TLE - 7 EXODUS

First Grading (Household Services)

WEEK 2: Environment and Market

Dear students, you have learned the basic concept of household services, their relevance, career opportunities, and
entrepreneurial competencies. At this point, you will be learning Environment and Market: Key concepts of Environment and Market,
SWOT Analysis, Product Development, Needs and wants of customers, and Process development steps.

Before proceeding to the next topic to be discussed, kindly reflect on the following questions:

1. Why is it important to conduct a market study before starting a business?

2. What are the things that you need to consider in starting a business?
3. How does one determine the product to be produced or services to be offered and delivered to the target market or customers in
a particular community?

Now, let’s get started.

Every business, no matter how big or small, operates within the marketing environment.  Its present and future existence,
profits,  image, and  positioning  depend on its internal and external environment. The  business environment  is one of the most
dynamic aspects of the business. To operate and stay in the market for long, one has to understand and analyze the marketing
environment and its components properly.
A marketing environment is a combination of internal and external environmental forces and factors that influences the business
operation of a business and its ability to serve its customers. It is essential to know both internal as well as external environmental
factors. Therefore, enterprises keep checking on them to do their business without any legal trouble and to generate maximum profit.
The internal marketing environment consists of factors like material, machines, workers, money, etc. All of these components
are necessary to run a business successfully. For example, if the raw material is not available on time and in sufficient quantity, then
the work of production will become slow, and the company will not be able to fulfill the demand of the product in the market. On the
other hand, the external marketing environment can be divided into two categories, such as macro external marketing environment
and micro external marketing environment. The micro-environment is closely related to the business and constitutes all external
business activities such as distribution and promotion of products of the company.
 
There are broadly two components of the marketing environment, such as the internal environment and external environment.
Different types of parts of the marketing environment are categorized under these two broad categories.
The internal environment of a business can be controlled, but there is very little control of a business in the external marketing
environment. Let’s discuss it one at a time.
 
1. Internal environment
The internal environment is formed of all the internal factors and forces of an organization. The internal environment of an
organization is within the control of the marketer, and he can change or modify the environment as per the demand in the market
and requirements of the business.
The following are the five factors that form the internal environment of an organization. These factors are also referred to as the
five M’s of a business.

1. Money
2. Men
3. Markets
4. Materials
5. Machinery

 
All the components of the internal environment are as important as that of the components of an external environment.
However, the internal environment factors are change, according to the change in the external marketing components. For example,
an organization is required to upgrade its technology if new technology in the market is introduced. The internal environment of an
organization also includes the marketing department, the sales department, the human resource department, and the manufacturing
department.
 
2. External Marketing environment
 The external marketing environment consists of all the external marketing factors that exist outside the organization, and the
marketer has little or no control over the external marketing environment factors.

The external marketing environment can be divided into two categories, such as the micro-environment and the  macro
environment.
A. Micro-environment

The micro-environment of a business consists of all the factors and forces that are directly associated with the company. The
micro components of the external environment are also known as task environments.
 
The following are the various components of the micro external environment.

1. Suppliers

Suppliers are an essential part of every organization. Suppliers supplies material and all other types of resources required for the
production of products. A company can run its business successfully only if its suppliers supply material of good quality and on time.

2. Market intermediaries

Market intermediaries are the intermediary parties that help a business to distribute its products in the market. The market
intermediaries can be wholesalers, retailers, and distributors. All of these market intermediaries are an essential part of the business
as they are the face of the company in the market and represent the products of the company in the market.

3. Partners

Business partners are the business entities that conduct business with the organization. For
example,  advertising  agencies,  banking  and insurance companies,  market research  organizations, brokers, and transportation
companies, etc. A company is required to partner with several other companies to run a successful business.

