MODULE 2

Marketing Environment
Marketing activities are influenced by several factors inside and outside a business firm.
These factors or forces influencing marketing decision making are collectively called
marketing environment.

According to Philips Kotler, marketing environment refers to “external factors and forces
that affect the company‟s ability to develop and maintain successful transactions and
relationships with its target customers”.
A company‟s marketing environment consist of the actors and the forces outside marketing
that affect marketing management‟s ability to build and maintain successful relationships
with target consumers.

Like, Xerox, Companies constantly watch and adapt to the changing environment.

Every manager in an organization needs to observe the outside environment, marketers

have two methods-

 Marketing Research
 Marketing Intelligence

Marketer also spend time with their customers and competitor environments to carefully
studying the environment.

The marketing environment may be broadly divided into two parts:

 Micro environment
 Macro environment

Microenvironment consists of the actors close to the company that affect its ability to
serve its customers- the company, suppliers, marketing intermediaries, customer
markets, competitors and publics. These actors can be controlled by the company with its
own action, hence are also called Controllable Factors.

Macroenvironment consists of larger societal forces that affects the microenvironment

– demographics, economic, natural, technological, political and cultural forces whichcannot
be controlled by the company with its own actions, atleast in the short run. So
these are also called Uncontrollable factors.

MACRO ENVIRONMENT

SAUMYA SINGH, Assistant Professor Page 1

Macro environment consists of six major forces viz, demographic, economic, physical,
technological, political/ legal and socio-cultural. The trends in each macro environment
components and their implications on marketing are discussed below:

DEMOGRAPHIC ENVIRONMENT

Demography is the study of human population in terms of size, density, location, age,
gender, occupation etc. The demographic environment is of major interest to marketers
because it involves people the people make up markets.

The world population and the Indian population in particular is growing at an explosive
rate. This has major implications for business. A growing population means growing human
needs. Depending on purchasing powers, it may also mean growing market opportunities. On
the other hand, decline in population is a threat so some industrial and the boon to others. The
marketing executives of toy-making industry spend a lot of energy and efforts and developed
fashionable toys, and even advertise “Babies are our business-our only business”, but quietly
dropped this slogan when children population gone down due to declining birth rate and later
shifted their business to life insurance for old people and changed their advertisement slogan
as “the company has not babies the over 50s”.

The increased divorce rate shall also have the impact on marketing decisions. The higher
divorce rate results in additional housing units, furniture, appliances and other house-hold
appliances. Similarly, when spouses work at two different places, that also results in
additional requirement for housing, furniture, better clothing, and so on.
Thus, marketers keep close tract of demographic trends developments in their markets
and accordingly evolve a suitable marketing programme.
FACTORS INCLUSE:
1) AGE
2) GENDER
3) RELIGION
4) LIFE STYLE
5) OCCUPATION
6) INCOME
7) PREFERANCES etc.

SAUMYA SINGH, Assistant Professor Page 2

ECONOMIC ENVIRONMENT
Markets require purchasing power as well as people. Total purchasing power is functions
of current income, prices, savings and credit availability. Marketers should be aware of four
main trends in the economic environment.
(i) Decrease in Real Income Growth
Although money incomer per capita keeps raising, real income per capita has decreased
due to higher inflation rate exceeding the money income growth rate, unemployment rate
and increase in the tax burden.
These developments had reduced disposable personal income; which is the amount
people have left after taxes. Further, many people have found their discretionary income
reduced after meeting the expenditure for necessaries. Availability of discretionary
income shall have the impact on purchasing behaviour of the people.
(ii) Continued Inflationary Pressure
The continued inflationary pressure brought about a substantial increase in the prices of
several commodities. Inflation leads consumers to research for opportunities to save
money, including buying cheaper brands, economy sizes, etc.
(iii) Low Savings and High Debt
Consumer expenditures are also affected by consumers savings and debt patterns. The
level of savings and borrowings among consumers affect the marketing. When marketers
make available high consumer credit, it increases market opportunities.
(iv) Changing Consumer Expenditure Patterns
Consumption expenditure patters in major goods and services categories have been
changing over the years. For instance, when family income rises, the percentage spent on
food declines, the percentage spent on housing and house hold operations remain
constant, and the percentage spent on other categories such as transportation and
education increase.

PHYSICAL ENVIRONMENT/ ENVIRONMENTAL

There are certain finite renewable resources such as wood and other forest materials
which are now dearth in certain parts of world. Similarly there are finite non-renewable
resources like oil coal and various minerals, which are also not short in supply. In such cases,
the
marketers have to find out some alternative resources. For instance, the marketers of wooden
chairs, due to shortage and high cost of wood shifted to steel and later on fiber chairs.

SAUMYA SINGH, Assistant Professor Page 3

SOCIO CULTURAL ENVIRONMENT
The socio-cultural environment comprises of the basic beliefs, values and norms which
shapes the people. Some of the main cultural characteristics and trends which are of interest
to the marketers are:
(i) Core Cultural Values
People in a given society hold many core beliefs and values, that will tend to persist.
People‟s secondary beliefs and values are more open to change. Marketers have morechances
of changing secondary values but little chance of changing core values.
(ii) Each Culture Consists of Sub-Cultures
Each society contains sub-cultures, i.e. groups of people with shared value systems
emerging out of their common life experiences, beliefs, preferences and behaviors. To the
extent that sub-cultural groups exhibit different wants and consumption behaviour,
marketers can choose sub-cultures as their target markets.
Secondary cultural values undergo changes over time. For example „video-games‟,
and other cultural phenomena have a major impact on children
hobbies, clothing and life goals. Marketers have a keen interest in anticipating cultural
shifts in order to identify new marketing opportunities and threats.

TECHNOLOGICAL ENVIRONMENT
Technology advancement has benefited the society and also caused damages. Open heart
surgery, satellites all were marvels of technology, but hydrogen bomb was on the bitter side
of technology. Technology is accelerating at a pace the many products seen yester-years have
become obsolete now.
There could be a new range of products and systems due to the innovations in technology.
This technology developments has tremendous impact on marketing and unless the
marketing manager cope up with this development be cannot survive in the competitive
market.

POLITICAL AND LEGAL ENVIRONMENT

Marketing decisions are highly affected by changes in the political/ legal environment.
The environment is made up of laws and government agencies that influence and constraint
various organizations and individuals in society.
Legislations affecting business has steadily increased over the years. The product the
consumes and the society against unethical business behaviour and regulates the functioning
of the business organizations. Removal of restrictions to the existing capabilities,

SAUMYA SINGH, Assistant Professor Page 4

enlargement of the spheres open to MRTP and FEMA companies and broad banding of
industrial licenses were some of the schemes evolved by the government.

*PLEASE REFER CLASS NOTES ALSO

SAUMYA SINGH, Assistant Professor Page 5