Marketing Environment

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Understanding the External Marketing Environment

INTRODUCTION

“All businesses operate within an environment, which directly or indirectly affects the way in which they function, just as we as consumers live within a cultural and social environment which to a greater or lesser degree determines the way in which we behave as individuals.” said Elaine O’Brien, University of Strathclyde.

Unlike the controllable marketing mix variables, the environmental forces are not controllable by marketers. However, marketers can control how they deal with those uncontrollable forces by identifying and monitoring those forces that are relevant to their firms. They also must forecast changes in these forces if they are to develop effective marketing plans and strategies.

All organizations operate within environments. That is, all profit-making and not-for-profit organizations are surrounded by, and must contend with, external forces. Managers cannot govern the nature of these environmental forces. These uncontrollable influences affect consumers’ behaviour and organizations’ development of effective marketing mixes.

Conceptually, the forces that comprise the marketing environment are viewed as existing at two levels. They are categorized as micro and macro influences. The microenvironment consists of those forces that directly affect the marketing programs of a particular firm. The activities of marketing intermediaries, company, customers, suppliers, and competitors are all examples of external forces that influence the marketing actions of a specific organization. The macro environment encompasses the broad environmental system within which all organizations must conduct business. In one sense, it defines or creates the structure of the marketplace for all organizations. The particular elements that make up the macro-environment are demographic trends, economic, natural, socio and cultural influences, political and legal issues, and technological advances.

In this study, we are going to evaluate the extent to which the macro-environment affects marketing decisions.

“Companies and their suppliers, marketing intermediaries, customers, competitors, and publics al operate in a macro environment of forces and trends that shape opportunities and pose threats. These forces represent ‘noncontrollables’, which the company must monitor and respond to”. (Kotler, Millennium Edition)

Although these forces are described separately below, marketers must pay attention to their causal interaction, since these sets the stage for new opportunities as well as threats. For example, population growth (demographic) leads to more resource depletion and pollution (natural environment), which leads consumers to call for more laws (political/legal) to reduce environmental damage. The imposed restrictions stimulate new technological solutions and products (technology), which if they are affordable (economic forces) may actually change people’s attitudes and behaviour (socio/cultural).

ENVIRONMENTAL FACTORS THAT AFFECT MARKETING DECISIONS

Political/Legal Environment

Marketing decisions are strongly affected by developments in the political and legal environment. This environment is composed of laws, government agencies and pressure groups that influence and limit various organizations and individuals. Sometimes these laws also create opportunities for business.

"There are a number of reasons why the legal environment is important to managers, particularly those involved with the marketing function. First and most obvious, managers themselves may be convicted for certain legal violations such as price fixing and mail or wire fraud. Second, product design considerations, often in conjunction with promotional and warranty materials, may lead to expensive product liability exposure, leading to high insurance rates and even bankruptcy. Similarly, private antitrust lawsuits by rivals or dealers may lead to treble damage...
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