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The market environment is a marketing term and refers to factors and forces that affect a
firms ability to build and maintain successful relationships with customers. Three levels of
the environment are 3: Micro (internal) environment - small forces within the company that
affect its ability to serve its customers. Meso environment the industry in which a
company operates and the industrys market(s). Macro (national) environment - larger
societal forces that affect the microenvironment.

The company aspect of micro-environment refers to the internal environment of the
company. This includes all departments, such as management, finance, research and
development, purchasing, operations and accounting. Each of these departments has an
impact on marketing decisions.Marketing managers must watch supply availability and
other trends dealing with suppliers to ensure that product will be delivered to customers in
the time frame required in order to maintain a strong customer relationships.
Marketing intermediaries refers to resellers, physical distribution firms, marketing services
agencies, and financial intermediaries. These are the people that help the company
promote, sell, and distribute its products to final buyers. Resellers are those that hold and
sell the companys product. Marketing services agencies are companies that offer services
such as conducting marketing research, advertising, and consulting. Financial intermediaries
are institutions such as banks, credit companies and insurance companies.
-Another aspect of micro-environment is the customer market. There are different types of
customer markets including consumer markets, business markets, government markets,
international markets, and reseller markets. The consumer market is made up of individuals
who buy goods and services for their own personal use or use in their household. Business
markets include those that buy goods and services for use in producing their own products
to sell. This is different from the reseller market which includes businesses that purchase
goods to resell as is for a profit. These are the same companies mentioned as market
intermediaries. The government market consists of government agencies that buy goods to
produce public services or transfer goods to others who need them. International
markets include buyers in other countries and includes customers from the previous
categories. Competitors are also a factor in the micro-environment and include companies
with similar offerings for goods and services. To remain competitive a company must
consider who their biggest competitors are while considering its own size and position in the
industry. The company should develop a strategic advantage over their competitors.

The macro-environment refers to all forces that are part of the larger society and affect the
micro-environment. It includes concepts such as demography, economy, natural forces,

technology, politics, and culture.

Factors affecting organization in Macro environment are known as PESTEL, that is: Political,
Economical, Social, Technological, Environmental and Legal.

DEMOGRAPHIC ENVIRONMENT: refers to studying human populations in terms of size,

density, location, age, gender, race, and occupation. This is a very important factor to study
for marketers and helps to divide the population into market segments and target markets.
An example of demography is classifying groups of people according to the year they were
born. These classifications can be referred to as baby boomers, who are born between 1946
and 1964, generation X, who are born between 1965 and 1976, and generation Y, who are
born between 1977 and 1994. Each classification has different characteristics and causes
they find important. This can be beneficial to a marketer as they can decide who their
product would benefit most and tailor their marketing plan to attract that segment.
Demography covers many aspects that are important to marketers including family
dynamics, geographic shifts, work force changes, and levels of diversity in any given area.

Another aspect of the macro-environment is the economic environment. This refers to the
purchasing power of potential customers and the ways in which people spend their money.
Within this area are two different economies, subsistence and industrialized. Subsistence
economies are based more in agriculture and consume their own industrial output. Industrial
economies have markets that are diverse and carry many different types of goods. Each is
important to the marketer because each has a highly different spending pattern as well as
different distribution of wealth.

THE NATURAL ENVIRONMENT: is another important factor of the macro-environment.

This includes the natural resources that a company uses as inputs that affects their
marketing activities. The concern in this area is the increased pollution, shortages of raw
materials and increased governmental intervention. As raw materials become increasingly
rarer(SCARCER), the ability to create a companys product gets much harder. Also, pollution
can go as far as negatively affecting a companys reputation if they are known for damaging
the environment.

THE POLITICAL ENVIRONMENT: includes all laws, government agencies, and groups
that influence or limit other organizations and individuals within a society. It is important for
marketers to be aware of these restrictions as they can be complex. Some products are
regulated by both state and federal laws. There are even restrictions for some products as
to who the target market may be, for example, cigarettes should not be marketed to
younger children. There are also many restrictions on subliminal messages and monopolies.
As laws and regulations change often, this is a very important aspect for a marketer to


External factors in technology that impact business operations. Changes in technology affect how
a company will do business. A business may have to dramatically change their operating strategy as
a result of changes in the technological environment.
Its a study of techniques,involving science in it.For instance;Gadgets,Automobiles etc.
A change in technology will change almost everything.


