Components of Marketing Environment

What is meant by the Marketing Environment?

The Marketing Environment consists of Internal and external factors which influence directly or indirectly in the marketing strategies and activities.   

According to Philip Kotler’s (12th Edition) definition, “A company’s marketing environment consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers” 

This environment can be divided into 02 types. That is,

• Micro Environment
• Macro Environment

Micro Environment

Customers: Customers are the most crucial part of an organization’s micro environment. The value delivery network highly aims to engage better and stronger relationships with their target customers as well.

Competitors: Competitors are the rivals who compete with the organization in the market and resources. Michael Porter’s five forces model offers a useful approach to competitor analysis. The five forces are as follows:

• Bargaining power of buyers.
• Bargaining power of suppliers.
• Threats of new entrance. (Potential entrants).
• Threats of substitute products and services.
• Rivalry among existing firms.

Intermediaries: Individuals or firm (an agent, a wholesaler, a retailer or a distributor) that links producers to other people like final buyers.

Suppliers: Suppliers are other business organizations and individuals who provide the organization with raw materials, parts, components, supplies, or services required to produce and supply products to the customers.

Publics: Also this can be divided into 03 types.

• Financial public – Banks, shareholders
• Local public – Local organizations
• Media public – Radio, Televisions

Macro environment

The macro environment includes the major forces that act not only on the organization itself, but also on its competitors and on elements in the micro environment. In the Macro Environment, PESTEEL analysis comes under this.

• P- Political Environment
• E- Economical Environment
• S – Social & Cultural Environment
• T – Technological Environment
• E – Ecological Environment
• E – Ethical Environment
• L – Legal Environment

Political Environment: marketers need to monitor the changing political environment because political changes can profoundly affect a firm’s marketing. Mainly, Political conditions and government regulation affect the business environment and trade markets. Some political factors that can affect are, 

• Government policies
• Taxes laws and tariffs
• Stability of government
• Trade regulations etc.

Economic Environment: the economic environment is basically about the level of demand in the economy and is the most visible aspect in the macro environment. Some economic factors that can affect are, 

• Unemployment rate
• The Interest Rate
• The Inflation rate
• The foreign exchange rate
• Economic Boom and recession
• Income distribution
• Investment policy
• Policies of Tax and Interest rates
• Saving Habits

Social and Cultural Environment: Social & Cultural factors are the most difficult to evaluate, and hence pose the greatest challenge to the marketing organization. The social factors might ultimately affect the sales of products and services as well.

Some Socio- Cultural forces are as follows:

• Demographic forces – this refers to the structure of population in terms of factors such as age, gender, family size, family life cycle, income, occupation….these variables will determine the marketing mix strategies.
• Socio- Cultural factors: these involve the shared beliefs, attitudes and behaviour prevalent within the society in which the organization operates.
• Education levels
• Social Responsibility and Ethics
• The impact of war
• Role of women in society
• Changes in social attitudes towards credit
• Changes in attitude towards health

Technological environment: the pace of technological change is becoming increasingly rapid and marketers need to understand how technological development might affect them in the following areas:

• New technology
• Technical obsolescence
• Impact of Internet
• Virtual shopping
• Technological development

Ecological Environment: Ecological Environment is concerned with issues as to how the organization interacts with and affects the natural environment or the Ecology. Ecological environment issues relevant to marketing as follows:

• Resources Depletion: the impact of the use of certain materials to develop products which would lead to the depletion of natural resources. Eg:- Waste disposal and recycling
• Pollution concerns
• Noise pollution
• Environmental Pollution (Environmental protection regulations)
• Eye Pollution
• Health Related Concerns 
• Related products, use of employees

The term “green marketing” first surfaced in the late 1980s as an extension of what the American Marketing Association referred to in 1975 as “ecological marketing”.

There is no single definition accepted universally, but in 

1994 Polonsky stated: “Green or environmental marketing consists of all activities designed to generate and facilitate any exchanges intended to satisfy human needs or wants, such that the satisfaction of these needs and wants occurs, with minimal detrimental impact on the natural environment.”

Ethical Environment: Marketing ethics are moral philosophies/ principles that define right or wrong behaviour in marketing. The most basic ethical issues have been formalized through laws and regulations.

• Product issues: should be honestly made and described
• Pricing issues: marketers have the right to price their products so that they earn a reasonable profit.
• Promotional issues: 
• Place issues: abuse of power in managing distribution channels and failure to pay for goods within the specified credit terms of the supplier are both regarded as unethical, but frequently occur anyway.

Legal Environment: changes in the political environment often lead to changes in the legal environment and in the existing laws enforced. Further, these legislative changes take place from time to time. Many of these changes affect the business environment. 

Some laws an organization should be aware of are as follows:

• Protection of intellectual rights
• Consumer Protection Act
• Companies Act
• Regulatory Commission
• Competitive regulations 
• Health & Safety regulations
• Environmental Protection laws
• Code of takeovers to media freedom
• Exchange control
• Laws relating to Advertising

Importance of Analysing Marketing Environment

• The environment forces are essential for effective planning – When preparing a plan in an organization or a company, analysing micro and macro factors are most helpful. (SWOT analysis)

                          – Analysing To identify strength and opportunity. 

                          – To determine weakness and threats.

• Understand its customers, rivals – Analysing micro and macro forces, this may help to understand the behaviour of the customers and what they expect from the particular company’s goods or services as well.
• Business survival – Also, this is almost important for businesses to keep the business operating activities for a certain amount of time. So by analysing marketing environment factors in an effective manner, the businesses can achieve their other financial aims and objectives. Such as, Profit, Sales, Market share and financial security. 
• To overcome challenges from changes – Specially, analysing the macro environment forces like, technological environment factors are most important to face challenges from the newest technology appliances. So companies can use new tools for communication purposes, different leadership styles, most suitable organization structures and latest marketing strategies (eg; Digital marketing ) as well.

The Internal Environment 

The organization’s internal marketing environment is the staff relationships, corporate culture and resource constraints and is within the control of the organization. 

• Staff and relationships:The relationships between staff within the organization are key in ensuring an effective working environment.
  • Staff members: an organization needs employees’ loyalty, commitment in exchange for which the staff is offered pay and security.
  • Organization structure: the formal structure and informal structure

• Resource constraints:Organizations operate with limited resources.

• Corporate culture: Culture is a set of shared rules and beliefs. Corporate culture has been called “the way we do things around here” and it can be a powerful influence on staff behaviour.

The External Environment

The external environment consists of all the outside factors and influences that impact the operation of businesses. So the companies should react to keep up its flow of operation as well as possible. The external environment can be divided into 02 types.That is Micro environment and Macro environment. In this article, we learned  separately ,those environments are very far earlier. As we know now, each type of environment has specific factors or influences on today’s business activities. Also now we know the importance of analysing those environmental factors as a more integral part in maintaining successful  business relation activities in an effective manner.