CHAPTER 3

MARKETING ENVIRONMENT
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.
WHY IS IT IMPORTANT?

An understanding of macro and micro marketing
environment forces is essential for planning.

Helps a business to compete more effectively against
its rivals.

Assists in the identification of opportunities and
threats.

Enables an organization to take advantage of
emerging strategic opportunities.
CONTROLLABILITY

The organization has no control over the macro
environment. It can only respond to the changes
taking place.

The organization has some degree of influence over
the 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.

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 the
organization.
Marketing Environment
Company
Demographic
Economic
Natural
Technological
Political
Cultural
Company
Customers
Intermediaries
Suppliers

Competitors
Public
Actors in the Microenvironment
9
Company
Company organization consists of Board of
Directors and functional managers.

Marketing plans are drawn up as per the
philosophy of Top management

Marketing decisions like new products,
expansion, etc depend on the support of top
management. It depends upon finance,
managerial skills, organizations strengths and
weaknesses.
10
Marketing plans should be in harmony with
policies of other departments such as
production, purchase, finance, personnel,
etc

For ex: quality depends upon production
policies
Advertising and sales promotion on
budgets
The Microenvironment
Departments within the company
impact marketing planning.
Suppliers:
Provide resources
needed to produce
goods and services.
Important link in the
value delivery
system.
Most marketers treat
suppliers like partners.
If they raise prices, we
too have to revise
ours.
SUPPLIERS
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
Customers
The target market of the company is usually of five
types:
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 and
services with a view to sell them to others.
4. Government and other non profit markets i.e.those
buying goods and services in order to produce public
services.
5. International market i.e. individuals and organizations of
nations other then home land who buy for either
consumption or industrial use.


Competitors
Must understand competitors strengths
Must differentiate firms products and
offerings from those of competitors
Competitive strategies should emphasize
firms distinctive competitive advantage in
marketplace
Competitive Intelligence
Publics
Public is defined as any group that has an
actual or potential interest in or impact on a
companys ability to achieve its objective.
The actions of the company do affect the
interest of other groups i.e., those who form
general public for the company who must be
satisfied along with the consumers of the
company.
Types of Publics
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 the
companys 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.
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, and
contribute to worthwhile causes.

General Public: A company needs to be concerned
about the general publics attitude toward its products
and 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.
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.
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

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, sex
composition etc
It helps in - Market segmentation, demand
forecasting, determination of market
potential
DEMOGRAPHIC FORCES

Demographic data helps in preparing
geographical marketing plans, household
marketing plans, age and sex wise plans.
It influences behavior of consumers which
in turn will have direct impact on market
place.
A marketer must communicate with
consumers, anticipate problems, respond
to complaints and make sure that the firm
operates properly.
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
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

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.

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
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

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

Demography - continued
Mexico is a nation of young population
Japan old generation
America was a melting bowl. Now it is a
Salad bowl with Chinese, Filipinos,
Japanese, Asians, Koreans
The Seven U.S. Generations
The Seven U.S. Generations
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)
Political Environment
Includes Laws,
Government
Agencies, and
Pressure Groups
that Influence or
Limit Various
Organizations and
Individuals In a
Given Society.
Increasing Legislation
Changing Government
Agency Enforcement
Increased Emphasis on Ethics
& Socially Responsible Actions
Political Environment
Coke moved out of India in 1977.
Domestic Politics
International Politics
Legal Environment
Prevention of food and adulteration act
1954.
Drugs control Act-1954.
Company Act-1956
Standard Weights and measurement Act-
1956.
MRTP-Monopoly and restrictive Trade
Practices-1969
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.

Political factors - continued
Political and legal factors are inter connected

Discontinuation of CCI, FERA,

Introduction of SEBI, FEMA, VAT

FDI Rules allow private participation in
transportation, telecom, airlines
Economic Environment
Economic forces influence both marketers
and the consumers
Consists of factors that affect consumer
purchasing power and spending
patterns.



