Shortened Notes – MARKETING ENVIRONMENT

Definitions of Marketing Environment

According to M. Weimer, “Business environment is the climate or set of
conditions -i.e., economic, social, legal, technological and political
situations in which business activities are conducted".
Philip Kotler defines "A company's marketing environment consists of the
actors and forces outside marketing that affect its management's ability
to build and maintain successful relationships with target customers.“
In the words of Keith Davis, "Business environment is the aggregate of all
conditions, events and influences that surround and affect it.”

ENVIRONMENTAL SCANNING

An environmental scanning by the firm for recognizing potential

opportunities and threats outside are very essential. It is, in fact, key to

business success. Through Environmental analysis, the management can

develop an Environmental Threat and Opportunity Profile (ETOP) which
gauges the impact of various environmental forces on the
firm.
IMPORTANCE OF ENVIRONMENTAL SCANNING (study any 5 points
)
1-Determining Opportunities-The interaction between the business
and its environment identifies opportunities and helps in getting 'First
Mover Advantage' out of it successfully.
2-Identification of Threats: Environmental scanning helps to identify
possible threats in future and give warning signals to the firms.
3-Sensitization of Management to Cope with Rapid Changes: A
keen watch on the trends in the environment would help to sensitize the
firm's management to the changing technology, competition etc.
4-Sensitization of Management to Cope with Rapid Changes: A
keen watch on the trends in the environment would help to sensitize the
firm's management to the changing technology, competition..
5-Image Building-If a firm is sensitive to the external environment, it
will come out with new products and services to meet the requirements
of the customers. This would build the image or reputation of the firm in
the eyes of the customers
6. Continuous Learning: Strategy formulation is a continuous process
that involves keeping in touch with the external environment. Thus,
managers continue to understand environmental changes and act on the
basis of such information.
7. Giving Direction for Growth: The interaction with the environment
leads to opening up new frontiers of growth for the business firms. It
enables the business to identify the areas for growth and expansion of
their activities.
8. Identifying Firm’s Strength and Weakness: Business environment
helps to identify the individual strengths and weaknesses in view of the
technological and global developments.It activates management to move
accordingly.
9. Basis of strategy: Strategists can gather qualitative information
regarding business environment and utilize it in formulating effective
plants.

TYPES OF MARKETING ENVIRONMENT

MICRO/INTERNAL-Micro environment consists of the elements or forces
that influence marketing and business directly.
MACRO/EXTERNAL-Macro environment includes demographics, economic
forces, political and legal forces, socio-cultural and technological forces,
which are beyond the control of firm and affect business indirectly.
MACRO ENVIRONMENT
The macro environmental factors/ forces which affect
organization's marketing decisions and activities are as follows:
I. Demographic forces
II. Politico-legal forces
III. Economic forces
IV. Natural forces
V. Technological forces
VI. Socio-cultural forces
Demographic forces
• Demography refers to studying human population in terms of size,

density, location, age, gender, race, literacy and occupation.

• Demography is a very important factor to study for marketers as it
helps to divide the population into market segments and target
markets.
For examples – refer PPT
Economic forces
• The tax rate, exchange rate, foreign trade policy or industrial policy
,inflation ,deflation etc., all have tremendous impact on business
decision making.
• Sometimes economic news spreads optimism; like Improvement in
growth rate, higher demand, low interest rates and declining
unemployment. On other times it may cause nervousness
indicating industrial recession, price rise, increase in taxation,
declining employment and demand etc.
Example :
Politico-legal forces

The political environment includes all laws, government agencies and

constitutional provisions affecting or limiting business organizations
within a society.
Following are the important components of the politico-legal
environment:
 The constitutional framework-directive principles, fundamental
rights of citizens, and division of legislative powers between central
and state governments.
 Political institutions like government and allied agencies
 The extent and nature of government intervention in business
 Commercial and economic laws and government policies under the
laws relating to licensing, monopolies, foreign investment, etc.
 Government policies related to imports and exports
 Government policies related to small scale industries, sick
industries, consumer protection, control of environmental pollution,
etc.
 Government policies related to pricing and distribution of essential
commodities.
 Court decisions for the protection of consumers, environment and
ecological balance.
( any 4/6points )
Natural forces

This includes the natural resources that a company uses as inputs that
affect their marketing activities.
To maintain ‘ecological balance’ the marketing managers are expected
to:
• Control the environmental consequences of the product adopting
green production processes and bio-degradable packaging.
• Follow the environmental criteria while deciding on product
ingredients, design and packaging;
• Respond to the issues raised by the environmentalists and
consumerists
For examples – refer PPT
Technological environment
• Technological environment refers to the state of technology in the
areas of manufacturing, mining, construction, materials handling,
transportation and information technology.
• Advancements in technology leads to greater productivity, higher
quality and lower cost of production for the business.
• However, introduction of advanced technology requires higher
capital investment. It may also lead to unemployment in some
 cases where machines replace jobs. That is why labour unions
generally oppose the introduction of new technology.

