4

Marketing Environment
LEARNING OBJECTIVES
After studying this chapter, you will learn:
4.1 Nature of Marketing Environment
4.2 Need for Understanding Marketing Environment
4.3 Micro Environment
4.4 Macro Environment
Summary
Test Questions

s STATED EARILJER, Marketing is a systen and it operates within a wider system

Acalled environment. Several factors inside and outside a business enterprise
influence its marketing and other activities. These factors or forces are collectivey
known as marketing environment.

4.1 Nature of Marketing Environment

According to Philip Kotler, marketing environment relers to the external factors
and forces that affect a firm's ability to develop and maintain successful
transactions and relationships with its target customers. Marketing environment
includes all the forces that influence marketing policies, decisions and activities
of an enterprise. These forces may be internal or external. Internal forces consist
ot the resources and marketing mix of the company. External forces include
Customers, competitors, intermediaries, suppliers, socio-cultural. political and
iegal, technological, economic and natural factors.
4.2
PRINCIPLES OF MARKETIMA
Some of the elements in marketing environment are within the control of.
hrm while other forces are beyond its control. The marketing environment ma
be static (stable) or dynamic. Since liberalisation and globalisation, marketi
environment in India has become turbulent. Marketing environment is comp
because it consists of several interacting forces.
Thus, marketing environment means the totality of forces and entities h.
surround and potentially influence the marketing ofa product or service.
4.2 Need for Understanding Marketing Environment
Continuous monitoring of environment enables a marketer to :
(0 understand and analyse the changing needs and preferences of
customers:
(i) take initiative in launching products/services for satisfying the unmet
needs:
(iü) anticipate and counter the moves of competitors:
(iv) design and modify marketing mix to fit the requirements of
Consumers;
() identify and anticipate the opportunities and threats for the
enterprise:
(v) acquire strengths and remove weaknesses for facing the threats and
exploiting the opportunities:
(vi) adapt the firm to the uncontrollable environment.
Environmental scanning involves costs in terms of time, money, and efforts.
But the benefits accruing from such scanning far exceed the costs.
Need for scanning marketing environment has increased in recent years
due to fast changes in India and abroad. Economic conditions, political situation,
Government policies, social environment and technology have undergone
significant changes. Indian firms are faced with cut-throat comnpetition from
multinational corporations. In order to survive and grow in this changed scenario.
business firms must continually improve products and services so as to provide
great value to customers. Well-established firms like Bajaj Auto have learnt a
bitter lesson that taking the customer granted can be disastrous. New entrants
like LML and Kinetic Honda captured market at the cost of Bajai Auto because
these firms brought out trendy products that better matched the needs of young
generation.

4.3 Micro Environment

Marketing environment may be divided into two broad categories
1. Micro environment, and
2. Macro environment.
MARKETING ENVIRONMENT
4.3

Micro environment implies the factors and forces in the immediate

environment which influence the company's ability to serve its market. These
forces are related to a specific enterprise and form part of its total marketing
Systemn. These are the direct action elements of the environment or the immediate
external forces which influence marketing plans and operations of the company.
Micro environment consists mainly of the following forces :
(0 Suppliers,
(i) Market intermediaries,
(ii) Customers,
(i) Competitors, and
(v) Public.

