MARKETING – CLASS XI

UNIT 2 : MARKETING ENVIRONMENT

Marketing Environment
Meaning: The marketing environment refers to all internal and external factors,

which directly or indirectly influence the organization‟s decisions related to

marketing activities.

Definition: According to Philip 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”.

Static Environment: Business is affected by multiplicity of factors and forces,

which constitute the environment of business. As most of these factors are

uncertain and also unpredictable, the business firm will not have any control over

them. However, certain factors may remain fairly static.

For example, it takes several decades or even centuries to change the socio-

psychological aspects and attitudes of the people in an economy.

Dynamic Environment: In a dynamic environment, factors in the environment

change very quickly, which cannot be anticipated easily. Development in the fields

of transportation, communication etc. has made the world a closer one. Besides,

economic environment also changes over time. In a dynamic economy,

population, human wants, capital resources, technology etc. are continuously

changing.The nature of human wants, tastes, preferences etc. also should be

forecasted. The business manager should be very alert in foreseeing the changes in

dynamic factors of the environment. He should revise the business policies as per

the changes forecasted.

There are few examples of external forces making an influence on a business:

i. Fast technological changes as in the mobile industry or computer industry

introduction of new models and software and Apps

ii. Uncertainty in political scenario, e.g., changing governments, change of finance

minister or minister of concerned industries etc.

iii. Changes in government's economic policies, e.g., licensing policy, taxation

policy, inter-state or foreign trade policy.

iv. Social changes, e.g., demand for reservation in jobs for minorities and women.

v. Changes in fashion and tastes of consumers, e.g., preference for organic

products or demand for Khadi clothes in place of synthetic clothes by the

customers etc.

vi. Industrial conflicts caused by labour unrest- labour demanding higher wages

and bonus and better working conditions, etc.

vii. Globalization and Liberalization resulting in increased competition in the

market with the entry of multinational corporations or start-ups

Environmental scanning

Environmental scanning is a constant and careful analysis of the internal and

external environment of an organization in order to detect opportunities, threats,

trends, important lessons, and weaknesses which can impact the current and

future strategies of the organization.

It is an important part of the business process as it is the responsibility of an

organization to keep a check on things which can put negative impacts on their

business and their consumers.

Importance of environmental scanning:

1. Optimum utilisation of resources: The environmental analysis helps to

determine whether the resources such as human resource, capital resource, etc.

are being used efficiently or not. It helps us to curb down the wastage of these

important resources.

2. Threat & Weakness identification: Constant environment scanning helps the

organization to learn about the strengths, opportunities and threats occurring in

the industry and give warning signals to the firms. On the basis of this
information future strategies can be planned and implemented. Hence, it helps the

organizations to stay strong in the game.

For instance, The proposal of Tata Motors to bring out a small economy car by

2008 was a warning signal for Maruti Suzuki to cut its costs or introduce

economy models.

3. Competitor Strategy: Environmental scanning helps to learn about the

business strategies of competitors which helps in forming strategies to tackle

competition.

4. 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 and the general public.

5. 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.

6. Determining Opportunities: The interaction between the business and its

environment identifies opportunities and helps in getting 'First Mover Advantage'

out of it successfully. Opportunities mean the positive or favourable external

forces that are likely to help a firm increase its business.

For instance, by learning that the demand for bikes is going to increase, a bike

producing company can take steps to increase production and introduce new

models of motorbikes to lure new customers. This is what Hero Honda did in the

1990s to establish its leading position in the Indian bike market.

7. Future Forecast:

8. Market knowledge:

9. Continuous Learning:

DIFFERENT TECHNIQUES OF ENVIRONMENTAL ANALYSIS

: Different methods of strategic analysis are:

ETOP: ETOP stands for the Environmental Threat Opportunity Profile. It helps an

organization to analyse the impact of the environment based on threats &

opportunities.

 Threat may be like emergence of strong competition in the market by new

firms and substitute products

 Opportunity may be in the form of path breaking new technology that may

help to reduce cost and improve product quality of the firm.

