Principles of Marketing

The Marketing Environment

  What is the marketing environment?
• “A company’s marketing environment consists of the actors and forces outside of
marketing that affect marketing management ability to build and maintain successful
relationships with target customers”. Philip Kotler
• The marketing activities of the business are affected by several internal and external
factors. Some factors are control and uncontrollable by a business, the business has to
adapt itself to avoid being affected by changes in these factors. These external and
internal factors group together to form a marketing environment in which the business
operates.
What Is Marketing Environment?
• Marketing Environment is the combination of external and internal factors and forces
which affect the company’s ability to establish a relationship and serve its customers.
• The internal environment is company-specific and includes owners, workers, machines,
materials etc.
• The external environment is divided into micro-environment & macro-environment.
• The micro or the task environment is also specific to the business but external. It
consists of factors engaged in producing, distributing, and promoting the offering.
• The macro or the broad environment includes larger societal forces which affect
society as a whole. The broad environment is made up of six components: political,
economic, social technological and environment
Importance Of Marketing Environment
Every business, no matter how big or small, operates within the marketing environment. Its present and
future existence, profits, image, and positioning depend on its internal and external environment. In order
to operate and stay in the market for long, one has to understand and analyze the marketing environment
and its components properly.

• Essential For Planning-A marketer needs to be fully aware of the current scenario,
dynamism, and future predictions of the marketing environment if he wants his plans to
succeed.
• Understanding Customers-Thorough knowledge of the marketing environment helps
marketers acknowledge and predict what the customer actually wants
• Tapping Trends-Breaking into new markets and capitalizing on new trends requires a lot of
insight about the marketing environment. The marketer needs to research about every
aspect of the environment to create a foolproof plan.
• Threats And Opportunities- knowledge of the market environment often gives an
advantage to the marketer as he makes sure that his business is safe from future threats and
taps the future opportunities.
• Understanding The Competitors-A better understanding of the marketing environment
allows the marketer to understand more about the competitions and about what
advantages do the competitors have over his business and vice versa.
INTERNAL ENVIRONMENT
Internal environment refers to factors existing within a business firm. These factors are generally regarded as
controllable factors because the company has control over these factors.
1. Value System: Value system consists of all those components that are a part of regulatory
frameworks, such as culture, climate, work processes, management practices and norms of the
organization. The employees should perform the activities within the purview of this framework.
2. Vision, Mission and Objectives: The company’s vision describes its future position, mission
defines the company’s business and the reason for its existence and objectives implies the
ultimate aim of the company and the ways to reach those ends.
3. Organizational Structure: The structure of the organization determines the way in which
activities are directed in the organization so as to reach the ultimate goal. These activities
include the delegation of the task, coordination, the composition of the board of directors, level
of professionalization, and supervision. It can be matrix structure, functional structure, divisional
structure, bureaucratic structure, etc.
4. Corporate Culture: Corporate culture or otherwise called an organizational culture refers to the
values, beliefs and behaviour of the organization that ascertains the way in which employees
and management communicate and manage the external affairs. For example, some key people
in management might see innovation and change as critical to success, but top level
management in other organizations may be quite conservative and risk adverse.
5. Human Resources: Human resource is the most valuable asset of the organization, as
the success or failure of an organization highly depends on the human resources of the
organization.
6. Physical Resources and Technological Capabilities: Physical resources refers to the
tangible assets of the organization that play an important role in ascertaining the
competitive capability of the company. Examples of capabilities would include: innovation
skills, speed to market, brand building expertise, data/marketing insights, cost efficiencies
and processes, customer relationships, use of new technologies, and so on. Further,
technological capabilities imply the technical know-how of the organization.
7. Labour Unions:
• Unions collectively bargain with top managers regarding wages, working conditions of
different categories of employees. Smooth working of a business organisation requires
that there should be good relations between management and labour union.
• Each side must implement the terms of agree­ment reached. Sometimes, a business
organisation requires restructuring and modernisation. In this regard, the terms and
conditions reached with the labour union must be implemented in both letter and spirit if
cooperation of workers is to be ensured for the reconstruction and modernisation of
business.
EXTERNAL ENVIRONMENT
 Micro Environment
• 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.
•Suppliers include all the parties which provide resources needed by the
organisation.
•Market intermediaries include parties involved in distributing the product or
service of the organisation.
•Partners are all the separate entities like advertising agencies, market
research organisations, banking and insurance companies, transportation
companies, brokers, etc. which conduct business with the organisation.
•Customers comprise of the target group of the organisation.
•Competitors are the players in the same market who targets similar
customers as that of the organisation.
•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.
Macro Environment

The macro component of

the marketing environment
is also known as the broad
environment. It constitutes
the external factors and
forces which affect the
industry as a whole but
don’t have a direct effect
on the business.
Political factors
The entire political environment includes looking at government policies and the risk and instability of current political
factors. Political risks can include an unexpected loss of ownership due to government takeover (nationalization), or
changes in labour laws which might increase the cost of the company's workforce. However often business can anticipate
issues by performing a political risk analysis. The political instability can influence the business and the duration of time
that business/ organization is profitable.