Demographic Economic
Forces Forces
Technological
Forces
Suppliers Intermediaries

FIRM + Public
Competitors Customers

Political and Legal Social and Cultural

Forces Forces

FIGURE 4.1: Components of Marketing Environment

wherein
Micro environment begins with the company's environment itself
handle
the marketing managers are necessarily required to
(9 brand managers,
(i) marketing researchers,
specialists.
(ü) advertising and sales promotion
(iv) sales managers, and
() sales representatives.
these selling personnel combined together hold the fort. They do help in
All
developing the marketing plans for all thewith existing products and are also helpful
developing new products. Keeping the company's environment. the
in with top management-Finance and
marketing managers in consultation
Purchase and Manufacturing-make
Accounts, Research and Development. (These proposals are duly approved by
decisions making their market proposals. managers are asked to implement them The
top management before marketing potential conlicts
managers, thus, are required to see through the
marketing
between marketing and other functions. In order to
within the company and to negotiate with internal company groups
are required
strike balance here they with a purpose to design and implement
the
action
to chalk out a course of
marketing plans.
 4.4 PRINCIPLES OF MARKETIMA
Suppliers. Suppliers are either individuals or business houses. They
by the company. Now th
resources that are needed
combined together. provide
should go for developing specifications, searching e
Company necessarily analysing the suppliers, and thereafter chon
potential suppliers, identifying and mix of quality, delivery, reliability, cre
suppliers who offer best
those developments in the suppliers' environ
warranties, and obviously low cost. The
a substantial impact on the marketing operations ol the company sin
have important and scientific in recent years
Supply planning has become more supply costs and increase their prod.
companies can lower their
the extent that a competitive advantage in the marke
quality. they in natural course can gaincareful scrutiny. Supply shortages hav
Price trends need constant check and have to be made to avoid the grin t
should
to be fully monitored and plans Regarding advertising, marketing. research
supply shortages on marketing efforts. the marketing managers are sole
sales. training, and marketing consultancy, prepare a broad policy framework
decision makers. The top management may
the decision in these matters lies on the shoulders of marketing
but
managers. either business houses
Market Intermediaries. Market intermediaries are
or individuals who come to the aid of the company in promoting, selling, and
They are middlemen
distributing the goods to the ultimate consumers.
service agencies.
(wholesalers, retailers, agents), distributing agencies, market
and financial institutions. Be they any type of intermediary the company must
take into active consideration the following major points :
in
1. Middlemen come into being to help overcome the discrepancies
quantities, place, time, assortment and possession that would otherwise
exist in a given condition.
2.1t is advantageous and efficient to work through the established marketing
channels instead of creating one and thus going for experiments.)
3. Of course, it is not easy to select and work with middlemen but the
marketing managers must ensure an effective management and satisfaction
of marketing channels to enlist their long-lasting support on better terms.
If this is not ensured there is very chance that the marketing efforts may
have to face diminishing support or sometimes may face even
exclusion.
4. The marketing managers have to decide the most cost effective modes ol
transportation while balancing the considerations of cost, delivery, speed
and safety.
5. The marketing management has also to constantly review the performance
of both middlemen and others helping its efforts periodically. If necessary:
it may take recourse to replacement of those who no longer perform a
the expected level.
6. The marketing management wing of the company may feel the shortag*
of funds. The company's performance may be affected accordingly. The
credit costs have to be weighed in all their perspectives. Business plans
MARKETING ENVIRONMENT 4.5

have to be developed as per such credit raising capacity and costs. Also
it is necessary to develop strong relationships with both outside and
inside financial intermediaries.
Customers. The company establishes faithful links with both suppliers and
middlemen with two objectives in mind :
1.To supply appropriate products and services to its target market: and
2. To see that consumer satisfaction is provided as per the dictates of the
target market.
The target market of a company is usually of the following five types :
" Consumer market, Le., individuals and householders.
" Industrial market, Le.. organisations buying for producing (manufacturing)
other products and services for the purpose of either earning profits or
fulfilling other objectives or both.
" Reseller market, ie., organisations buying goods and services with a view
to sell them to others for a profit. These may be selling intermediaries
and retailers.
" GoverTunent and other non-profit market, Le., those buying goods and
services in order to produce public services. They transfer the goods and
services to those who need them for consumption in most of the cases.
" International market, ie., individuals and organisations of nations other
than homeland who buy for either consumption or for industrial use or
for both. They may be foreign consumers, producers, resellers and
governiments.
It must, however, be not forgotten that consumer satisfaction is the prime
motto of a company.
needs
Competitors. No company stands alone in serving and satisfying the
of a customer market. It faces competition. It is, therefore, necessary tohost build
company in facing a of
an efficient system of marketing. This helps thebetter results. Identification of
competitors with confidence and, of course, with competitors need
competitors is of utmost importance. Then after these successfully. has
out
monitoring. This is not all. The company, in order to come
competitors and capturing
to adopt means which may help it to outmanoeuvre the
customer's loyalty is not enough. The loyalty so earned has to be maintained.
the maintain such a marketing system which
For this purpose the company has to run.
may be abl to maintain the loyalty for a long
certain basic things which every
The comnpetitive environment consists of
marketing manager has to take note gf.fullPhillip Kotler is of the opinion that the
company to grasp the range of its competition is to take the
best way for a think about that which eventually leads
viewpoint of a buyer. What does a buyer
has illustrated by taking a person who has
to purchasing something? Kotler what should
working hard and needs a break. He may ask to himself as to
been
attaining this break after a sustained hard work. Among the
he ought to do for his mind may be socialising, exercising,
reading,
possibilities that may pop into
 4.6 PRINCIPLES OFF
going to cinema, watching television, hotelling, etc. Kotler has also MARKETIk
the types of competition (Desire, Generic, Formn and Brand Competitions explaine Mi

has summarised by pointing out that a company must keep four basic dimenso
in mind, which can be called the four Cs of market positioning. It nust consi
the nature of the Customers, Channels, Competitors, and its own
Characteristig
as a company. Successful marketing is a matter of achieving an ellective align
of the company with customers, channels, and competitors.
a

