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MODULE 1 COMPANY ORIENTATION TOWARDS MARKETING

4.1 ANALYSING MARKETING ENVIRONMENT


Marketing management rests squarely on the knowledge of the
marketing environment. The firm has to know where the environment
is heading, what trends are merging therein & what should be its
response to the environmental changes. Only by analyzing the
environment, can the firm grapple with these issues.

PURPOSE OF MARKETING ENVIRONMENT ANALYSIS


To know where the environment is heading; to observe & size up
the relevant events & trends in the environment.
To discern which events & trends are favorable from the
standpoint of the firm & which are unfavorable; to figure out the
opportunities & threats hidden in the environmental events &
trends.
To project how the environment each factor of the environment
will be at a future point of time.
To assess the scope of various opportunities & shortlist those that
can favorably impact the business.
To help secure the right fit between the environment & the
business unit, which is the crux of marketing; to help the business
unit respond with matching product market strategies; to
facilitate formulation of a marketing strategy in the right way in
line with the trends in the environment & the opportunities
emerging therein.

MODULE 1 COMPANY ORIENTATION TOWARDS MARKETING


4.2 FACTORS TO BE COVERED IN ENVIRONMENT ANALYSIS
In marketing environment analysis, a firm gathers relevant information
relating to the environment, studies them in detail, takes note of the
changes in each element of the environment & forecasts the future
position in each of them. Since marketing environment has 2 parts 1)
mega/macro environment & 2) environment that is specific to the given
business the firm covers both these parts in the environment analysis.

MEGA/MACRO ENVIRONMENT
Demographic environment
Socio-cultural environment
Economic environment
Political environment
Natural environment
Technology environment
Legal (business legislation) environment
Government policies

ENVIRONMENT THAT IS SPECIFIC TO BUSINESS


The market/demand
The consumer
The industry
The competition
Government policies ( specific to the business concerned)
Supplier-related factors

MODULE 1 COMPANY ORIENTATION TOWARDS MARKETING

4.3 MEGA/MACRO ENVIRONMENT FACTORS

Demographic Environment
Several factors relating to population, such as size, growth rate, age
distribution, and religious composition & literacy levels need to be
studied. Aspects such as composition of workforce, household patterns,
regional characteristics, population shifts also need to be studied, as
they are all part of the demographic environment.

Facts on the demographic environment of India


Population: 1.00 billion (2001 census)
Growth rate of population: 2% per annum
Life-expectancy: 62 years
Literacy rate: Low but steadily growing 65%
Previous literacy rate: 17% (1951)

Socio-Cultural Environment
Culture: Religion, Language, Education & Upbringing
Social class: Determined by income, occupation, Residence, Lifestyle

Facts on socio-cultural environment of India


Major Religious Groups: Hindus, Muslims, Christians, Buddhists, Jains
Languages: 17 major registered languages
Traditions: marriage, Family-life, rituals
Changing position of women: Opportunities/Threats

MODULE 1 COMPANY ORIENTATION TOWARDS MARKETING

4.4 ECONOMIC ENVIRONMENT


FACTORS TO BE COVERED UNDER ECONOMIC ENVIRONMENT
General economic conditions
Economic conditions of different segments of the population; their
disposable income, purchasing power etc.,
Rate of growth of the economy, rate of growth of each sector of
the economy:
Agriculture
Industry
Consumer goods
Capital goods
Services
Infrastructure
Imports/Exports
Income, prices & consumption of expenditure (size & patterns)
Credit availability & interest rates
Savings rate/Capital formation
Inflation rate
Behavior of capital markets
Foreign exchange reserves
Exchange rates
Tax rates
Prices of important materials
Energy scene (cost, availability etc.)
Labor scene (cost, skill availability etc.)

