Marketing Environment: Micro and Macro

A company needs to understand its marketing environment to successfully operate in the market. That marketing strategy is guided by 5Cs, which leads the firm to go forward in fulfilling the needs of the customer.

The basis of the context is the macro environment. Macro environment presents an uncontrolled environment for the company. In this environment, the company needs to operate and make profits. Everybody right from the company to the customers to the competitors operate in this environment.

Learn about:-

A. Macro Environment –

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1. Demography 2. Economic Environment 3. Social and Cultural Environment 4. Political and Legal Forces 5. Science and Technology 6. Competition 7. Ecology 8. International Environment 9. Customer Demand

B. Micro Environment –

1. Organisation 2. Corporate Resources 3. Marketing Mix 4. Markets 5. Supplies 6. Market Intermediaries 7. Employees.

Marketing Environment – Micro and Macro: Demographic Environment, Economic Environment, Socio Cultural Environment

Micro and Macro Marketing Environment – Demographic, Economic, Competition, Ecology, International, Customer Demand Environment and a Few More

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These five C’s are – Customers, Company, Competitors, Collaborators and Context. It’s better to be aware about yourself and your competitors. But it is also important to know your context. Context whether it is cultural, technological, regulatory and legal factors can play a greater part in influencing your business decisions, your strategic marketing decisions. It’s also important, because it is ever changing.

For example in India, if you manufacture a car which is lesser than four meters in length and have engines not exceeding 1200 cc for petrol and 1500 cc for diesel; you get excise benefits. You need to pay only 10% excise duty instead of 22%. Now all the sedans are above four meters and so these cars don’t get the excise benefits. Taking the legal environment to the market scenario, Tata Motors launched a new version of its Tata Indigo called Tata Indigo CS (Compact Sedan).

This model is the cheapest sedan in the world with a price tag of less than Rupees four lacs for petrol variant. This has been possible just due to the excise benefits of around Rs. 30,000 – Rs. 40,000/-; which has been passed on to the customers.

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Now Tata motors has launched an upgraded version of Indigo CS called Indigo eCS.

Taking a cue from Tata Motors, Maruti Suzuki has launched a sub 4 meter Dzire to avail the excise benefits and has also cut the price to make it more competitive in the market. Honda has also followed the same strategy and launched a car Amaze, based on its hatchback Brio. Now even Ford has come out with the compact SUV to get the excise benefits.

Macro environment include the following:

1. Demographic Environment,

2. Economic Environment,

3. Socio Cultural Environment,

4. Green Environment,

5. Technological Environment and

6. Legal and Political Environment

1. Demographic Environment

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Demographic environment gives an overview of the opportunities available for a company. Marketers are interested in population, because it serves their customer base. They are also interested in knowing the size and growth rate of population, age, sex, education, income, occupation, marital status, family size, family life cycle, religion, nationality and social class of population. It helps the marketer to segment and target the market.

In India, the Indian Census provides the most credible source of information on Demography (Population characteristics), Economic Activity, Literacy and Education, Housing & Household Amenities, Urbanisation, Fertility and Mortality, Scheduled Castes and Scheduled Tribes, Language, Religion, Migration, Disability and many other socio- cultural and demographic data since 1872.

The 15th National Census of the country was done in 2011. This is the only source of primary data in the village, town and ward level, it provides valuable information for planning and formulation policies for Central and the State Governments and is widely used by National and International Agencies, Scholars, business people, industrialists, and many more.

Demographic environment provides a broader picture of the market with population, population age mix and literacy data.

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a. Population:

Currently the world population is estimated to be 6.91 billion by the United States Census Bureau. Asia accounts for over 60% of the world population with more than 4 billion people. China and India together have about 37 percent of the world’s population. Africa follows with 1 billion people, 15% of the world’s population.

Europe’s 733 million people make up 11% of the world’s population. Latin America and the Caribbean region to 589 million (9%), North America is home to 352 million (5%) and Oceania/Australasia to 35 million (less than 1%).

Currently India accounts for 17.3% of the world population, estimated at 1.21 billion. India is the second most populous country in the world after China and followed by USA. By 2050, it is estimated that India will be the most populous country in the world.

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Census of India 2011:

India’s population has jumped to 1.21 billion, an increase of more than 181 million during 2001-11, based on the provisional data of Census 2011.

Although the population is almost equal to the combined population of the U.S., Indonesia, Brazil, Pakistan, Bangladesh and Japan (1,214.3 million), the silver lining is that after 1911-21 the past decade (2001-11) witnessed the addition of smaller population than the previous decade’s growth.

Of the total provisional population of 1,210.2 million, the number of males stood at 623.7 million and females at 586.5 million. The percentage growth in 2001-11 was 17.64 — males 17.19 and females 18.12. India’s population accounts for 17.5 per cent of the world’s population.

Among the States and the Union Territories, Uttar Pradesh is the most populous State with 199 million people, followed by Maharashtra with 112 million people. Lakshadweep is the least populated at 64,429 people.

The percentage decadal growth rates of the six most populous States have declined during 2001-11 compared with 1991-2001. The population growth in Uttar Pradesh has declined from 25.85 per cent to 20.09 per cent, in Maharashtra from 22.73 per cent to 15.99 per cent, Bihar from 28.62 per cent to 25.07 per cent, West Bengal from 17.77 per cent to 13.93 per cent, Andhra Pradesh from 14.59 per cent to 11.10 per cent and Madhya Pradesh from 24.26 per cent to 20.30 per cent.