r
Public. General public do take interest in the business undertaking
company has a duty to satisfy the people at large along with competitors at
has
the consumers. This is not a futile exercise. But it is an exercise which
larger impact on the well-being of the company for tomorrow's stay and groua
The actions of the company do affect the interests of other groups also. Thes
must
other groups are those who form general public for the company, who
satisfied along with the consumers of the company's products. A public is define d
as any group that has an actual or potential interest in or impact on a company L
ability to achieve its objectives. Public relations is certainly a broad marketin: a
operation which must be fully taken care of. The company expects some respons
from this public as well.(Goodwill, favourable reactions, donation (of time at
well as money) and hidden potential futåre buyers are a few of the response
which a company expects from the public. To build such a goodwill and to seet
favourable response, it is very much necessary to satisfy the public as wel
Kotler in this regard has stated that companies must put their primary energ
into effectively managing their relationships with their customers, distributor:
and suppliers. Their overall success willbe affected by how other publics in th
society view their activity. Companies would be wise to spend time monitorin
all their publics, understanding their needs and opinions, and dealing with ther
constructively.

4.4 Macro Environment

Macro environment consists of the indirect action elements or remote forces in
the marketing environment. They affect the overall climate in which the marketün;
department functions. These forces indirectly influence the firm's ability t
operate the market effectively.
Maero environment consists of the following components.
Demographic Forces. Demography is the study of population and 1
characteristics. In marketing demographic environment implies size and growt
of population, age, sex, education, incomewise distribution of populatio
Dermographic forces are very important because people make up the market.
order to market his product/service effectively, a marketer must understan
the needs, habits and behaviour of people. These differ with age, sex, educatiot
income, family influence, etc. Demographic study provides a consumer pron
which serves as the basis of market segmnentation.
India's population is estimated to be more than 1,000 million people.
the second largest in the world and is growing about 2 per cent per annu
MARKETING ENVIRONMENT 4.7

Population is a problem in lndia and the Government is using social marketing

(family planning schemes) to restrict population growth.
In recent decades. market has expanded due to rise in
per capita incone
and education level.
Demographic data help in preparing geographical marketing plans:
marketing plans, age and sexwise plans, etc. These plans may prove to household
be reliable
in the short run. The firm may forecast the major demographic trends in order
to achieve good results.
It is true that a marketer is capable of developing substantial control over
a target market (group of consumners). But he cannot have any control over the
population characteristics. viz., age, income, marital status, occupation, education.
etc. Moreover. demographic structure is seldom static for long and changes in
demographic composition often test the resiliency of a marketing firm. Rarther.
these changes influence the behaviour of consumers which, in turn, will have
a direct impact on the market place. The ripples of these changes will reach the
organisation compelling it to alter or amend the existing marketing practices.
In short, marketing fîrms will have to continuously measure the ehanges
qualitative as well as quantitative that are taking place in the population structure.
To avoid negative consequences brought on by active consumer groups, a
marketer must communicate with consumers, anticipate problems, respond to
complaints, and make sure that the firm operates properly.
Economic
forces
Political
forces
Competitive
forces Product

Price Market Distri

bution

Promotion Legal and

Socio regulatory
cultural forces
forces
Technological
forces

FIGURE 4.2: Macro Environment

country's economic
Economic Forces. Economic environnent cOprises the economic
of factor endowInent,
System, structural anatomny of the economy, nature
policies and markets.
 PRINCIPLES OF MARKETING
4.8
Consists
system of a country
(0 Nature of economic system :The economicproduction relations, role of
ew
of ownership of means of production. capitalistic system there are
In a business
price mechanism, etc.
planning, wvhereas there is no freedom of
1esuictions on free
enterprise economy wherein private
mixed
system. India has a
a communist with the public sector. output,
enterprises have to compete the
national
composition of formation, trade
anatomy: It refers to capital
c9 ruCtural of labour force, structural balance or
OcCupational distribution the
These factors highlightagriculture, industry, trade,
Composition, etc.
different sectors like country though industry
Imbalance between agricultural
India is mainly an national income.
Services, etc. significant proportion of the total
Contributes a
Market
Economic place
conditions

