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.

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