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The overall sex ratio nationwide has increased by seven percentage points to 940 against 933 in Census 2001. Sex ratio is defined as the number of females per 1,000 males. An increase in sex ratio was observed in 29 States/Union Territories. Kerala with 1,084 has the highest sex ratio followed by Puducherry with 1,038. With 618, Daman and Diu has the lowest ratio.

This is the highest sex ratio at the national level since Census 1971 and a shade lower than 1961. Three major States – Jammu and Kashmir, Bihar and Gujarat – have shown a decline in sex ratio as compared to Census 2001. India’s skewed sex ratio due to female foeticide and selective sex determination has been a cause for concern.

However, the area of grave concern remained the lowest ever child sex ratio of 914. The provisional data showed that the child sex ratio [0 to 6 years] came down to 914 females per 1,000 males against 927 in Census 2001. It showed a continuing preference for male children in the last decade.

An increasing trend in the child sex ratio was seen in Punjab, Haryana, Himachal Pradesh, Gujarat, Tamil Nadu, Mizoram and the Andaman and Nicobar Islands, but in the remaining States/UTs, the ratio showed a decline. While the overall sex ratio has improved since 1991, the decline in child sex ratio has been unabated since the 1961Census. The total number of children in the age group of 0-6 is now 158.8 million, less by five million since 2001.

The literacy rate has gone up from 64.83 per cent in 2001 to 74.04 per cent, an increase of 9.21 percentage points.

The Goldman Sachs BRIC countries i.e. Brazil, Russia, India and China, has projected that India would become the third largest economy by 2050. That’s why all the large multinational corporations (MNCs) are lining up in India to do business.

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b. Populaion Age Mix:

Besides the size and growth rate, population age mix is also very important. Population age mix helps to understand the demand size of various products and services. For example -India’s young population require mobiles, laptops, electronic gadgets, home appliances, mutual funds, homes, milk, diapers, toys etc; whereas Japan’s older population require more of healthcare, insurance and other products and services.

c. Literacy:

As per the provisional data of 2011 census, the literacy rate in India is 74.04%. Males’ literacy rate stands for 82.14%, while only 65.46% females are literate. Higher level of literacy leads to demand for education and related products like newspapers, magazines, books etc. Now Internet literacy is also important for a marketer.

2. Economic Environment:

Economic environment of any economy defines the market for products and services. The size of an economy is defined in terms of gross domestic product (GDP). Indian economy is eleventh largest in the world by nominal GDP and fourth largest on the basis of purchasing power parity (PPP). Since 1991, with liberalization and globalisation, Indian economy has been growing at a higher pace. This size of the economy presents huge opportunities for companies. Besides GDR income distribution is another important factor for a marketer.

Currently the income distribution in India is as follows:

Household incomes have reached the level of Rs 3.61 million crores in 2009. There is dramatic different shifts in the higher and the lower income categories. Whereas the proportion of households earning less than Rs 75,000 pa has reduced by 2.6% and the proportion earning between Rs 75,000 and Rs 150,000 pa has reduced by 2.5%, the proportion earning over Rs 10 lac pa has increased by 2.7% and the proportion earning between Rs 3 lac pa has increased by 3%.

The three higher income categories have all seen an increase in proportion while all the three lower income categories have seen a decrease in proportion. This clearly indicates the propensity of consumption to shift from basic goods to higher value goods and services, which is clearly borne out by the consumption figures.

The consumption shift means a lot for the marketer, as it can guide the current and future path of the company.

The major changes in the consumption pattern are:

1. People are spending proportionately less on food items. Fast Moving Consumer Goods (FMCG) demand is expected to increase.

2. We are spending more on transportation, which is a combination of running our own vehicles as well as making use of transport services. This calls for more demand for automobile industry on the whole.

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3. We are spending more on health and well-being. The cost of medical care has gone up. Increase in life expectancy also means people live longer with greater need for medical care. More demand for health care also means more opportunities for private health sector.

4. We are spending more on communications. Telecom companies are expected to grow.

All the above factors mean a lot to the marketer; as it entails rise in the consumption of FMCG products, rise in the demand for automobile, demand for healthcare and demand for mobile services and mobile handsets. The increase in consumption means increased opportunities for a marketer.

Besides the GDP and per capita income, the economic environment concerning inflation, interest rate and stage of the business cycle also means a lot to the marketer. Currently India is facing a high inflation rate situation, which has also led to the rise of interest rate in the economy.

The situation of high inflation rate combined with high interest rate is slowing down the Indian economy. It is not only affecting the core areas, but also has a great impact on the other sectors. Right from the Housing to the Automobile to Cement to Sanitary ware to Steel to Clothing, it is affecting the whole economy.

The stage of the business cycle also means a lot to the marketer. It either helps the companies to grow or it makes them shrink. Recently USA was gripped with recession between ends of 2007 to June, 2009. It not only eroded the demand in US, but it also led to hundred thousands of employees losing their jobs. The recession also spread into European countries and affected the demand as well as livelihood of many people. These recessionary trends also had a great impact on Indian as well as other Asian economies, with the international business linkages.

3. Socio-Cultural Environment:

Language, culture, norms, religious beliefs, values etc. form the socio cultural environment. The socio cultural environment plays a major role in defining the needs and wants of the consumers, as their lifestyle patterns and consumption behavior depends upon these factors. In India, these factors become too prominent than the other developed economies like USA and UK, as India is a land of cultural diversity and regional differences.

With more than 33 major languages and six major religions, India presents a dramatic picture to the marketer with a wide diversity in the consumption habits and needs and wants of the consumers. For example, the preferred drink in northern part of India is tea, while it is lassi (sweet curd) in Punjab and coffee in southern states.