Marketing

Economic Conditions on Marketing

FIGURE 4.3: Effect of and general
supply of land and capital, size resources
endowment : It impliesentrepreneurial talent and other
(ü) Factor force, country.
health of the labour labour-surplus and capital-scarceare other
India is a credit
in the country. savings, debt and availability of
Income distribution, economic environment. and
important elements of policy, fiscal policy, monetary policy,
: Industrial
(w) Role of planningpolicies influence on marketing.
exercise a significant programmes
other economic have affected marketing plans and
Five-year Plans in India
in different industries.
market, labour market and factor market
(u) Markets: Conditions in capital
affect marketing activities.
Policy for Marketing Process
TABLE 4.1: Implication of share, et.
Objectives:Rate of growth, Rate of return, Market
Organisational system Marketing
will be affected
affected.
Internal and External Resources are
Marketing effect of safety and health needs,
Opportunities Uncontrollable variables get altered due to
changes in the level of economic activity, etc.
package, use of materials, etc
Marketing Restriction on product features, controls on
Strategies Price, promotion, distribution are also affected.
Dretu
Economic forces influence marketing both directly and indirectly.econo
these forces affect costs and prices of products and services. Indirectly, price
forces affect the purchasing power of people. Money supply, interest rates.
marketing pla
level, consumer credit and other economic conditions influence
 TABLE 4.2: Effect of Different Economic Stages on Marketing Variables ENVIRONMENT
MARKETING
Economic Stage Marketing Mix Variables
Product Price Places Promotion
1. Recession 1. Narrow down Product 1. Lower prices 1. Increase distribution 1. Sales promotion to stimulate
Line. outlets dermand.

2. Offer cheaper functional 2. Offer Credit facilities to sell 2. Use Direct Channel 2. Motivate sales force to sell
products more more

3. Offer discounts
2. Inflation 1. 1&2 as above 1. Raise prices 1. Limit distribution 1. Discourage demand
3. Use ess expensive 2. Stop price discounts 2. Limit quantity for 2. Decrease sales promotion
material customer efforts
4. Invest in research for finding 3. Stop credit facilities 3. Higher price to achieve 3. Push more profitable
substitute product differentiation products
3. Stagflation 1. Reduce product line 1. Adjust price frequently 1. Re-examine distribution 1. Discuss slow moving
channels products
2. Increase Research and 2. Maintain competitive 2. Increase all promotional
Development pricing tools.

3. Develop alternative raw 3. Grant credit strictly

materials.

Source: Adapted from Avraham Shama, Management and Consumers in an Era of Stagflation, Journal of Marketing (Uuly 1979), p. 50.

4.9
 PRINCIPLES OF MARKETMe
4.10
of consumer credit in India
market for real estate
programmes. example.
For and
growthdurables.
consmer Trade cvcles affect has expande
sales. Durin:
and
consumers tend to Curtail or posStpone expenditure on luxurv nred
inflation
On the other hand. during a period of prosperity. Consumers are less Consciou
goods.
of small differences and tend to buy Iuxury
kuowledse of economic forces is essential for preparing
Study plans. No firm is immune to econonie 1orces although some are
market ing
effective
conditions wi le
Ulnerable than others. Anticipation of Iuture cConomic
the firm to devisewithapPropte merhetngSuategies. Adoption of marketin
strategies in tune economic phases is outlined in Table 4.2.
Social and Caltural Forces. The socio-cultural environment consists
sete strncture. customs and conventions, mobility of labour., educational syste
cultural heritage. social beliefs and values, lifestyles, etc. Increase in knowledg
and scientific progress have led to rising consumer expectations. Consurmner
now expect better quality products and greater information rom marketers
Growing consumerism indicates consumer dissatisfaction.
Social and cultural forces are very important to a marketer. Peoples' attitudes
customs and values influence the type of products and services demanded. Fo
example, changes in the attitudes of people towards food and clothing in Ind;
have resulted in the growth of food processing and garment manufacturing
firms. Socio-cultural environment is always dynamic and cable TV is changing
social and cultural values in India. Business firms must mnake necessar
adjustments in their marketing efforts to cope with these changes. Social and
cultural forces also determine the code of conduct marketers should follow
Social pressures on business are growing.
Walmart found that Chinese consumers preferred to select their own lift
fish and sea food. So, their stores began displaying the meat uncovered and
installed fish tanks, leading to increase in sales.
In recent years, the concept of social responsibility has crept into the
marketing literature as an alternative to the marketing concept. The implicatiorn
of socially responsible marketing is that business firms should take the lead in
eliminating socially harmful products (e.g., cigarettes). As such social responsibility
has become another legitimate pressure of the maYket pBace. Theré ar
innumerable number of pressuregroups who impose restrictions on marketin.
process as may be seen from the following diagram :

Activist Consumners
Consuming Public Marketing
Management
Affects:
Social Workers Marketing/
+ Social Organisations Production
Mass Media
Financial
Performance

Restricts:
Professional Groups Government Marketing
Strategies
(Pricing/
Politicians Promotion)

