MARKETING ENVIRONMENT

Background: 

Marketing is essentially an externally focussed function of an organisation. The firm's environment defines its threats and opportunities because, organisation is a subsystem of a broader supra-system. A system is a set of objects, parts, elements, components that are interrelated and interacting with one another. Rather a system consists of Inputs-Processor Outputs and Feedback. By its very nature, any system is goal oriented and does not exist in isolation. It subsists with a given environment or supra-system. The environment is complex and undergoing continuous and, sometimes, cataclysmic change. There is every good reason to believe that the rate of change in the environment outstrips the rate of change in the organisation, thus leaving the organisation in a mal-adjusted state. Therefore, an organisation must adapt continuously to the changing environment. A passive firm faces extinction; an adaptive firm will survive and probably enjoy modest growth and a creative firm will prosper and even contribute to the changes taking place in the environment. This chapter plans to discuss in detail the meaning and the controllable and uncontrollable forces.   

WHAT IS ENVIRONMENT?

In simple terms, 'environment' implies every thing that is external to the organisation. Environment is what is outside the organisation. It is something that surrounds an enterprise. It is the sum-total of external factors within which the enterprise operates. It is made up of tangible and intangible factors both controllable and uncontrollable. It is made up of turbulence and tranquility, science and technology, ethics, economic and political situations, attitudes, traditions, cultures, alliances and so on. To be very precise, it stands for the provision of inputs both material and human and setting limits beyond which an organisation cannot go. In this sense, -marketing itself is a system that is responsible for free flow of goods from producers to consumers to meet dimensions of time, place, price, quality, quantity and variety. Again, marketing management is a system of marketing system itself.   

               

                                    Thus, marketing system is made up of elements like: marketing management-products or services-marketing agencies linking producers and consumers-target market representing a class of customers willing to pay and buy and the environment giving opportunities and threats and challenges thus

putting certain limits. Here, we are concerned with the marketing environment which consists of SOCIAL, ECONOMIC, ETHICAL, POLITICAL, PHYSICAL AND TECHNOLOGICAL forces as depicted in the diagram on this page which are better known as the uncontrollable forces that act as the constraints on marketing decisions.

 I. SOCIAL FORCES :

The social forces are made up of sociological, psychological and anthropological factors. Following is the outline of these factors.

Sociological factors: For every marketing unit, the greatest asset is a permanent group of satisfied customers. Consumers are the part and parcel of society or the community. Consumers being social and rational animals, their life-style is deeply influenced by the social set-up. The social constitution or the conditions are bound to have deep influence on consumer taste, temperament, life and living. It goes without saying that the alert marketer cannot afford to neglect or underestimate these aspects. Thus, the needs, the desires, hopes and aspirations of the consumers can be understood in totality if the marketer has a thorough knowledge of the sociology of consumers.

Psychological factors: The study of consumer behaviour is much more important than the number of consumer in the market because each consumer is unique. His behaviour, attitude, temperament, mentality and personality have their own say on what he wants and how his needs can be best satisfied. That is why, a separate chapter is devoted to this aspect of consumer behaviour. It suffices to say here that very little is known about the peculiar nature of working of human mind. Marketers have succeeded in finding the quantitative answers but not the qualitative answers which depend on his ability to uncover the human mind.

Anthropological factors: Anthropological factors are vital in noting the national and regional characters, cultures and sub-cultures and the patterns of living. In depth study of these aspects will help the marketers in designing and implementing the advertising, sales-promotion, direct selling strategies, packaging of products and pricing of products. In fact the basic components of marketing mix are involved in anthropological factors. Thus, it is quite evident that GITS INDIA and ORKAY INDIA companies specialised in supplying gourmet mixes to house-wives know fully well that the product ranges and taste ranges differ from North India to South India and the consumers like difference in packaging.

          In short, the social scientists can contribute by studying the consumer in the face to sociological, psychological and anthropological influences which govern the society of which consumer is the- focal point. Social forces lay basis of better consumer understanding.

11. ECONOMIC FORCES   

 As noted earlier, consumer is not only social animal but rational animal too. These economic forces take into account the economic influences. The components of economic forces are the factors of consumers, competition and price.

Consumers: Consumer interest, progress and prosperity should be the aim of every economic activity. The marketer is to make available quality products, at reasonable prices, in sufficient quantities, at required time interval. The goods and services so made available by the marketing system must generate additional income by improving his physical and mental health. Thus, consumer welfare and protection should be the final of marketing as a sub-system.   

Competition: Competition is the breath of modern economic systems. Healthy competition is the cause of quality improvement, quantity multiplication and economy encouragement. On the contrary, unhealthy competition is harmful to the interests of consumers and producers too as it results in increased costs and wastes. The following chart gives a convincing pictures about the competitive practices in product area of mouded luggage in India.

