Marketing Management

Marketing Environment
Unit-03
1.Introduction of Environment
2.Marketing Environment
3.Components of the Marketing Environment
4.Importance of Marketing Environment
1.Introduction of Environment

Environment literally means the surroundings, external objects, influences or circumstances under which someone
or something exists.

The environment of an organization is the aggregate of all conditions, events and influences that surrounds and
affects it. Since the environment influences an organization in many ways, its understanding is of crucial importance.
2.Marketing Environment

According to Philip Kotler, “Marketing environment refers to the external factors or forces that affect the company’s
ability to develop and maintain successful relationship with its target customers”.

A marketing environment is a combination of internal and external environmental forces and factors that influences
the business operation of a business and its ability to serve its customers.
3.Components of the Marketing Environment

There are broadly two components of the marketing environment, such as the internal environment and external
environment. Different types of parts of the marketing environment are categorized under these two broad
categories.

The internal environment of a business can be controlled, but there is very little control of a business in the external
marketing environment.
3.1 Internal Marketing Environment

The internal environment is formed of all the internal factors and forces of an organization.The internal
environment of an organization is within the control of the marketer, and he can change or modify the environment
as per the demand in the market and requirement of the business.

The following are the five factors that form the internal environment of an organization. These factors are also
referred to as five M’s of a business.

1.Money
2.Men
3.Markets
4.Materials
5.Machinery
The internal marketing environment consists of all factors that are internal to the organisation like:

•Company`s mission, vision and business objectives

•Company Culture
•Company image and Goodwill
•Marketing Strategy
•Technical Capacity
•Managerial Skills and Abilities
•Structure and Processes
•Finance and Sales force
•Production and Research
•Internal Processes and Procedures
•Allocation of responsibilities
•Resource availability
•Attitude of stakeholders
•Organisation culture
•Human Resources-HR department, Operations department, Accounting and Finance departments, Research and
Design
3.2 External Marketing Environment

The external marketing environment consists of all the external marketing factors that exist outside the organization,
and the marketer has little or no control over the external marketing environment factors.

The external marketing environment can be divided into two categories, such as
Micro environment
Macro environment
3.2.1 Micro Environment

The microenvironment of a business consists of all the factors and forces that are directly associated with the
company. The micro components of the external environment are also known as task environments.

The following are the various components of the micro external environment.
• Suppliers
• Market intermediaries
• Business partners
• Customers
• Public
• Competitors
1.Suppliers
Suppliers are an essential part of every organization. Suppliers supplies material and all other types of resources
required for the production of products. A company can run its business successfully only if its suppliers supply
material of good quality and on time.

2.Market Intermediaries
Market intermediaries are the intermediary parties that help a business to distribute its products in the market.

Types of Intermediaries
Mainly four types of intermediaries act at the different stages of distribution:
•Agents and Brokers
•Wholesalers
•Distributors
•Retailers
Agents and Brokers

Agents
Agents are people that represent another person or entity. They serve as an intermediary between buyers and sellers
on a permanent basis.

They have the power to negotiate and are given decision-making power. They are most actively present in the real
estate industry.

Brokers
Brokers are similar to agents in their role as intermediaries between buyers and sellers. However, they are not
permanent representatives of a person or an entity.

They are most active in the trading sector.

Both agents and brokers are paid on commission for a sale or transaction they have mediated.
Wholesalers

Wholesalers act as intermediaries between manufacturers and retailers. They buy products from manufacturers or
farmers and sell them to retailers.

Products are purchased in huge quantities from the manufacturer, and the wholesaler distributes them to retailers.

Wholesalers mainly focus on the Business-to-Business (B2B) market rather than the Business-to-Consumer (B2C)
market.

Wholesalers can operate in traditional cash-and-carry outlets or warehouses, but technological advancements have
also allowed wholesalers to move their business onto digital platforms.
Distributors

Similar to wholesalers, distributors are in direct contact with the manufacturer. But unlike wholesalers, they do not
sell the products to a retailer but the end-user.

They usually distribute only from a specific manufacturer and provide after-sales services to customers. They are
either paid in commission or fees by the manufacturer.