Its Impact on Marketing

FIGURE 4.4: The Interaction of Pressure Groups and
MARKETING ENVIRONMENT 4.11

It may be noted that legal and the social environments are closely related.
often it is found that the legal environment is an off-shoot of social pressures.
Again. the social pressure develops as a consequence of the criticisms against
marketing practices. It is interesting to note that though people are well aware
of the ills of marketing, they are unable to explain what marketing really is.
Generally criticisms centre round the following premises:
1. Marketing system is not capable of eradicating poverty.
2. Disadvantaged and unorganised consumers are exploited.
3. Creating products for personal satisfaction affects the interests of the
society in general.
4. The proliferation of trivial products and services leads to wastage of norn
replenishable scarce resources.
5. The goal of proft maximisation penetrates deeper into all activities of the
firm rather than the social obligation.
Political and Legal Forces. The politico-legal environment of a country
consists of the political organisations, political stability, constitutional provisions
affecting business, government intervention in business, foreign policy. legal
framework, court rulings, regulating agencies, etc. In India, Government policy
was responsible for the flight of multinationals like IBM and Coca Cola in 1978.
As the policy regarding multinationals and foreign investment has been liberalised.
a large number of multinationals have entered the country even in low tech
areas like food processing (Pepsi), electronics (Sony), cars (Hundai),have etc. Now
power, communication, roads, ports and other infrastructural areas been
opened up for the multinationals.
In recent times, political instability, nuclear tests, economic sanctions, South
marketers
East Asian Crisis, and World Trade Organisation (WTO) have influenced
in India. Political and legal forces determine public policy. Marketers must
enhance
understand the public policy and its implications. In some cases it may
same distribution
marketing opportunities while in other cases it may restrict the
systems. account the
Marketing decisions cannot be taken without taking into
developments in political and legal field. Government agencies, political parties,
pressures and constraints for
pressure groups and laws create tremendous
marketing management. Laws affect product design, pricing and process promotion.
Irrespective of the political ideologies, intervention in the marketing has
almost becomne common in every nation.
yars has been
The history of business legislation during the past hundred
characterised by three distinct legislative philosophies :
(0 To prevent monopoly and protect competition,
(i) To protect individual consumers, and
(iih To protect society.
as Public Policy environment. The
The legal environment is also referred to
policy decisions, government
Vast governmental network of laws and regulations,
 4.12 PRINCIPLES OF MARKETIN

marketine
have varied impact on
bureaucracy. and the legislative processes

probibit
policy actions reach the marketing
ategles. Fig. 4.5 depicts bowy different public many practices that were Comimo,
oviues of a firm. Public policy mav
earlier.
Protection Act and other laws designed to prote
ndia, the Consumer avoid unfair practices. Marketing mnanager
firms to
COnsumers require business political and legal forces.
must fully understand and respect
Judicial Action
Executory Action
Legislative Action

Implementing Rules through Case Decisions

Regulatory Agencies
Enactments

Marketing

Environment on Marketing
FIGURE 4.5: The Impact of Leqal
the manufacturers
increasing complexity of legal environment makes necessary that basic
The situation. It may be
constant vigil of the
to be on avoid constraints arising out of the
organisational structure has to be altered to the net effect
In the area of marketing strategy.
public policy implementation.many
of public policy is to prohibit practices that had once been quoted commor
opportunities enhanced in some
regardless of their ethics. There might be
instances but the general effect is negative.
during 1977 due
Multinationals like Coca Cola and IBM had to flee India
permitted
to hostile political environment. The positive political situation has
these corporations to again operate in the country.
The impact of political and legal environment may be summarised as
under:
(0 Substantial amount of legislation regulating business exists to protect
consumers from unfair business practices, to avoid unfair competition
to safeguard small firms and to conserve foreign exchange.
(9 Marketing managers are required to get full knowledge and understanding
of political and legal forces for achieving their goals.
Technological Forces. Science and technology havé transformed life and
consumption patterns. Technological developments determine the type and
quality of products and services to be produced and'the nature of plant and
equipment used. Computers, pocket-sized water purifier (Aqua pen), digita
watches, internet, E-mail, Fax, frozen foods, are some of the examples. Technolog
influences product development, packaging, prices, and promotion.
Advances in technology are an important uncontrollable environment to
marketers in two ways: First, they are totally unpredictable; and secondy
adontion of new technology often is prevented by constraints imposed by interna
 MARKETING ENVIRONMENT 4.13