The breakfast habits are also very different, right from rajma-chawal and curry-rice in the Delhi, Punjab and adjoining states to Puri, Bhaji, Jalebi in norther states to Idli, Dosa in southern states. Festivals are also very different in different regions.

If Ganesh Puja is the major festival in Maharashtra, the same place is occupied by Durga Puja in West Bengal, Orissa, Jharkhand and Northern States. While Holi and Chhath takes the centrestage in Bihar; Onam in Kerala, Pongal in Tamilnadu and Ugadi in Karnataka and Andhra Pradesh is celebrated widely. Diwali has the distinction of only festival, which is celebrated all across India.

On the language front also, official language Hindi is widely spoken in India, while English is recognized as an additional language for office work. There are 22 scheduled languages under eighth schedule of Indian Constitution including Assamese, Bengali, Bodo, Dogri, Gujrati, Kannada, Kashmiri, Konkani, Maithili, Malayalam, Manipuri, Marathi, Nepali, Oriya, Punjabi, Sanskrit, Santhali, Sindhi, Tamil, Telugu and Urdu. Besides these official languages, several other languages and dialects are also spoken and used widely like Bhojpuri in northern parts of India.

Multiplicity and diversity in the socio cultural environment creates a lot of complexities for the marketer. That’s why an advertisement for a product or service may not need only to be dubbed for different regions or states, but it may also require different celebrity endorser to do the same. On the similar lines, Bhojpuri star Ravi Kishan has been signed for promoting Parle Monaco in the Hindi belts of Uttar Pradesh and Bihar, while Bengali actress Rituparna Sengupta will do the same in Eastern part of India.

Again in 2010, Dabur signed Ravi Kishan to endorse its Chyawanprash brand exclusively for localised below-the-line activities such as interactions with consumers, dealers and stockists in UP and Bihar.

Telecom services provider Bharti Airtel released ads for rural audiences featuring Rajpal Yadav, a popular star in the North, with the tagline – Airtel bajega toh tarraki bolegi’. Similarly, despite Coca Cola having national star Salman Khan as brand ambassador for its Thums Up brand, it uses Telugu actor Mahesh Babu for endorsing the same brand in the South.

Regional diversity does not only require a marketer to plan their promotional exercises, but it also requires making necessary changes in the product and service offerings on a global scale. McDonalds, the world’s largest chain of burgers, operate in 119 countries. Based on the local taste and preferences, it modifies its product line.

In India, it sells Aloo Tikki more, while it does not serve any beef products as in USA, due to religious sentiments here. In some countries, it offers rice burgers as well as shrimp burgers.

4. Green Environment:

With growing environmental concerns, the word ‘Green’ has received a lot of attention in the recent times. For a marketer, it has become very important to be in synch with the natural environment, as it provides a lot of opportunities and also creates challenges to adapt to the changing business environment. The importance can also be understood with the modifications in AMA’s definition of marketing with the addition of three words ‘Society at large’.

Earlier marketing was only meant for benefitting the organisation and its stakeholders. Now it also means that the product and services should benefit the society on the whole. It is for that reason only that a company like Pepsi India has only one out of four major links to talk about its products, that too by saying ‘Nourishing and Delighting India’.

The other three links deals with ‘Innovation to Transform Lives’, ‘Tomorrow Better than Today-Environment’ and ‘Empowering Growth with Fun at Work’. Here the environmental concerns are shown more than the junk nature of their aerated drinks and food products. Now, societal welfare is as important as the company’s welfare.

For a marketer, going green has become the new success mantra in marketing to differentiate the products and services from their competition. It has also become a platform for innovation. Now, more and more organisations are trying to follow the green path either directly or indirectly.

Whether it is the case of Panasonic with the ‘Eco-Ideas’ implemented in their production facilities or the case of ICICI Bank with the ‘E-statements’ saving hundreds of trees every month; marketers all across the world are trying to relate their products and services to the ‘Green’ to be more marketing savvy and innovative.

Green also means new opportunities for a company like Toyota with Toyota Prius, the hybrid car or Nissan with Nissan Leaf. There might be changes in the packaging as well as in the advertising.

5. Technological Environment:

‘Change is the only constant’ – This proverb applies beautifully to the technological environment. While technological developments have done well to the society in the area of healthcare, communications etc. it has also done badly with the development of weapons of mass destruction like nuclear bombs, missiles, machine guns etc.

The technological environment has a great impact on the markets and businesses. Many times, it creates a business opportunity or it ruins a business. Mobile technology created business for companies like Airtel, Vodafone, Idea etc. but it also ruined the business for Pagelink, Mobilink and other players in the paging services. Similarly, the business of

BSNL and MTNL got divided and shrunk also with other players in the market. In the MP3 player category, it created an opportunity and Apple took the lead through its iPods. But it also ruined the business for Sony Discman and Walkman. Sony is still struggling to make a mark in that space.

You not only need to be careful about the competitors only, you also need to be careful about changing business space. Canon, Nokia, Pentax etc. are competing against one another for the market share in the camera market, whereas a non-camera company Nokia is selling the largest number of cameras in the world today through its mobile phones.

Now you need to be in the printer business like HP to be successful in photo printing space. Again technology is also paving the way for mass customization as it is made possible by Dell for its Laptops and Desktops and Asian Paints for its more than thousands of shades of paints.

Now a company cannot sit on its past laurels to be successful in market. It needs to be proactive in understanding the changing needs of the consumers and moves by its competitors. It needs to innovate.

