A company’s marketing system often operates within the framework of marketing forces, which constitutes the system’s environment. Such forces are either external or internal to the firm.
EXTERNAL FORCES: THE MARKETING ENVIRONMENT
The external variables (also known as the marketing environment) general y are not control able by the organisation. Formally stated, a company’s marketing environment consists of the actors and forces external to the marketing management function of the firm that impinge on the marketing manager is ability to develop and maintain successful transactions with its target customers.
These “non-controllable” factors are constantly spinning out new marketing opportunities. They also set the limits within which firms may apply the “controllable” factors in their efforts to capitalise on marketing opportunities. In turn, the impact of differing applications of controllable factors makes for further changes in the non-controllable factors. The result is that every aspect of marketing is characterised by endless changes.
Although the individual marketing manager can exert little influence over the non-controllable factors, he must know a good deal about them: Apart from being familiar with their general nature, he must also be consistently alert for changes in them which might affect the application of marketing factors he can control. It should be observed that changes in the non-controllable factors, and in the way they interact mean not only changes in markets but changes in his marketing problems. Changes of this kind may even result in significant alterations in the operations of wholesale and retail marketing institutions. The marketing environment (or the non-controllable factors) may be divided into two groups: MICRO-ENVIRONMENT (so cal ed because they affect a particular firm) and MACRO-ENVIRONMENT (so called because they affect al firms).
MICRO-ENVIRONMENT.
The micro-environment consists of the actors in the company’s immediate environment that affect its ability to serve its market. This includes the company, suppliers, marketing intermediaries, customers, competitors, and publics. While general y classified as noncontrol able forces, these elements in the micro-environments are probably susceptible to a greater degree of influence than the macro group is. For example, a marketing organisation may be able to exert some pressure on its suppliers or middlemen. It should also be expected that a firm’s advertising efforts wil have some influence on its present and potential competitors.
Company: The important actors here include top management (e.g. Chairmen/ Managing Directors, Executive Directors, Board of Directors, etc), which sets the company’s mission objectives, broad strategies, and policies. As a rule, marketing managers must make their decision within the limited context set by these higher levels of management. We should also note that their marketing proposals must be approved by top management before they can be implemented.
In addition, marketing managers need to work closely with other functional departments within the organisation. These include finance, R&D, purchasing, manufacturing and accounting. The success or failure of the marketing manager depends on how wel he interacts with these various internal actors.
Suppliers: These are business firms and individuals who provide resources needed by the company and its competitors to produce the particular goods and services. Since development in this environment can have effects on the company’s marketing operations, it is essential for the marketing manager to monitor
( i ) p r i c e t r e n d s
(i )supply availability – supply shortages, strike actions by labour unions, etc.
Marketing Intermediaries: These are firms that aid the company in promoting, selling and distributing its goods to the final buyers. They include the following:
(i) Middlemen e.g. agent middlemen & merchant middlemen
(ii) Physical distribution firms e.g. warehousing firms, transportation firms
(i i) Marketing service agencies e.g. marketing research firms, advertising agencies, media firms, marketing consulting firms.
(iv) Financial intermediaries e.g. banks, credit companies, insurance companies.
Customers: A company’s target market can be one (or more) of the following types of customer markets:
(i) Consumer markets: individuals and households who buy goods and services for personal consumption
(ii) Industrial markets: organisations that buy goods and services needed for producing other products and services for the purpose of making profits and/or achieving other objectives
(i i) Reseller markets: organistions that buy goods and services in order to resel them at a profit
(iv) Government markets: Government agencies that buy goods and services in order to produce public services, or transfer these goods and services to others who need them.
(v) International markets: Buyers found abroad, including foreign consumers, producers, resel ers, and government.
Competitors: Competition is often a strong environmental force to be reckoned with in virtual y al socio-economic systems. It should therefore be expected that a company’s marketing system will be surrounded and influenced/ attacked by lots of competitors. It is therefore imperative that these competitors be identified, monitored, and outmaneuvered in order to gain and maintain customer loyalty. Apart from the presence of other companies, the competitive environment also consists of more basic things.
Publics: A public is any group that has an actual or potential interest or impact on an organisation’s ability to achieve its objectives. In-as-much as publics can substantially influence an organisation’s fortunes, the best thing to do is to spend some time monitoring these publics, anticipating their moves, and dealing with them in constructive ways. There are seven types of such publics:
(i) Financial publics. These influence the company’s ability to obtain funds. Examples here include banks, fmance houses, stock brokerage firms, and other stockholders.
(ii) Media publics. Media publics are organisations that carry news, features, and editorial opinions. Examples include newspapers, magazines, and radio and television stations.
(i i) Government publics. These have to do with the regulatory activities of government agencies/departments. Examples, NAFDAC, FEPA, National/State Assemblies, NNPC, PPMC, etc.——————————–
(iv) Citizen-action publics/Consumersism. These are an organised movement of citizens and government to enhance the rights and powers of buyers in relation to sellers. Consumerists’ groups seek, through company persuasion and legislation, to increase the amount of consumer information, education, and protection.
