UNIT-2 UNDERSTANDING MARKETING ENVIRONMENT

Concept of Marketing Environment Marketing is a subsystem of business system. The business system itself is a subsystem of social system. So, external forces affect all the activities of marketing. It becomes inadequate only to consider internal components while making decisions, strategies, programs etc in marketing.

A business should also consider the external factors while taking decisions, making policies and plans relating to marketing activities. The business firms which cannot properly consider or pay attention towards external environment factors or forces become unable to get success and survive. According to Kotler and Armstrong, The marketing environment comprises all actors and forces influencing the companys ability to transact business effectively with the target market.

According to Prof. Kotler, A companys marketing environment consists of the factors and forces that affect the companys ability to develop and maintain successful transactions and relationships with its target customers. The definition makes it clear that marketing environment consists of the external forces or factors affecting marketing activities, and they are beyond the control of marketer. So, business activities should be changed according to the environmental situation.

The business firms that become able to face the environmental challenges can use different opportunities. A marketing manager should correctly analyze the changed needs of market and carefully observe the new as well as mega trends to take benefits from environmental dynamism. Thus, in short we can say that marketing is environment specific. It operates in a dynamic environment. Marketing environment refers to all actors and forces which influences exchange relationship of marketing with target customers. They affect the performance and outcomes of marketing.

Features of Marketing Environment 1. Dynamic: Marketing environment is always dynamic in nature. The environment all over the world is undergoing radical changes. These changes are significant because of their impact on business organization. 2. Complex: Marketing environment is complex because of its composition. It includes all interacting events, conditions, forces, and influences that surround and affect business firms. There are different level of events and elements of the marketing environment.

3. Uncertain: Marketing environment is not always certain, rather it is uncertain. The constantly changing economic, social, cultural, political, legal and technological factors create environmental uncertainty. The changes in environmental forces can hardly be predicted by entrepreneurs and managers. Unpredictability further leads to uncertainty to marketing environment. 4. Multi-dimensional: Marketing environment is multi-dimensional. It means environmental changes may effect on different business firms differently. Ctd.

A particular change in the environment can provide an opportunity for one business firm, but threat to others. 5. Long-term impact: Marketing environment creates long term impact on business firms. It greatly affects their ability to achieve goals and objectives.

Classification of Marketing Environment 1. Micro Environment 2. Macro Environment Micro Environment: In the course of earning a profit by satisfying the needs of the target market, a business firm needs to have or contact with different factors or forces. Among them customers, suppliers, intermediaries, public etc are notable. These forces also affect the firms marketing activities. So they are discussed in brief as follows:ctd..

i. Customers: A business firm works for satisfying the needs of customers. They can efficiently supply necessary goods or services to the target market with the help of suppliers and middlemen. Such target markets may be consumer market, industrial market, resale market, government, profit making and non-profit making market. Customer market includes individual or members of families who buy goods or services for personal use. Materials are purchased in business markets to use in producing goods or reprocessing them. Similarly, in the reselling markets goods are purchased for reselling them to earn profit and so on.

ii. Company: A marketing manager should consider the top level management, finance, research and development, purchase, production, account etc. departments while making marketing plan. These all are interrelated aspects of internal environment. Mission, objective, goal and strategy of a company are determined by top level management. Marketing manager takes marketing decisions remaining under the plan made by the top level management. In this way, the top level management and marketing management have relationship and each undertaking of the high level management always affect marketing.

iii. Suppliers: The organization or person who provides necessary materials and resources to a company for production of goods or services is called supplier. As the supplier greatly affects the marketing, it is taken as an important elements of marketing environment. Supplier should renowned and able to supply quality materials and resources in necessary quantity regularly. Besides their, terms and conditions of sale also should be simple. If the supply cost increase, the cost and goods of services also increase. As a result, sale gets adversely affected.

iv. Competitor: Competitor is the other element of micro environment of marketing. A company should give maximum satisfaction to the consumers by providing quality goods or services compared to the competitors. Besides, the company should be able to remain in the heart of customers by maintaining more effective product positioning than the competitors. Same marketing strategy cannot be fit for all companies. So, each company should adopt suitable strategy according to or considering the size, nature, scope of activity, life cycle etc.

v. Marketing intermediaries: The marketing intermediaries help in carrying companys products to the consumers and market promotion. This includes sellers, physical distribution firms, marketing service agencies and financial intermediaries. The distribution channel which carries the services or goods produced by a firm to the consumers is called Seller. Dealers, wholesalers and retailers are in the group of seller. The body which helps in delivering companys product services to consumer is called physical distribution firm. This includes transportation and warehousing. Marketing service agencies include research firms, advertisement agencies, media firms, marketing consultancies etc. They help in promoting and delivering products or services to right markets. Financial intermediaries include banks, credit companies, insurance companies etc. They help business firms by bearing risk and providing necessary financial support.

