Segmentation Variables for Industrial Market

The market of industrial products is called industrial market. In other word, the total demand made by industrial users is industrial market. The goods used in industrial purpose are industrial goods. Raw materials, equipment, installation (big machines), operating supplies etc. are industrial goods. In industrial market, goods are purchased with the purpose of business use, or resale
produce new goods. The industrial purchaser is fully knowledgeable about the goods. Although the number of industrial customers may be small, they demand big quantity. Industrial market should be segmented on the basis of four variables. They are related to geographic, demographic, operational and purchasing variables.
The components for Industrial Market Segmentation

1. Geographic variables

Area, climate, topography etc. are included in geographic variables.
  1. Area: On the basis of geographic area, industrial market can be divided into four segments as local, national, regional and international.
  2. Climate: On the basis of climate, industrial market can be divided into three segments as tropical, temperate and alpine.
  3. Topography: On the basis of topography, industrial market can be segmented as Himali market, hilly market, Terai market, rural market, sub-urban market, fully urban market etc.
Tips
Geographic segmentation for industrial market
Variables
Typical market segments
- Area                  
- Climate
- Topography
Local, National, Regional, International              
Tropical, Temperate, Alpine
Himali, Hilly, Terai, Rural, Sub-urban, Urban

2. Demographic variables

Industrial market can be segmented on the basis of demographic variables such as type, size etc. of the business firm.

  1. Types of business: Different types of industries and organizations (customers) operate in industrial market. They are agriculture, construction, mining, manufacturing, finance, insurance, services, govt. organization etc. Such industries and organizations need distinct marketing mix. So, industrial market can be segmented on the basis of different types of business to satisfy all the types of customers.
  2. Size of business: Different sizes of business organization (customers) operate in industrial market. It (size of business) can be used as the variable of industrial market segmentation. On this basis, industrial market can be segmented as follows:
    1. Very small customers (footpath vendors)
    2. Small customers (small and cottage industries)
    3. Medium customers (medium size industries)
    4. Large customers (big industries)
    5. Very large customers (government bodies)

Tips
Demographic segmentation for industrial market
Variables
Typical market segments
- Types of business                  




- Size of business
Agriculture, Construction, Mining,
Manufacturing, Finance, Insurance, Services,
Government Organization            
Tropical, Temperate, Alpine
Himali, Hilly, Terai, Rural, Sub-urban, Urban
Very small, small, Medium, Large, very large

3. Operating variables

Technology, requirements of service, usage, rate etc. are the main operating variables.

  1. Technology: Technology can also be used in segmenting industrial market. The variables like, labor incentive technology, capital incentive technology, automatic ultramodern technology and computer technology should be considered while segmenting industrial market on the basis of technology.
  2. Requirement of services: Industrial users require different types of services. Marketing mix becomes effective if the market is segmented by identifying such requirements of the services. The main variables of market segmentation on the basis of requirement of services are warranty of products, machinery installation, machinery repair service etc. after sale.
  3. Usage rate: Usage rate of industrial goods differs according to customers. Usage rate affects continuity and quantity of purchase of goods. So, marketing mix should be fixed considering this fact. The main variables of segmentation of industrial market are heavy users, medium users, light users, non-users etc.
Tips
Operating segmentation for industrial market
Variables
Typical market segments
- Technology


- Requirement of services    
- Usage rate
Labor incentive, Capital incentive
Automatic ultra modern technology,
Computer technology    
Warranties, Installation, Repair, After service sale       
Heavy users, Medium users, Light users, Non users

4. Purchase related variables

Purchase organizations, purchase procedures and methods negotiation period, contract duration etc. are purchase related variables.

  1. Purchase organizations: Purchase may be different according to the size and nature of business organization. Some organizations give all purchasing responsibility to a certain individual; some give this responsibility to purchase committee or department. It becomes easy to sell goods to single individual but it becomes difficult to sell goods to purchase committee or department. So, effective marketing mix should be made by segmenting industrial market.
  2. Purchase procedures and methods: Purchasing procedures differ according to business organization. Some purchase goods through contract, some others purchase through tender. Similarly, purchase methods also differ according to organization. Some organizations adopt centralized purchase methods and others decentralized methods. So, industrial market should be segmented on the basis of purchasing procedures and methods.
  3. Negotiation period: Industrial market can be segmented on the basis of negotiation period. Many persons involve in taking decisions on purchase negotiation to purchase some goods and few person take decisions for some other goods. If many individuals need to be involved in taking decision on purchase negotiation, such negotiation period becomes long. Otherwise the period of purchase negotiation becomes short. Negotiation period of some goods may be years long.

Tips
Purchase-related segmentation for industrial market
Variables
Typical market segments
- Purchase organization            
- Purchase procedures and methods

- Negotiation
Individual, Purchase Committee, Purchase department      
Negotiation, Tender, Quotation, Centralization Purchase,
Decentralization Purchase
Short, Long

Segmentation Variables for Consumer Markets

The market of consumer goods is called consumer market. In other word, the total demand of final consumers is consumer market. The goods, which are used by family, family members of persons, are consumer goods. Foodstuff, clothes, radio, television, etc. are consumer goods. The market of these very things is called consumer market. Religion, education, age, purchasing power, gender, race and caste,
occupation, urbanization, purchasing purpose, etc. directly affect consumer market. So, a business organization should study and analyze such aspects of customers for business success. Consumer market can be segmented on the basis of the four major variables. They are geographic variables, demographic variables, psychographic variables and behavioral variables.
Variables of Consumer Market Segmentation

1. Geographic variables

Consumer market can be segmented on the basis of different geographic variables. Region, density, climate, city size, etc. are the geographical variables of market segmentation.
  1. Region: Consumer market can be classified on the basis of geographic region. If the market is worldwide, it can be segmented as Pacific, Mountain, West, East, Central, South Asian, South Atlantic, Middle Atlantic etc. Suppose, consumer market is all over Nepal, it can be segmented as Himalayan Region, Hilly Region and Terai Region etc. Similarly, it can be segmented on the basis of Development region as Far Western, Mid-Western, Western, Central and Eastern regions. If the consumer market is to be segmented into further smaller segments, it can be divided on the basis of fourteen zones and seventy-five districts.
  2. Density: Here density means population density. Population density means certain number of people living in certain land area. Population density is determined by calculating the number of people living in one square kilometer land are. Population density becomes high in cities but low in villages. Market can be divided into three segments as fully urban area, suburban area and rural area.
  3. Climate: Consumer market can be segmented on the basis of climate. While segmenting market on the basis of climate, the world consumer market can be segmented as Southern and Northern regions. On the basis of climate, Nepal’s consumer market can be segmented in three parts as Himalayan, Hilly and Terai regions.
  4. City size: The consumer market can be segmented on the basis of the size of city. Some cities are very big and some are small. For example: the city having less than one hundred thousand population, city having one hundred thousand to two hundred thousand population, the city having two hundred thousand to four hundred thousand population, city having more than four hundred thousand population etc. So, consumer market in cities can be segmented on the basis of the size of population.
Tips
Geographic segmentation for consumer market
VariablesTypical Market Segments
- Region
- Density
- Climate
- City Size





Himali, Pahadi, Terai
Urban, Suburban, Rural
Northern, Southern
Under 100,000
100,000 - 200,000
200,000 - 300,000
300,000 - 400,000
Over 400,000

2) Demographic variables

Religion, education, income, age, gender, occupation, social class, family size, family life cycle, caste background, etc. are the demographic variables for market segmentation. As these variables can be easily measured, demographic variables are found to be popular in market segmentation.