A cultural environment is a set of beliefs, practices, customs and behaviors that are
found to be common to everyone that is living within a certain population. Cultural
environments shape the way that every person develops, influencing ideologies and
personalities. Cultural environments are determined by the culmination of many
different aspects of culture that influence personal choices and behaviors.
Religious beliefs are an important building block of a specific cultural environment. For
many cultures, a certain religion has been a critical part of everyday living for
generations. Outsiders need to be aware of the customs and traditions related to
specific religion in order to respectfully navigate a certain cultural environment.
Family and the relationship within the family are additional factors that determine a
cultural environment. Many cultures are structured around families, while others
promote individuality and self-sustainability. Like religion and family, language is the
third most important element of a cultural environment. Outside of these components,
educational and social systems affect the structure of a cultural environment. Social
systems may determine customs or taboos that are important to a particular region,
while education may determine what types of ideologies are publicly shared. When
visiting a new country or region, it is important for visitors to understand the cultural
environment in order to protect themselves from shame, embarrassment or the act of
offending a stranger.
Consumer behavior refers to the selection, purchase and consumption of goods and services for the
satisfaction of their wants. There are different processes involved in the consumer behavior. Initially
the consumer tries to find what commodities he would like to consume, then he selects only those
commodities that promise greater utility. After selecting the commodities, the consumer makes an
estimate of the available money which he can spend. Lastly, the consumer analyzes the prevailing

prices of commodities and takes the decision about the commodities he should consume.
Meanwhile, there are various other factors influencing the purchases of consumer such as social,
cultural, personal and psychological. The explanation of these factors is given below.
1. Cultural Factors
Consumer behavior is deeply influenced by cultural factors such as: buyer culture, subculture, and
social class.

Basically, culture is the part of every society and is the important cause of person wants and
behavior. The influence of culture on buying behavior varies from country to country therefore
marketers have to be very careful in analyzing the culture of different groups, regions or even
Marketers are always trying to spot cultural shifts in order to discover new products that might be
wanted. Example
Each culture contains different subcultures such as religions, nationalities, geographic regions, racial
groups etc. Marketers can use these groups by segmenting the market into various small portions.
For example marketers can design products according to the needs of a particular geographic
group. Many subcultures makeup important market segments, and marketers often design products
and marketing programs tailored to their needs. Examples of such important subculture groups
based on religion include hindu, muslim, sikh, Christian, Buddhist , jain and parsi consumers in the
subcontinent. Many products and services, especially those linked with religious rituals and festivals,
are targeted at these subcultures.
Its a group of people within the culture with shared value systems based on common life
experiences and situations.
Social Class:
Every society possesses some form of social class which is important to the marketers because the
buying behavior of people in a given social class is similar. In this way marketing activities could be
tailored according to different social classes. Here we should note that social class is not only
determined- measured by income but there are various other factors as well such as: wealth,
education, occupation etc.
Social clases are societys relatively permanent and ordered divisions whose members share similar
values , interests , and behaviors. ( shampoo-unilever)

2. Social Factors:
Social factors also impact the buying behavior of consumers. The important social factors are:
reference groups, family, role and status.

Reference Groups:
Reference groups have potential in forming a person attitude or behavior. The impact of reference
groups varies across products and brands. For example if the product is visible such as dress,
shoes, car etc then the influence of reference groups will be high. Reference groups also include
opinion leader (a person who influences other because of his special skill, knowledge or other
Buyer behavior is strongly influenced by the member of a family. Therefore marketers are trying to
find the roles and influence of the husband, wife and children. If the buying decision of a particular
product is influenced by wife then the marketers will try to target the women in their advertisement.
Here we should note that buying roles change with change in consumer lifestyles.

