MARKETING ENVIRONMENT

(macro)
UNIT 2
MARKET ENVIRONMENT- INTRODUCTION

MEANING
• The market environment refers to various internal & external
factors and forces that affect a firms activities such as
marketing plans, customer management, financial planning
etc, directly or indirectly.
1. Confined by external forces
2. Complex & dynamic
3. Needs adaptability
4. Changes regularly
5. Long term impact
ANALYZING MARKET ENVIRONMENT

ENVIRONMENTAL SCANNING : Meaning & Concept

• Environmental scanning is a process of monitoring, forecasting,
assessing & collecting information about various internal & external
factors & forces influencing a marketing firm.

IMPORTANCE OF ENVIRONMENTAL SCANNING

• Identification of SWOT
• Explore & exploit business opportunities
• Respond to new demands & trends
• To grow & stay alive in competition
• Ensure effective utilization of resources
• To build brand reputation
• Proactive approach & strategy building
COMPONENTS OF MARKETING ENVIRONMENT

MARKETING ENVIRONMENT

MICRO ENVIRONMENT MACRO ENVIRONMENT

•Competitors •Population &

•Organisation Demographic
•Suppliers •Economic
•Marketing •Socio-Cultural
intermediaries •Technological
•Customers •Environmental
•Legal & Political
DEFINITION OF MICRO (INTERNAL) ENVIRONMENT
(CONTROLLABLE)
Micro environment refers to the environment which is in direct contact with
the business organization and can affect the routine activities of
business straight away. It is associated with a small area in which the firm
functions. It is also known by the name Internal Environment
• Suppliers are the ones who provide inputs to the business like raw
material, equipment and so on.
• Competitors are the rivals, that compete with the firm in the market and
resources as well.
• Marketing intermediaries may include wholesalers, distributors and
retailers that make a link between the firm and the customers.
• Customers / Consumers are the one who purchases the goods for their
own consumption. They are considered as the king of business.
The firm itself, is an aggregate of a number of elements like owners like
shareholders or investors, employees and the board of directors.
This is known as COSMIC
DEFINITION OF MACRO (EXTERNAL) ENVIRONMENT
(UNCONTROLLABLE)
• It refers to all major external factors and forces over which the
marketing firm has no control . It is dynamic in nature,
therefore it keep on changing.
• It constitutes those outside forces that are not under the
control of the firm but have a powerful impact on the firm’s
functioning. That is why, it is also termed as external
environment
• The study of Macro Environment is known as PESTEL Analysis.
PESTEL stands for the variables that exists in the environment,
i.e. Population & Demographic, Economic, Socio-Cultural,
Technological, Legal & Political and Environmental.
POLITICAL & LEGAL ENVIRONMENT
• Political environment simply refers to the way a country is being
run in terms of politics.
• The political environment includes all laws, government agencies
and lobbying group that influence or restrict individuals or
organisations.
• Elected political parties may have negative attitudes toward a firm
or its industry are more likely to create or enforce regulations that
are unfavourable for the firm.
• Legal Environment provides a framework on laws, government
policies relating to legal or regularity set up.
• The purpose of these laws and regulations drives many marketers
to abide and accept these laws as predetermined aspect of market
planning.
• It even create new opportunities for business- for eg: new law on
helmets.
COMPONENTS OF POLITICAL ENVIRONMENT & ITS IMPACT
OF MARKETING
Political System
• It is a combination of various members of a social organisation who
are empowered to form the government to make policies,
administration , maintaining of order and sanity in the society.
• The various form of political systems such as single party, two party
and multi party- e.g.: BJP, Congress , AAP etc.
Political Risk
• Political Risk means difficult situation encountered by organisations
and government as an outcome of political decisions or disruptions
that may hurt an investment or business.
Political Ideologies
• It refers to the way of perceiving expressing and comprehending
views and includes set of ideas, expectations and actions of a
political party.
Indicators of political instability:
• It is a situation where by a country is currently going through
political turmoil.
• The political instability can be ascertained with indicators such
as social unrest, attitude of people and policies of the
government and in many cases the country declines in terms
of its economic stability.
• Instability poses greater risk to business
ECONOMIC ENVIRONMENT
• Economic environment refers to the sum of all economic factors, policies
and nature of an economy, trade cycles, economic resources, level of
income, distribution of income and wealth etc. Which act as a major
determinant of the economic environment within which the business
enterprise work.
• Macroeconomic influences are broad economic factors that either directly
or indirectly affect the entire economy and all of its participants, including
your business. These factors include such things as:
• Interest rates
• Taxes
• Inflation
• Currency exchange rates
• Consumer discretionary income
• Savings rates
• Consumer confidence levels
• Unemployment rate
• Recession
• Depression
COMPONENTS OF ECONOMIC ENVIRONMENT
Economic System
• It means structured regulations, objectives that governs economic
relation with people in a society and the way in which the
production , distribution, consumption and allocation of resources
takes place.
• Different nations have different economic systems- capitalism,
socialism and mixed economy.
Inflation rates and interest rates
• High rate of inflation rates results in reduced purchasing power for
consumers which leads to lower demand for goods and service.
Business Cycle
• It is the periodic but irregular up and down movements in economic
activity over a long period of time and includes conditions such as
boom,recession, recovery, depression .
Economic growth rate
• Economic growth normally has a positive impact on a
company profits and business confidence.
• Growing economies provide the means for people to enjoy
better living standards and results in increased purchasing
power, which leads to increased consumption and sales.
DEMOGRAPHIC(POPULATION) ENVIRONMENT
• Demography is the study of population and demographic
environment refers to trends in country's population
composition and its growth , level of income, household
patterns & regional characteristics and other demographics
factors of the market in which an organisation operates.
Components of Demographic environment & its impact on
marketing:
Population Growth:
• Indicates increase in the number of people who inhabit a
territory.
• Population growth if not checked may result in insufficient
supply creating a disparity in demand and supply side of
goods and services.
Population age mix:
• It refers to the spread of people living in a given area and also
initiates arrangement of population according to variables
such as age, race, income etc
Household patterns:
• It signifies the way in which a family is organised, it plays an
important role in buying decisions how products are
purchased by a family.
Geographical Shifts in population:
• Due to regional imbalances in terms of economic
development there is great migratory movements between
and within the states and countries.
SOCIO-CULTURAL ENVIRONMENT
• It refers to a set of beliefs, customs, practises, norms and behaviour
that exists within a society which describes relationship to
themselves and others.
• It influence the way people live and help to determine what, where,
how and when customers buy a firms products.
Components of socio-cultural environment
Changes in lifestyle: Lifestyle plays a significant role in defining
marketing decisions brands are accepted if they fit into their
lifestyle and values, it becomes important for marketing firms to
closely align to cultural and family traditions. Eg: Dressing in india.
Beliefs, Values and attitudes: Values refers to a set of principles or
beliefs that guides us in making decisions about behaviours and life
choices especially in terms of quality such as honesty, ideals,
integrity and openness.
• Attitudes is an expression or a feeling towards a certain idea, object,
person or situation.
• Believes signify trust or confidence is placed in some person or
thing.
For eg: Why Hindus buy gold on Akshaya Tritiya?
Family Structure & Household Patterns: it means the way a
family is constituted.