(v) Local publics. These are neighbourhood residents and community organisations.
(vi) General public. Though the general public does not act in an organised way toward the company, the public’s image of the company affects its patronage. Hence a company needs to be concerned with the general public’s attitude towards its products and activities.
(vi ) Internal publics. These include blue-collar workers, white-collar workers, managers, and the board of directors.
MACRO-ENVIRONMENT
The following six inter-related macro-environmental forces impinge considerably on any company’s marketing system. Like their micro-environment counterparts, they are also not controllable by management.
They are:
( i ) D e m o g r a p h y
( ii)E cono mic cond itions
( i i i ) P h y s i c a l e n v i r o n m e n t
( i v ) T e c h n o l o g i c a l
( v ) P o l i t i c a l / l e g a l f o r c e s
(v i)So cio /cu ltur al for ces
Demography. Demography is the statistical study of human population. Marketers are keenly interested in the size of the population of a place; its geographical distribution; density; mobility trends; age distribution; birth/ marriage, and death rates; and racial, ethnic, and religious structures.
Demography is especially important to marketing executives, because people (together with money to spend and the willingness to spend it) are what constitute markets. The above listed distribution characteristics can be properly monitored to bring out useful demographic trends and their implications for marketing.
- Disposable personal income
- Discretionary income
- income distribution
- Geographical income Variation
- Level of inflation
- Interest Rates
- Money Supply
- Consumer Savings and Debt patterns
- Availability of credit
- Consumer expenditure patterns
Physical environment.
The concern here is on marketing’s impact on the environment and the costs of serving these needs and wants. For instance, environmentalists are not against marketing and consumption; they simply want them to operate on more ecological principles. They are of the opinion that the goal of the marketing system should be to maximise life quality. And, life quality means not only the quantity and quality of consumer goods and services but also the quality of the environment. Marketing managers, therefore, need to pay attention to the physical environment in terms of obtaining needed resources and also of avoiding damage to the physical environment.
In this regard, marketers need to be aware of the threats and opportunities associated with four trends in the physical environment:
(i) Impending shortages of certain raw materials especially finite renewable resources (e.g. forests and food) and finite nonrenewable resources (e.g oil, coal and other minerals). The marketing implications of these shortages are twofold: In the first instance, firms making use of these scarce minerals face substantial costs increases, even if the materials remain available. Secondly, they may not find it easy to pass these cost increases on to the consumer. Hence, only firms that engage in research and development and exploration have vast opportunities to develop valuable new sources and materials.
(ii) Increased cost of energy.Crude petroleum remains world’s major source of energy for industrial activities. Its price however continues to leap jump. This has created a frantic search for alternative forms of energy: coal, solar, nuclear, wind, etc.
(iii) Increased levels of pollution. The quality of the natural environment has been remarkably impacted upon by the following industrial/economic activities:
(a) dumping of chemical and nuclear wastes into streams, rivers, oceans;
(b) application of heavy doses of chemicals in agriculture, leading to the presence
of chemical pollutants in the soil and food supply
(c) littering of the environment with non-biodegradable bottles, plastics, and
other packaging materials.
Protests and public outcries about the gradual destruction of the natural environment in the manners cited above can create marketing opportunities for smart companies. For instances, there is the creation of a large market for pollution – control solutions such as scrubbers and recycling centre. It also leads to a search for alternative ways to produce and package goods that do not cause environmental damage.
(iv) Strong government intervention in natural – Resource management here, various
government agencies [such as the Federal Environmental Protection Agency (FEPA) and States’ Environment mental Protection Agencies] play active roles in environmental protection. Companies are made to comply with some environmental regulations.
Technological Environment. Technology has a tremendous impact on people’s lives – e.g. life-styles, consumption patterns and economic well-being. It has been a major factor underlying the economic growth in the developed countries. However, major technological breakthroughs carry a threefold market impact:
(a) They can start an entirely new industry – e.g. computers, airplane
(b) They can radically alter, or virtual y destroy, existing industries. For example, television crippled the radio and movie industries, wash-and-wear fabrics hurt commercial laundries and dry cleaners; digital watches are turning the traditional watch business upside down.
(c) They can stimulate new markets and industries in fields not related to the new technology. For instance, new home appliances and frozen foods , therefore, therefore, give home-makers additional time, thereby allowing them to engage in other gainful activities.
It is therefore necessary for the marketing manager to understand the changing technological environment and how technologies can serve human needs. They need to work closely with the research and development people to encourage more market-oriented research. More importantly, they must be alert to the negative aspects of any innovation that might harm the users and thus bring about distrust and opposition.
To a very large extent, a company’s conduct is being influenced by the political-legal processes in our society. This environment is made up of laws, government agencies and pressure groups.
Legislation at the federal, state and local government levels exercise more influence on the marketing activities of a firm than on any other phase of its operations. These legislations have a number of purposes.