4. Customers

Customers are the most crucial component of the business. Customers are the  target  audience of the product, and the
preference of customers influences all the marketing and business efforts of a company.
5. Public
The public is  people  other than the target audience of the organization. The public plays a vital role in the success of the
business as it can build or destroy the image of a company in the market. The public has the power to influence
the purchasing decision of the target audience. Especially in the times of the internet, the ability to control the public has increased as
they can share their views about your products and services on the internet freely.
6. Competitors
The last but not least component of the micro-environment is the competitors of a business. The competitors are the other
businesses that sell similar products as your products or are part of the same strategic group in the industry.
B. Macro Environment

Macro components of a marketing environment consist of all external forces and factors that impact the whole industry rather
than just changing an organization directly. Therefore, the macro marketing environment is also referred to as a large environment.
 
The following are the six components of the macro environment.
 

1. Technological environment

Technology is one of the elements that have great potential to influence the business of an organization. It is dynamic, as it
changes rapidly. Technology provides several threats and opportunities to the business environment.
The technological environment consists of research and development in technology, innovation, inducement of technology, and
technical alternatives, etc.

2. Demographicenvironment

The demographic environment component of the macro marketing environment consists of people that form a market. The
population of the demographic environment can be characterized based on various factors such as age, gender, density, size,
location, race, and occupation, etc.
The demographic environment is a crucial component for business as the company design and builds its products based on the
characteristics of the demographic environment.

3. Social-cultural environment

The social-cultural component of a macro environment is formed using the values, lifestyle, culture, beliefs, and prejudices of
the target audience of a business. The social-cultural environment varies from one region to another region.
 People living in one area might prefer a different type of product than the preference of the product of the people of any other
region. Businesses are required to have in-depth knowledge of the social-cultural environment to design a product or service that is
preferred by most people.

4. Economicenvironment

The economic environment component is a type of component that influences all industries. The economic environment affects
the purchasing power and spending patterns of the buyers.
 
The following are the different factors that form an economic environment.

1. Interest Rates.
2. Gross Domestic Products(GDP).
3. Gross National Product (GNP).
4. Inflation.
5. Subsidies.
6. Income distribution.
7. Government funding.
8. Other significant economic variables.

5. Political-legal environment

The political-legal environment consists of the laws and policies of a country. In addition, to rules and procedures, the political-
legal environment also includes agencies and pressure groups. All of these political entities, impact the working capacity of the
industry in society.

6. Physical environment

The last component of the macro environment is the physical environment in which an organization exists. The following are the
components of the physical environment.

1. Climate condition
2. Environmental change.
3. Availability of the raw material.
4. Natural resources like water.
5. Pollution.

After knowing the key concept of environment and market, let’s proceed to SWOT Analysis.

Before an entrepreneur fully engages in a certain business, he/she initially needs to determine whether the venture is feasible
and profitable. One process of confirming the competitiveness of the firm is the utilization of SWOT analysis. It is a strategic planning
method used to evaluate the strengths, weaknesses, opportunities, and threats involved in an enterprise. Based on a realistic point of
view, it is more advisable to know the initial opportunities and threats for the establishment of a certain business. Bear in mind that a
need or want determines what product or service is being demanded.

Strength- characteristics of the business that give advantage and edge over the others in the same industry

                                             -  What will differentiate your business from others? What are the services?

Weaknesses- characteristics that pose disadvantages on the part of the firm as compared to others

                          - In what areas do your competitors have an edge? What areas do you need to improve?

Opportunities- external chances that can yield greater profits and sales.

                        - Is there an unmet need/want you can fulfill? What external changes present might bring interesting
opportunities/uniqueness?

Threats- external factors that can subject the business to conflicts and possible trouble.

                          - What obstacles might hinder you from starting or growing the business?

Now, let’s discuss about Product Development.

 This is a process of making a new product to be sold by a business or enterprise to its customers. It involves modification,
presentation, or formulation of the new product. The entire process of identifying a market opportunity, creating a product to appeal
to the identified market, and finally, testing modifying and refining the product until it becomes ready for production.
 

These are the possible questions in developing a product:

For whom are the product services aimed?

What benefit will the customer expect from it?

How will the product differ from the existing brand? From its competitor?