and external resources. At the same time it should be remembered that

technological progress creates new avenues of opportunity and also poses threat
for individual companies. As an opportunity, technology is a source of new and
better products. It is an easy way to gain a differential advantage over competitors
with a technologically superior product. As a threat, technological development
by competitors may result in loss of markets. Product advances in copier
instruments offer a good example in this context. Similarly, the technology has
contributed shifts from Black and White TV sets to Colour sets and now to the
three-dimensional sets. Quartz and Digital watches account for a substantial
share of all timepieces sold.
The fact that technology is a major force in business and industry. its
consequent stresses on marketing cannot be denied. A new development can
give birth to new industry or make an existing. profitable product obsolete. The
one possible way to avert the exigencies, in such circumstances, is to strengthen
Research and Development (R&D) and to imbibe a preparedness at all levels of
the organisation.
The technological developments and consequent industrialisation have caused
another problem to crop up, viz., environmental pollution. Business firms have
to make more capital investments for expensive pollution control devices which
ultimately raises the cost of production resulting in loss of markets. It is true
business
that pollution problem is an uncontrollable variable for the individual
kinds of
firm. But it should also be noted that pollution creates three
difficulties.
opportunities1 for those firms that have the foresight to address these
and the imagination and technical skill to solve them. First, it creates markets
for recycliDg. Second, a
for improved methods of waste treatment and methods developing inexpensive
marketing challenge to devise alternative ways to
packaging methods and materials. Third, an opportunity to find productive and
socially beneficial uses for industrial, animal and human wastes. The technologies,
micro-electronics, computers, robotics, telecommunications are all destined
ViZ.,
organisations.
to affect future of many marketing
to pay attention to the
Marketing management is very much required how new technologies can
changing technological environment and to see as to
human needs. Marketing management today has to establish a
serve best the
relation with R&D experts and has to draw a plan whereby market
very close managers have to be alert enough
oriented research is encouraged. Marketing
responsive to the negative aspects of any innovation that "might
and have to be opposition". They must watch carefully
harm the users and create distrust and it must see through the:
the trends in general. In particular,
Accelerating pace of technological change so as to assess the impact on
1. systems.
consumption patterns and marketing
nnovational opportunities so as to accept the challenge in each
2. Unlimited versions of these products.
develop practical affordable
case and so as to modernise the research
Development Budgets
3. Higher Research & highly qualified and trained research team, and
laboratories, to induct
 4.14 PRINCIPLES OF MARKETINC

hope to achieve a stronger marketing orientation by accepting major

challenges and solving major scientific problems.
4. Concentration on minor improvement rather than on major inovations
and discOvertes so as to avoid copying competitors' products, making
minor feature and style improvements and to proceed cautiously with
a view to become offensive in improvements and developments.
Physical/Natural Forces. Ecology is the study of relationship between living
things and their surroundings. With the acceptance of societal marketing concept
marketers are expected to pay attention to the allocation and conservation of
Scarce resources so as tT maintain the ecological balance. They must avoid
pollution of air, water and noise. In India, the Government has introduced Eco
mark for marketing Eco-friendly products. Need for conservation of power and
other sources of energy, and forest wealth have affected wood-based and other
industries.
Impact of physical environment on marketing decision-making may be
enumerated as below
1. There should be a balance between the attention paid on efficient service
of the consumers' needs and costs involved in term of environment
imbalances, if any, in serving these needs and wants.
2. The company management has to take into active consideration while
chalking out marketing plans and programmes. The environmentalists
express concernabout strip mining. forest depletion, factory smoke. loss
of recreational opportunities and other health hazards because of rash
and unmindful industrialisation following profit-oriented marketing plans
and programmes.
3. The marketing management is more concerned about the quality of life
it can offer through marketing efforts. The environmentalists too are
interested in quality of life. But they are not prepared to sacrifice the
ecological balance and quality of the environment. A marketing decision
must, therefore, strike a balance between the two assuring that ecological
balance willbe maintained for better tomorrow. The present has to sacrifice
for tomorrow.
4. It is a pertinent demand of the environmentalists to get included the
environmental costs while taking aproduction and marketing decisions.
Unless this is done, marketing efforts may succeed today but surely these
efforts are bound to fail tomorrow and day after.
5. Environmentalists are of the view that packaging is a waste and
advertisements lead people to consume what actually they would have
not liked to consume in normal circumstances. The marketing management,
on the other hand, feels that packaging is a convenience for both the
marketers and consumers. For them, advertisement is an education and
the consumers need education in every sense of the term. Here again,
marketing decision will have to strike balance in order to maintain the
ecological balance.
6. Shopping centres are a boon tor both the marketers and consumers. Less
MARKETING ENVIRONMENT 4.15