 Price: Price is the determinant of the fate of the business house. It makes or mars very fortunes of the house. Pricing strategy is the big gun in the kit-bag of a marketing manager. The pricing of a product or a service is a delicate issue. If it is too high, reduces the consumers and consumption and if it is too low, the producers and marketers are left in the lurch. Thus, the pricing to be determined must take into account the costs of production and distribution keeping in mind the decent return on investment and efforts of producers and the marketers. It also means that it can not cross the limits set by the governmental rules and regulations. 

III. ETHICAL FORCES 

 The business community has the ethical responsibility while delivering the goods to the society. Of late excessive profiteering, making quick money have forced some of the business people to disintegrate the ethical values from the business. Ethical degeneration has been bringing untold and unbearable miseries to the consumers resulting in physical and mental health problems. Non-standardisation as to quality, adulteration, imitation, giving false impression and so on. These have led to the consumer exploitation beyond the limits resulting in socio-economic pollution of minds and relations. 

IV. POLITICAL FORCES 

 Marketing environment has the brace of political frame-work in which the government of the nation works. It is the government that regulates the business activities as it is the custodian of the nation. Whatever the marketer is to decide, he will have to decide and act in the face of legal frame-work provided by the political party ruling the nation. In fact, what is to be produced, how much, of what quality, for whom, when and at what cost and at what price are to be determined by the policies of the government. The producers and marketers are to work within these concessions and limits set by the political forces. Normally, what is good or bad or the society and hence consumers is determined on the basis of maximum social good. Thus, government policies-pricing, fiscal may be internal taxation or external levies, regional preferential policies-all have to be studied and interpreted before having individual policies and strategies in case of marketing units. 

V. PHYSICAL FORCES 

 The physical factors, here, refer to the physical distribution of goods and services. These refer to the creation of place and time utilities. The distribution system is to be so designed as to take into account product-consumers-time-location and process. It implies the in depth study of cost and convenience involved in the process of physical distribution of products from producers to consumers. It deals with the logistics.  

VI. TECHNOLOGICAL FORCES  

Science and technology is always changing. This changing face of science and technology has impact on marketing environment. Change in technology means change in production and production possibilities, their manufacturing process, costs and qualities. This warrants change in marketing efforts too. It changes price structure, competition and the consumers. In turn, it affects governmental policies to restore equilibrium so distorted. Thus, video piracy has virtually ransacked the theatre cinema as each house is a mini theatre with video-cassettes. The STD telephone facilities have changed the pattern of government earnings. Sky television concept going to change the existing system. This, new technology will mean new ideas, new products and new marketing efforts. This makes the marketer to run after a moving target than shooting a still target.  

                        In a nutshell, an agile marketer can not afford to miss these minute yet farreaching influences while designing and implementing the marketing strategy for his success and prosperity of the society at large. It is so because marketing enterprise is an open adaptive system working in the environment; it does not exist independent of the environment. It has interaction and interdependence with social, economic, ethical, political, physical and technological forces. His marketing strategy hovers round four Ps namely, PRODUCT-PRICE-PROMOTION - and PLACE. All these four aspects are governed by the above forces cited. As these forces continue to develop and change they determine the changing requirements for the efficient and effective marketing plans, strategies and policies. Therefore, whatever the modern marketer is to decide, he will have to do so in the backdrop of these changing forces and act accordingly. His position is ever changing; what has happened in the past is not to continue, for what was yesterday has not been today and what is today is not going to be tomorrow. He has control over the four P‟s and not on these external forces and hence he is to become more and more adaptive and creative to survive and survive successfully. 

MACRO AND MICRO ENVIRONMENT  

Some authors are contented with the meaning of the word ENVIRONMENT as something external to the marketing organisation. The earlier pages have made those external' forces. On the other hand, according some group of authors including William J. Stanton, Michael J. Etzel and Bruce J. Walker, the environment has a broad meaning and according, they talk of EXTERNAL and INTERNAL environment. According to them MACRO ENVIRONMENT stands for EXTERNAL ENVIRONMENT and MICRO ENVIRONMENT stands for INTERNAL ENVIRONMENT. To avoid confusion, these can be taken up afresh in brief: In effect it is sub-division of EXTERNAL ENVIRONMENT into MACRO and MICRO. 

MACRO ENVIRONMENT:  

Any organisation-be industrial and trading-operates within an external environment that it generally cannot control. Macro environmental forces have considerable influence on any organisations marketing system. These are Demography, Economic conditions; Competitions; Social and Cultural forces; Political and Legal forces and Technology. They are macro-environmental forces because change in any of them can changes in one or more of the others. Therefore, they are closely interrelated. One thing is certain that all these forces have one thing in common that they are dynamic forces which are subject to change and at an increasing rate per sec.