6. Legal and Political Environment:

Legal and political environment also influences a marketer. Through various legislations, a government tries to moderate and regulate the role of the business in the society. With a stable political system in a country, businesses benefit a lot as there is coherence in the legal and business policies. It is all due to the excise policy of Govt. of India that India is becoming global hub for the small car market.

Various laws like Monopolies Restrictive Trade Practices (MRTP), Foreign Exchange Management Act (FEMA), and Value Added Tax (VAT) etc. are governing the businesses in India. Soon, Goods and Services Tax (GST) will have a significant impact on almost all aspects of businesses operating in the country, including the supply chain, sourcing and distribution decisions, inventory costs and cash flows, pricing policy, accounting and IT systems and transactions management.

On the consumer side, Consumer Protection Act (COPRA) protects the interests of consumers. The provisions of the Act came into force with effect from 15^th April, 1987. Consumer Protection Act imposes strict liability on a manufacturer, in case of supply of defective goods by him, and a service provider, in case of deficiency in rendering of its services. The term “defect” and “deficiency”, as held in a catena of cases, are to be couched in the widest horizon of there being any kind of fault, imperfection or shortcoming.

Furthermore, the standard, which is required to be maintained, in services or goods is not restricted to the statutory mandate. But it is applicable to that claimed by the trader, expressly or impliedly, in any manner whatsoever. The Ministry of Consumer Affairs, Food and Public Distribution also runs an awareness campaign called ‘Jago Grahak Jago’.

Micro and Macro Marketing Environment

It is well-known that environment affects business planning. The more a business understands its environment, the better chance it has for profitable growth. The business environment represents a complex of shifts in the structure of society and the economy, in the state of technology, in the customer demand in the market place, in the policies and requirements of the governments, and in the state and character of international tensions, in short, it is the sum of all the factors outside the control of a company’s management, which can change and, when changing, carry with them sizable monetary impacts on the markets for particular products and services.

Management should first establish a programme for consistently monitoring the market environment like an early-warning radar system. Second strategies have to be developed for fulfilling a growing need or ways to seize the opportunities and avoid the threats.

According to William J. Stanton, “Successful marketing depends largely on a company’s ability to manage its marketing programme within its environmental framework.” Marketing management is concerned with matching of the organisation with the demands of the business environment. There is a need for the marketer to monitor the business environment on an ongoing basis so that opportunities and threats facing the organisation are identified and subsequently reflected in the firm’s strategy.

Profitable solutions to marketing problems can only be realised if the significance of environmental change on the firm and its customers is recognised. These external forces which affect marketing opportunities, consumer behaviour and business action must be reflected in marketing policies, plans, strategies, programmes, and decisions. The essential point is that the business organisation must constantly monitor its environment.

The heart of the marketing system of a company is its marketing-mix. Marketing Management evolves the marketing mix in relation to its external environment. Hence, it must respond in time to changes in the marketing environment and it must adopt intelligent forecasting devices to anticipate the trend and intensity of environmental changes. It has to use internal controllable resources in the best manner while adjusting quickly to changing demands of the marketing environment.

All the environmental forces are subject to change and we are living in a dynamic world. Changes in the environmental forces are challenges to marketing executives and these must be met in order to secure profitable growth by marketing management. A firm ignoring environment will face certain death. An adaptive firm has good prospects of survival and growth.

I. Macro-Environment:

External forces have considerable influence on company’s marketing activities.

They are dynamic, ever-changing and are largely uncontrollable by management:

1. Demography:

Marketing Management is directly interested in demography, i.e., scientific study of human population and its distribution structure. Demographic analysis deals with quantitative elements such as age, gender, education, occupation, income, geographic concentration and dispersion, urban and rural population, etc.

Thus, demography offers consumer profile, which is very necessary in market segmentation and determination of target markets. Growing population indicates growing market particularly for baby products. If a baby boom is anticipated, the market potential is tremendous.

But when we have reduction in the birth rate and the lower rate of growth of population, many companies specialising in baby products will have to adjust their marketing programme accordingly. With a population of 50 crore below the age of 25, our country is one of the biggest youth markets for consumer goods.

Quantitative aspect of consumer demand is provided by demography, e.g., census of population, whereas qualitative aspect of consumer demand such as personality, attitudes, motivation, perception, etc., is provided by behavioural analysis. Good demographic analysis combines several factors such as population rate of growth or decrease, income or economic power, life-cycle analysis of consumer, occupation, education, and geographic segmentation.

Both demographic and behavioural analyses enable marketing executives to understand the bases of market segmentation and to determine marketing reaction to a new product or consumer reaction to an advertising campaign.

2. Economic Environment:

People constitute only one element of a market. The second essential element of a market is purchasing power and willingness to spend. Then only we have effective demand. Hence, economic conditions play a significant role in the marketing system. High economic growth assures higher level of employment and income, and this leads to marketing boom in many industries.

Marketing plans and programmes are also influenced by many other economic factors such as interest rates, money supply, price level, consumer credit, etc. Higher interest rates adversely influence real-estate market and markets for consumer durables sold on instalment basis.

Exchange fluctuations, currency devaluation, changes in political and legal set-up influence international marketing. The level of take-home pay determines disposable personal income and it influences marketing programmes directly. Economic conditions leading to recession can influence product planning, price fixing, and promotion policies of a business enterprise. Energy crisis and inflation are the two factors hindering accelerated economic growth in spite of liberalisation.

Performance of Indian economy during the last few years has been very encouraging and we have achieved a higher growth of 9.4 per cent in the year 2007. Per capita income (at constant prices-1990-2000) has increased from Rs.17,432 in 2004 to Rs.22,483 in 2007. Further, there is a shift from agricultural economy to manufacturing and service economy and this has resulted in increase in income and demand for goods and services.