Roles and Status:

Each person possesses different roles and status in the society depending upon the groups, clubs,
family, organization etc. to which he belongs. For example a woman is working in an organization as
finance manager. Now she is playing two roles, one of finance manager and other of mother.
Therefore her buying decisions will be influenced by her role and status.

3. Personal Factors:
Personal factors can also affect the consumer behavior. Some of the important personal factors that
influence the buying behavior are: lifestyle, economic situation, occupation, age, personality and self
Age and life-cycle have potential impact on the consumer buying behavior. It is obvious that the
consumers change the purchase of goods and services with the passage of time. Family life-cycle
consists of different stages such young singles, married couples, unmarried couples etc which help
marketers to develop appropriate products for each stage.
The occupation of a person has significant impact on his buying behavior. For example a marketing
manager of an organization will try to purchase business suits, whereas a low level worker in the
same organization will purchase rugged work clothes.
Economic situation;
consumer economic situation has great influence on his buying behavior. If the income and savings
of a customer is high then he will purchase more expensive products. On the other hand, a person
with low income and savings will purchase inexpensive products.
Lifestyle of customers is another import factor affecting the consumer buying behavior. Lifestyle
refers to the way a person lives in a society and is expressed by the things in his/her surroundings. It
is determined by customer interests, opinions, activities etc and shapes his whole pattern of acting
and interacting in the world.

Personality changes from person to person, time to time and place to place. Therefore it can greatly
influence the buying behavior of customers. Actually, Personality is not what one wears; rather it is
the totality of behavior of a man in different circumstances. It has different characteristics such as:
dominance, aggressiveness, self-confidence etc which can be useful to determine the consumer
behavior for particular product or service.

4. Psychological Factors:
There are four important psychological factors affecting - influencing the consumer buying behavior.
These are: perception, motivation, learning, beliefs and attitudes.
The level of motivation also affects the buying behavior of customers. Every person has different
needs such as physiological needs, biological needs, social needs etc. A need becomes a motive
when it is aroused to a sufficient level of intensity.The nature of the needs is that, some of them are
most pressing while others are least pressing. Therefore a need becomes a motive when it is more
pressing to direct the person to seek satisfaction.
Psychologists have developed theories of human motivation. Two of the most popular-the theories of
Sigmund frued and Abraham maslow-have quite different meanings for consumer analysis and

MOTIVE: A motive or drive is a need that is sufficiently pressing to direct the person to
seek satisfaction of the need.
Selecting, organizing and interpreting information in a way to produce a meaningful experience of
the world is called perception. A motivated person is ready to act. How the person acts is influenced
by his or her own perception of the situation. All of us learn by the flow of information through our five
senses; sight, hearing , smell, touch, and taste. However, each of us receives, organizes and
interprets , this sensory information in an individual way. There are three different perceptual
processes which are selective attention, selective distortion and selective retention. In case of
selective attention, marketers try to attract the customer attention. Whereas, in case of selective
distortion, customers try to interpret the information in a way that will support what the customers
already believe. Similarly, in case of selective retention, marketers try to retain information that
supports their beliefs. Consumers are likely to remember good points made about a brand they
favour and to forget good points made about competing brands. Because of selective attention ,
distortion and retention marketers must work hard to get their messeges through. This fact explains
why marketers use so much drama and repetition in sending messeges to their market.
Beliefs and Attitudes
Customer possesses specific belief and attitude towards various products. Since such beliefs and
attitudes make up brand image and affect consumer buying behavior therefore marketers are
interested in them. Marketers can change the beliefs and attitudes of customers by launching special
campaigns in this regard.

A belief is descriptive thought that a person has about something. Beleifs may be based on real
knowledge, opinion or faith and may or may not carry an emotional charge.
ATTITUDES: People have ATTITUDES regarding religion, politics, clothes, music, food and almost
everything else. ATTITUDE describes a persons relatively consistent evaluations, feelings, and
tendencies toward an object or idea. Attitude put people into a frame of mind of liking and disliking
things, of moving toward or away from them.