These six forces are largely uncontrollable by management. However, these are not totally uncontrollable. A company may be able to influence its external environment to some extent. For instance, an international marketing company can improve its competitive position by a joint venture with a foreign firm that markets a complementary product. NOV ARTIS is a fine example where two well known pharmaceutical companies namely Ciba and Sadoz came together by merger. Another example is that of Brooke Bond and Liptons came together as Lipton Brooke Bondrenowed companies in tea and coffee beverages. A company may influence its political and legal environment by lobbying or by contributing to a legislator's campaign fund for fighting elections. In India, giant companies like HLL, GLINDIA, BIRLA Group, Tata Group, Reliance, Garwares decide the politics and legal frame as a return. In case of technological front, new product research and development can strengthen a firm's competitive position. This is going on in a big way in automobile industry and electronics. Let us note each of these six points in brief. 

1. Demographic Forces. Demography is the study of human population and its distribution. Demography deals with people and people constitute market for company's products. These demographic features relate to growth of population - Birth and Death rates, Sex ratio, Age group, rate of literacy, ethnic groups, density of population, rural and urban and so on. Thus, the total population consists more of old people and babies, there is more demand for medicines and walking sticks. More younger generation component speaks of demand for personality improvement products. Quality of life is greatly influenced by rate 0 literacy and so on. 

2. Economic Forces. Mere presence of people does not constitute market. We want people with money to spend and their willingness to spend. Hence, economic component features a force having significant impact as marketing activities. A marketing programme of a company is influenced by such factors which are both current and anticipated. These are, stage of business cycle, inflation, rates of interest. 

          A business cycle has a typical four stages namely prosperity, recession, depression and recovery. However, only two are mostly serious - prosperity or boom and depression or doom. Prosperity is a period where organisations tend to extend and expand their marketing programs as they add new products and enter new markets. It is a period of rising demand, free money supply, optimistic mood of people to enjoy the goods and services as they have more disposable per capita income. On the other hand, depression is a period of-stockpiles, restricted money supply, lack of demand, unemployment. That is why marketing programs are cutdown to the rock bottom as there is modernised. In between these two, recession and recovery periods do have implications. During recession, there is a temporary fall in demand as we are facing today where people expect further fall in prices. Take the examples of real estate. While goods where price wars are going on. This affects the prospects of company badly but temporarily. In period recovery, demand picks up, once again firms marketing programs get restabilised. Thus much depends on each phase. Inflation is another component of economic forces. Inflation is a rise in the prices of goods and services. That is the value of a dollar or a rupee has come down. The purchasing power of a. rupee or real value so reduced. For same quantity and quality of goods, people are forced to pay higher prices. Inflation of wild dose is good for everyone but wild rise is bad for the society particularly middle and poor class. That consumers spend less and less on luxuries, comforts and concentrate as basic necessities of living. This inflation poses a real problem in managing marketing program in that as to how to price the products and how to control the costs. The people spend not only less as purchasing power is reduced but also prefer to spend today than later as there is danger for further price rise. It is a precautionary stand as value of a rupee falls day by day. 

       Coming to INTEREST RATES is still another economic component having influence on marketing programme of a firm. It is but natural that when interest rates high they do not go in for long-term needs such as housing, automobiles as they find it difficult to fulfill their short-term needs. That is why, the only anecdote to cut the prices of products substantially and zero rate of interest programs in case of durable goods to increase or sustain business. 

3. Competition. Obviously the competitive environment is a major component affecting the marketing efforts. A wise and skillful marketing executive constantly monitor all aspects of competitor's marketing activities namely, their products, pricing, distribution system, promotion programs and so on. As firms are going global, there is threat of external competition in addition to internal competition. Today, Indian market is filled with all foreign products in important areas like electronics, electricals, textiles, agro-based products and the like. The types of competition can be brand competition, substitute product competition, limited customer competition. 

4. Social and Cultural Forces. The marketing managers of today do not have sound sleep because social and cultural values and value systems are constantly changing affecting the present marketing programme. This component is made up of social and cultural forces. Social forces stand for social values of life and living. The society of today can be divided in to materialists and spiritual values. The domestic or materials values say life is short - beg, borrow or steal-but enjoy the life. While other group says think of simple living and high thinking because more and more needs and wants are the root causes of our miseries of life. On the other hand, cultural values are also changing as to clothing, shelter, and day to day living. Take one aspect that fashions and style movements change and the business house is to give those. If girls and boys want jeans, other ever better products will not do. Again we people as the members of society are interested in environmental friend products like- soapless soap, smokeless cigarette, diet beer, high tech food, fast food and so on. Today, women liberation movement, has made home ministry all the powerful though finance minister is financing' all the needs, because marketing manager of family is a housewife. Again parents alone do not decide but children too. It has resulted in fast changing lifestyle of women and earning capacity bringing into play-healthy and fitness, impulse buying and conveniences as to focus.  