3. Social and Cultural Environment:

Marketing management is called upon to make necessary adjustments in marketing plans in order to meet the changing social and cultural environment. It includes social class, values, beliefs, traditions and life-style of people.

Social class is determined by income, occupation, location of residence of members. Broadly, we have three social classes i.e., upper, middle and lower and each class has its own standards with respect to lifestyle, behaviour, etc. Example- An upper class person may like to dine in a star hotel, while a middle class person may prefer a cost-effective restaurant.

Social factors consist of opinion of family members, friends and reference group. A reference group includes family, a circle of friends, local club, athletic team etc. When a member of the group is satisfied with a product, he recommends the product to others. Example- Film stars and cricketers to promote consumer goods, cars, etc.

Culture provides people with a sense of identify and understanding of acceptable behaviour in a society. Our food habits, rituals, family life are all influenced by culture. Of course, lot of changes are taking place due to increase in literacy, urbanisation, exposure to mass media and changing role of women from being a simple housewife to an employee taking care of home and office.

Example- In our country, the younger generation is moving ahead with the times, but the traditional population is not comfortable with the westernisation of our culture i.e., moving from Lime juice, Buttermilk, Vada Pav, Roti to Cola drinks, Burger, Pizza and excessive importance given to material possessions, selling worthless/insignificant products through heavy advertising, etc.

There are three aspects of social and cultural environment i.e.:

i. Changes in our life-styles and social values, e.g., changing role of women, emphasis on quality of goods instead of quantity of goods, greater preference to recreational activities and demand for readymade food, beauty parlour, etc.,

ii. Major social problems, e.g., concern for pollution of our environment, socially responsible marketing policies, need for safety in occupations and products, etc.,

iii. Growing consumerism indicating consumer dissatisfaction since 1960. Consumerism is becoming increasingly important to marketing decision process. Social environment in many countries is responsible for emphasising social responsibility of business and customer-oriented marketing approach. Societal marketing concept, demanding not only consumer welfare but also citizen welfare, is due to the prevalent social environment and social or cultural values in many countries. Marketers are now called upon not only to deliver higher material standard of living, but also assure quality of life, i.e., environment free from pollution.

4. Political and Legal Forces:

Political and legal forces are gaining considerable importance in marketing activities and operations of business enterprises. Marketing systems are affected by government’s monetary and fiscal policies, import-export policies, customs duties. Legislation controlling physical environment, e.g., anti-pollution laws also influence marketing plans and policies.

Then, in many countries we have specific legislation to control marketing, e.g., forward markets of commodities and securities. Consumer legislation tries to protect consumer interests. We have also legislation to control and regulate monopoly and unfair trade practices in many countries.

Marketing Management cannot ignore the legislation regulating competition and protecting consumers. Business enterprises may not be allowed to resort to price discrimination, false and misleading advertising, exclusive distributorships and tying agreements, deceptive sales promotion devices, division of markets, exclusion of new competitors, and such other unfair trade practices. Marketing policy-making is influenced by Government policies and controls throughout the world.

Since 1991, successive Governments have taken initiatives for economic development of the country and have invested heavily in infrastructural facilities like roads, communication, airports, and railways. The new policies and reforms have covered several areas like industrial licensing, foreign investment, subsidies, and price control.

Public Sector investment, flow of technology and human resources, banking, insurance, and telecommunication services. During the last few years, several programmes like Employment Guarantee Scheme, Gram Sadak Yojana, Rastriya Krishi Vikas Yojana have been taken up for development of rural areas. While one may attribute some of the measures to win votes, these initiatives have certainly led to increase in income and opportunity for the marketers.

5. Technology:

Phenomenal development in science and technology since 1980 has created a tremendous impact on our lives and life-styles, in our consumption as well as in our economic welfare. The evolution of global market by 2001 has been due to the wonders of science and technology. It is the driving force behind many new product innovations and the development of many markets.

The time between idea generation and commercialisation is now considerably shortened and a technological breakthrough can take place within a few years now. For instance, ideas of frozen foods needed 70 years for their commercialisation. For integrated circuits, commercialisation took place within three years.

Advances in electronics, telecommunications, computers, biology, and plastics have very wide impact on all business and marketing activities all over the world. Without computers much of the progress in biology, electronics, and the development of new man-made materials would not be possible.

Examples of effects of telecommunications on marketing:

1. FAX machines revolutionising inter-communications.

2. Use of computers in data processing.

3. Shopping by television: teleshopping.

4. Computer-based reorder system reducing inventories.

5. T.V. commercials, telephone interviews, supermarket scanners.

6. Increasing consumer information.

7. Mobile phones.

8. Video Conference.

Note:

Interaction between electronics and communications is called telecommunications.

Electronic industry is the best example of exploiting new marketing opportunities. Digital watches killed the marketing prospects of traditional watches. Artificial fibre cloth has almost taken over the pure cotton textile industries in many countries. Television has adversely affected radio and cinema industries. Eighty per cent of food products now available to a housewife in highly industrialised countries were simply non-existent thirty years ago.

6. Ecology (Nature):

Ecology is the science dealing with living things and their environment. All living things are related to other living things and they likewise are related to their physical environment.

Industrial and computer revolutions have brought us many benefits. Mankind now should be able to live in plenty and peace, and welcome facilities for seeking higher life quality. But look at the reality we face. Exploitation of man by man is carried forward to exploitation of NATURE (natural resources) by man-machine organisations. The human species is proving to be totally unworthy of the free gifts of nature (air, water, natural resources).

