chapter 3 environment

8/11/2019 Chapter 3 Environment

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CHAPTER 3

MARKETINGENVIRONMENT


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THE MARKETING

ENVIRONMENT

All the actors and forces influencing the companys

ability to transact business effectively with its target

market.

The trading forces operating in a market place over

which a business has no direct control, but which

shape the manner in which the business function and

is able to satisfy its customers.


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WHY IS IT IMPORTANT?

An understanding of macro and micro marketing

environment forces is essential for planning.

Helps a business to competemore effectively against

its rivals.

Assists in the identification of opportunitiesand

threats.

Enables an organization to take advantage of

emerging strategic opportunities.


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CONTROLLABILITY

The organization has no control over the macroenvironment. It can only respond to the changes

taking place.

The organization has some degree of influence overthe micro environment but by no means complete

control.

The organization controls its own internal environment

although this does not mean the marketing

department or marketing manager has control.


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Includes:

Microenvironment (TASK): actors close to the

company that affect its ability to serve its

customers.

Macroenvironment (BROAD): larger societal

forces that affect the microenvironment.

Considered to be beyond the control of theorganization.

Marketing Environment


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Company

Demographic

Economic

Natural

Technological

Political

Cultural

Company

Customers

Intermediaries

Suppliers

Competitors

Public


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Actors in the Microenvironment


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9

Company

Company organization consists of Board ofDirectors and functional managers.

Marketing plans are drawn up as per thephilosophy of Top management

Marketing decisions like new products,

expansion, etc depend on the support of topmanagement. It depends upon finance,managerial skills, organizations strengths andweaknesses.


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Marketing plans should be in harmony withpolicies of other departments such asproduction, purchase, finance, personnel,

etc

For ex: quality depends upon production

policies Advertising and sales promotionon

budgets


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The Microenvironment

Departments within the companyimpact marketing planning.


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Suppliers: Provide resources

needed to produce

goods and services.

Important link in thevalue delivery

system.

Most marketers treat

suppliers like partners. If they raise prices, we

too have to revise

ours.

SUPPLIERS


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Marketing Intermediaries

Marketing Intermediaries: Help the company to promote, sell, and distribute

its goods to final buyers

Resellers

Physical distribution firms

Marketing services agencies

Financial intermediaries


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Customers

The target market of the company is usually of fivetypes:

1. Consumer market i.e. individual and householders

2. Industrial market i.e. organizations buying for producing

other and services.3. Reseller market i.e. organizations buying goods andservices with a view to sell them to others.

4. Government and other non profit markets i.e.thosebuying goods and services in order to produce public

services.5. International market i.e. individuals and organizations ofnations other then home land who buy for eitherconsumption or industrial use.


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Competitors

Must understand competitors strengths

Must differentiatefirms products and

offerings from those of competitors

Competitive strategies should emphasize

firms distinctive competitive advantage in

marketplace

Competitive Intelligence


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Publics

Public is defined as any group that has anactual or potential interest in or impact on acompanys ability to achieve its objective.

The actions of the company do affect theinterest of other groups i.e., those who formgeneral public for the company who must besatisfied along with the consumers of thecompany.


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Types of Publics


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Financial Public:influence the companys ability to obtain

funds. Banks, investment houses, and stockholders and the

major financial publics.

Media Publics:carry news, features, and editorial opinion.They include newspapers, magazines, and radio and

television stations.

Government Publics:Management must take government

developments into account. Marketers must often consult thecompanys lawyers on issues of product safety, truth in

advertising, and other matters.

Citizen-Action Publics:A companys marketing decisions

may be questioned by consumer organizations, environmental

groups, minority groups, and others. Its public relations

department can help it stay in touch with consumer and citizen

groups.


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Local Publics:include neighborhood residents and

community organizations. Large companies usually

appoint a community relations office to deal with the

community, attend meetings, answer questions, andcontribute to worthwhile causes.

General Public: A company needs to be concerned

about the general publics attitude toward its productsand activities. The publics image of the company

affects its buying.

