Chapter-2, Last Lecture

Chapter-2(Marketing Environment)/last lecture
B) External Environment:
The environment which lies outside the organization is known as external
environment. These factors are unpredictable and uncontrollable.
External environment is further classified as:
1. Micro Environment
2. Macro Environment
I. Micro Environment:
Micro environment is also known as operating environment. It consists’ of

company’s immediate environment that affect its performance. It includes
customers, suppliers, intermediaries, competitors etc. The micro environment
consist the elements that directly affects the company.
According to Philip Kotler, “Micro environment consist of the factors in the

company’s immediate environment which affects the performance of the business
unit. These include suppliers, market intermediaries, competitors, customers and
the public”.
1. The customers:
Consumer is the king of the market. They are the centers of the business. They are
one of the most important factors in the external environment. Customer
satisfaction has become more challenging due to globalization.
Nowadays, consumer expectations are high. Therefore the firm must keep in mind
the customer’s expectations, their requirements and accordingly make market
decisions. The success of the business depends upon identifying the needs, wants,
likes and dislikes of the customers and meeting with their satisfaction.
2. The competitors:
The company has to identify its competitor’s activities. Information must be
collected about competitors in respect of their prices, products, and promotion and
distribution strategies. World is becoming a global market.
3. The Suppliers:
Suppliers supply raw material, machines, equipment’s and other supplies. The
company has to keep a watch over prices and quality of materials and machines
supplied. It also has to maintain good relations with the suppliers.
4. Society/publics:
Society affects company’s decisions. The expectation of the society from the
business is increasing. Therefore the business firm maintains public relations
department to handle complaints, grievances and suggestions from general public.
The members of the society include:
i. Financial institutions
ii. Shareholders
iii. Government
iv. Local community
v. General public
vi. Media
5. Marketing intermediaries:
Market intermediaries include agents and brokers who help the business firm to
find the customers. They help the firm to promote and distribute the goods to the
final consumers.
They are the link between the firm and the final customers. Market intermediaries
include wholesalers, retailers, advertising firm, media, transport agencies, banks,
financial institutions etc. They assist the company in promoting and targeting its
product to the right market.
2. Macro Environment:
According to Philip Kotler, “Macro environment create forces that creates
opportunities and pose threats to the business unit. It includes economic,
demographic, natural, technological, political, political and cultural environments.”
1. Demographic Environment:
Demographic Environment relates to the human population with reference to its
size, education, sex ratio, age, occupation, income, status etc. Business deals with
people so they have to study in detail the various components of demographic
environment.
Demographic environment differs from country to country. Demographic factors

like size of the population, age composition, density of population, rural-urban
distribution, family size, income level, status etc. have significant implications on
business.
2. Economic Environment:
Economic environment consists of economic factors that influence the functioning
of a business unit. These factors include economic system, economic policies,
trade cycle, economic resources, gross national product, corporate profits, inflation
rate, employment, balance of payments, interest rates, consumer income etc.
Economic environment is dynamic and complex in nature
3. Technological Environment:
Technology has brought about far reaching changes in the methods of production,
quality of goods, productivity, and packaging. There is a constant technological
development-taking place.
The business firm must constantly monitor the changes in the technological
environment, which may have a considerable impact on the working of a business.
It also indicates the pace of research and development and progress made in
introducing modern technology in production.
4. Cultural Environment:
Culture involves knowledge, values, belief, morals, laws, customs, traditions etc.
Culture passes from one generation to another through institutions like family,
schools, and colleges. Business is an integral part of the social system.
Society is largely influenced by the culture and in turn culture influence the
business firm. Culture shapes the attitude and behavior of the society. Any change
in the cultural factor affects the business in large. Business should be organized
and governed, taking into consideration various values and norms of the society.
5. Political Environment:
The political environment in a country influences the legislations and government
rules and regulations under which a firm operates.
6. Natural Environment:
Resource availability like land, water and mineral is the fundamental factor in the
development of business organization. It includes natural resources, weather,
climatic conditions, port facilities, topographical factors such as soil, sea, rivers,
rainfall etc.
Every business unit must look for these factors before choosing the location for
their business.
7. Legal Environment:
The state sets the formal rules, laws and regulations for the country’s operational
system. It creates a framework of rules and regulations within which a business has
to operate. The business should have complete knowledge of laws and policies to
run the business effectively.

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Chapter-2(Marketing Environment)/last lecture

External environment is further classified as:

Micro environment is also known as operating environment. It consists’ of

According to Philip Kotler, “Micro environment consist of the factors in the

iv. Local community

Demographic environment differs from country to country. Demographic factors

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