Ecology, economic development, and market economy can go hand-in-hand. Environmental quality, human health and social well-being need not be sacrificed or unduly injured as a result of the developmental activities. Sustainable development, environmental protection can be integrated to assure a healthy, peaceful, and productive life in harmony with Nature, our Earth-Goddess.

Environmental experts are vigorously advocating the preservation and survival of our entire ecological systems. It is said that pollution is an inevitable by-product of high-consumption economic systems prevalent in the advanced countries. The marketing system of an enterprise has now to satisfy not only the buyers of its products (consumers/users) but also societal wants.

In future, marketing executives will have to pay due attention to the quality of our life and our environment. They are expected to take measures to conserve and allocate our scarce resources properly. Above all, they must show active interest in the welfare of community life.

Science and technology brought about phenomenal industrialisation and commercialisation at the huge cost of indiscriminate and ruthless exploitation of Mother Earth or Nature. Ecological crisis is a burning problem in the global economy. Fortunately marketers and business leaders of the world have come together under the UNO and WTO to bring about sustainable industrial and commercial development free from dangers of pollution and prevent further self-destructive and ruthless exploitation of nature.

II. Micro-Environment:

These are factors which are specific to the business concerned and include Consumers, Marketing intermediaries and Suppliers.

1. Consumers:

The wants, desires, preferences, expectations and aspirations of consumers keep fluctuating. Under the market-oriented marketing philosophy, customer needs and desires act as the centre of the marketing programme. Customer demand is ever-changing, unpredictable and also unmeasurable with accuracy.

It is also complex and very intricate. Under the market- oriented marketing philosophy, customer needs and desires act as the centre of the marketing universe. In fact marketing system must respond to the customer needs and desires in all aspects. Marketing policies, programmes and strategies are planned, organised and executed with the main objective of customer satisfaction and service.

According to P. Drucker there is only one valid definition of business purpose- to create a customer. The business enterprise aims to earn profits through serving the customer demand. Today, marketing in the firm begins and also ends with the customers. First, we have to identify customers, i.e., our markets.

Then, we develop our marketing programme in the form of the appropriate marketing mix to reach our customers, i.e., our target market. We offer our output of goods and services primarily to secure continuous customer satisfaction. Repeat sales are possible only on customer satisfaction.

2. Marketing Intermediaries:

The important intermediaries are wholesalers, retailers, and agent middle men such as commission agents, brokers, etc. Channel members are useful to producers as well as consumers. Even if a company has a product that meets the requirement of consumers, it will succeed only if it is made available at the right place as and when required by the customer.

The middle men facilitate the movement of goods from the producer to the consumer. The intermediaries carry out distribution activities at a lower cost than the company can do by itself.

3. Suppliers:

The Company purchases raw materials from vendors/suppliers and it has to ensure regular supplies to maintain continuity of production. Shortage of raw materials can affect production volumes leading to low sales and low profits. Similarly increase^–in the prices of raw materials can affect sales volumes and profits. Therefore, suppliers play a major role in the profitable running of an organisation.

4. Competition:

Although price competition is still present, particularly in the retail market, non-price competition is of paramount importance for the manufacturer. No marketing decision of major importance should be made without assessing competition in a free market economy.

The Marketing Manager has little or no control over the actions of competitors. He can merely anticipate competitive actions and be prepared to deal with them. Competitors considerably influence the company’s choice of marketing strategies, particularly in relation to selection of target markets, suppliers, marketing channels as well as in relation to its product-mix, price-mix and promotion-mix.

In fact, formulation of marketing-mix is on the basis of anticipation of competitors’ moves. Marketing strategy is itself a plan to fight against competition and to win over the competition. Examples- The paging industry has been almost wiped out by cellular companies offering short messaging service. Typewriters have become obsolete with the introduction of computers.

III. Internal Environment:

The marketing efforts are also influenced by internal forces that are controllable by the management. These forces include Production, Finance, HR, Research and Development, Company location, Company image and marketing-mix components of product, price, promotion and distribution.

Example- a Company wants to increase sales volumes by extending the marketing activities to new geographical areas. It has to consider human resources requirements like number and type of sales people required to cover the new markets.

Micro and Macro Marketing Environment – External or Uncontrollable and Internal or Controllable Factors

1. Micro-Environment (Internal or Controllable Factor):

The Micro Environment:

The micro-environment of our organisation consists of those elements which are controllable by the management.

Some of them are explained here:

I. Organisation:

The organisation consists of many departments such as marketing, production, finance, personnel etc., and each department is placed under the control of a manager. All the departmental heads work in co-ordination so as to achieve the organisation objectives The marketing department which is one of the important organs of the organisation has to stream line it activities so that it would be in a position to achieve its targets.

II. Corporate Resources:

This comprises of men, material, money, machinery and management. All these are controllable and be adjusted according to marketing planning and policy. However, these factors influence the marketing environment. The organisation and the environment are interdependent. The availability of labour, material, power are determined by environment.

Organisation receives certain inputs like plant and machinery, materials, finance, personnel from the environment. The utilisation of these resources and manufacturing activity depends upon the company’s external environment. Corporate resources are well within its reach and can be varied in accordance with the manufacturing programme.

III. Marketing Mix:

Another controllable factor is marketing mix. It consists of four elements or variables, viz.- (a) Product, (b) Price, (c) Promotion and (d) Place of distribution. The organisation can vary the price, or production, can plan the promotion activity according to external environment and can have its own distribution strategy keeping in view the competition in the market, consumer satisfaction and cost effectiveness.

IV. Markets:

Markets consist of different types of purchasers, e.g. individuals and householders for personal consumption, producer and manufacturer for their manufacturing plants, wholesaler for selling to retailer, retailers for selling to ultimate consumer, exporter for selling to foreign countries etc.