SWOT analysis: SWOT stands for Strength, Weaknesses, Opportunities, and

Threats. This is a strategic technique opted by an organization to learn about its

internal strengths and weaknesses. It is a technique to learn to identify internal

and external factors which can be helpful in achieving the goal of an

organization. It is important to learn about business competition and project

planning.

PEST analysis: It is done to learn about the external macro environmental factors.

PEST stands for P: Political, E: Economic, S: Social, T: Technological. These external

macro environmental factors put an impact on the business of the organization

and it is important for an organization to keep a track of them.

QUEST: QUEST stands for the Quick Environmental Scanning Technique. This

technique is designed to analyse the environment quickly & inexpensively so that

business can focus on critical issues that have to be addressed in a short span.

INDUSTRIAL CONFLICT CAUSED BY LABOUR UNREST AFFECT A FIRM‟S

PRODUCTIVITY

Labor is one of the major production factor. Without labour there is no

production. Labor unrest occurs when employees believe that they are treated

unfairly by the management of the company. Employees organize themselves

under a certain labor union and strike upon the company and obstruct the

normal process of business and generate industrial unrest.

The Human resource managers must be of humanitarian view rather than

authoritative view. Generally
preventing labour unrest is of great importance, if it is not, it will lead to several

impacts including loss of jobs by employees, Loss of profit to the company due to

its stoppage in production, Poor image of the company .

CONTROLLABLE AND UNCONTROLLABLE FACTORS IN THE

MARKETING ENVIRONMENT

The business firm has to deal with the changes taking place 'within' and 'around'

it. There are certain forces that can be controlled to a large extent by the

management of a company. These are called internal environment factors, which

are generally related to product design, volume of production, procurement of

raw material, employment of labour, doses of financial investment and expansion

plans of the firm. These changes can be introduced as per desire of the company's

management. Besides this, the four P's of marketing i.e., product, price, place and

promotion are also controllable.

Another type of marketing environment, which generally cannot be guarded by

the management of a company, is called uncontrollable environment. This also

affects marketing policies and strategies of the firm to a great extent. The external

uncontrollable environment consists of factors and forces at two levels namely-

micro environment, and macro environment.

Micro-Environment: Micro environment includes those factors, which act and

react in the immediate environment of the business enterprise. They affect the

performance of the company. It includes suppliers of raw materials, marketing

intermediaries, competitors in business, customers and also the public.

Macro Environment: The macro environment consists of societal forces, which

affect the micro environment. These are demographic factors, economic factors,

technological factors and also political and cultural forces. International factors

also fall within the scope of macro environment.

MACRO ENVIRONMENTAL MEANING AND FACTORS AFFECTING A

BUSINESS.
Meaning

Macro environment involves a set of environmental factors that is beyond the

control of an organization. These factors influence the organizational activities to

a significant extent. Macro environment is subject to constant change. The

changes in macro environment bring opportunities and threats in an

organization.

MACRO ENVIRONMENT:
SOCIAL &
CULTURAL
POLITICAL & LEGAL NATURA
L

ECONOMIC COMPAN TECHNOLOGICAl

Y
L

DEMOGRAPHIC COMPETITION

1. Demographic Environment: Society is the first environmental factor of

interest to marketers as the people in society create the market. It is

characterised as the factual investigation and segregation of the population

according to their size, density, location, age, gender, race, and occupation.
 It also includes the increasing role of women and technology. Demographic

environment is responsible for the variation in the tastes and preferences

and buying patterns of individuals. The changes in demographic

environment persuade an organization to modify marketing strategies to

address the altering needs of customers.

2. Economic Environment : Economic environment affects the organization‟s

costs structure and customers‟ purchasing power and spending patterns.