Internal Publics: include workers, managers,

volunteers, and the board of directors. Large

companies use newsletters and other means to inform

and motivate their internal publics. When employees

feel good about their company , this positive attitude

spills over to external publics.


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The Macroenvironment

The company and all of the other actors

operate in a larger macroenvironment of

forces that shape opportunities and pose

threats to the company.


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Factors affecting Macro environment

1.DEMOGRAPHIC FORCES

2.POLITICAL/ LEGAL FORCES

3.ECONOMIC FORCES

4.SOCIAL AND CULTURAL FORCES

5.NATURAL FORCES

6.TECHNOLOGICAL FORCES


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Demographic Environment

Demography gives consumer profile It is the study of population in respect of its

size, density, location, age, race,

occupation, marital status, education, sexcomposition etc

It helps in - Market segmentation, demand

forecasting, determination of marketpotential

DEMOGRAPHIC FORCES


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DEMOGRAPHIC FORCES

Demographic data helps in preparing

geographical marketing plans, householdmarketing plans, age and sex wise plans.

It influences behaviorof consumers which

in turn will have direct impact on marketplace.

A marketer must communicate with

consumers, anticipate problems, respond

to complaints and make sure that the firm

operates properly.


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Demographic Environment

Consumer Groups-

1. Infants

2.Children

3.Young Adults(19-30 years) Location

4.Adult (35-50)

5.Senior Citizens

6.Women

7. Singles

8.Occupation and Literacy


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Segmentation with respect to age

SKIPPIES: School Kids with Income and

Purchasing Power

MOBYs: Mother Older, Baby Younger

DINKS: Double Income, No Kids

PUPPIES: Poor Urban Population

WOOFS: Well Off Older Folks


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Indian Demographic Scene

Close to one billion population Growth rate over 2% per annum

Life expectancy from 48 years in 1947 to

70 years in 2001

National literacy rate is over 50% (2001

census) .

Diverse religions and languages

Dialects in few hundreds.


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Indian Marketing environment

Prosperity in rural area

Overflowing unaccounted money everywhere

Inflationary condition [ inflation is a permanent guest]

Aggressive advertising on TV inspiring children and

women. Consumer is a King


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Indian Marketing environment - continued

Middle class explosion - Consumption community

Better educated and exposed to the life styles of the rich

Their aspirations have been constantly growing.

They often spend more than what they earn


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Middle class explosion

Their expenditure on non-food items is continuously growing

Our market is on par with UK, France, West Germany

More disposable income

Spend more on non food items

Invest in stock market


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Demography - continued

Mexico is a nation of young population

Japanold generation

America was a melting bowl. Now it is aSalad bowl with Chinese, Filipinos,

Japanese, Asians, Koreans


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The Seven U.S. Generations

The Seven U.S. Generations


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The Five Indian Generations

Veterans(born between 1920-45)

Free Gen (born between 1946-60)

Gen X(born between 1961-70)

E Gen (born between 1971-80)

Gen Y(born between 1981-90)


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Political Environment

Coke moved out of India in 1977.

Domestic Politics

International Politics


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Legal Environment

Prevention of food and adulteration act1954.

Drugs control Act-1954.

Company Act-1956 Standard Weights and measurement Act-

1956.

MRTP-Monopoly and restrictive TradePractices-1969


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Legal Environment

Display of price order-1963

Indian Patents Act.

Packaged Commodities(Regulation)Order-1975.

Consumer Protection Act-1986.

Water(Prevention and control of pollution)Act-1981.


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Political factors - continued

Political and legal factors are inter connected

Discontinuation ofCCI, FERA,

Introduction of SEBI, FEMA, VAT

FDI Rules allow private participation intransportation, telecom, airlines


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Economic Environment

Economic forces influence both marketersand the consumers

Consists of factors that affect consumer

purchasing power and spendingpatterns.

E i E i t


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Economic Environment Competitionmonopoly,

oligopoly

Buying power

Willingness to spend

Income

Inflation

Recession

Exchange rate

Economic development

National income

Standard of living

Fiscal policies

Income Distribution Upper class

Middle class

Working class

Underclass


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Technological Environment

Most dramatic force now shaping our

destiny.

