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Meaning of Marketing Environment | Scope of Marketing Environment | Micro and Macro Environmental Forces

  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 steps. 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 in 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 is 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 capita 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 of 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 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 of 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 looks of the people at themselves, business organization, society and the world etc. are 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 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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