Macro Environment: Macro environment of marketing is also called external environment. External environment affects a business firm directly and indirectly form outside. This includes demographic, economic, natural, technological, political-legal, social and cultural elements or forces. These macro environmental elements do not remain under control of any firm. The macro environmental elements may appear both as the threats & opportunities for the business firms. So a marketing manager should make plans and programs only after scanning the macro environmental elements or forces.

i. Demographic environment: Demographic environment includes total population size, growth rate of population, age mix, migration, urbanization process etc. Future plans and programs should be made only after carefully studying and analyzing these elements. ii. Economic environment: A marketing manager should make future plans, programs and strategies by studying and analyzing this element carefully. Consumers purchasing power, economic health, inflation rate, exchange rate, regional group, consumers income availability of credit & other elements are included in economic environment.

iii. Natural environment: Natural environment is one of the main elements of macro environment. A marketing manager should wisely and carefully make marketing plan, programs and strategies. Natural resources, topography, climate etc are elements of natural environment. Since the natural environment does not remain under control of business organization. iv. Political-legal environment: This environment directly affects the marketing activities. So, a marketing manager should study and analyze it carefully while making marketing strategies, plans and programs. Law, government policies, government agencies, pressure groups etc are included in political-legal environment. Since these elements do not remain under control of any organization, marketing mix should be made in agreement with them.

v. Technological environment: This includes level of technology, technology changes, research and study, development budget etc. These elements directly affect marketing plans, programs & strategies. So, a marketing manager should study and analyze these things carefully for marketing mix. vi. Socio-cultural environment: This is other important element of macro environment. This environment includes tradition, social customs, belief, religion, human value and norms, language, attitude, lifestyle, art, culture. These elements become different according to country, society, community. So, a marketing manager should carefully study & analyze these things while making marketing plans, programs & strategies.

Marketing Environment in Nepal

Nepals marketing environment can also be analyzed in terms of the macro environmental variable. The macro environmental variables relevant in marketing in Nepal are demographic, economic, socio-cultural, political-legal, technological & natural. 1. Demography: The population of Nepal is estimated at 30 millions. The population has been growing at the rate of 2.8 percent per annum. The rapidly increasing population is expanding the size of the Nepalese market. Improvement in medical care has reduced the crude death rate and life expectancy at birth. However, the economy is more or less, stagnant due to a negative growth in agriculture production and lack luster performance in the industrial sector. About 30.8% (2060/61) of the total population live under the poverty line. This has made the Nepalese market less attractive for international market.

2. Economy: Nepals economy is mainly agrarian in character. About 40% of National GDP originates in the agricultural sector. Only about 20% of the land is arable and only about 30% of arable land is irrigated. Agriculture productivity has been declining over the years. Increase in population and declining agricultural production has made Nepal a net importer of food grain. In Nepalese context, people invest their money, assets in land, gold, buildings, houses rather than investing in business. So, it also creates problem in economic environment of Nepal.

3. Socio-culture: The Nepalese society is composed of different cultural groups based on geography, ethnicity, castes & religions. These sub-cultural groups exhibit significant differences in tradition, values, and attitudes that are reflected in their product choice. Development in the fields of transportation, communication & education has dramatically change the socio-cultural beliefs, attitude & behavior of the Nepalese people. In Nepalese context, the urban population is increasingly adopting the western cultural values and outlooks and gradually distancing themselves from established beliefs, religions and traditions. Changes in dressing, housing, food, education & entertainment are clearly visible. People have adopted a more materialistic way of life and have become more status conscious. All this dynamism has brought new marketing opportunities in Nepal.

4. Politics and Law: The frequent change of government has been adversely affecting the marketing activities in Nepal. Foreign Investments are also distracted when governments and their policies are not stable. The country has been suffering from a chronic problem of political instability. Thus, political environment in Nepal has not contributed positively for the development of marketing. Moreover, the cost of corruption has been increasing rapidly in the country.

5. Technology: In the context of the Nepalese market the major technological aspects to be considered are level of technology and pace of technological change. A large part of the economy is rural and depends on the rural technology which is highly labor-intensive. Most of the manufacturing industries are sick mainly because the technology adopted is obsolete. Although, the use of computer based technology is getting popular, shortage of manpower to handle advanced technology has been creating several problems. The country has no manpower planning & there has been lopsided development of manpower in the country.

6. Natural forces: Nepals high potential for generating hydro-electricity provides ample hope for economic development in future. Abundance of water is highly essential for industrial as well as agricultural production. So, natural resources are the keystone for production and hence for marketing activities. Nepal has a variety of climates due to the wide variation in the topography. This gives Nepal the opportunity to produce a variety of fruits & vegetables. The variety of fauna & flora in Nepal attracts tourists from all over the world.