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Lesson # 8 Scanning the Environment
Scanning the Environment:
Within the rapidly changing global picture, marketers must monitor six major environmental forces, demographic, economic, social-cultural, natural , technological, and political-legal, and pay attention to their interactions, because these will lead to new opportunities and threats. Explosive population growth (demographic) leads to more resource depletion and pollution (natural), which leads consumers to call for more laws (political-legal), which stimulate new technological solutions and products (technological), which, if they are affordable (economic), may actually change attitudes and behavior (social-cultural).
In demographic environment, marketers must be aware of population characteristics; the age mix of population; literacy and education levels.
• As per 2001 Census, India’s population is 102.86 crores (16.7% of world population). • By 2025, Indian population will be 139.5 crores, and by 2050 it will be 159.3 crores overtaking China. It is estimated that by 2025 Chinese population will be 144.1 crores and by 2050, it will be 139.2 crores.
What does world population consist of?
• If the world were a village of 1000 people, it would consist of 520 females and 480 males, 330 children, 60 people over the age of 65, 10 college graduates, and 335 illiterate adults. • The village would contain 52 North Americans, 55 Russians, 84 Latin Americans, 95 Eastern & Westen Europeans, 124 Africans, and 584 Asians. • Communication would be difficult because 165 people would speak Mandarin, 86 English, 83 Hindi/Urdu, 64 Spanish, 58 Russian, 37 Arabic, and the rest would speak one of over 200 other languages. • There would be 329 Christians, 178 Muslims, 132 Hindus, 62 Buddists, 3 Jews, 167 nonreligious, 45 atheists, and 84 others.
• Indian Male--Female ratio 52:48. • Age group of Indian population as per 2001 census: Of the people above 12 years of age 12 years – 25 years 34% 25 years – 34 years 24% Below 6 years 15.35% of the total. 54 years and above 14% of the total
Literacy Levels: (as per 2001 census) 65.38% Urban area : Males : 80.3% 75.85% Rural area: Females : 59.4% 54.16%
Out of the 52% male population, 3.4% are Graduates and above. 11.5% matriculates but non-graduates. 23.8%non-matriculates 13% illiterates Out of 48% female population, 1.4% are Graduates and above. 6% matriculates but non-graduates 16.5% non-matriculates 24% are illiterates Literacy level: 15 - 24 years ; 76% 25 - 34 years 64.5% 65+ 35.6%
In the economic arena, marketers need to focus on income distribution and levels of savings, debt, and credit availability. Income distribution: NCAER (National Council of Applied Economic Research) has classified Indians as under: Destitute: Household income below Rs.16000 p.a.
(Not active participants in market exchange for a wide variety of goods)
Aspirants: Rs.16000-22000 p.a.
(New entrants into the consumption systems due to Increase in their real income)
Climbers: Rs.22,000-45,000 p.a.
(Have desire and willingness to buy, but have limited Cash in hand).
Consuming Class: Rs.45,000-Rs.215,000
(Households forming majority of consumers; have money and are willing to spend) The Rich : (Those who have money and own a wide variety of products).
The first three income categories show significant growth from 199596. The households classified as rich grew by 95% from 95-96 to 06-07, consuming class grew by 132% and climbers by 51%. Aspirants and destitute decreased by 54% and 50% respectively. By income level, the rich grew by 400% in urban areas, and 200% in rural areas, Climbers by 145% in urban areas and 119% in rural areas. There will be a sharper reduction in the number of Aspirants and Destitutes. The trend suggests that the urban areas are likely to witness a relatively higher growth of “people with money”, who actively participate in market exchange. The overall trend provides a strong indication of better economic levels of the population that is conducive to the demand for goods and services.
In social-cultural arena, marketers must understand influence of religion, languages, and customs that shape the values and attitudes of consumer preferences, habits, and behavior. Regional differences in language, customs, social systems, values, habits, religions and caste systems make the social-cultural environment very complex in India. • A marketer needs to understand the cultural nuances of different regions, and address the differences through creative alignment of the specific elements of marketing decisions. • Islamic Banking a viable and successful business model built on specific values and principles, reflects religious and cultural sensitivities.
• People in India follow 160 languages, of which 33 are spoken by more than 1 lakh people – 22 are officially recognized. • Regional differences in language, customs, social systems, values, habits, religions and caste systems make the social-cultural environment very complex in India. • Dress codes vary from region to region. • There are variations in food habits from region to region. • An obvious implication of diversity in language is in making a decision concerning marketing communication. It is difficult to translate an original advertisement theme composed in English or Hindi into different regional languages with the same emotional meaning.
In the natural environment, marketers need to be aware of the public’s increased concern about the health of the environment. Many marketers are now embracing sustainability and green marketing programs that provide better environmental solutions as a result. Corporate Environmentalism is the recognition of the importance of environmental issues facing the firm and integration of those issues into the firm’s strategic plans. Finite nonrenewable resources such as oil, coal, platinum, zinc, silver, pose serious problems as the point of depletion approaches. Firms using these as inputs, face substantial cost increases. Firms engaged in research and development have an excellent opportunity to develop substitute materials.
As oil prices sour to record levels, companies are searching for practical means to harness, solar, nuclear, wind, and other alternative forms of energy. Indian Railways is looking to develop sustainable fuels such as Jatropha oil to power its locomotives. Delhi has implemented the rule that autorikshaws and buses should use only CNG as fuel. Other States are trying to follow the Delhi example. Successful green products - Organic foods are seen as healthier, tastier and safer, and energy-efficient appliances that cost less to run. Bank of America example: In Bank of America Tower in Manhattan, every drop of rain that falls on its roof is caputured for use; scraps from the cafeteria will be fermented to produce methane as a supplementary fuel for a generator designed to produce more than half the building’s electricity, and the waste heat from the generator will both warm the offices and power a refrigerator plant to cool them. Great opportunities await companies and marketers who can create solutions that reconcile prosperity with environmental protection.
Marketers should take account of the accelerating pace of technological change, opportunities for innovation, varying R&D budgets, and the increased governmental regulation brought about by technological change. Through the years, technology has released such wonders as penicillin, open-heart surgery, lazer-cateract surgery and the birth control pill as well as such horrors as the hydrogen bomb, nerve gas and the sub-machine gun. It has also brought out mixed blessings such as the cell phone and video games. Every new technology is a force for “creative-destruction”. Transistors wiped out the vacuum tube industry; xerography hurt the carbon-paper business; autos hurt the railroads, television hurt the newspapers. It is the essence of market capitalism to be dynamic and tolerate creative destructiveness of technology as the price of progress. The contraceptive pill created smaller families, more working wives and larger discretionary income resulting higher expenditure on vacation travel, durable and luxury goods. (i-Pill, Unwanted72)
The political-legal environment consists of laws, government agencies, and pressure groups that influence and limit various organizations and individuals. Sometimes these laws create new opportunities. Mandatory recycling laws have given the recycling industry a major boost and spurred creation of a dozen new companies making products from recycled materials. The political-legal environment has given rise to increase in business legislation and growth of special-interest groups. Business legislation has four main purposes – to protect companies from unfair competition, to protect consumers from unfair trade practices, to protect interests of society from unbridled business behaviour, and to charge the business with the social costs created by their products and production processes. MRTP (Competition) Act, Consumer Protection Act, 1986. RBI is in the process of formulating guidelines for credit card companies, keeping in mind the interests of consumers.
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