(i) To protect companies from each other
(ii) To protect consumers from unfair business practices.
(ii)To protect the larger interests of society against unbridled business behaviour
A serious marketing manager should, out of necessity, have a good working knowledge of the major laws protecting competition, consumers and the larger interests of the society.
We noted earlier that macro-environmental forces are not controllable by management. However, in limited areas in the political-legal area, a large firm or an industry working through its lobbyists and trade association may have some influence in shaping a piece of legislation or regulation from government agencies.
Socio/Cultural Environment
The economic, political-legal and technological forces just reviewed actually make up the socio-cultural environment. In order words, our people and their socio-cultural customs and beliefs are fundamentally what shape our economy, political-legal system, and technology. For instance, social pressures against air and water pollution have led to legislation and government regulation, which in turn stimulated new technology to reduce pollution.
In addition, cultural patterns, such as lifestyles, social values, beliefs and desires are changing much faster than ever before. Examples of these changes include:
- From a thrift and savings ethic to spending freely and buying on credit
- From a work ethic to self-indulgence and having fun
- From sexual chastity to sexual freedom
- From a husband-dominated family to equality in husband-wife roles; or in a broader context, the changing role of women,.
- From emphasis on quantity of goods to quality of life
- From the artificial to the natural (e.g. “braless” look)
All these changes pose serious marketing challenges to marketing executives.
INTERNAL FORCES: CONTROLLABLE MARKETING VARIABLES OR THE MARKETING MIX
The second set of forces that make marketing an endlessly changing activity is put in motion by individual enterprises when they make continual adjustments in the control able marketing factors. These forces are known as the marketing mix.
Though there are a multitude of these controllable variables, Jerome McCarthy has popularised a four-factor classification, now commonly known as the 4Ps: Product, Place, Promotion, and Price.
Definitionally, marketing mix is the mixture of controllable marketing variables that the firm uses to pursue the sought levels of sales in the target market.
The 4Ps give the marketing manager a framework within which he can operate on a costeffective manner. His eventual success will be determined by the wisdom of his choices, his ability to modify his mix in the face of uncertainty and change, and his determination to make his strategy work.
Product
Under the first P, which stands for the product, the company takes care of all the problems of developing the product or service which it plans to offer to the target market.
Such problems include:
(i) selecting a product or product lines;
(ii) adding or dropping items in the product line;
( i i i ) b r a n d i n g ;
( iv)p ack ag ing; and
In a nutshel , the product area is concerned with developing the right product to the target market.
A product (or a service) is not of any use to the consumer if it is not available when and where he wants it. Therefore, the company must consider where, when, how and by whom the goods and services are to be offered for sale. Sometimes, for example, complicated channels of distribution are necessary, while at the times, very simple methods can be used effectively. Wholesaling, retailing, transportation, and storage play a part in the distribution of most goods and services.
Place
The second P (for place) is concerned with all problems, functions and institutions involved in getting the right product to the target market.
Promotion
The third P (for promotion) has to do with the methods of communicating to the target market, the “right product” that will be sold in the “right place” and the “price”. Here, all the problems of sales promotion, advertising and the development, training, and utilization of a sales force are usual y covered. Advertising, sales promotion and personal selling are to be considered as complementary methods of communicating with customers.
While the marketing manager is developing the “right” product, place, and promotion, he must also decide on the “right” price, i.e the one which will make his total marketing mix attractive. Before setting the price, the marketing manager considers the nature of competition in his target market, as well as the existing practices on mark-ups, discounts, and terms of trade. In some instances, he must also consider legal restrictions affecting prices. In summary, price is concerned with determining the “right price” to move the “right product” to the “right place” with the “right promotion” for the target market.
By varying each of these controllable marketing variables, a marketing mi can be selected from a great number of possibilities. Though this framework may appear simple, the task of making choices within it is fairly cumbersome. For instance, each of these four control able marketing variables has man–, potential variations, thereby making the number of possible marketing mixes very large. Let us assume that there are five (5) variations of each of the variables (i.e 5 products, 5 places, 5 promotions and 5 different prices), there would be 625 possible different marketing mixes!. And, it could be more. Hence, as the number of variations increases the number of possible mixes which must be considered by the marketing manager increases geometrically.
We must stress here that no human mind is quite capable of currently evaluating all the possible marketing mixes. What is practicable is a progressive elimination of the least desirable, such that the problem can be reduced to manageable proportions.
Generally, there is only one “best” strategy at any given time. However, since conditions, often change in the market situations; there may be many good ones. Even then, a good strategy will need to be altered as consumer behaviour, competitors’ behaviour, and other non-controlable variable change.
CONCLUSION
You have learned in this unit that environmental forces influence an organisational marketing. The marketing environment presents an unending series of opportunities and threats. The major responsibility for identifying changes in the macro-environment falls to a company’s marketer. Environmental scanning and analysis are particularly important here.