Depending upon the policy of the organisation and conditions in the market, the organisation can exercise control over the market. If the organisation would like to have a balanced sales, it can think of dividing the market into segments. Aggressive sales activity can be taken up in one market and the controlled supply can be made to another market. Thus the market element can be controlled.

V. Supplies:

Even regarding supplier, the organisation can think of availing the required material or labour according to its manufacturing programme. It can adopt such a purchase policy which gives bargaining power to the organisation. The supplies can thus be controlled.

VI. Market Intermediaries:

Depending upon the sales policy of the organisation, market intermediaries can also be controlled. Market intermediaries here refer to the distributors. The size of production and supply will determine the channel choice. The organisation can decide whether it should reach the consumers directly on through wholesalers and retailers. Thus, it is also a controllable element.

VII. Employees:

Employees of an organisation, consisting of managers, executives, supervisors, etc., can be controlled to a great extent. Employees’ loyalty, sincerity, productivity and these attitude towards their job and the organisation and the behaviour can he controlled by the organisation following sound and employees-oriented personnel policies.

2. Macro Environment (External, Uncontrollable):

The marketing management must keep close contact with many uncontrollable forces. To be successful in marketing, we must learn to accommodate them, and if possible, to take advantage of them, in our marketing plans and policies. These uncontrollable forces are the parameters of the market. They act as constraints on the organisation at all levels. Constraints are limitations on freedom of action.

Let us describe, in brief, these limitations:

I. Demography:

Market means people with money and with a will spend their money to satisfy their demand. Hence, marketing management is directly interested in demography, i.e., scientific study of human population and its distribution structure. Growing population indicates growing market particularly for baby products. If a baby boom is anticipated, the market potential is tremendous.

But when we have reduction in the birth rate and the lower rate of growth of population, many companies specialising in baby products will have to adjust their marketing programme accordingly. Population forecasts during the next decade can be arrived at with considerable accuracy and on the basis of such forecasts marketing management can adjust marketing plans and policies to establish favourable relationship with demographic changes.

Demographic analysis deals with quantitative elements such as age, sex, education, occupation, income, geographic concentration and dispersion, urban and rural population, etc. Thus, demography (study of population) offers consumer profile which is very necessary in market segmentation and determination of target markets.

Quantitative aspect of consumer demand is provided by demography, e.g. census of population, whereas qualitative aspect of consumer demand such as personality, attitudes, motivation, perception, etc., is provided by behavioural analysis.

Good demographic analysis combines several factors such as population rate of growth or decrease, income or economic power, life cycle analysis of consumer, occupation, education and geographic segmentation. Both demographic and behavioural analyses enable marketing executives to understand the basis of market segmentation and to determine marketing reaction to a new product or consumer reaction to an advertising campaign.

II. Economic Environment:

Marketing plans and programmes are also influenced by many other economic items such as interest rates, money supply, price level, consumer credit, etc. Higher interest rates adversely influence real estate market and markets for consumer durables on installment basis. Exchange fluctuations, currency devaluation, changes in political and legal set-up influence international marketing.

The level of take home pay determines disposable personal income and it influences marketing programmes directly. Economic conditions leading to recession can influence product planning, price fixing, and promotion policies of a business enterprise. Marketing mix must be formulated on the basis of important economic indices.

Since 1974, i.e., after the energy (oil) crisis, all over the world we have inflationary trends and general level of prices is continuously rising. When a high rate of inflation e.g., 12 p.c. rate per year becomes a reality, the whole economic structure of a country is in danger. Inflation coupled with scarcity conditions can radically change consumer buying habits.

Many purchases may be postponed or even eliminated. Higher petrol prices created a trend in favour of small cars and public transport. Inflationary conditions affect adversely the market for consumer durables. Economic forces can have positive or negative effects upon the promotion efforts of business units. State of trade and business booms and slumps constitute the economic aspects of marketing environment.

III. Social and Cultural Environment:

Social and cultural forces usually influence the welfare of a business concern in the long run. We have ever-changing society. New demands are created and old ones are lost in due course. Marketing management is called upon to make necessary adjustments in marketing plans in order to fulfill new social demands.

There are three aspects of social environment:

(a) Changes in our lifestyles and social values, e.g., changing role of women, emphasis on quality of goods instead of quantity of goods, greater reliance on governments, greater preference to recreational activities, etc.,

(b) Major social problems, e.g., concern for pollution of our environments socially responsible marketing policies need for safety in occupations and products, etc.,

(c) Growing consumerism indicating consumer dissatisfaction since 1960. Consumerism is becoming increasingly important to marketing decision process. Social environment in many countries is responsible for emphasising social responsibility of business and customer-oriented marketing approach.

Societal marketing concept demanding not only consumer welfare but also citizen welfare is due to the prevalent social environment and social or cultural values in advanced countries. Marketers are now called upon not only to deliver higher material standard of living, but also assure quality of life, i.e., environment free from pollution.

IV. Political and Legal Forces:

Political and legal forces are gaining considerable imp6rtance in marketing activities and operations of business enterprises. Marketing system are affected by government monetary and fiscal policies, import-export policies, customs duties. Legislation controlling physical environment, e.g., anti-pollution laws also influence marketing plans and policies.

Then in many countries we have specific legislation to control marketing, e.g., forward market of commodities and securities. Consumer legislation tries to protect consumer interests. We have also legislation to control and regulate monopoly and unfair trade practices in many countries. Marketing management cannot ignore the legislation regulating competition and protecting consumers.