energy. less time, less expenditure. and more satisfaction for both the
marketers and consumers are a few of the objectives behind these shopping
centres. But environmentalists are against such centres on the plea that
disturbances.
these centres are more prone to pollution and ecological
Here marketing decision is hard. But hard decisions are also to be taken
for a better future.
and non
7. There cannot be two opinions that steel enterprises, ferroUs
ferrous industries and public utilities have led to huge investmernt in
pollution-control instruments and devices, and also costlier fuels. The
etc. are health
auto industries, the soap factories, the gasoline industries., environmental
hazards for the surroundings. These industries do not like
go costlier
restrictions and regulations. The products of these companies
absorbed and then
because of such costlier devices since these costs are is hard pressed
passed over to the consumers. Marketing management
or two is called for.
on this point. Here again a hard decision
What should be the decision
What should the marketing management do?
has become too complicated
under these circumstances? Marketing manager's life
these days. He has to:
consequences of the product. its packaging
() check into the environmental
and above all its production processes: costs are
environmental costs (no doubt these
(i) raise prices to cover it is also a fact that such
ultimately borne by the consumers, and
products are harder to sell):
respecting the environment:
(ii) recognise the validity of deciding on product ingredients.
(iu) introduce the environmental criteria while
design, and packaging:
(v) direct its Research & Development wing to find out ecologically superior
and
products so as a major selling point of the product:
to make it
and consumerists
(vû see that there is no tussle between the environmentalists following their
since both are interested in providing quality of life by
own principles within their own precincts.
TABLE 4.3: Macro Environment of Marketing
Description
Component
in terms of age, sex, education, income,
1. Demographic Size and growth of population, composition
ethnic background, etc.
of economy, factor endowment,
2. Economic Nature of economic system, structural anatomy
economic plans and policies, markets.
institutions, beliefs and values, etc.
3. Socio-cultural Caste structure, customs and traditions, social
government, laws, judiciary, foreign
4. Politico-legal Political system and structure, stability of
policy.
development, inventions, information
5. Technological Science and technology, research and
technology.
concerns, ecology, pollution control.
6. Physical/Natural Natural resources, environmental
 4.16 PRINCIPLES OF MARKETIN
Potential shortages of certain raw materials, e.g.. oil, coal, minerals; unstak1
cost of energy: increased levels of pollution: changing role of Governme
dangers this world is facing
in environment protection are a few of the world thinkers h
physical environment forces. Keeping these forces in mind, environment is beine
expressed their concern over whether the physical activities of todav
irreparably damaged by the industrial and other business
modern nations.
Environmentalism has now sprung up. Every nation is trying to conserve
campaign. Ih
and recvcle its natural resources through legislation and vigorous
current rate of
is because the world is about to face crisis on many counts if
may alsa
consumption of materials continues without check. Ecological balance
be disturbed. All these are bound to have an impact on marketing decisions.
Controllable and Uncontrollable Environment
Marketing environment can also be classified as follows :
1. Controllable factors, and 2. Uncontrollable factors.
Controllable Factors. These consist of marketing policies and marketing
strategies. Of these marketing policies are framed by the firm depending on its
philosophy on marketing. The top management is responsible for framing the
broad policies taking into consideration the ine of business and integrating all
business functions (production, finance. personnel, etc.) to marketing, overall
objectives and the firm's own culture.
Marketing strategies are developed by middle-level managements who are
having rich experlence in the field. Various factors considered under this aspect
of controllables are depicted below (Fig. 4.6).

Selection of Marketing
Target Market : Planning Marketing
Control
Size, (Periodical
Characteristics, Monitoring)
etc.
Marketing
Strategies

Marketing
Objectives: Marketing Mix:
Image, Sales, Product,
Profit Price, Place,
Promotion
Marketing
Organisation
FIGURE 4.6: Controllable Factors

The controllable factors are well within the grip of the firm and relatively
easy to adjust to suit the charnges. These factors are combined into what we
MARKETING ENVIRONMENT 4.17

have referred to earlier as Marketing Mix. For example. if the price appears to
be on the higher side a decision to reduce it for a short term or even a long
term is possible and could be implemented as quickly as possible. off season
prices' or 'discounts' are examples in this connection.
The selection of target market involves two considerations : whether a product
is intended lor all market (Mass Marketing Concept) or for a selected market
only (Market Segmentation Concept). In addition, the marketer should also be
familiar with problems posed by changing qualitative factors of the target market.
viZ. children, grown ups, male-female, affluent-middle class, etc. All these factors
to
create impact on the controllable elements and a firm has to be adaptive
such factors.
Marketing objectives should aim at creating a differential advantage over
to select
competing products. Me too philosophy offers no reason for consumersmarketing
Similarly,
a particular product offering over a competitors' product.
objectives of the firm in the
organisation has to be shaped in such a way thatelements are the tools often used
market place could be satisfied. Marketing mix external variables. For instance.
the
to harmonise the internal variables with
products to capture rural markets
the packaging revolution has found many a
compared to urban counterparts.
where the disposable income is comparatively low
Shampoos in sachet for one time use proves this point.uncontrollable variables
Uncontrollable Factor8. Various elements under that
organisation and its marketing efforts. It is now recognised by all
affect an may fail if adversely influenced by
even a well-conceived marketing plan
environment must be continually
uncontrollable factors. Therefore, the externalmarketing plans. This may call for
monitored and its effects incorporated into
important uncontrollable variables
are
plans. The
even preparing contingency
illustrated in Fig. 4.7.
Competitive Technological
Environment
Environment