5 .Political and Legal Forces. Each and every firm's control is influenced more and more by political and legal forces in the country. The political and legal forces prevailing in country can be grouped into at least five captions namely. (1) Monetary and Fiscal policies: Marketing systems are affected by the level of government spending, the money supply and its tax policies. 2. Social legislation and. Regulation: Legislation affecting the environment-anti-pollution laws, protection of public life and the like. 3. Government relationship with the industries : This relates the treatment given by government in case of industries and industrial units in terms of subsidies and penalties. This also speaks of the encouragement and discouragement through incentives and fines- controlling and de controlling. 4. Legislation." Related specifically to marketing: There are many Acts and Laws specifically applied in the area of marketing – that affect the working of these units. To illustrate MRTP Act, 1919, Consumer Protection Act of 1986, Indian Sale of Goods Act of 1930, Essential Commodities Act and so on. Here the marketing executives need not be lawyers but should be aware of the Acts and provisions affecting their area. These Acts may be central, state and local. 5. Source of information and buyer of the product. This area is one where government at all levels publishes information to help the executives as government is the bulk buyer in case of some common duties and services. 

 6. Technology. Technology has an immense impact on our daily life and lifestyles, our consumption patterns and economic well-being. Just imagine the technological developments over the years of any commodity, say watch, sport, radio, television, telephone, anti-bodies, and think what would be the shape of the things to come after say 10 or 20 years. Perhaps the most important breakthrough is miniatures sales of electronic products. Today, a hand held computer - smaller than lap top size - allows sales people to place orders directly from customers location. Technological breakthrough can affect markets and marketing activities at least in three ways: (1) Can start entirely new industries as computers, lasers, robots have done. (2) Radically alter or totally destroy existing industries and (3) Stimulate markets and industries not related to the technology. For instance already existing home equipments and appliances can generate free time to households to engage in new activities. It should be noted that technology is a fad mixed blessing in other ways too. On one hand it helps us to improve our lives at the same time creating environmental and social problems. Thus automobiles have come to stay, creating problems of traffic and jams, air pollution. 

EXTERNAL MICRO ENVIRONMENT 

The external micro environment is made up of three basic forces that are external but are part of company's marketing system. These are the firm's market, suppliers and its marketing intermediaries. While, they are generally controllable, these external forces can be influenced more than the macro forces so far discussed. For instance, a marketing organisation can exist pressure on its suppliers or middlemen. Through advertising a firm has some influence on its market. Let us take up these three points for better understanding. This external micro environment can be represented as .under :  

1. The Market. As noted earlier, market really is what marketing is all about how to reach it and serve it profitably and in a socially responsible manner. It goes without saying that market becomes the focus of all the marketing decisions in an organisation. In this context a market is a place where buyers and sellers meet, goods and services are offered for sale and transfer of title of the goods takes place. In other words, market is demand made by a certain group of potential buyers for a good or service. For example, there is a farm market for plastic products. In this context market is taken as people or organisation with wants to satisfy, money to spend and the willingness to spend. That is market demand for a given good or service taken into account three points - people organisation with wants - purchasing power- their buying behaviour. 

2. Suppliers. The marketing firm cannot sell if it make the products or buys it first. Suppliers are crucial to the firm's success because they supply those products what consumers )want from the marketing house. They are crucial because they take the responsibility of understanding consumers' needs as viewed by selling or marketing form. Marketing form cannot Severe the relations with suppliers as it cannot in case of customers. 

3. Marketing Intermediaries. Marketing intermediaries are the independent individuals or organisations that directly help in the' free flow of goods and services between marketing organisations and its markets. There are basically two types namely 'merchant' and 'agent'. Merchant middle can be wholesalers and retailers, while agent middlemen can take five to six forms. These intermediaries render so important services that they cannot be removed and hence, become part and parcel of the system.

 MARKETING ORGANISATIONS INTERNAL ENVIRONMENT 

A firm's marketing system is also shaped by internal forces that are controllable by management. These internal influences include firms PRODUCTION - FINANCIAL and PERSONNEL activities. If Godrej company is thinking, of adding a new brand of toilet soap - which already more than half  a dozen, It must determine whether existing production facilitates a new brand, and its expertise can be used more fruitfully. In case new brand needs a new plant and machinery, it gives rise to its financial capabilities. The other marketing forces are company's location, its research and development (R & D) strength, and the overall image or stand of the company in the minds of public. This organisation's internal environment can be represented as under: Another point which must not be forgotten is that of co-ordination of marketing and non-marketing activities. Sometimes, it is difficult task because of conflicts in goals and executive personalities. Products people might think of long production runs of standard items while marketing executives may think of wider product line. However, financial executives have tighter credits and expense limits than warranted by other people.