MODULE 1 COMPANY ORIENTATION TOWARDS MARKETING

4.5 POLITICAL/NATURAL ENVIRONMENT


Political environment: Economic environment is often a by-product
of the political environment, since economic & industrial policies
followed by a nation greatly depend on its political environment.
Political environment has several aspects:
Form of government adopted by the country
Political stability
Social/religious organizations, media & pressure groups & lobbies of various kinds

Some features of Indias political environment: The fact that the


democratic form of government has endured since independence is one
major feature. Another factor is that while in the first 40 years since
independence, the country had a single party government at the center,
in recent times, coalition government experiments have been going on.
Natural environment: The analysis of the mega environment must also
cover aspects like extent of endowment of natural resources in the
country, ecology, climate etc., These constitute the natural environment.
Natural resources: The extent to which the country/region under
reference is endowed with natural resources has an impact on the
functioning of the firm. Raw materials & energy are a few examples.
Ecology: In modern times, all societies are concerned with ecology,
especially about environmental pollution, protection of wild life & ocean
wealth. And, governments are becoming active bargainers in
environmental issues.
Climate: Firms with products whose demand depends on climate, &
firms depending on climate-dependent raw materials will be
particularly concerned with this factor.
In the case of India, the country is rich in natural resources like iron,
coal, rare minerals, ocean wealth etc. The country also receives good
rainfall & has a strong network of rivers. As regards climate, the
tropical climate in the country generally favors agriculture & industry.
In the matter of energy, costs are constantly on the rise.

MODULE 1 COMPANY ORIENTATION TOWARDS MARKETING

4.6 TECHNOLOGY/LEGAL ENVIRONMENT


For a business firm, technology affects not only its final products but
also its raw materials, processes & operations as well as its customer
segments. The IT & Telecom industries are a few examples.
Technology selection: It is possible that several levels of technologies
are floating at the same time in an industry. Firms have to scan the
technology environment & select technologies that will be appropriate
for the firm & the given product-market situation. They have to
forecast technological trends, assess current & emerging technologies &
develop the inputs for right technology choice. The policies of the
government on technology import are also a concern in this regard.
India is adopting a fairly liberal approach to technology import. It also
supports efforts at internal technology development.
Legal environment/Business legislation: Businesses have to operate
within the framework of the prevailing legal environment. They have to
understand the implication of all the legal provisions relating to their
business. Business legislation can be classified into the following broad
categories, based on the area covered by them:
Corporate affairs
Consumer protection
Employee protection
Sectoral protection
Corporate protection (preventing unfair competition)
Protection of society as a whole against unrestrained business behavior
Regulations on products, prices & distribution
Controls on trade practices
Protecting national firms against the MNCs (Desi Vs Videsi)
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MODULE 1 COMPANY ORIENTATION TOWARDS MARKETING


4.7 ENVIRONMENTAL FACTORS SPECIFIC TO BUSINESS
Market/Demand: The aspects to be studied here include
Nature of the demand
Size of the demand, present & potential
Changes taking place in demand
Invasion of substitute products
Changes taking place in consumption pattern/buying habits

Analyzing the Consumer: Factors to be monitored


According to the firm, what is the basic need the product serves?
According to the consumer, what is the need it serves?
What constitutes the customer value in the business as per their
perception?
What benefits do the consumers look for in the product?
Of the many benefits they look for, what are
preferences/priorities?
Who are the consumers (number, location)?

their

Purchasing power of the consumers.


Buying behavior/motives/habits.
Personality traits/attitudes.
Lifestyles & needs: present position & trends.
Brand loyalty.
Reasons/motives for customers patronage of specific brands.
Brand switching: how loyalties are shifting.
Reactions of customers to the companys & competing products.
Who among the competitors remains closest to the customer & why?

MODULE 1 COMPANY ORIENTATION TOWARDS MARKETING

4.8 SUPPLIER RELATED FACTORS


Suppliers form another important component of the proximate
environment of a firm. Suppliers influence the costs of raw
materials & other inputs to a firm & hence the profits a firm
can take home.
It is in this context that the trade-off between integrating
versus outsourcing of supplies assumes importance for a firm
because this has implications on the cost as well as quality
fronts. Suppliers also keep introducing frequent changes in
their products, processes & business activities.
Sometimes, suppliers suddenly become direct competitors to a
firm, by themselves becoming end-product manufacturers.
Obviously, firms have to closely monitor the supplier
environment.
Environment analysis has to be a Continuous Affair: If the
company does not analyze the environment on a continuous
basis, the firm will not be in a position to respond properly to
the changes taking lace in the environment.
At no point of time can the firm declare we have concluded
our environmental analysis & for the next 5 years, we can take a
holiday from the task. On the contrary, the firm has to treat
environmental analysis as a continuous process.
Fresh facts emerging from environment analysis influence the
implementation & monitoring of the strategy. And, at times,
such fresh facts result in reshaping of the strategy.