  1. Religion: As religion, living style, fashion, food, purchasing behavior, become different, the total consumer market can be segmented accordingly. In Nepal, there are Hindu, Buddha, Muslim, and other religious people. According to 1991 census, they are 86%, 8%, 4% and 2% respectively. On the basis of religion, the worldwide consumer market can be divided as Catholic, Protestant, Jewish etc.
  2. Education: Education affects customers’ purchasing behavior, necessity, priority etc. On the basis of education, market can be segmented as grade school or less, some high school, high school graduates, some college, college graduates etc. On the basis market can also be segmented into two classes as educated and uneducated. About only half of the Nepal’s population is literate.
  3. Income: Customers’ income affects their purchasing power. More income creates more purchasing power and less income less purchasing power. On the basis of income, consumers’ market can be segmented into high income, middle income and low income.
  4. Age: Market can also be segmented on the basis of age. Customers are of different age groups. Their interest becomes different according to age. Small children like dolls, teenagers like goods of modern fashion. Adults and old like long lasting and gentle looking goods. On the basis of age, consumers’ market can be segmented as children’s market, teenagers’ market, adult and elders’ market etc.
  5. Gender: On the basis of gender, the total consumer market can be segmented into two as male and female. Clothes/garments, ornaments, cosmetics, shoes, papers, etc. are found segmented on the basis of gender.
  6. Occupation: People’s needs, wants, spending habit etc. become different according to their occupation. So, consumer market can be segmented into professional and technical managers, officials, proprietors, clerical, farmers, foremen, craftsmen etc.
  7. Social class: Different class people live in society. Their purchasing power, purchasing behavior, purchasing purposes, etc. are different. So, consumer market can be segmented on the basis of social classes. On this basis, market can be divided as high class, middle class and low class.
  8. Family size: family size also can be used for market segmentation. Family size affects types, volume of foodstuff and domestic goods and their use. So, market can be segmented on the basis of family size. In Nepal, most of the families are found living in joint family. We can find six members in a family on average.
  9. Family life cycle: Life cycle of family goes through different conditions. As family li8fe cycle directly affects market, it is also used for market segmentation. Number of family member becomes different according to the change of time. A young man marries and gradually gets children. The children become young and they marry and get children. As a result, the family gets on bigger and bigger. Then they leave their home for job, study etc. So, consumer market can be segmented on the basis of young, single, married couple with no children, married couple with child or children, married couple with no children living with them, elder single etc.
  10. Ethnic background: Living style, fashion, food, custom, spending habit etc. become different according to ethnic background. Their needs and wants also become different. So, ethnic background can be used for market segmentation. On this basis, market can be segmented as African, “American, Asian, European etc.

3. Psychographic variables

Lifestyle, personality and purchasing purpose are included in psychographic variables.

  1. Life style: Activities, interest, thoughts, habit etc. as a whole is called life style of the people. The way the consumers pass their time is activity. The areas of hobbies are their interest. Besides what and how they think about themselves, society and social issues are their thoughts. Lifestyles of people are different. Some are achievers and some others believers. Similarly, some are strivers. So, consumer market should be segmented on the basis of lifestyle of the people for marketing mix according to their lifestyle. Research should be carried out to study consumers’ life style. Profile should be prepared according to their lifestyle and consumers’ market should be segmented on the basis of the profile.
  2. Personality: The quality, ability and character of a person as a whole is called personality. For vehicles, cosmetics, television, garments, cigarette, alcohol etc. can be segmented on the basis of consumers’ personality. Producers produce such goods according to the personality of the consumers. Different consumers of different personality such as independent, dependent, self-dependent, ambitious, authoritarian etc. can be found in societies. So, market should be segmented accordingly.
  3. Buying motives: Consumers buy goods to fulfil their certain motive. Some consumers buy goods with ration motive, some buy with emotional motive, some others buy with ego-related motive. The consumers who buy goods with rational motive consider about components life price, quality, simplicity etc. of the goods. Those who buy goods with emotional motive consider about the variables like love, interest, hobby, imitation, gratitude etc. Those who buy goods with ego-related motive consider the variables like dignity, respect, high class life etc. So, a marketing expert should divide consumers’ market in different segments having the components analyzed influencing buying motive.

4. Behavioral variables

Benefit, purchasing occasion, users’ status, usage rate, loyalty status, attitude towards product etc. are behavioral variable. Such variables can also be used in segmenting consumer market.

  1. Benefits: Consumers expect different kinds of benefits from goods. Such benefits can be taken from quality, service, economy etc. So, consumer market can be segmented on the basis of these variables.
  2. Purchase occasion: Purchase occasion also affects purchasing and use of goods. So, these variables should also be used in market segmentation. For example, regular purchase occasion market segment, special purchase occasion market segment etc.
  3. Users’ status: Consumer market can be segmented in non-users, ex-users, potential users, first time users, regular users etc. Non-users’ group includes those who have not used the products. Ex-users’ group includes those who have already used the products but used yet but can use the product in future. The first time users group includes those who have not used the product before but are using for the first time, and the regular users’ group includes those who used the product regularly.
  4. Usage rate: Usage rate of product differs according to the using habit of consumers. Consumer market can be segmented in three groups like light users, medium users, heavy users. The purchasing percent of heavy users becomes high. So, business firms are attracted towards heavy users and inspire light users to increase usage rate.
  5. Loyalty status: Market can be segmented on the basis of the consumers’ loyalty to the brand of the products. The consumers become loyal to the brand, store and company. Market can be segmented on the basis of the extent how much they are loyal to the brand of the products. If they are fully loyal to the brand, they always buy the products of the same brand which they like much. But, if they are not so loyal to the brand of the product, they buy other products with different brand. Similarly, if the consumers are not loyal to the products, they may buy andy other products with any brand. They become uninterested to buy and brand of the goods.
  6. Attitude towards product: Customers’ attitude towards the products also can be used in market segmentation. The attitude of the customer towards the products may be enthusiastic, positive, indifferent, negative, and hostile.

Meaning of Market Segmentation

Meaning of Market Segmentation

The process of exchanging goods or services is called market. There may be different kinds of customers in market. Only one type of firm cannot fulfil/meet all the needs of all customers. So, a firm should classify the market on different basis and identify target market, the same is called market segmentation. Consumer markets can be segmented on geographic and demographic levels, population, psychographic and behavioral basis. Similarly, industrial market can be segmented on the basis of geographic, demographic, operation and purchasing system. Customers may be of different types according to their need, want, interest, buying purpose, buying habit, age, gender, education, religion, income level, and place. So, market segmentation should be made deeply studying and analyzing such factors.

While segmenting market, very practical strategy should be formed. The characteristics of the customers of segmented market should be similar while segmenting the total market. For instance, on the basis of income level, market can be segmented in three categories such a slow income level, middle income level and high income level. On the basis of age, market can be segmented in four categories such as children’s market, teenagers’ market, youths’ market, elders’ market. Similarly, on the basis of gender, market can be segmented in two categories like females’ market and males’ market. Generally, the character of same income level customers becomes same. Similarly, the character of same aged customers becomes the same. Generally, the character of the customers of the same segmentation becomes same even segmented on other basis.

While segmenting the total market, it becomes easy to make market strategy as the needs, wants, interest and other characteristics of the customers become almost same. The nature and features of goods should be considered in segmenting market. Same basis of segmentation cannot be fit for all types of goods. Let’s take an example to make it clearer, if an automobile manufacturing company has not adopted market segmentation policy, it becomes appropriate to segment market on the basis of low income level, middle income level and high income level but not on the basis of education, age, gender, religion etc.

All types of customers can be supplied with different quality and types of automobiles of different prices by segmenting the market in this way. High quality, middle quality and low quality vehicles of high price, middle price and low price respectively can be supplied to the customers having high, middle and low income customers. All the three or two or only one types of customers can be targeted and manufactured automobiles accordingly. Different experts, writers and scholars have defined market segmentation; important ones have been given as follows:

According to William J. Stanton, Michael J. Etzel and Bruce J. Walker, “Market segmentation is a process of dividing the total market for a goods or services into several smaller groups, such as that the members of each group are similar with respect to the factors that influence demand.”

According to Prof. Philip Kotler, “Market segmentation is the act of identifying and profiling distinct group of buyers who might require separate product and/or marketing mixes.”

According to Ronald W. Hasty and W. R. Ted, “Segmenting markets simply divides the heterogeneous mass market into groups each of which has one or more homogeneous characteristics.”

According to Prof. E. Jerome McCarthy, “Market segmentation is naming broad product markets and segmenting these broad product markets in order to select target market and develop suitable marketing mixes.”

In conclusion, the process of dividing total market into several small parts on the basis of customers’ need, want, buying purpose, buying habit, age, education, gender, religion, income, place etc. is called market segmentation. Market segmentation is made in a way that, generally, the characteristics of all the customers within same segmentation are similar. As it is difficult to satisfy all types of customers by a firm, it should identify target markets by making market segmentation and should develop proper marketing mix. Market segmentation is customer oriented mission, in which total market is divided into several parts of same characteristics by identifying customers’ needs or wants to supply them with their demands.

Requirements of Market Segmentation

Market segmentation is a consumer oriented mission. This mission supplies goods or services to satisfy wants and needs of customers of the target market in order to achieve organizational goal. Same basis of market segmentation for different products cannot be appropriate. The necessary components for market segmentation are as follows:
The requirements of Market Segmentation

1) Divisible 

Market should be made divisible for market segmentation. Market should be divided on the basis of purchasing power, purchasing purpose, purchasing habit, lifestyle, living style, gender, religion, place etc. While dividing market, the customers having same wants and character should be grouped. Doing so, it becomes easy to form marketing mix strategy. If the total market is not easy to divide and has no characters, adopting market segmentation policy becomes impossible.

