting consumers.
 MACRO ENVIRONMENT
4. Political & Legal Forces

• Business enterprises may not be allowed to resort to

price discrimination, false & misleading advertising,
exclusive distributorship and agreements, deceptive
sales promotion devices, division of markets,
exclusion of competitors & other unfair practices.
• During last few years, several programmes like
Employment Guarantee Scheme, Gram Sadak
Yojana, have been taken up for development of rural
areas. While one may attribute some measures to
win votes, these initiatives have certainly led to
increase in income & opportunity for the marketers.
 MACRO ENVIRONMENT
5. Technology

• The evolution of global market by 2001 has been

due to the wonders of science and technology. It is
the driving force behind many new product
innovations and the development of many markets.
• The time between idea generation and
commercialisation is now considerably shortened
and a technological breakthrough can take place
within a few years now.
• Electronic industry is the best example of exploiting
new marketing opportunities. Digital watches killed
the marketing prospects of traditional watches.
 MACRO ENVIRONMENT
5. Technology

• Artificial fiber cloth has almost taken over the pure

cotton textile industries in many countries.
Television has adversely affected radio and cinema
industries.
 MACRO ENVIRONMENT
6. Ecology (Nature)

• Ecology, economic development & market economy

can go hand-in-hand. Sustainable development,
environmental protection can be integrated to assure
a healthy, peaceful, and productive life in harmony
with Nature, our Earth-Goddess.
• Environmental experts are vigorously advocating
the preservation and survival of our entire ecological
systems. It is said that pollution is an inevitable by-
product of high-consumption economic systems
prevalent in the advanced countries.
 MACRO ENVIRONMENT
6. Ecology (Nature)

• The marketing system of an enterprise has now to

satisfy not only the buyers of its products
(consumers/users) but also societal wants.
• Marketing Executives are expected to take measures
to conserve and allocate scarce resources properly.
Above all, they must show active interest in the
welfare of community life.
• Ecological crisis is a burning problem in the global
economy.
 MACRO ENVIRONMENT
6. Ecology (Nature)

• Fortunately marketers and business leaders of the

world have come together under the UNO and WTO
to bring about sustainable industrial and commercial
development free from dangers of pollution and
prevent further self-destructive and ruthless
exploitation of nature.
 MICRO ENVIRONMENT
• These are factors which are specific to the
business concerned and include Consumers,
Marketing intermediaries and Suppliers.

1. 2. Marketing
Consumers Intermediaries

3. Suppliers 4. Competition
 MICRO ENVIRONMENT
1. Consumers

• The wants, desires, preferences, expectations and

aspirations of consumers keep fluctuating.
Marketing system must respond to the customer
needs and desires in all aspects.
• Marketing policies, programmes and strategies are
planned, organized and executed with the main
objective of customer satisfaction and service.
• Today, marketing in the firm begins and also ends
with the customers. First, we have to identify
customers, i.e., our markets.
 MICRO ENVIRONMENT
1. Consumers

• Then, we develop our marketing programme in the

form of the appropriate marketing mix to reach our
customers, i.e., our target market.
• We offer our output of goods and services primarily
to secure continuous customer satisfaction. Repeat
sales are possible only on customer satisfaction.
 MICRO ENVIRONMENT
2. Marketing Intermediaries

• The wants, desires, preferences, expectations and

aspirations of consumers keep fluctuating.
Marketing system must respond to the customer
needs and desires in all aspects.
• Marketing policies, programmes and strategies are
planned, organized and executed with the main
objective of customer satisfaction and service.
• Today, marketing in the firm begins and also ends
with the customers. First, we have to identify
customers, i.e., our markets.
 MICRO ENVIRONMENT
2. Marketing Intermediaries

• Then, we develop our marketing programme in the

form of the appropriate marketing mix to reach our
customers, i.e., our target market.
• We offer our output of goods and services primarily
to secure continuous customer satisfaction. Repeat
sales are possible only on customer satisfaction.
 MICRO ENVIRONMENT
3. Suppliers

• The Company purchases raw materials from

vendors/suppliers and it has to ensure regular
supplies to maintain continuity of production.
Shortage of raw materials can affect production
volumes leading to low sales and low profits.
• Similarly increase in the prices of raw materials can
affect sales volumes and profits. Therefore,
suppliers play a major role in the profitable running
of an organization.
 MICRO ENVIRONMENT
4. Competition
• Although price competition is still present,
particularly in the retail market, non-price
competition is of paramount importance for the
manufacturer.
• The Marketing Manager has little or no control over
the actions of competitors. Competitors considerably
influence the company’s choice of marketing
strategies, particularly in relation to selection of
target markets, suppliers, marketing channels as well
as in relation to its product-mix, price-mix and
promotion-mix.
 MICRO ENVIRONMENT
4. Competition
• Marketing strategy is itself a plan to fight against
competition and to win over the competition.
Examples: The paging industry has been almost
wiped out by cellular companies offering short
messaging service. Typewriters have become
obsolete with the introduction of computers.
 INTERNAL ENVIRONMENT
• The marketing efforts are also influenced by internal
forces that are controllable by the management.
These forces include Production, Finance, HR,
Research and Development, Company location,
Company image and marketing-mix components of
product, price, promotion and distribution.
• Example: A Company wants to increase sales
volumes by extending the marketing activities to new
geographical areas. It has to consider human
resources requirements like number and type of
sales people required to cover the new markets.
 CONCLUSION
• The business enterprise is an open adaptive system
with its own environment.
• It has interaction/interdependence with economic,
social, political, legal, technological , cultural forces.
• The market place, place where buying & selling
takes place with help of money and intermediaries,
also exists in the external environment.
• The main forces operating to create the need for new
responses from the firm are: changing customer
demand, changing competition, changing
technology, changing economic & legal policies of
Governments, & changing social &cultural trends.
THANK YOU!!!