The marketers must constantly watch changes in technology for

keeping track of competition and customer wants. In any country, the
state of technology plays an important role in determining the type
and quality of goods and services to be produced and the type of
plants and equipment to be used. Early adoption of new technology
helps in new improved products and increases the competitive
advantage of the business firm.
For examples – refer PPT
Socio-cultural forces
Sociological factors such as caste structure, mobility of labour, customs,
cultural heritage, view towards scientific methods etc. might have a far-
reaching impact on business.
In India, the attitudes of people have changed with respect to food and
clothing.
Some of the socio-cultural factors which have the potential of influencing
marketing decisions include the following:
• Caste and occupational structure
• Family structure- joint v/s nuclear family
• Increasing number of women in the workforce
• Population shifts from rural to urban areas
• Educational system and literacy rates
• Changing consumption habits of the population for enhancement of
qualit y of life
• Exposure to western modern culture
Any 4 points
For examples – refer PPT

PESTEL
 • This macro environment is also known as PESTEL, that is,
Political Environment, Economic Environment, Social
Environment, Technological Environment, Environmental
forces (Natural) and Legal Environmental study by an
organization

MICRO ENVIRONMENT FACTORS

Suppliers
The suppliers comprise all the business firms or individuals who provide
raw materials, components and semi-finished goods to be used in
production or even sell finished products of the organization.
The buyer-supplier relationship is one of mutual economic
interdependence, as both parties rely on one another for their
commercial well-being.

Marketing intermediaries
Marketing intermediaries are the independent individuals or
organizations that directly help in the free flow of goods and services
between marketing organizations and the customers. Generally these are
of two types, namely 'merchant' and 'agent’.
• Merchant middlemen can be wholesalers and retailers.
• Agent middlemen are an important part of the distribution network
and render important services in different capacities.
Customers
A customer may be an individual or household, an organization that
purchases a product for use in the production of other products, or an
organization that purchases a product for resale at a profit.
Target may be grouped as follows: (Important )
i. Consumer market- individuals and households buying the product for
consumption.
ii. Industrial market-organizations buying for producing other goods and
services for the purpose of either earning profits or fulfilling other
objectives or both.
iii. Reseller market-organizations buying goods and services with a view
to sell them to others for a profit. These may be selling intermediaries
and retailers.
iv. Government and other non-profit market- the institutions buying
goods and services in order to produce public services. They transfer
these goods and services to
those who need them for consumption in most of the cases.
v. International market- individuals and organizations of other countries
buying for
their consumption or industrial use or both. They may be foreign
consumers,
producers, resellers and governments.

Competitors
There are three types of competition:
a) Competition from similar products-The most direct form of competition
occurs
amongst marketers of similar products. For example, competitors in
electronic home appliances are LG, Samsung or Philips etc.
b) Competition from substitute products-The second type of competition
involves
products that can be substituted for one-another. For example, in air
transport
industry, Indigo competes with Jet airlines. The increase in fares of one
airline
increases demand for other airline services.
c) Competition amongst all firms-The final type of competition occurs
among all
organizations that compete for the consumer's purchases. In other words,
modern marketers accept the argument that all firms compete for a
limited amount of market share.

Publics
The company's micro environment also includes various publics, i.e.
groups of people. A 'public' means any group that has an actual or
potential interest in or impact on the company's ability to achieve its
objectives
Kotler and Armstrong have described seven types of publics as follows-
(Important )
1. Financial publics-banks, investment houses and shareholders.
2. Media publics-They include- newspapers, magazines, radio and
television stations.
3. Government publics-Marketers must often consult the company's
lawyers on issues of product safety, truth-in-advertising and other
matters.
4. Citizen-action publics-consumer organizations, environmental groups,
minority groups and others
5. Local publics-Every company has local publics, such as neighbourhood
residents
and community organizations
6. General public's-The public's image of the company affects its buying.
7. Internal publics-A company's internal publics include its workers,
managers, and
board of directors.
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