2) Measurable

Customers’ wants, purchasing power and characteristics should be measurable. Besides, the information necessary for market segmentation also should be easily available. Customers’ income, age, gender etc. can be easily available. Customers’ income, age, gender etc. can be easily obtained and measurable. But beliefs, perception and attitude of the customers cannot be measured. So, market segmentation should not be made on the basis of the components which cannot be measured because true information cannot be obtained from it. As a result, it becomes difficult to make marketing mix.

3) Accessible

Market segmentation should be made in a way that it becomes easy to reach there and provide effective services. Market segmentation should be made in a way that marketing activities such as distribution, advertisement media, selling efforts etc. can reach there easily. If market segmentation is made beyond the access, it becomes difficult to reach there, provide goods or services and market segmentation becomes ineffective. So, these factors should be well though and considered while segmenting market.

4) Substantial

Profit components should not be missed while segmenting market. If profit cannot be earned from providing goods or services to the customers, a business firm cannot make sustainable development. The main purpose of market segmentation by identifying target market is to earn profit. So, market should be segmented so that profit can be clearly seen. For this, market segments should be sufficient and satisfactory. If the market segment is small, it becomes difficult to earn profit.

5) Actionable

The other important requirement of market segmentation is action ability. A business organization should be able to implement its policy and programs to attract targeted market segment and provide services. So, market segmentation should be made considering the human, physical and financial resources of a firm so that it can be easily implemented. If actions cannot be carried out due to the lack of human, physical and financial capacity, the market segmentation becomes ineffective.

Benefits of Market Segmentation

Dividing total market into small parts or segments is called market segmentation. Market segmentation is a customer oriented concept. It makes easy to identify target market and make marketing plans and programs. Market segmentation plays an important role in identifying market opportunities, effectively using market resources, evaluating competitors, making strategic plans, specializing market, making effective marketing mix and making business organizations adoptable to the environment. The benefit of market segmentation can be presented in the following figure:
Benefits of Market Segmentation

1) Identification of market opportunities

To be able to identify market opportunities is an important aspect of market segmentation. Size, development and wants of each segment can be analyzed by dividing total market in several segments. Besides, characters of the customers of each segment and possible profit also can be analyzed by segmenting the market. Market opportunities can be identified from such analysis. More profitable market segment can be chosen leaving aside the less profitable one. As a result, the business firm becomes able to achieve its goal. The joint venture commercial banks operating in Nepal want to conduct their activities in only profitable city areas. They are not willing to open their branches and operate in less profitable rural areas.

2) Effective use of marketing resources

The other important aspect of market segmentation is to be able to use marketing resources effectively. Marketing resources can be effectively used by using separate marketing mixes for each segment. Goods or services can be produced according to the demand of market segment. Price of goods or services can be fixed according to the purchasing power of the customers of each segment. Promotional activities also can be conducted according to the market segment. Proper distribution channel can be selected according to the demand and wants of segment. If market is not segmented, it becomes difficult to produce suitable goods or services to all segments, fix price, conduct promotional activities and select distribution channel.

3) Evaluation of competitors

The other important aspect of market segmentation is successful evaluation of competitors. It is necessary to get all information about competitors’ situation of each segment from market segmentation. Their weak and strong aspects can be identified through their evaluation. True information about competitors’ strategy and marketing mix can be obtained. Business success can be achieved by identifying weak aspects of competitors.

4) Strategic planning

The other important aspect of market segmentation is to help in making effective strategic plans. Strategic plans can be made for each market segment by segmenting market. Information about number of customers, purchasing behavior of customers, their purchasing power and purchasing purpose should be obtained for making strategic plans. Along with this, it is also necessary to get knowledge about the market strategies of competitors. If a detail study is carried out of market segment by segmenting market, information about all these matters can be acquired. Appropriate strategic plans for each segment can be made on the basis of this information.

5) Market specialization

Market segmentation also helps in market specialization. Total market becomes vast. In vast market, it becomes difficult to specialize market by analyzing customers. So, a business organization should divide total market in different segments, specialize market by studying and analyzing the customers of each segment and can specialize market adjusting with marketing mix to satisfy the customers.

6) Effective marketing mix

The other important aspect of market segmentation is to be possible for effective marketing mix. True information about customers’ interest, their habit, custom, purchasing power, purchases behavior, buying motives etc. can be acquired from market segmentation. Proper marketing mix can be prepared for each market segment on the basis of such information and can be implemented effectively. Besides this, marketing mix can be changed according to necessity and time.

7) Environmental adaptation

Environment is an important component to affect any business organization. If environment is made favorable to the organization, business success can be easily achieved. Environmental components of small segments also can be identified through market segmentation. The quick changing environment can be anticipated. As a result, business organization can be made adaptable to the environment by marketing mix.

Meaning and Concepts of Market

Market is the English word. It was derived from the Latin word ‘Marcatus’. In Latin, its meaning is ‘buying and selling place’. If it is defined with this meaning, market means a place where selling and buying goods or services is done. But this definition is narrow. This view cannot define the word ‘market’ in a broad term the word ‘market’ does not mean only the place of selling and buying goods or
services; it also means selling and buying the process. Such process may not be only directly but also takes place indirectly. In direct process the customer and seller may talk and bargain directly and sell and buy goods or services but in indirect process they can sell and buy by talking or bargaining through telephone, fax, e-mail, internet, correspondence etc. It is clear that market is not only the place where selling and buying of goods is done, it is also a process of exchange. In this process, consumers demand goods or services after the sellers make flow of goods to markets. The seller hand over goods to consumers and consumers pay for the goods or services accordingly. Finally the buyers give feedback.

Market is a process of exchange, in which the producers and sellers make flow of goods or services in market. Buyers/consumers demand for goods or services on the basis of their flow in market. The process of selling and buying between sellers and buyers takes place, which is called market. After buying goods or services, buyers show reaction which may be of dissatisfaction or satisfaction. Such reaction is called feedback. To make much clearer about market, it is necessary to study its concepts, they are as follows:
Concepts of Market

1. Place concept

According to place concept of market, market is the physical place where buyers assemble for buying goods or services and sellers assemble for selling goods or services. In other words, the easy place where buyers to buy goods or services and sellers to sell meet together is called market. Giving his concept about place William J. Stanton has defined market as, “Market may be defined as a place where buyers and sellers meet, goods or services are offered for sale, and transfer of ownership occurs.”

But the place concept of market has not defined it in a broad term. So, this has narrowed the market. So, this concept has not become universally acceptable.

2. Commodity concept

According to commodity concept, the activity of selling and buying goods or services is called market. Goods or services are put in market for sale. Sellers sell and buyers buy goods or services for their mutual interest. The economist Chapman has defined market as, “The term market refers not only to place but also to a commodity or commodities and buyers and sellers and they should be in direct competition with one another.”

Hence, the activity of selling and buying goods or services is called market.

3. Area concept

According to area concept of market, the meaning of market is the whole area where sellers and buyers make exchanges directly or indirectly (without direct contact or using modern means of communication) in free and open manner. The modern communication means are letters, e-mail, fax, telephone, internet etc. Area may be large or small. Market of some goods may be a small place or nationwide or worldwide. The economist Benhaim has defined area concept of market as, “A market as any area over which buyers and sellers are in such close touch with one another, either directly or through dealers, that the price obtainable in one part of the market affects the prices paid in other parts.” Similarly, Philip Kotler has defined it as, “Market is an area of potential exchanges, that is, a group of buyers and sellers interested in negotiating the terms of purchases and sales of goods and services.”

So, an area where sellers sell and buyers buy goods or services in free and frank ways is called market. Market area may be limited or vast.

4. Demand concept

According to demand concept of market, the total amount of actual and potential buyers for goods or services is market concept. As it is to fulfil the unlimited needs and wants through limited means, buyers buy only necessary goods or services. After one need or want has been satisfied/fulfilled, another want/need appears. This incessant process keeps on increasing. Today’s very popular thing may be unpopular tomorrow. Its demand may decrease to zero. So, market depends on consumers’ demand. American Marketing Association has defined market as, “A market is the aggregate demand of the potential buyers for a product or services.”

So, according to demand concept, the total or aggregate demand of consumers for goods or services is called market.