Social Mobility: It is the ability to move up or downs in the

social scale.
• It is important for marketer to track these movements and
respond accordingly, change in social class results in change in
lifestyle, shift in brands, products according to their social
status.
TECHNOLOGICAL ENVIRONMENT
• It means the advancement in the field of technology which
influences business by new inventions of productions and
other innovations in techniques to perform the business
operations and product development.
Components of technological environment
Degree Of automation & productivity: Productivity can be
increased by making business operations automated.
• This allows businesses to serve more customers with less
resources, thus technology facilitates businesses to grow and
expand in ways never thought possible.
Emerging Technologies:
Technology Transfer: refers to the processes by which
technological skills, knowledge moves within or between
organisations or countries.
Use of IT & Communication:
NATURAL ENVIRONMENT( ENVIRONMENT FACTOR)

• The natural environment is another important factor of the macro-

environment. This includes the natural resources that a company
uses as inputs that affects their marketing activities. The concern in
this area is the increased pollution, shortages of raw materials and
increased governmental intervention.
Components of Natural environment
• Geographical Location: The study of geographical location
becomes important to assess the availability of raw materials,
concentration of the best potential customers etc is needed to
produce or sell a product.
• Availability of resource: Marketing operations involve massive
investment in capital expenditure and therefore availability of
required resources for marketing need to be considered to achieve
good profit. Eg: reason for india emerging as a BPO and IT hub is
because of availability of skilled employees for cheaper price.
• Access to natural resources: natural resources are materials
that are available in the natural environment that are
considered valuable in their relatively natural form such as oil,
water, mineral or land.
• Concern for environment: use of certain products damage
the natural environment; therefore, an increased focus on
environmental issues, has contributed to a rise in the demand
for environment friendly products and services.
• Increased energy cost: we are living in an industrial
civilisation which functions on energy, without energy modern
life would cease to exit.