Changes rapidly.

Creates new markets and opportunities

Challenge is to make practical, affordable

products.

Safety regulations result in higher

research costs and longer time between

conceptualization and introduction of

roduct.


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Technology

It has a definite impact on buyers and marketers

decisions

It provides mechanical, physical and numerous other

processes which help in attaining higher standard of

living

It has adverse effects like pollution, unemployment,

increase in crime rate, etc

Marketers must be aware of new developments in

technology.


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Technology-continued

Technological developments may put

some people out of business and at the

same time, open up new business

opportunities to others

For ex: introduction of synthetic fabrics

drove away sheep raisers and cottongrowers out of business


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Solar pocket calculators and hand

cameras

CDs and Video tapes

Virtual reality applications in Marketing is anew application due to technological

progress


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Technological developments haveimproved the standard of living and givenmore leisure time

Improvements in communication,transportation

Technology has given wonder drugs likeAmpicilliin, by- pass surgery,


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Technology grows out of research made

by business, universities

Most of the products that we talk today

were not there a few years back. For

example, Computers, Photostat, laser

technology, scanners.


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Socio-Cultural Environment

The institutions

and other forces

that affect asocietys basic

values,

perceptions,

preference, and

behaviors.


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Core beliefs arepersistent

Passed from parentsto children; reinforced

by society Shape attitudes and

behavior

Secondary cultural valueschange andshift more easily

Societys cultural values

are expressed through

peoples views of:

Themselves

Others

Organizations

Society

Nature

The Universe

The Cultural Environment

CULTURE


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CULTURE

Variations Country

Regional

Impact of culture on

expectations and what isright to do Individuality vs. collectivism

Relationships between people

Work habits


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Socio-Cultural

Life style

Emergence of shopping malls,supermarkets and

Hypermarkets(Both husband & Wife Earning).

Average income level Food habits.

Multiple Life styles

The changing structure of families.


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Social-Cultural environment

Advertisements and culture

Some ads are banned on TVs

Festivals like Ganesh festival, Diwali, Id-

Milad, Christmas,

Dress styles are different

School uniforms

S i l d lt l f


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Social and cultural forces

Social responsibility has crept into the

marketing literature as an alternative to the

market concept.

Socially responsible marketing is that

business firms should take the lead in

eliminating socially harmful products

SOME CHANGING


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SOME CHANGING

SOCIETAL VALUESIncreasing emphasison

Recycling and green

products

Diversity

Organic foods

Choice and customization

Decreasing emphasison

Formality

Mass media

Traditional brands


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Natural Environment

Involves the natural

resources that are

needed as inputs bymarketers or that are

affected by marketing

activities.


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Natural Environment

Maintain Ecological Balance

Technological Developments have led toecological imbalances.

Resources:De-marketing their Products-IOC SAVE OIL-SAVE INDIA

Weather,pollution(CFC,PVC,Polyethylene

bags). Government Interventions.


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Pest Analysis


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Pest Analysis

A scan of the external macro environment in

which the firm operates can be expressed as apest analysis.

The acronym PEST (or sometimes rearranged

as STEP) is used to describe a framework forthe analysis of these macro environmental

factors.

A PEST Analysis fits into an overallenvironmental scan, which includes Political,

Economical, Social, and Technological

environment.

PURPOSE OF ANALYSING THE


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PURPOSE OF ANALYSING THE

MARKET

To know where the environment is

heading

To discern which events and trends are

favorable

To assess the scope of various

opportunities

To help secure the right fit between the

environment and the business unit


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Economic Factors

Inflation

Employment Disposable income

Business cycles

Energy availability and cost


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Sociocultural factors

Demographics

Distribution of income Social mobility

Lifestyle changes

Consumerism Levels of education


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Technological

New discoveries and innovations Speed of technology transfer

Rates of obsolescence

Internet Information technology

CONTROLLABILITY


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The organization has no control over the macro

environment. It can only respond to the changestaking place.