5. Exchange concept

According to exchange concept, the process of selling and buying goods or services in a free manner between seller and buyer is called market. The exchange between goods or services of seller and money or credit instruments of buyer is called real market. Such market should be conducted freely and independently and competitive price should be fixed.
The Market or Exchange

6. Space concept

Space concept is new concept of market. It is based on internet. Producers or sellers put valuable information about their goods and services. Customers can select needed goods and services searching internet. Buyers and sellers need not come together. But it needs telephone computer and internet for communication.

Features of Market

The features of market are as follows:

1. Commodity

Commodity is the center point of market. Commodity includes the things having physical shape and existence and services having no physical shape or existence and services having no physical shape or existence. Exchange cannot take place without commodity and market cannot exist without exchange. So, goods or commodity is very necessary component for market. There may be different types of market according to the nature of commodity. For instance, consumer goods market, industrial goods market etc.

2. Price

Price is the measurement of goods or services. It expresses intrinsic quality of goods or services. Not any goods or services. Not any goods or services can be sold or bought without price. Buyers can take ownership of goods or services by paying price. So, market is impossible without price. The price of goods or services should be stable. There are various methods of fixing prices. Prices of goods or services should be properly fixed by considering the nature of goods cost and market communication.

3. Buyers and sellers

Dealing between buyer and seller is market. So, market cannot exist without them. Buyers buy goods or services and sellers sell them. Dealing between sellers and buyers may be directly or indirectly. Sellers and buyers are suppliers and demanders respectively. Market becomes complete by demand and supply.

4. Area

The other important feature of market is area. The word ‘market’ does not denote only a certain place, it refers to the whole area of exchange where selling and buying of goods or services is completed with direct or indirect contact between sellers and buyers. Such dealing is freely and independently takes place without any external pressure or compulsion. The area of exchange may be limited or extensive.

Types of Market

There are various types of market. Scholars, experts and writers have classified market in different types. Here, market has been classified on the basis of geographical area, time, volume, control, delivery of goods or services, competition and nature of goods for easy study.

1. On the basis of geographical area

On the basis of geographical area, market can be classified into four types as follows:
  • Local market: If goods or services are sold and bought in small area, it is called local market. In such market, the sellers and buyers perform exchanges mostly with direct contact. The markets of perishable goods like fruits, fish, vegetables, milk etc. are local markets. It has also become possible to expand markets of perishable goods to regional and national levels due to development of fast means of transport and cold stores.
  • Regional market: The market which occupies a large area compared to local market is called regional market. Suppose, market of some goods or services has covered only the central region, such market is called regional market. For example, Shree Distillery has been supplying its products in plastic bags in only the Central Development Region of Nepal. So, the market of Shree Distillery is regional market.
  • National market: National market is also called domestic market. If the market of goods or services has expanded nationwide, such market is called national market. Nationwide selling and buying of goods or services takes place in national market. Nebico Biscuit, Wai-Wai Noodles, Mechi Tea etc. are bought and sold all over Nepal. So, the market of these goods is called national market.
  • World market: World market is also called international market. Such market covers the whole world. If goods or services are sold and bought all over the world, it is called world or international market. Toyota, Fait, Gulf Oil etc. have covered the world. They are sold and bought all around the world. So, it is an international market.

2. On the basis of time

On the basis of time market can be classified in the four types as follows:
  • Very short market: The market where supply of goods or services is stable is called very short market. In such market, even a very little time cannot be found to increase volume of goods or services according to the increase of demand. Or supply cannot be increased. Mostly, market of perishable goods becomes very short. For example, the market of fruits, vegetables, mushroom, fish, meat, milk etc. become very short. Generally, demand affects price in such market. If demand increases, price goes high and if demand decreases price comes down.
  • Short period market: Short period market remains longer than very short time market, during which supply volume can be increased to meet the demand through maximum mobilization and utilization of machineries, means and resources. But resources, means and machineries cannot be added. In such market also demand of goods affects price.
  • Long period market: A lot of time can be found to increase volume of goods according to demands in such market. Production of goods or services can be increased by adding machineries, resources and means. Goods or services can be supplied to meet demands whatever greater it may be. So, in such market price is fixed according to rule of demand and supply. But in this market, new wants and needs of customers cannot be satisfied by adding new technology.
  • Very long period market: In a very long period market, any firm or company gets a long time that within which it can produce a lot of goods or services according to the interest, fashion, needs and wants of the customers. The firm studies and researches markets, identifies demands, develops new technology and supplies its products to the markets.

3. On the basis of volume of business

  • Wholesale market: The place where sellers buy goods from producers and sell them to retailers is called wholesale market. In wholesale market, a large amount of goods are dealt in. as little amount of goods is not sold in wholesale market, goods are not sold to the ultimate consumers. The wholesale price of goods becomes less than retail price.
  • Retail market: The market in which sellers buy goods from wholesalers and sell them in little amount to ultimate consumers is called retail market. In other words, the function of the retailer is retail market. In such market, the retailers have direct contact with consumers.

4. On the basis of control

On the basis of control, market can be classified into two types as follows:
  • Regulated market: The market controlled by rules and regulations by Trade association and government over the production, quality, features, marketing, price etc. of goods or services is called regulated market. In such market, the quality of goods becomes high, no immoral activities are done and the price becomes reasonable. So, such market is taken as reasonable and fair market. The uncontrolled tendency and immorality cannot spread in such market.
  • Unregulated market: The market where the government and trade association have no control is called unregulated market. In such market, firms or companies become free to fix quality, features price, marketing of their goods or services. Generally, price is fixed on the basis of the law of demand and supply. Quality of goods and features depends on competition.

5. On the basis of delivery

On the basis of delivery market can be classified into two types as follows:
  • Spot market: The market where delivery of goods and payment takes place immediately after agreement between seller and buyer is called spot market. In such market selling, buying and paying price take place at a time.
  • Future market: If an agreement or contract is signed at present for selling and buying any goods or services at any certain time in future, such market is called future market. Payment of price and delivery of goods take place in future in such market. Conditions of payment of price, discount, commission, delivery etc. are fixed in the agreement or contract.

6. On the basis of competition

On the basis of competition market can be classified in the following three types:
  • Perfect market: The market where a large number of sellers and buyers throng in, same types of goods are found in large quantity and price is fixed on the basis of interactions of demands and supply is called perfect market. In such market, there should be freedom of entrance and abdication for business firm. The buyers and sellers should have knowledge about goods or services. Generally perfect market cannot be found in practice.
  • Imperfect market: The imperfect market is the market which is neither perfect nor monopoly market. It is middle way market. It has neither the features of monopoly market nor perfect market. The sellers and buyers may or may not have complete knowledge about goods or services. Different types of goods can be found in such market. Same types of goods or services may be sold at different prices and different customers at same place/shops. Generally, such markets are found in practice.
  • Monopoly market: The market where there is full control on supply of goods or services is called monopoly market. In monopoly market there remains only one producer and price is fixed by the producer himself. The price is not fixed on the basis of demand and supply in such market. The examples of monopoly market are electricity, drinking water, fuel/petroleum, rail transport, etc. in Nepal.

7. On the basis of nature of products

Market can be classified into two types on the basis of nature of goods or services as follows:
  • Commodity market: The market where selling and buying of customer and industrial goods takes place is called commodity market. For example: the market of fruit, food stuffs, machineries, different equipment, furniture etc. is commodity market.
  • Financial market: The market of money and financial equipment is called financial market. In this market, money, share, debenture, treasury bill, commercial paper etc. are dealt. The dealing of short term fund is called money market and dealing of long term fund is called capital market.

Marketing Environment in Nepal and Its Impact on Marketing Activities

Marketing Environment in Nepal

Economic, political-legal, socio-cultural and technological factors are the major elements of marketing environment in Nepal. These elements directly and indirectly affect marketing activities. The environmental elements and sub elements of marketing are given in the following figure:
Environmental elements of marketing in Nepal

a) Political-legal environment

Political and legal environment of Nepal is changing according to time. The changed political and legal environment can be explained in the following points:

i) Political parties: Politics of a country directly affects marketing. Multiparty democratic system came in Nepal as a result of the people’s movement in 2046 B.S. Political parties came upper-ground and some new political parties came into existence. Economic thought and policy of political parties directly affect the country’s economy. There are mainly three types of economic thoughts and policies of Nepal’s political parties. They are capitalist economic thought, socialist economic thought and mix economic thought.

