What is Marketing Environment? Definition, Components, Importance

  • Post last modified:8 August 2021
  • Reading time:25 mins read

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.

Marketing Environment
Marketing Environment

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.

Marketing Environment Definition

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.

Kotler and Armstrong

Marketing environment is that which is external to the marketing management function, largely uncontrollable, potentially relevant to marketing decision-making and changing and/or containing in nature

Cravens et. al

The marketing environment of the task environment and the broad environment. The task environment includes the immediate actors involved in purchasing, distributing and promoting the offering. The broad environment consists of six components: demographic environment, economic environment, natural environment, technological environment, political legal environment, social-cultural environment

Philip Kotler

Components of Marketing Environment

The Components of marketing environment are 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.

There are two types of marketing environment:

  1. Internal Environment
  2. External Environment
types-of-marketing -environment -Geektonight
Types of marketing environment

Components of Marketing Environment are:

  1. Internal Environment
  2. External Environment
    • Micro environment
    • Macro environment
      • Demographic Environment
      • Social and Cultural Environment
      • Legal Environment
      • Political Environment
      • Economic Environment
      • Technological Environment

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

The external environment are the factors and forces which are external to the organization and marketer has little or no control.

There are two types of external environment: macro and micro 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.

Micro environment
  • 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 microenvironment. 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.

Six macro-environment forces and factors are grouped as the

  • Demographical
  • Social and Cultural
  • Legal
  • Political
  • Economic
  • Technological
Macro environment
Macro environment

Demographic Environment

Demography environment 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 social and cultural environment 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.

Macro vs Micro Environment

Read: Marketing Management Philosophies

Features of Business Environment

On the basis of the above discussion the features of business environment can be summarized as follows:

  • Business environment is the sum total of all factors external to the business firm and that greatly influence their functioning.

  • It covers factors and forces like customers, competitors, suppliers, government and social, cultural, political, technological and legal conditions.

  • The business environment is dynamic in nature, which means, it keeps on changing.

  • The changes in business environment are unpredictable. It is very difficult to predict the exact nature of future happenings and the changes in economic and social environment.

  • Business environment differs from place to place, region to region and country to country.

Purpose of Marketing Environment

  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

  1. Determining Opportunities and Threats
  2. Giving Direction for Growth
  3. Continuous Learning
  4. Image Building
  5. Meeting Competition
  6. Identifying Firm’s Strength and Weakness

Determining Opportunities and Threats

The interaction between a business and its environment would identify opportunities for and threats to the business. It helps the business enterprises in meeting the challenges successfully.

Giving Direction for Growth

The interaction with the environment leads to opening up of new frontiers of growth for the business firms. It enables the business to identify the areas for growth and expansion of their activities.

Continuous Learning

Environmental analysis makes the task of managers easier in dealing with business challenges. The managers are motivated to continuously update their knowledge, understanding and skills to meet the predicted changes in the realm of business.

Image Building

Environmental understanding helps business organizations in improving their image by showing their sensitivity to the environment within which they are working. For example, in view of the shortage of power, many companies have set up Captive Power Plants (CPP) in their factories to meet their own requirement of power.

Meeting Competition

It helps the firms to analyze the competitors’ strategies and formulate their own strategies accordingly.

Identifying Firm’s Strength and Weakness

Business environment helps to identify the individual strengths and weaknesses in view of the technological and global developments.

Marketing Management Topics

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