Economic
Environment

Uncontrollable
Variables

Political-Legal
Environment
Demographic
Environment
Socio-Cultural
Environment

Uncontrollable Factors
FIGURE 4.7: The
to easy adjustments. One
uncontrollable factors are not that vulnerable
and they exert pressure
for
The numerous factors involved
reason is that there are
 4.18 PRINCIPLES OF MARKETIN

within which
change individually and jointly to provide the frame of reference variables
marketing decisions are to be made. Secondly. the controllable
various uncontrollable
(marketing mix elements) will have to be filtered through 4.8).
environmental factors before they reach the consumers (Fig.
The Firm

Product

\Economic
Legal Price

Cultural

Promoti n
Marketing Decisions

FIGURE 4.8: Controllable and Uncontrollable Factors

As aforestated these factors and their effective composition is decided and

determined by the frm in general and by the top management in particular.
Technically these processes are called Marketing Planning,
Contributions of these factors result in an overall marketing strategy or
offering. But the acceptance of the offering depends on the intensity of impact
caused by uncontrollable factors on the offering. The offering of the firm and
the impact of the uncontrollable environment interact to determine the firm's
level of success or failure in reaching its objectives. The effect and relationship
of these factors are illustrated as follows (Fig. 4.9).
Uncontrollable
Factors

Consumers

Uncontroilable Competition
Factors

Government
Markeing Level of success or
Policies
faiture in achieving
Economy
objectives B
Marketing
Strategies Technology

Legal

Feedback Social/Cultural

A-Refers to offering
B-Impact of uncontrollable factors
C-Appropriate changes in the offerings to suit the pressure of environment of marketing.
FIGURE 4.9: Impact of Controllable and Uncontrollable Factors
 4.19
MARKETING ENVIRONMENT

SUMMARY
dynamic and all pervading
Nature : Marketing environment is comprehensive, elernernts of
of environment helps marketers in taking decisions about different
Need : Study
marketing mix. competitors and
Environment : It consists of suppliers, intermediaries, custorners,
Micro
public. technological and
Environment : It includes economic, social, cultural, political, legal,uncontrollable.
Macro are either controllable or
that affect marketers. These forces
natural forces
TEST QUESTIONS
environment.
environment? Explain the nature of marketing
1. What is marketing the marketing
environment. Explain the need for understanding
2. Define marketing of such
environment. elements
environment of marketing? Describe various
3. What is micro forces
environment.
marketing? Explain the social and cultural
of
4. What is macro environment
relevant to marketers. decisions.
environment which influence marketing influence
5. Discuss the
economic
environment of marketing. How does it
political and legal
6. Explain the marketÉng
marketers? society interact and influence the
groups in
How do various pressure
7. marketer mneet
activities of a firm? environmental forces on marketing. How can a
impact of environment?
8. Discuss the arising from changes in the
affecting marketing.
challenges uncontrollable factors
the controllable and the environment. Explain
the monitoring
9. Explain survival in marketing
requires
and
10. "Success
giving relevant examples. marketing environment when he can
to study
marketing manager need
11. Why does a influence it? making in marketing. How
control or decision
do little to that affectenvironment?
environmental forces marketing
the
12. Describe react to changes in its soft drink that would be
a
can a firm considering introducing the firm's
agribusiness firm is environmental factors could influence
13. A large What
targeted at adults. challenging for marketers.
decision?
India is becoming increasingly
14. "Marketing environment in the various micro and macro
discuss
Explain. business scenario in India face.
With reference to business houses have to organization. What
15. that environment of an
environmental factors mid-size automobile
understand by marketingfor a new brand of (DU, 2007]
what you required
16. Explain environmental scanning is discuss the likely
kind of India? environment? ldentify and 2007)
to be
in
introduced
marketing pharmaceutical company. (DU,
is it
necessary to scan changes for a
17. Why
consequences of
demnographic