CPN (UML), Nepali Congress, National Democratic Party, Nepal Sadbhavana Party, United People’s Front, Nepal Worker and Peasant Party etc. are the main political parties of Nepal. Nepali Congress appeared as the largest party in the general election in 2046 B.S. and CPN (UML) appeared as the largest party in the mid-term election held in 2051 B.S. Both of these parties have adopted mixed economic system as their economic policy.

ii) Administrative policy: Administrative policy is another important element of political-legal environment. As the administrative policy affects whole marketing activities of a country, marketing managers should be well-informed about administrative policy. His majesty’s government has adopted the policy to strengthen administrative organizations, make effective instruction and training programs, bring coordination among different organizations, make all levels participate through decentralization and delegation of authority, simplify decision making process, activate the role of administrative court, adopt special and rigid policy for corruption control, create high level manpower, regularize and strengthen monitoring system etc. Administration becomes strong, transparent and healthy through such policies.

iii) Legal provision: The other important element of political-legal environment is legal provision. Legal provisions directly affect marketing. Positive provisions positively affect marketing; negative provisions affect negatively. Arrangement of different Laws and Acts are made to regularize and control business and industry. His majesty’s government has made arrangement to exempt cottage industry from excise-duty and income tax, to exempt other production oriented industries such as cigarette, bidi, alcohol, beer, plastics, vegetable ghee, electric goods, fuel producing, agricultural and forest resources and mines industries, etc. from income tax for five years after they start production. HMG prepares necessary infrastructures for industries and business. Such provisions positively affect development of industry and business. Import and Export Act, Nepal Agency Act, Private Firm Registration Act, Partnership Act, Company Act, Patent Act, Design and Trademark Act, Nepal Mine Act, Nepal Hotel Management and Alcohol Sale Control Act, Bonus Act, Black Market and Other Social Crime Control and Punishment Act, Tourism Act, Customs Act, Income Tax Act, Property Tax Act, Sale Tax Act, Contract Act, Value Added Tax Act, Labor Act, Foreign Investment and Technology Act, Industrial Business Act etc. become subjects of concern for managers. So, they should be knowledgeable about such acts.

iv) Constitution: Constitution is the major element of political-legal environment. Economic policy of a country should be clearly defined by constitution. The Constitution of the Kingdom of Nepal, 2047 B.S. has clearly mentioned economic system and policy of the country. Such policies should be compulsorily abided by the managers. The following economic policies have been mentioned in Part 4 of the Constitution of the Kingdom of Nepal, 2047 B.S.:-
  • The state shall pursue a policy of raising the living standard of genera public through the development of infrastructures such as education, health, housing and employment for all the regions by equitably distributing investment of economic resources for balanced development in the various geographical regions of the country.
  • The state shall pursue a policy of mobilizing the natural resources and heritage of the country in a manner which might be useful and beneficial to the interest of the nation.
  • The state shall create a condition for the economic progress of the majority of the people, who are dependent on agriculture, by introducing measures which will help in raising productivity in the agricultural sector and develop the agricultural sector on the principles of industrial growth by launching land reform program.
  • The state shall pursue a policy of increasing the participation of the labor forces, the chief socio-economic force of the country, in the management of enterprises by gradually securing employment opportunities to it ensuring the right to work and thus protecting its rights and interests.
  • The state shall pursue a policy of making female population participate, to a greater extent, in the task of national development of making specials for their education, health and employment.
  • The state shall, with a view to bringing prosperity in the country, pursue a policy of giving priority to the development of science and technology and shall also give due consideration to the development of local technology.
  • The state shall, for the purpose of national development, pursue a policy of taking necessary measures for the attraction of foreign capital and technology while at the same time promoting indigenous investment.
  • The state shall pursue a policy of creating conditions for the acceleration of the speed of the rural development, keeping in view the welfare of the majority of the rural population.
These policies both directly and indirectly affect marketing activities.

b) Economic environment

Economic environment is the very important environment to affect marketing. If the economic environment is favorable, business organization can get sufficient opportunities, and if it is adverse, they have to face different challenges. Nepal’s economic environment has been gradually changing. HMG has been trying its best to make the economic environment favorable to the business organizations. Nepal’s present economic environment can be seen as follows:

i) Economic condition: Nepal is an agricultural country. About 80% of the total population is involved in agricultural occupation. So, Nepal’s economy is based on agriculture. According to the World Development Report, 1990 published by the World Bank, Nepal is included in the list of the poorest countries of the world in economic standard. Its per-capita annual income is only 230 American dollars. There is also great inequality in the distribution of national income. According to statistics published by the National Planning Commission, (2060/61) 30.8% of the Nepalese people are compelled to live below poverty line. Nepal has adopted mix economic system. In Nepal, there are socialist model cooperation conducted and controlled by the state and capitalist model companies conducted and controlled by private entrepreneurs.

Nepal’s economy has not become fully self-reliant. Large part of annual national budget depends on foreign assistance. Nepal gets foreign loan and aid. Nepal is a country legged far behind in creating capital through saving collection and its effective mobilization. So, Nepal’s financial market is miserable. The Nepalese trend is such that they invest their money in home, land, gold etc. instead of investing in industry and business. A lot of effort is necessary to improve such miserable condition of economic condition of the country.

ii) Trade and transit policy: HMG has implemented Commercial Policy, 2049, to simplify and regularize foreign trade. The objectives of the Commercial Policy, 2049 are to increase the contribution of private sectors to the national economy through their increasing participation in internal and international trades by creating open and liberal economic environment, make sustainable development of trade to minimize trade imbalance, link this sector to other sectors by developing and expanding employment oriented trade, increase export trade making sustainable and competitive etc. Besides, proper export and import policy, arrangement of foreign exchange and internal trade policy also have been adopted.

Nepal has become the member of World Trade Organization (WTO). So, HMG has supported the policy that it should get unobstructed transit facility. Nepal has been using Kolkata port of India as its transit point. As this route is long and expensive for Nepal, several round talks were held with India to make an arrangement for using the nearest and shortest Phulbari Banglabanda route and finally an agreement was signed in June 1997. But practical problems have appeared in the use of this route.

iii) Industrial policy: Proper industrial policy should be adopted to industrialize the country. So, HMG has implemented Industrial Policy, 2049. This policy has aimed to hand over the state run industries gradually to private sectors and not to nationalize the private sector industries. The government’s policy is to invest in the sectors which are necessary for the national economy and wherein the private sectors are not attracted to invest. The government has forwarded the policy to make private sectors participate in the development of community and private forest, in hydro-electricity production and distribution, construction of road, ropeway, tunnel, bridge, hospital etc. and operate them.

The main objectives of the industrial policy 2049, are to minimize the pressure of unemployment on the agriculture sector by developing employment oriented industries, utilize local means and resources, give emphasis to export oriented increase the contribution of these sectors to the national economy by rising industrial production and productivity, adopt proper policy of industrialization for balanced development of the country etc. HMG has made the policy to provide different services to the entrepreneurs and investors on the basis of the nature of industry and make proper arrangement of necessary infrastructures.

iv) Privatization policy: Nepal is country of mixed economy. Due to failure to give reasonable return on investment and being unable to contribute to the per-capita income of the industry, the government has been gradually taking its hand off the state owned/public corporations since 1980s. The Sixth Plan has mentioned to involve private sector in the management. The Seventh Plan has mentioned ot hadn over all sectors, except urgent necessary and basic services, to the private sectors. The Industrial Policy, 2049 mentions to privatize all the sectors except those related to public utility, defense and other nationally important corporations. The privatization policy was brought to public in 2048 and Privatization Act was endorsed by the 5th session of the House of Representatives in 2050.

The privatization Policy has been implemented with the objective to lighten the financial and administrative burden on the government, to increase productivity by improving operating efficiency of the public corporations, to increase people’s participation in industries and business sectors, to provide capital to the government for alternative use, to heighten economic growth rate of the country etc. The government has adopted the policy not to nationalize private sector industries, and to invest itself in the sectors of public utility and basic, urgent and necessary as well as nationally important sectors and in the sectors and where the private sectors are not attracted to invest. So, the government has given priority to the free and liberal economic system.

v) Income distribution: Nepal is an undeveloped country. Per-capita income of the Nepalese people is only 230 American dollars. This income shows the purchasing power of the Nepalese people. Rich people are very rich and poor people are very poor in Nepal. Only very small number of people are rich here. Poverty is seen everywhere. So, income distribution is unequal in Nepal.

vi) Economic policy: Financial and monitory policies are included in economic policy. These policies also affect business organizations directly. So, such policies should be studied carefully. Tax and public expenditure policies come under financial policy. Such policies are made by HMG. The business organizations should abide by them compulsorily.

