Marketing Environment – Meaning, Components, Importance

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The marketing firm operates within an unpredictable and dynamic external environment. It is the task of the marketing-oriented organisation to link the resources of the organisation to the requirements of customers. This is done within the framework of opportunities and threats in the external environment.

What is Marketing Environment?

Marketing Environment is the combination of Internal factors (customers, shareholders, retailers, employees & distributors) and the External factors (demographical, cultural, social, legal and political, economic, natural and technological environment) and forces outside marketing that affect top-level management’s ability to develop and maintain successful relationships with its target customers.

A company’s marketing environment consists of the actors and forces outside of marketing that affect marketing management ability to build and maintain successful relationships with target customers.

Philip Kotler

Components of Marketing Environment

The marketing environment is the combination of the internal and external environment component of the business. While the external environment has less or no control while the internal environment can be controlled.

Internal Environment

The internal environment consists of all the factors and forces inside the organization that can affect or can be affected with, the choices, activities and decisions of the organization.

These forces include Production, Finance, HR, Research and Development, Company location, Company image and marketing-mix components of product, price, promotion and distribution.

External Environment

These are the factors and forces which are external to the organization and marketer has little or no control. These are two types of external environment are micro environment and macro environment.

Micro environment

The forces and factor close to the company that affect its ability to serve its customers – the company, market channel firms, customer markets, competitors and publics, which combine to make up the firm’s value delivery system.

  • Company: In designing marketing strategies, marketing division must take other company’s divisions into account.
  • Suppliers: Firms that provide the resources needed by the organization and its competitors to produce goods and services.
  • Marketing intermediaries: Firms that help the company to promote, sell and distribute its goods to costumers; which includes physical distribution firms, marketing-service agencies and financial intermediaries.
  • Customers: consist of a target group of the company. An organization should be concerned about the constantly changing requirements of its customers and should keep in touch with these changing needs by designing and implementing an appropriate information gathering system.
  • Competition: The marketing concept states that to be successful, an organisation must provide greater customer value and satisfaction than its competitors.
  • Public: The organisation’s micro environment also includes various publics. A public is any group that has an actual or potential impact on an organisation’s ability to achieve its objectives.

Macro environment

The larger societal forces that affect not only the organization as a whole but also on its competitors and on elements in the micro environment. It is also known as the broad environment

Decisions take shape in relation to the macro world, as a marketing manager cannot really influence these external, uncontrollable forces. So, he needs to monitor the external world and try to moderate the effect of these external factors on his business.

As we have mentioned, macro environmental factors are grouped as the demographical, cultural, social, legal and political, economic, natural and technological environment.

Demographic Environment

Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation and other statistics and its characteristics. Marketers are always interested in population-related growth indices because the eventual market growth rate in the long run largely depends on the growth of population.

Social and Cultural Environment

Of all the elements making up the macro environment, perhaps socio-cultural factors are the most difficult to evaluate, and hence pose the greatest challenge to the marketing organisation. Social and cultural change manifests itself in changing tastes, purchasing behaviour and priorities of consumers and marketers need to understand and identify these changing trends.

Legal Environment

Legal environment also influences marketing decisions. Changes in the political environment often lead to changes in the legal environment and in the existing laws enforced. The legal environment sets how a business should operate in society within the law.

Political Environment

The political environment can be one of the less predictable elements in a marketing environment. Organization need to regularly monitor the changing political scenario because political change can impact a firm’s marketing.The political environment consists of laws, government agencies etc that influence and restrict and limit the various organizations and individuals in a given society.

Economic Environment

The economic environment has the highest influence on the marketing decisions, consists of factors that affect consumer purchasing power and spending patterns and is basically about the level of demand in the economy and is the most visible aspect in the macroenvironment.

Technological Environment

The technological environment is perhaps the most dramatic forces that create new technologies, creating new product and market opportunities. Technological changes occur in two ways. Some changes evolve over a period of time. But some technological changes are so strong and disruptive in nature that they establish a new consumption pattern.

Read: Marketing Concept – 5 Marketing Management Philosophies

Purpose of marketing environment analysis

  1. To know where the environment is directing, to observe & size up with the trends in the environment.
  2. Proper environment analysis helps in strategic response to the environment.
  3. It also helps in assessing the various opportunity and favourable impact on the business.

Importance of marketing environment analysis

  • It creates an increased general awareness of environmental changes on the part of management.
  • It guides with greater effectiveness in matters relating to Government.
  • It helps in Marketing Analysis
  • It suggests improvements in diversification and resource allocations
  • It helps firms to identify and capitalise upon opportunities rather than losing out to competitors.
  • It provides continuing broad-based education for executives in general and the strategists in particular.

Recommended Article:

  1. Marketing Mix – 4ps: Definition, Example, Importance
  2. Market Segmentation | Definition, Types, Bases, Examples
  3. Marketing Management Process

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