The organization has some degree of influence overthe micro environment but by no means complete

control.

The organization controls its own internal environment

although this does not mean the marketing

department or marketing manager has control.


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The Indian Marketing Environment 63

b. Economic Scene

Top ten economies of the world.

Our GDP is growing at 5.5% per annum.

Agriculture 16%

Industry 24%

Services 60%

Slow growth rates till 70s. Average 3% p.a.

Last two decades have seen massive growth in the

industry and services sector.

In 90s spectacular growth after liberalization

One of the fastest growing economies of the

world


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c. Agricultural Scene

Predominance is there. Dependence has reduced

2

/3rd population dependent directly/indirectly onagriculture.

Rural markets development at a faster rate.

Impressive achievements. Self dependent. Rare

foodgrain imports.

Main cause of development of other sectors.


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d. Industrial scene

Contribution to GDP growth increasing

More than this, there are qualitative change

Rapid foreign investment and competition from

multinational companies.


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e. Social scenario: The middle class explosion

Estimate of 25 crores in size

Rapid industrial growth seen emergence of professionals inmany spheres.

Target group for most of the companies.


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Social scenario: The middle class explosion

Emerged as the consumption community of the country.

Better education, higher aspirations.

Consumption of nonfood items on the increase

Joint families giving in. Concept of nuclear families.

Higher disposable incomes.

Demand for lifestyle products is on the rise.


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f. Rural marketing scenario

Shown impressive growth-television, mobile penetration.

Earthenware yielded place to a variety of newkitchenware.

Becoming increasingly urbanized.


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Rural marketing scenarioTapping these markets continues to bewilder most

companies.

Future growth lies in this market.

Videocon tapping all towns upto 50,000 population

for increasing television sales.

Huge, untapped market.


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g. Legal scenario

Has direct impact on the marketing environment.

E.g.: The introduction of Consumer Protection Act and

Consumer Courts.

Pace of legal reforms slow. Organizations exploiting theseweaknesses

ITC versus excise department for 800 crores (last ten

years)

About one lac litigations pending Average time of ten years

to resolve litigations.

Grim scenario


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h. What do we observe

Indian marketing environment acquiring greater

dynamism and robustness

Evolution of Middle class

Growing rural markets

Lifestyles undergoing rapid changes.

Demand for lifestyle products.


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New Economic policies

1. New Industrial Policy

Delicensing of industries.

Fera relaxation

MRTP relaxation

Curtailment of the role of the public sector.

2.New Trade Policy

Freer Trade

Linking of imports to exports


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3. Economic reforms and structural adjustment

Fiscal and monetary reforms

Banking sector reforms

Capital market reforms

Red Carpet to Foreign institutional investors.

Insurance sector reforms

Phasing out of subsidies

Dismantling of price controls and introduction of market driven

price environment.

Public sector restructure

Privatization of PSUs (Public Sector Units)

New Policy on PSUs

Exit Policy (closing of business)


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Marketing challenges in the liberalised economy

1. Delicensing implies a degree of destablisation for

existing players.

Umbrella of protection disppears

New entrants can alter economies of scale, put up global

size plants and pose a threat to existing players.

E.g.. Samsung, Hyundai


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2. The challenge of MNC Dominance

Majority equity lends MNCs a new strategic edge.


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The Indian Marketing Environment

3.The fierce competition

Competition from fresh Indian Players

Competition from MNCs

Indian companies are not giving up

BPL leader in televisions

Asian paints in paints.

Import liberalisation adds to the

competition.

Access to technology adds to the

competition.

Competition is now global in character.


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4. The demands of a buyers market

Graduating from shortages to surplus.

The challenge of competitive pricing.

Graduating from shoddy products to products of

excellence.

The consumer calls the tune.

IT IS A BUYERS MARKET


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5. Indian companies are now compelled to export andgo global.

Indian companies taking initiative

Going global

Ranbaxy, Dr Reddy, Infosys

Strong names in the international market.

chapter 3 environment

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