Economic Environment
Competition monopoly,
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

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
product.
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.
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 cotton
growers out of business
Solar pocket calculators and hand
cameras

CDs and Video tapes

Virtual reality applications in Marketing is a
new application due to technological
progress
Technology-continued
Technological developments have
improved the standard of living and given
more leisure time

Improvements in communication,
transportation

Technology has given wonder drugs like
Ampicilliin, by- pass surgery,
Technology-continued
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.
Socio-Cultural Environment
The institutions
and other forces
that affect a
societys basic
values,
perceptions,
preference, and
behaviors.
Core beliefs are
persistent
Passed from parents
to children; reinforced
by society
Shape attitudes and
behavior
Secondary cultural values
change and
shift more easily

Societys cultural values
are expressed through
peoples views of:
Themselves
Others
Organizations
Society
Nature
The Universe
The Cultural Environment
CULTURE
Variations
Country
Regional
Impact of culture on
expectations and what is
right to do
Individuality vs. collectivism
Relationships between people
Work habits
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.

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
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
SOCIETAL VALUES
Increasing emphasis
on
Recycling and green
products
Diversity
Organic foods
Choice and customization

Decreasing emphasis
on
Formality
Mass media
Traditional brands


Natural Environment
Involves the natural
resources that are
needed as inputs by
marketers or that are
affected by marketing
activities.
Natural Environment
Maintain Ecological Balance
Technological Developments have led to
ecological imbalances.
Resources:De-marketing their Products-
IOC SAVE OIL-SAVE INDIA
Weather,pollution(CFC,PVC,Polyethylene
bags).
Government Interventions.
Natural Environment Trends
Shortage of raw materials.
Limited quantities of non-renewable resources.
Increased pollution.
Waste disposal, air/water pollutants.
Increased government intervention.
Kyoto and other initiatives.
Environmentally sustainable strategies.
G.R.E.E.N. movement.

Pest Analysis
A scan of the external macro environment in
which the firm operates can be expressed as a
pest analysis.

The acronym PEST (or sometimes rearranged
as STEP) is used to describe a framework for
the analysis of these macro environmental
factors.

A PEST Analysis fits into an overall
environmental scan, which includes Political,
Economical, Social, and Technological
environment.
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
Political/legal
Monopolies legislation
Environmental protection laws
Taxation policy
Employment laws
Government policy
Legislation
Economic Factors
Inflation
Employment
Disposable income
Business cycles
Energy availability and cost
Sociocultural factors
Demographics
Distribution of income
Social mobility
Lifestyle changes
Consumerism
Levels of education
Technological
New discoveries and innovations
Speed of technology transfer
Rates of obsolescence
Internet
Information technology
CONTROLLABILITY

The organization has no control over the macro
environment. It can only respond to the changes
taking place.

The organization has some degree of influence over
the 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.

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
The Indian Marketing Environment 64
c. Agricultural Scene

Predominance is there. Dependence has reduced
2
/
3
rd population dependent directly/indirectly on
agriculture.
Rural markets development at a faster rate.
Impressive achievements. Self dependent. Rare
foodgrain imports.
Main cause of development of other sectors.
The Indian Marketing Environment 65
d. Industrial scene


Contribution to GDP growth increasing

More than this, there are qualitative change

Rapid foreign investment and competition from
multinational companies.

The Indian Marketing Environment 66
e. Social scenario: The middle class explosion

Estimate of 25 crores in size
Rapid industrial growth seen emergence of professionals in
many spheres.
Target group for most of the companies.
The Indian Marketing Environment 67
Social scenario: The middle class explosion

Emerged as the consumption community of the country.
Better education, higher aspirations.
Consumption of non food items on the increase
Joint families giving in. Concept of nuclear families.
Higher disposable incomes.
Demand for lifestyle products is on the rise.
The Indian Marketing Environment 68
f. Rural marketing scenario

Shown impressive growth-television, mobile penetration.
Earthenware yielded place to a variety of new
kitchenware.
Becoming increasingly urbanized.
The Indian Marketing Environment 69
Rural marketing scenario
Tapping 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.
The Indian Marketing Environment 70
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 these
weaknesses
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
The Indian Marketing Environment 71
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.
The Indian Marketing Environment 72
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
Relying more on exchange rates and tariffs.
Lowering of tariffs
Convertibility of rupee and the new exchange rate system.
Encouragement to exports.
Open door to foreign investment.
Integrating the countrys economy with the global economy.
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)
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
2. The challenge of MNC Dominance
Majority equity lends MNCs a new strategic edge.
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.


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
5. Indian companies are now compelled to export and
go global.

Indian companies taking initiative
Going global
Ranbaxy, Dr Reddy, Infosys
Strong names in the international market.