The following are the Process Development Steps:

 

1. Identify customer needs – using survey forms, interviews, researches, focus groups, discussions, and observations. It can
determine the product to be produced or provided.
2. Establish Target Specifications -are essentially a wish-list.
3. Analyze competitive products - To provide important information in establishing product or services specifications.
4. Generate product concepts -to illustrate what types of products or services are both technically feasible and would best meet the
target specifications.
5. Select a product concept -through the process of evaluation between attributes, a final concept is selected.
6. Refine product specifications - Product or services specifications are refined based on input from forgoing activities.
7. Perform economic analysis -always review and estimate the economic implications regarding development expenses,
manufacturing costs, and selling price
8. Plan the remaining development project -prepare a detailed development plan (list of activities, necessary resources and
expenses, and development schedule).

In the business world, you should have these characteristics:

Innovation

Introduction of something new in your product or service.

Unique Selling Proposition (USP)

factor or consideration presented by a seller as the reason that one product or service is different from and better than that of
the competition.

How to discover USP?

Use empathy
Identify what motivates your customer
Discover the actual and genuine reasons why customers buy your product instead of a competitor’s.

Now, after knowing the product development and its steps, it is also important to know the needs and wants of customers.
 

When we say need, this is necessary for survival. The lack of a need may result in a negative outcome. Needs may be in
physical forms, such as food, shelter, and clothing. However, they can also be in subjective forms like respect, self–esteem, self-
actualization. Needs are dictated by society or the environment, but they are also inherent in man’s natural well-being. While want is
simply anything that a person desires to have whether necessary or not. Unlike a need, the absence of want will not cause any
harmful physical effect. However, being denied of want can sometimes result in setbacks in self-fulfillment. In the field of
entrepreneurship, many business people cater to serving the wants of the market because it is limitless. A business becomes
successful when it can continuously meet the needs and preferences of its target market. On the other hand, the entrepreneurs must
always find creative and positive ways on how to keep these products or services available to maintain the market’s demand stable.

These are various categories of business that may interest an entrepreneur. These include the following:

Food
Energy
Technology
 Finance
Travel and tourism
Basic commodities for consumption
Clothing and other personal belongings
Shelter, sanitation, and health
Education

 
Generalization

The following are the key points of the discussed topic this week, in which it highlighted that every business, no matter how big
or small, operates within the marketing environment. Its present and future existence, profits, image, and positioning depend on its
internal and external environment. The  business environment  is one of the most dynamic aspects of the business. To operate and
stay in the market for long, one has to understand and analyze the marketing environment and its components properly.
Also, a marketing environment is a combination of internal and external environmental forces and factors that influences the
business operation of a business and its ability to serve its customers. It is essential to know both internal as well as external
environmental factors. Therefore, enterprises keep checking on them to do their business without any legal trouble and to generate
maximum profit.
Another, the  internal marketing  environment consists of factors like material, machines, workers, money, etc. All of these
components are necessary to run a business successfully. For example, if the raw material is not available on time and in sufficient
quantity, then the work of production will become slow, and the company will not be able to fulfill the  demand  of the  product  in
the  market. On the other hand, the external marketing environment can be divided into two categories, such as macro external
marketing environment and micro external marketing environment. The micro-environment is closely related to the business and
constitutes all external business activities such as  distribution  and promotion of  products  of the company. There are broadly two
components of the marketing environment, such as the internal environment and external environment. Different types of parts of the
marketing environment are categorized under these two broad categories.

Also the SWOT analysis which is a strategic planning method that is used to evaluate the strengths, weaknesses, opportunities,
and threats involved in an enterprise.

Moreover, the Product Development which stated that there is a process of making a new product to be sold by a business or
enterprise to its customers and it involves modification, presentation, or formulation of the new product.

Lastly, in the needs and wants of a business, a business becomes successful when it can continuously meet the needs and
preferences of its target market. Remember, that entrepreneurs must always find creative and positive ways on how to keep these
products or services available to maintain the market’s demand stable, and always bear in mind, that entrepreneurship is living a few
years of your life like most people won’t so that you can spend the rest of your life like most people can’t.