Nepal Rastra Bank is the only authority to make monitory policy in Nepal. Its policy directly affects demand and supply of currency, credit cost, level of average demand, etc. This affects business organizations and their activities directly due to the effect on interest rate and inflation rate.

c) Socio-cultural environment

Socio-cultural environment includes population, pressure groups, reference groups, social classes, life style, attitude, belief, religion, education, language etc. Socio-cultural environment also affects marketing directly.

i) Population: According to 2058 B.S. census, Nepal’s population is 23,151,423. Among them 49.95 percent rate are male and 50.05 percent rate are female. The population growth rate is 2.25 percent in Nepal. Some 8 or 9 years ago, pressure of migration was on Terai, but nowadays it is growing on big cities including Kathmandu Valley.

ii) Pressure group: Pressure groups do different activities for the interest of themselves and society. Their activities affect business organizations. Consumer’s association, civil society, human right organization, woman organization, environment protection forum, child right forum etc. are pressure groups. Such groups are also working in Nepal. So, marketing is affected by them.

iii) Reference group: Reference groups bring change in consumers’ behavior. Cine-stars, characters, heroes, heroines, musicians, singers, political leaders, scientists etc. are reference groups. The consumers like to imitate them in using products. So, marketing is affected by reference groups.

iv) Social class: The Nepalese society can be classified in three classes as high class, middle class and lower class. Their interest, expense capacity, trend, behavior etc. become different according to class. This also affects marketing.

v) Life style: Social change brings change in the life style of people. People’s life style is expressed through their activities, behavior, speaking, etc. Such changes also affect marketing. The life style of Nepalese people is also changing.

vi) Attitude: The other important element of social and cultural environment is the attitude of the people towards time, occupation and change. A marketing manager should consider this element carefully as the people’s attitudes affect business organization. Education, language, belief etc. influence people’s attitudes in business organization. The trend of delay dallying, trust and honesty are rarely found. The trend of avoiding work and responsibility is found widespread. The Nepalese have not become able to adopt changes easily. The trend of accepting changes in technology and management has not developed yet. They give more importance to traditional views and practices. This also affects marketing.

vii) Beliefs: People’s belief is another element of socio-cultural environment. Education, religion, tradition, etc. influence people’s belief. The Nepalese people believe in fate. They think that success or failure depends on the will of God but not on human efforts. They take success or failure in any work as God’s will or the result of fate. They worship Gods or pray at temples to get success. They go to witch doctors to get cure from diseases. Now a little change has been found in such blind belief. It will take more time for the people to overcome such superstition.

viii) Religion: Religion is also another element of socio-cultural environment. According to the Constitution of the Kingdom of Nepal 2047, 80.62% Nepalese are Hindus. The second largest population after Hindus is Buddhists. 10.74% population are Buddhists in Nepal. Muslims, Jains, Christians, etc. people are also living in Nepal. Religious tolerance is found among the people following different religions. No sectarianism, fighting nor dispute over religions is found in Nepal. Hindus and Buddhists have developed religious relationship and friendship. Human welfare and prosperity is the conclusion of all religious in Nepal.

ix) Education: The other important element of socio-cultural environment is education. Education is the backbone of all round development. So, education should be given priority for the development of the country. Education provides different level man power necessary for the development of the country. Nepal is the backward country in education. Here only 53.75% people are literate. Among them male are 65.08% and females are 42.49%. Marketing is also affected by the level of education and awareness of the people.

x) Language: Language is the other important element of socio-cultural environment. Language is the powerful media of communication. It affects business organizations directly. It also plays important role in developing the country. In the ancient time, Sanskrit, Kirat, Newari languages were used as official languages in Nepal. In modern Nepal, Nepali language is used as official language as most of the Nepalese people understand and speak this language. The constitution of the Kingdom of Nepal, 2047, has given recognition to Newari, Maithaili, Gurung etc. languages as national languages. Foreign diplomatic missions, different organizations, NGOs, foreign trade and business organizations etc. use English language. Although Nepali language is used and spoken in most of the business organizations, records are kept in English. But financial statements to be sent to the concerned HMG offices are prepared in Nepali language.

d) Technological environment

This is the age of new technology. Technological development positively affects industrial development. Technological development of Nepal can be mentioned in the following four points:

i) Level of technology: The level of technology is labor oriented and capital oriented. In labor oriented technology man power is used and capital oriented technology advanced machineries are used. In Nepal, mostly labor oriented technology has been used; however, capital oriented technology is gradually replacing the labor oriented technology.

ii) Pace of technology: Technology is dynamic. Its changing pace is speedy. So, a manager should be able to adopt the changing pace of technological environment. Nepal also cannot remain aloof from it.

iii) Research & development – R&D: The other important element of technological environment is research & development. The business organizations are also affected by the fact how capable the country is in the development of science, technology and research sectors. The organizations themselves can also develop new technology by opening R & D section. But as Research & Development needs a lot of money, only business organizations may not do such works alone. So, the state should be involved in such works. Different organizations such as Technical Schools, Practical Science and Technology Research Center, Nepal Academy for Science and Technology, etc. are working in research and development sector. But, due to the lack of necessary means, resources and commitment, these organizations have not become successful in their objectives.

iv) Technology transfer: Nepal is a backward country in the development of science and technology. A country should be economically rich for development of science and technology. As Nepal is economically weak, there is no possibility for Nepal to develop science and technology by itself. So, it has adopted the policy of transfer of new technology. The examples of new technology transfer are CocaCola of Nepal Bottlers, WaiWai Noodles of Thai Food Limited, Goldstar Television, Tuborg and Sanmiguel Beer etc. Technology can be transferred in the following ways:
  • By directly importing new technology into the country,
  • By opening branch of multinational companies,
  • By handing over the management of industry and business to foreign firms or experts,
  • By sending indigenous manpower to foreign countries for study and training,
  • By inviting foreign technicians to industry or company etc.

2. Environmental Impact on Marketing Activities

Marketing performs different important activities to satisfy new needs and wants of consumers. Among them are purchasing, selling, transporting, labeling, standardization, grading, branding, advertising, packaging, sale promoting, risk bearing, financing, market research, warehousing etc.

Strong economic system, favorable economic policies, political stability, healthy competition, etc. provide opportunities to marketing but elements such as increase in instability, unhealthy competition, political instability, frequently changing economic policy, development in technology etc. become threats. So, the environment affects marketing in both ways, positively and negatively.

a) Positive impact

The environment like strong economic system, favorable economic policy, stable politics, healthy competition, etc. positively affect marketing activities. Marketing environment has positive impact on marketing activities as follows:
  1. Provides opportunities: Environment provides different opportunities to marketing. Favorable economic policies, stable politics, healthy competition, strong financial market etc. greatly help in expansion and development of marketing.
  2. Reduces uncertainty: Environment is dynamic. The changes in it increase uncertainty in marketing. However, such uncertainties can be minimized by scanning and regular monitoring. In other words, favorable economic policies, stable politics, healthy competition, strong financial market etc. help to lessen uncertainty in marketing.
  3. Helps to identify consumers’ needs: Consumers’ needs and wants may be many and different. Demands can be increased by identifying their wants and needs through environmental scanning.
  4. Helps in goal achievement: Organizational goal can be achieved by bringing improvement in performance after scanning, analyzing and studying the changes in environment. So, environment helps in goal achievement.
  5. Helps to identify the strength: Proper utilization of strong aspects should be utilized to achieve success in marketing. This needs careful analysis and scanning of dynamic environment.

b) Negative Impact

Uncertainty, unhealthy competition, unstable politics, frequent changes in economic policy, etc. in environments negatively affect marketing activities. They affect marketing by,
  1. Increase in uncertainty: Dynamic environment increases uncertainty. If the changing and dynamic environment cannot be correctly scanned and analyzed, it negatively affects marketing. Unstable politics, ever changing economic policy, unhealthy competition, etc. have increased uncertainty in Nepalese marketing.
  2. Gives threats: Environment does not always provide opportunity to marketing, it also gives threat. Unfavorable economic policies, unhealthy competition, weak financial market, unstable politics, corrupt practices etc. give threats to marketing.
  3. Difficult to goal achievement: Consumers’ demands should be increased by identifying and analyzing their wants and needs. If the environment becomes difficult, uncertainty increases and correct and sufficient information is not available, it becomes difficult to identify the needs and wants of the consumers. It makes goal achievement difficult.

Meaning and Scope of Marketing Environment

Meaning of Marketing Environment

The whole situation of forces and elements that affect marketing is called marketing environment. Marketing environment remains dynamic. Marketing runs within the same environment. Environment gives different threats to marketing and, at the same time, also provides different opportunities. Business organizations should be able       to    predict     the
environment and monitor regularly by scanning it to face environmental threats successfully and use opportunities fully.