Public policy affects marketing management. Business enterprises may not be allowed to resort to price discrimination, false and misleading advertising, exclusive distributorships and trying agreements, deceptive sales promotion devices, division of markets, exclusion of new competitors and such other unfair trade practices.

Marketing policy-making is influenced by government policies and controls throughout the world. In some countries the government, rather than the market, provides dominating marketing mechanism.

V. Science and Technology:

Unprecedented development of science and technology since 1940 has created a phenomenal impact on our lives. We have witnessed in one generation radical changes in our life-styles, in our consumption pattern as well as in our economic welfare.

The phenomenal development of science and technology has completely transformed life and living conditions in developed and developing countries. Ever-expanding markets create conditions that lead to technical progress. In most cases, the market was the mother of invention. The basic incentive for inventions through research and development of profit-seeking through meeting market needs.

Technology is the way things are done; the methods, materials and techniques used to achieve commercial and industrial objectives. Modern economics have been shaped by technology. New technologies offer a main source of economic growth. Many businesses are earning handsome profits from products which did not exist 50 years ago.

Electronic industry is the best example of exploiting new marketing opportunities. Computers and airplanes are entirely new industries. Digital watches are killing the marketing prospects of traditional watches. Artificial fibre cloth has almost killed the pure cotton textile industries in many countries. Television has adversely affected radio and cinema industries. Seventy per cent of food products now available to a housewife in highly industrialised countries were simply non-existent fifty years ago.

Consumer purchases and the manner in which they are consumed reflect a society’s life-style Technological forces help to shape changes in the style of living of consumers. Marketing management with the help of technology can create and deliver standards and styles of life in, many countries. It has the responsibility of relating changing life-style patterns, values and changing technology to market opportunities for profitable sales to particular market segments.

VI. Competition:

Although price competition is still present particularly in the retail market, non-price competition is of paramount importance for the manufacturer. No marketing decision of major importance should be made without assessing competition in a free market economy. The marketing manager has little or no control over the actions of competitors.

He can merely anticipate competitive actions and be prepared to deal with them. Competitors considerably influence the company’s choice of marketing strategies particularly in relation to selection of target markets, suppliers, marketing channels as well as in relation to its product mix, price mix, and promotion mix. In fact formulation of marketing mix is on the basis of anticipations of competitors’ moves.

Marketing strategy is itself a plan to fight against competition and to win in the battle of competition. The aggressive marketing manager knows that his marketing mix will encourage competition and he must anticipate the nature of this reaction while assessing his own situation. Similarly, he must understand that activities of his rivals are bound to limit the marketing opportunities of his firm sooner or later.

Marketing strategies recognise the force of competition of a free market economy and these strategic plans are always based on the anticipated moves of the opponent. You have to out manoeuvre your opponent and then only your survival.is assured in a competitive environment.

Competitive conditions within an industry are ever-changing and perplex the marketing manager frequently. But changing inter-industry competition can keep a marketing manager sleepless for a long time. Marketing manager of a cotton mill has to face the introduction of synthetic fibres and cotton king was dethroned overnight, in many countries after 1960.

VII. Ecology (Nature):

In the wider concept of marketing, ecological environment has assumed an unique importance in production and marketing in modern economies. Environmental experts are vigorously advocating the preservation and survival of our entire ecological systems. It is said that pollution is an inevitable by-product of high consumption economic systems prevalent in the advanced countries.

The marketing system of an enterprise has now to satisfy not only the buyers of its products (consumers/users) but also societal wants which may be adversely affected by its activities and then only it is entitled to achieve its profit objective. In future marketing executives will have to pass due attention to the quality of our life and our environment. They are expected to take measures to conserve and allocate our scarce resources properly.

They must show active interest in welfare of community life. Prevention of all types of pollution and efficient use of our scarce resources can restore the balance in our ecological environment. Economical use of energy and natural resources must be essential ingredients of marketing strategies. Ecology has assumed unique importance under the societal marketing concept since 1965.

VIII. International Environment:

This environment consists of those factors which have an impact on foreign trade of a country. These factors may be foreign policy, international treaties and foreign investment policy and various acts which are concerned with the dealings with the other countries in trade matters.

With the changes in government and their policies, there will be change in international environment. With the introduction of economic reforms and the policy of liberalisation in our country, our exports have increased considerably and many foreign investors started to invest capital in our country. With the formation of WTO, there is a tremendous change in the international trading environment.

IX. Customer Demand:

Customer demand is ever-changing, unpredictable and also unmeasurable with accuracy. It is also complex and very intricate. Under the market-oriented marketing philosophy, customer needs and desires act as the centre of the marketing universe. In fact marketing system must respond to the customer needs and desires in all respects.

Marketing policies, programmes and strategies are planned, organised and executed with the main objective of customer satisfaction and service. It is in marketing that we satisfy individual and social values, needs and wants — be it through production of goods, supplying services, fostering innovation, or creating satisfaction. According to P. Drucker there is only one valid definition of business purpose- to create a customer.

The business enterprise aims to earn profits through serving the customer demand. It now thinks more in terms of profitable sale rather than more sales-volume for its sake. Today marketing in the firm begins and also ends with the customers. First we have to identify customers i.e., our market. Than we develop our marketing programme in the form of appropriate marketing mix to reach our customer, i.e., our target market.

We offer our output of goods and services primarily to secure continuous customer satisfaction. Repeat sales are possible only on customer satisfaction. The firm’s profits indeed its very survival are linked to the satisfaction of customer needs and wants. Despite this obvious logic, even today many firms are still production or sales-oriented and not market-oriented as yet.