Economic factors
The economic factors of the business environment are all the variables that impact how the consumer spends their money
and the power of that purchase. There are multiple factors that exist at any time. An example of an economic factor is the
recent recession influenced people to spend less and save more which has impacted current consumer spending patterns.
The economic development of a country Is an important element when scanning the economic environment.Countries are
often categorized as either 'developing' or 'developed'. The exchange rate of a country can have an extensive impact on
the profitability of a business. Relatively small changes in the exchange rate may be the difference between profit and loss.
When promoting, selling a product it is important for an organization to consider the extra financial information including
current rates, taxes etc. in the economy of the country.

Socio-cultural
The socio-cultural environment looks at the demographic characteristics of the current business environment. It looks at
the values, customs and norms of the environment of which a company or organisation is placed. [18] When looking at the
socio-cultural environment it is important to consider the social values of the environment. Organizations look at the
cultural characteristics of the society and consider all values and customs that are often associated with the culture while
they try to market and sell the product or service,such as:values, beliefs, language
Religion,education,literacy,time orientation,lifestyle.
Technological factors
The technological environment is becoming a lot more important in the modern day business environment. New
technology produces new opportunities for companies and organizations to create, sell and promote a product. Technology
is rapidly growing and forever changing. Telecommunication technology e.g. cellphones and laptops are increasing the
opportunity within an organization to promote and sell a product. The internet has made information available to the
consumer to easily compare current prices of a product or service with the price of the competitors of the same product or
service. The internet has also created more opportunity to market the product or service via the use of social media.

Environmental factors
include natural resources that are affected by the processes of selling and marketing products or services. The two main
environmental trends that need to be considered when evaluating the natural environment is the increased pollution and
growing shortage of raw materials, Government regulations are creating practices that encourage environmental
sustainability. A business might for example utilize recyclable and biodegradable packaging, thus making the most of the
environmental opportunities to create a sustainable organizational in the current natural environment.
(Competitive advantage,Waste disposal, Energy consumption, Pollution monitoring

Legal factors
The legal environment includes the laws and regulations of a state. The laws and regulations will influence the way in
which an organization will market or sell the product and services. The legal factors influence trade agreements between
different governments and states. The governments that have a well developed public policy about selling and marketing
goods may limit competition and place other obligations on retailers. A business needs to be aware of things like
Employment law,Health and safety, Product safety, Advertising regulations,Product labelling, Labour laws etc.
SWOT ANALYSIS
SWOT analysis
A SWOT analysis is a simple tool to help you work out
the internal and external factors affecting your
business. It is one of the most commonly used
business analysis and decision-making tools.

A SWOT analysis helps you:

build on strengths
minimise weakness
seize opportunities
counteract threats
CONDUCTING A SWOT ANALYSIS
• A SWOT analysis is a tool for documenting internal strengths (S) and
weaknesses (W) in your business, as well as external opportunities (O) and
threats (T). You can use this information in your business planning to help
achieve your goals.
1. Decide on the objective of your SWOT analysis
• To get the most out of your SWOT analysis, you should have a question or
objective in mind from the start. For example, you could use a SWOT analysis to
help you decide if you should introduce a new product or service, or change your
processes.
2. Research your business, industry and market
• Research is to understand your business, industry and market. Get perspectives
by talking to staff, business partners and clients. Also conduct some market
research and find out about your competitors.
3. List your business's strengths
• The first step is to identify and list what you think are your business's strengths.
Examples could include strengths relating to employees, financial resources, your
business location, cost advantages and competitiveness.
4. List your business's weaknesses
• List things in your business that you consider to be weaknesses (i.e. that put your business at a
disadvantage to others). Weaknesses could include an absence of new products or clients, staff
absenteeism, a lack of intellectual property, declining market share and distance to market.
• Make sure you address the weaknesses raised in your SWOT analysis. The list of weaknesses
can indicate how your business has grown over time. When you review the SWOT
5. List potential opportunities for your business
• Think about the possible external opportunities for your business. These are not the same as your
internal strengths, and are not necessarily definite – an opportunity for one aspect of your business
could be a threat to another (e.g. you may consider introducing a new product to keep up with
consumer trends, but your competitors may already have a similar product). Keep this in mind, but
for the SWOT analysis, the same item shouldn't be listed as both an opportunity and a threat.
• Opportunities could include new technology, training programs, partnerships, a diverse
marketplace and a change of government.
6. List potential threats to your business
• List external factors that could be a threat or cause a problem for your business. Examples of
threats could include rising unemployment, increasing competition, higher interest rates and the
uncertainty of global markets.
7. Establish priorities from the SWOT
• When you have completed the steps above, you will have 4 separate lists. Ideally,
these lists can be displayed side-by-side so you can have an overall picture of
how your business is running and what issues you need to address. You can then
work out what issues are the most important and what can be dealt with later (i.e.
develop 4 prioritised lists).
8. Develop a strategy to address issues in the SWOT
• Review your 4 prioritised lists by asking:
• How can we use our strengths to take advantage of the opportunities identified?
• How can we use these strengths to overcome the threats identified?
• What do we need to do to overcome the identified weaknesses in order to take
advantage of the opportunities?
• How will we minimise our weaknesses to overcome the identified threats?
• Once you have answered these questions and finalised your lists, you can now
use the SWOT analysis to develop strategies for achieving your business goals.
 SWOT
ANALYSIS
EXAMPLE
ANY QUESTIONS?