Marketing environment consists of micro and macro environment. Companies, suppliers, marketing intermediaries, agents, customers, competition, people etc. are micro environmental elements. Demographic, economic, natural, political and legal, social – cultural, technological etc. are macro environmental elements. As all these elements affect marketing, a marketing manager should analyze such elements and take proper step. The other managers also should observe and examine these macro environmental elements of marketing.
According to Philip Kotler and Gray Armstrong, “A company’s marketing environment consists of the actors and forces outside marketing that affect marketing management ability to develop and maintain successful relationship with its target customers.”
In conclusion, the whole situation of the environmental forces and elements forces that affect marketing activities is called marketing environment on the whole. Marketing manager should scan the marketing environment and identify the environmental elements clearly and make future plans and programs accordingly.

Scope of Marketing Environment

The actors and factors that directly and indirectly affect marketing on the whole is called marketing environment. The scope of marketing is vast. This can be expressed in the following points.

1. Customers

Customers is the important element of marketing. Marketing does not exist without customers. Customers buy goods or services. The behavior which the customers exhibit while buying goods or services is affected by environment. So, the customer is included within the scope of marketing environment. Customers may be individuals and organizations. Purchasing behavior of individuals and organizations becomes different, but marketing environment affects both of their purchasing behaviors.

2. Marketing organizations

The organizations conducting marketing activities are called marketing organizations. Business organizations, service providing organizations and public organizations are included in marketing organization. So, these organizations come under the scope of marketing environment. The activities of these organizations are directly and indirectly affected by the environment.

3. Internal and external elements

Both the internal and external elements of an organization also fall under scope of marketing environment. Companies, suppliers, intermediaries, customers, competitors, people etc. are internal elements whereas population, economic, natural, socio-culture etc. are external elements.

4. Marketing mix element

Product, price, place (distribution), and promotion are the elements of marketing mix. They are also included in the scope of marketing environment. Types of product, design, quality, branding, packaging, warranty, specialty etc. are the elements of product mix. Discount, terms and conditions of sale, method of payment etc. are the elements of price mix. Similarly, agents, whole sellers, retailers, warehousing, transportation etc. are the elements of place mix. Sale promotion, personal selling, publicity, advertisement etc. are the elements of promotion mix. All these elements are affected by marketing environment.

Micro and Macro Environmental Forces

Marketing environment can be classified into two types as micro and macro environments. It is made clearer by the following figure:
Micro and Macro Environmental Elements

1. Micro Environmental Forces

The micro environmental elements affect marketing activities remaining within or nearby a business company. The micro environment includes the company, suppliers, marketing intermediaries, customers, competitors and publics.

a) Company: A marketing manager should consider the top level management, finance, research and development, purchase, production, account etc. departments while making marketing plan. These all are interrelated aspects of internal environment. Mission, objective, goal and strategy of a company are determined by top level management. Marketing manager takes marketing decisions remaining under the plan made by the top level management. The marketing decisions taken by the marketing manager should be approved by the top level management before their implementation. In this way, the top level management and marketing management have relationship and each undertaking of the high level management always affect marketing.

The marketing manager also performs his/her activities remaining in contact with other departments. Financial department should arrange necessary budget and its use for the implementation of marketing plans, and research and development (R & D) department should design safe and attractive goods. Similarly, the purchasing department should search suppliers and receive quality materials whereas the production department should produce quality and marketable goods in necessary quantity. Account department keeps records of income and expenditure. All these activities affect marketing. So, the marketing department should perform its works with effective coordination among all the departments.
Internal Environmental Elements of Company
b) Suppliers: The organization or person who provides necessary materials and resources to a company for production of goods or services is called supplier. As the supplier greatly affect marketing, it is taken as an important element of marketing environment. Supplier should be renowned and able to supply quality materials and resources in necessary quantity regularly. Besides this, terms and conditions of sale also should be simple. The cost of supply should be minimum. If the supply cost increase, the cost and goods of services also increase. As a result, sale gets adversely affected.

c) Marketing intermediaries: The marketing intermediaries help in carrying company’s products to the consumers and market promotion. This includes sellers, physical distribution firms, marketing service agencies and financial intermediaries. The distribution channel which carries the services or goods produced by a firm to the consumers is called seller. Dealers, wholesalers and retailers are in the group of seller. The body which helps in delivering company’s products services to consumers is called physical distribution firm. It also helps to stock management. This includes transport action and warehousing. Marketing service agencies include research firms, advertisement agencies, media firms, marketing consultancies etc. They help in promoting and delivering products or services to right markets. Financial intermediaries include banks, credit companies, insurance companies, etc. They help business firms by bearing risk and providing necessary financial support.

Marketing intermediary is also an important element to affect marketing. So, a business firm should take right decision by analyzing the elements of marketing intermediaries.
Elements of Marketing Intermediary or Marketing Intermediaries
d) Customers: Customers are the other important element of micro environment. So, a business firm should study and analyze customer markets. There are five types of customer markets. They are consumer market, business market, reselling market, government markets and international market. Customer market includes individuals or members of families who buy goods or services for personal use. Materials are purchased in business markets to use in producing goods or reprocessing them. Similarly, in the reselling markets goods are purchased for reselling them to earn profits. Goods are purchased in government markets in order to provide public services. Producers, sellers and purchasers of different countries are involved in international markets. The features of all types of markets become different. So, their features should be carefully as well as specially studied and analyzed.
Types of Customer Markets
e) Competitors: Competition is the other elements of micro environment of marketing. A company should give maximum satisfaction to the consumers by providing quality goods or services compared to the competitors. Besides, the company should be able to remain in the heart of customers by maintaining more effective product positioning than the competitors. Same marketing strategy cannot be fit for all companies. So, each company should adopt suitable strategy according to or considering the size, nature, scope of activity, life cycle etc. of the company. Big companies can, sometimes, adopt such strategy using their power. But small companies cannot do so. But bigness of any country is not everything. Small companies also can achieve greater success by developing much more appropriate strategies than big companies can.

f) Public: Different public (communities of people) also included in the marketing environment of a company are financial public, media public, citizen action public, local public, general public, internal public and government public. This made clearer by the following figure:
Types of Public Communities
  1. Financial public: Financial public affect fund receiving capacity of a company. This includes banks, investment houses, stockholders etc.
  2. Media public: Media public work for the advertisement and publicity of goods or services. This includes newspapers, magazines, radios, televisions, etc.
  3. Citizen action public: Each decision of a company affects civil society. If any decision is made against their interests, reaction comes promptly. So, a proper decision should be taken keeping regular contact with civil society through company’s public relation department. This includes consumers’ association, environment protection group, minority group, etc.
  4. Local public: All the companies have local public. Local public include neighboring residents, community organizations, etc. Big companies appoint a public relation officer to keep relation with the public for taking proper decision.
  5. General public: The general public also affect a company. So, the company should take proper decision by understanding the public views and trend of the general public towards its products.
  6. Internal public: Labors, other employees, manager, volunteers, management committee etc. are the internal public. A proper step should be taken by the company to motivate the internal public. The internal public work with interest on the one and dispatch good message to external environment.
  7. Government public: The government public also affect company and its products. So, the company should take advice from its legal advisor on several issues including safe goods, truth in advertisement etc.