Retailers

Retailers are the types of intermediaries consumers are most familiar with and interact with the most. Shops,
supermarkets, websites, etc., are examples of retail.

Retailers have a wider reach. They either buy from the manufacturer or another intermediary.
Types of Distribution Channels/Level

1.Direct Channel (Zero Level)

For example: Jewellers use direct channels, Apple sells its products directly to the customers through its stores,
Amazon sells directly to the consumers, etc.
Types of Distribution Channels/Level

Indirect Channels

One-Level Channel

For example: Goods like clothes, shoes, accessories, etc., are sold by companies with the help of a retailer.
Types of Distribution Channels/Level

Indirect Channels

Two-Level Channel

For example: Unilever Limited sells its goods like detergent, tea leaves, etc., through wholesalers and retailers.
Types of Distribution Channels/Level

Indirect Channels

Three-Level Channel

For example: Wholesalers purchase goods from different distributors, then pass the goods to the retailers, who
ultimately sell the goods to customers.
3.Business Partners
Business partners are the business entities that conduct business with the organization. For
example, advertising agencies, banking and insurance companies, market research organization s, brokers, and
transportation companies, etc. A company is required to partner with several other companies to run a successful
business.

4.Customers
Customers are the most crucial component of the business. Customers are the target audience of the product, and
the preference of customers influences all the marketing and business efforts of a company.

5.Public
The public is people other than the target audience of the organization. The public plays a vital role in the success of
the business as it can build or destroy the image of a company in the market. The public has the power to influence
the purchasing decision of the target audience.

6.Competitors
The last but not least component of the microenvironment is the competitors of a business. The competitors are the
other businesses that sell similar products as your products or are part of the same strategic group in the industry.
3.2.2 Macro Environment

Macro components of a marketing environment consist of all external forces and factors that impact the whole
industry rather than just changing an organization directly. Therefore, the macro marketing environment is also
referred to as a large environment.

• Technological environment
• Demographic environment
• Social-cultural environment
• Economic environment
• Political-legal environment
• Physical environment
1.Technological environment

❖ Technology is one of the elements that have great potential to influence the business of an organization. It is
dynamic, as it changes rapidly.
❖ Technology provides several threats and opportunities to the business environment.
❖ The technological environment consists of research and development in technology, innovation, inducement of
technology, and technical alternatives, etc.

2.Demographic environment

❖ The demographic environment component of the macro marketing environment consists of people that form a
market.
❖ The population of the demographic environment can be characterized based on various factors such as age,
gender, density, size, location, race, and occupation, etc.
❖ The demographic environment is a crucial component for business as the company design and builds its
products based on the characteristics of the demographic environment.
3.Social-cultural environment

❖ The social-cultural component of a macro environment is formed using values, lifestyle, culture and beliefs of the
target audience of a business. The social-cultural environment varies from one region to another region.
❖ People living in one area might prefer a different type of product than the preference of the product of the
people of any other region.
❖ Businesses are required to have in-depth knowledge of the social-cultural environment to design a product or
service that is preferred by most people.

4.Political-legal environment

❖ The political-legal environment consists of laws and policies of a country.

❖ In addition to rules and procedures, the political-legal environment also includes agencies and pressure groups.
❖ All of these political entities impact the working capacity of the industry in society.
5.Economic environment

The economic environment component is a type of component that influences all industries. The economic
environment affects the purchasing power and spending patterns of the buyers.

The following are the different factors that form an economic environment.

1.Interest Rates.
2.Gross Domestic Products (GDP).
3.Gross National Product (GNP).
4.Inflation.
5.Subsidies.
6.Income distribution.
7.Government funding.
8.Other significant economic variables.
6.Physical environment

The last component of the macro environment is the physical environment in which an organization exists. The
following are the components of the physical environment.

1.Climate condition
2.Environmental change
3.Availability of the raw material
4.Natural resources like water
5.Pollution
4.Importance of Marketing Environment

The marketing environment holds great importance when it comes to conducting business successfully. Businesses
of all sizes, whether small or large or required to do their business within the marketing environment.

1. To learn about your competitors

2. To learn about your customers
3. Necessary for future planning
4. To make most out of the latest trends
5. To learn about all the threats and opportunities related to business