Economic policies, economic conditions, economic factors create the

economic environment of the business. These factors include the GDP, GNP,

interest rates, inflation, income distribution, government funding and

subsidies, and other major economic variables

3. Natural or Physical Environment: The physical environment includes the

natural environment in which the business operates. This includes the

climatic conditions, environmental change, accessibility to water and raw

materials, natural disasters, pollution etc. Natural environment consists of

 natural resources, which are needed as raw materials to manufacture

products by the organization. The marketing activities affect these natural

resources, such as depletion of ozone layer due to the use of chemicals

(Green House effect). The corrosion of the natural environment is increasing

day-by-day and is becoming a global problem. Marketers need to be aware

of risk and opportunities with the subsequent four trends in the natural

environment. Raw material shortage Raised cost of energy.

 Expanded pollution levels.

 Dynamic act of government in environmental protection.

4. Socio-Cultural Environment: The social-cultural aspect of the macro-

environment is made up of the lifestyle, values, culture, prejudice and beliefs

of the people. This differs in different regions. These forces help in

determining that what type of products customers prefer, what influences

the purchase attitude or decision, which brand they prefer, and at what time

they buy the products. The socio-cultural environment explains the

 characteristics of the society in which the organization exists. The analysis

of socio-cultural environment helps an organization in identifying the

threats and opportunities in an organization.

For example, the lifestyles of people are changing day-by-day. Now, the

women are perceived as an active earning member of the family. If all the

members of a family are working then the family has less time to spend for

shopping. This has led to the development of shopping malls and super

markets, where individuals could get everything under one roof to save their

time.

5. Technological Environment: Technology contributes to the economic

growth of a country. It has become an indispensible part of our lives.

Organizations that fail to track ongoing technological changes find it

difficult to survive in today‟s competitive environment.

Technology acts as a rapidly changing force, which creates new

opportunities for the marketers to acquire the market share. Marketers with
 the help of technology can create and deliver products matching the life

style of customers. Thus, marketers should observe the changing trends in

technology. The technological environment constitutes innovation, research

and development in technology, technological alternatives, innovation

inducements also technological barriers to smooth operation. Technology is

one of the biggest sources of threats and opportunities for the organisation

and it is very dynamic.

6. Political and Legal Environment: The political & Legal environment includes

laws and government‟s policies prevailing in the country. It also includes

other pressure groups and agencies which influence or limit the working of

the industry and/or the business in the society. Every organization should

take care of the fact that marketing activities should not harm the political

and legal environment prevailing in a country.

The political and legal environment has a serious impact on the economic

environment of a country. The major political trends are:

  A significant amount of legislation managing business.

 Expansion of public interest groups.

 Developing government agency administration.

Various legislations affecting the marketing activities are as follows:

(a) Anti-pollution laws, which affect the production or

manufacturing of various products.

(b) Customer legislation, which tries to protect the customer‟s

interest.

7. Competition : One key measurement of the environment in which the business

competes is the rivalry among firms competing and selling similar products or

services. All firms within same market niche are striving to increase market share,

revenue, and profits. It‟s crucial to know and understand the competitor and

their strengths and weaknesses.

 TECHNOLOGY ADOPTION HELPS TO GAIN COMPETITIVE

ADVANTAGE TO THE BUSINESS FIRM.

Technology will lead to more growth of knowledge and ideas in a person‟s mind

and it becomes easy for entrepreneur to make the business better. Technology

adoption is a term that refers to the acceptance, integration, and use of new

technology in society. Businesses that can identify technology trends, for instance,

can adopt technology earlier than competitors. This will often result in a

competitive advantage for those businesses.

Technology is revolutionizing businesses and it‟s becoming a fundamental

requirement for a successful business. Technology revolution has a big impact on

the way businesses are currently run and presents ways business can use

technology to increase revenue and reduce operational cost.

Advancements in technology leads to greater productivity, higher quality and

lower cost of production for the business. As technology advances, the way of
doing business also changes and therefore, it is imperative of entrepreneurs or

business owners to adapt to these changes brought in by new technologies.