2. Macro Environment Forces

Macro environment of marketing is also called external environment. External environment affects a business firms directly and indirectly from outside. This environment equally affects all the business firms. This includes demographic, economic, natural, technological, political legal, social and cultural elements or forces. These macro environmental elements do not remain under control of any firm. So, the business firm should itself make adoptable to the macro environment. The macro environmental elements may appear both as the threats and opportunities for the business firms. So, a marketing manager should make plans and programs only after scanning the macro environmental elements or forces. 
a) Demographic environment: Demographic environment is an important element of macro environment. This includes total population size, growth rate or population, age mix, migration, urbanization process etc. Future plans and programs should be made only after carefully studying and analyzing these elements.
Demographic Environmental Elements
  1. Population size: Population size affects marketing activities. In the countries like China and India where the size of population in huge, the size of market also is huge. And in the countries where the population is small, market size also becomes small. The multinational companies and foreign investors are not attracted to Nepal because Nepal’s market is small. In some developed countries birth rate is very low; the child related markets have been adversely affected.
  2. Population growth: The growth rate of world population is increasing. Due to the increasing rate of population, food supply has become insufficient, mines have been finished/exhausted, and environment has been polluted. As a result, quality of life style changes. The people have to face difficulty to use goods or services. Now, population growth rate is much higher in underdeveloped countries than in the developed countries. The rate of population growth in the underdeveloped countries of the world is 2% (that is 76% of the world population) whereas the population growth rate in the developed countries is only 0.6%. According to the demographic reports of 2002, Nepal’s population is 23.2 million and the growth rate is 2.1%. In some developed countries, the population growth rate is 0% or is negative or running to minus side. Both very high growth rate and negative rate or minus rate of population growth are challenges to the countries.
  3. Age mix: Age mix directly affects marketing activities. So, while marketing plans, programs and strategies, age mix also should be considered. Age affects working power and purchasing behavior. To have adequate working power and to have large number of people with the ability to purchases of goods or services are the positive aspects for marketing. 42% people of the total population in Nepal are below 14 years. But in the developed countries 14% of people are above 65 years.
  4. Urbanization: People provide new opportunities to marketing. When the people migrate to urban area (city areas) from rural areas (villages), they adopt city life style and begin to demand for goods or services suitable to the urban life style.
  5. Migration: Migration of people also affects marketing activities. People may migrate to cities, Terai and other places from remote villages, hills or Himalayan areas. When the people migrate from one place to another, market also migrates with them.
b) Economic environment: The other main element of macro environment is economic environment. A marketing manager should make future plans, programs and strategies by studying and analyzing this element carefully. Income distribution, consumers’ purchasing power, economic health, inflation rate, availability of credit, exchange rate, regional group, consumers’ incomes and other elements are included in economic environment. As the economic environmental elements do not remain under the control of entrepreneurs or any business organization, marketing mix should be made fitting to this environment.
Economic Environmental Elements
  1. Income distribution: Income distribution is one of the effective elements under economic environment. Per capital income in different countries of the world is not equal. In the developed countries like America, Japan, Britain etc. the per capita income is very high but it is very low in the developing countries like Nepal, Bangladesh, Bhutan, Afghanistan etc. So, the purchasing power of the people of the rich and developed countries is high but the purchasing power of the people of poor countries is low. In the lack of socialist economic system or equal income distribution system, purchasing power of the people differs in the same country. A section of people have high purchasing power whereas others have low.
  2. Purchasing power of consumers: Purchasing power of consumers directly affects marketing. The purchasing power of the consumers is influenced by their level of income, economic system of their country, inflation, spending style etc. Availability or unavailability of facility in credit also affects purchasing power.
  3. Economic health: Economic health element denotes business cycle. In prosperous condition, economic situation becomes healthy or income increases. But just opposite to this, economic health deteriorates in economic depression, income decreases. The recovery situation of business cycle leads business organizations towards prosperity. Such fluctuation in business cycle affects the whole market system.
  4. Inflation rate: Inflation decreases consumers’ purchasing power by increasing price of goods or services. Nepal’s inflation rate is high. When inflation rate becomes high, saving decreases and depression comes in investment.
  5. Credit availability: Availability or unavailability of credit also directly affects marketing activities. If credit facility is available, quantity of sale increases; if it is not available, the quantity of sale decreases. Credit cards, debit card, hire purchase programs and other plans increase sale quantity. Nepal’s finance companies have made plans to provide TVs, motorcycles, buses, cars etc. on installment basis, due to which sale quantity goods has increased.
  6. Exchange rate: Exchange rate plays an important role in international markets. If exchange rate declines, it adversely affects the global market. The decline in exchange rate in Japan and Indonesia in 1998 had adversely affected the global market.
  7. Consumer’s income: Consumers’ income also affects marketing activities. The consumers’ income directly affects their purchasing. If the income of the consumers’ is high, purchasing power also becomes high, and if income is low, their purchasing power is also becomes low. Unemployment rate, wage rate, interest rate and tax rate affect consumers’ income.
  8. Regional economic group: The regional economic groups provide protection and facilities to their member country. The major regional groups are ASIAN, EU, SAFTA, SAARC, LAFTA etc.
c) Natural environment: Natural environment is one of the main elements of macro environment. A marketing manager should wisely and carefully make marketing plan, programs and strategies. Natural resources, topography, climate etc. are elements of natural environment. Since the natural environment does not remain under control of business organization, marketing mix should be made in agreement with it.
Natural Environmental Elements
  1. Natural resources: Raw materials, mines, land, climate, forest etc. are natural resources. These elements play an important role in marketing activities.
  2. Topography: Topography plays an important role in transport and distribution. If the roads are easy and means of transport can be taken from place to place, goods can be transported at lower cost; just the opposite if the roads are difficult and means of transport cannot be taken everywhere, the cost of goods becomes high in such places. So, the topography affects cost of goods.
  3. Climate: Climate also affects the needs of customers and marketing mix. In the place where the climate is hot, demand of cotton clothes and cold drinks becomes high. In the places where the climate is cold, demand of woolen clothes and hot drinks becomes high. Similarly, demand of umbrella increases in rainy season and in the winter season demand of thick and warm clothes becomes high. So, climate also directly affects sales of goods and marketing activities.
d) Political-legal environment: Political-legal environment is also another important element of macro environment of marketing. It directly affects the marketing activities. So, a marketing manager should study and analyze it carefully while making marketing strategies, plans and programs. Law, government policies, strategies, plans and programs. Law, government policies, government agencies, pressure groups etc. are included in political-legal environment. Since these elements do not remain under control of any organization, marketing mix should be made in agreement with them.
Political-legal Environmental Elements
  1. Laws: Preventing dishonest business activities, protecting consumers, protecting business organization from unhealthy competition, protecting the interest of society etc. are the major purposes of law. So, arrangements of legal provisions are made in every country to regularize standardization, quality of goods, import, export, patent right, trademark, copyright, dealing of foreign currency etc. Such legal provisions affect marketing activities. The Consumer Protection Act 1997 of Nepal has protected consumers’ interest. But, as the fragile implementation of the business Laws and Acts made to regularize copyright, patent right and trademark in Nepal, the inventors and organizations cannot feel security.
  2. Government policies: Trade policy, industrial policy, privatization policy, environment policy, foreign investment policy, tax policy, foreign currency exchange policy, currency supply policy etc. affect marketing activities. Government policies should be suitable to business organizations and they also should be stable. If the policies of government related to business are changed along with political change in a country, business world has to face a great threat. One of the main reasons for not showing interest by foreigners to invest in Nepal is the unstable business policy of the government.
  3. Government agencies: Government agencies are government bodies. So, they perform their works remaining under government control. Such agencies provide license, fix quotas, provide loan, pledge as guarantor, and provide relief to industries. The activities of government agencies are conducted at national, regional and local levels. Such activities of government bodies directly affect the business activities.
  4. Pressure groups:

    Marketing activities are also affected by pressure groups. Consumers’ associations raise voices for their own interest; environment groups raise voice for environment protection, feminist for women rights, business organizations raise voices for the interest for business
    organizations. They give pressure to government or related bodies. Such pressure affects marketing activities.
e) Socio-cultural environment: Socio-cultural environment is the other important element of macro environment. This environment includes tradition, social customs, belief, religion, human value and norms, language, attitude, living style, art, culture etc. These elements become different according to country, society, community. So, a marketing manager should carefully study and analyze these things while making marketing plans, programs, and strategies.
Socio-cultural Environment
  1. Social environment: Social environment includes belief, value and norms, lifestyle, behavior, habit etc. These factors also directly affect marketing (in buying goods or services). So, a marketing manager should carefully study and analyze social environment while making marketing mix or making plans, programs and strategies.
  2. Cultural environment: Cultural environment directly affects human behavior and wants. General look of the people at themselves, business organization, society and the world etc. is their cultural value or norms. Feasts and festivals, castes and races, languages and religions etc. are included in cultural environment. It affects their daily life, living their wants and needs etc. So, a marketing manager should make marketing mix or plans, programs and strategies by studying and analyzing these factors.
f) Technological environment: Technological environment is the other important element of macro environment. This includes level of technology, technology changes, research and study, development budget etc. These elements directly affect marketing plans, programs and strategies. So, a marketing manager should study and analyze these things carefully for marketing mix.
Technological Environmental Elements
  1. Level of technology: Appropriate technology should be used to produce goods or services as desired or wanted by the customers. The wants and desires of rural consumers differ from urban consumers. Similarly, the wants, needs or desires of the consumers of developed countries differ from the consumers of underdeveloped countries. So, appropriate technology should be used to satisfy the wants and desires of different types of consumers.
  2. Technological change: Technology is a dynamic power. It is developing with speedy pace. As it affects marketing mix, a marketing manager should adopt the changing speed of technology to take opportunity of new innovation.
  3. Research and development budget: Research and development budget plays an important role in marketing. So, each business organization should make arrangement of sufficient budget for research and development (R&D).

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