Technology acts as a rapidly changing force, which creates new opportunities for

the marketers to acquire the market share. Marketers with the help of technology

can create and deliver products matching the life style of customers. Thus,

marketers should observe the changing trends in technology.

Early adoption of new technology helps in new improved products and increases

the competitive advantage of the business firm.

The elements of external micro-environment before a business.

OR

„A firm plans production keeping in view the customers' needs, market

characteristics, competing rivals, behaviour of

suppliers and distributors for its product.‟ Do you agree the statement?

Discuss.
 The micro-component of the external environment is also known as the task

environment. It comprises of

external forces and factors that are directly related to the business. These include :

1. Suppliers: Suppliers are the providers of production or

Service materials. Dealing with suppliers is an important task of

management. A company can run its business

Successfully only if its suppliers supply material of good quality and on

time. A good relationship between the

Organization and the suppliers are important for an organization to keep a

steady following of quality input materials.

2. Market Intermediaries : These are the intermediary parties that help a

business to distribute its products in the

market. They involve physical distribution firms, middlemen, financial

intermediaries, marketing services agencies.

3. Customers: Customers are the most crucial component of the business.

“Satisfaction of customer” is the primary

goal of every organization. Strategy managers must

understand the composition of the company’s customers. With this end in

view, they need to develop an exhaustive customer

profile of both the present and potential customers.

4. Competitors: They are the players in the same market who targets similar

customers as that of the organization. Competition refers to a situation

where various organizations offer similar products and try to gain market

share by adopting different marketing strategies.

5. Public: Public is made up of any other group that has an actual or

potential interest or affects the company’s

ability to serve its customers. Public may hold attention in the business

undertakings, and it‟s the duty of the

organization to please the people at large in addition to competitors and

customers.

Suppliers influence firm‟s decision making

Suppliers are sources of resources such as raw materials, components,

equipment, financial support, services,

and office Supplies. To ensure the long-term survival and growth of a

company, it is essential to develop a

dependable relationship between a business-firm and its suppliers.

Suppliers can impact the business in the following way:

quality of the product.

are crucial as reliability of customers is

dependent on this.
 -up on your competition based

on their pricing, quality, reliability,

Technological breakthroughs and knowledge of industry trends.

liers can make major contributions to new product

development.

able to tap suppliers for additional

financing .Developing good relationships with suppliers is not a

complicated process. Be communicative, treat

them fairly, be demanding (coupled with loyalty) and pay them on time.

Role played by intermediaries in a market

Marketing intermediaries include the following:

Resellers: It purchases the products from the organizations and sell to the

customers. Examples of resellers are

wholesalers and retailers.

Distribution Centers: It helps organizations to store the goods. Example: A

warehouse.

Marketing Agencies: It promotes the organization‟s products by making the

customers aware about benefits of

products. An advertising agency is an example of marketing agency.

iii) Financial Intermediaries: It provides finance for the business transactions.

Examples of financial intermediaries are

banks, credit organizations, and insurance organizations.

Role of Customer in marketing micro environment

Various Categories of customer market:

Customers are the most crucial component of the business. Satisfaction of

customer” is the primary

goal of every organization. Customers are the target audience of the product, and

the preference of customers

influences all the marketing and business efforts of a company. The organization

must scrutinize its consumer‟s

market. Consumer‟s market includes:

s and services for

personal use.

for applying in their production

process.

s: It includes hospitals, schools, prisons, nursing homes, and

other institutions which

supplies goods and services to people in their responsibility.

and services for individuals

who are in need. Every market type has certain features that ask for careful study

by the sellers. At any time,

the enterprise may carry out one or more consumer markets.

for their consumption or

industrial use or both. They may be foreign consumers, producers, resellers and

governments.

What do you mean by publics?

Seven types of publics affecting a business decision making. IMP

A public is described as any society that has a

definite and hidden interest in or impacts on an organization‟s capability to

accomplish its objectives. There are seven types of the public; they are as follows:

includes Investment houses, banks and shareholders.

organizations.

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