3 marketing environment

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Marketing Management Unit 3

Sikkim Manipal University 35

Unit 3 Marketing Environment

Structure

3.1. Introduction

3.2. Environmental scanning

3.3. Analyzing the organizations micro environment.

3.4. Companys macro environment.

3.5. Difference between micro environment and macro environment.

3.6. Summary

Terminal questions

Answers to SAQs and TQs3.1. Introduction.

A marketing oriented company always keeps tab on its external environment carefully to analyze

opportunities and threats. This external environment influences companys strategies in two levels

i.e. external macro environment and external micro environment. The macro environment involves

political and legal, economic and natural, social and cultural and technology environment. The micro

environment consists of supply chain, customer and competitor. These factors are uncontrollable by

the organization. Even the best company faces threat if one of the external environments is adverse

to it. A moderate company will be successful if the external environment favors it. Hence marketingcompanies should monitor the external environment carefully and continuously.

Learning Objectives

After studying this chapter you should be able to

1. The need of environmental scanning.

2. How external micro environment affects the companys strategies.

3. The influence of external macro environment on companys plans.

4. The difference between the external macro and micro environment.

5. The role of organizations internal environment in dealing with opportunities and threats.


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3.2. Environmental scanning

This is the process of gathering, analyzing and forecasting of external environments information to

identify opportunity and threats that company faces.

Need for environmental scanning:

It helps in

1. Identifying the opportunities that company has in immediate future.

2. Identifying the threats faced by the company.

3. Demand forecasting

4. Developing appropriate business plans.

5. Adjusting the company strategy in changing competitive environment.

3.3. Analyzing the organizations micro environment

Marketing department let alone can not satisfy all the needs of customer. Therefore it is essential to

integrate the functions of suppliers, publics, company departments and intermediaries in creating the

value to the customer. These forces are known as organizations micro environment.

Microenvironment: The forces which are very close to company and have impact on value creation

and customer service

Figure 3.1

Forces in the micro environment


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3.3.1. The company

Remember in the previous unit we discussed about the strategic and marketing planning. Deducing a

strategic plan in to specific marketing plan require coordination of other functions like finance, Human

resource, production, and research and development. For example, Safe Express, a leader in the

supply chain management solution wants to hold its position in the US $ 90 billion Indian logistics

market. Company plans to expand its service areas in the coming months. To meet the targets of the

marketing plan, other departments of safe express also expanding their horizon. Company is coming

out with logistics parks in different cities plans to hold seven million square feet of warehousing

capacity in the next three years and investing Rs 10 billion in three years to meet that targets. The

above example shows that companys marketing plan should be supported by the other functional

department activities also.

3.3.2. Intermediaries

Marketing intermediaries: The firms which distribute and sell the goods of the company to the

consumer.

Micro

Environment


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Marketing intermediaries plays an important role in the distribution, selling and promoting the goods

and services. Stocking and delivering, bulk breaking, and selling the goods and services to customer

are some of the major functions carried out by the middlemen. Retailers, wholesalers, agents,

brokers, jobbers and carry and forward agents are few intermediaries to name. Retailers are final link

between company and customers. Their role in the marketing of product is increasing every day.

3.3.3. Publics

These are microenvironment groups, which helps company to generate the financial resources,

creating the image, examining the companies policy and developing the attitude towards the

product.

We can identify six types of publics

1. Financial publics influence the companys ability to obtain funds. For example, Banks,

investment houses and stockholders are the major financial publics.

2. Media publics carry news and features about the company e.g. Deccan Herald

3. Advertisement regulation agencies, telecom regulation agency( TRAI), and insurance regulation

agency(IRDA) of the government

4. Citizen action groups: Formed by the consumer or environmental groups. For example, people

for ethical treatment of animals (PETA) or Greenpeace.

5. General publics: a company should be concerned towards general publics attitude towards its

products and services.

6. Internal publics: Employees who help in creating proper image for the company through word of

mouth.

3.3.4. Competitors

A company should monitor its immediate competitor. The product should be positioned differently

and able to provide better services.


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3.3.5. Suppliers

Suppliers are the first link in the entire supply chain of the company. Hence any problems or cost

escalation in this stage will have direct effect on the company. Many companies adopted supplierrelation management system to manage them well.

3.3.6. Customers

A company may sell their products directly to the customer or use marketing intermediaries to reach

them. Direct or indirect marketing depends on what type of markets Company serves. Generally we

can divide the markets into five different categories. They are

a. Consumer market.

b. Business market

c. Reseller market

d. Government market and

e. International market

You will come to know about these five different markets from the following example.

MRF a tyre company sells its product directly to consumer (in case of urgency, customer purchases

directly from showroom) i.e. operates in consumer market. It operates in business markets by selling

tyres to companies like Maruti Udyog limited. MRF also sells TYREs to BMTC and KSRTC, transport

organizations of Karnataka government. If MRF sells tyre in African or American countries then it is

operating in the international market. If MRF buys the old tyres, retreads it and sells it to the

consumer at a profit then company is operating in the reseller market.

Self Assessment Questions 1

1. Political and legal environment belongs to environment.

2. Suppliers are part of marketing intermediaries

a. True b. false

3. Newspaper is an example of

a. Citizen action publics

b. Internal publics


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c. General publics

d. Media publics

4. In market, company buy goods and services to resell at a profit.

5. Retailers are final link between and

3.4. Companys macro environment.

Figure 3.2 Forces in the macro

environment.

3.4.1. Demographic Environment.

Demography: The study of population characteristics like size, density, location, gender composition,

age structure, occupation and religion.

Demography statistics helps companies to develop their products in better way. These statistics arealso used in developing proper supply chain, communicating product information and changing the

product attributes. Demographic environment is analyzed on the basis of the following factors.

1. Age structure of the population

Macro

Environment


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2. Marital status of the population

3. Geographic distribution of the population

4. Education level

5. Migration

6. Occupation.

Age structure of the population: from the following table you can generalize that India is having

48% population who are aged less than 21 and 28% of the population are in the bracket of 21 25.

Many marketing companies are focusing on these two segments. For example, Radio Indigo, FM

radio station from Jupiter capital venture operates in Bangalore and Goa, plays international music.

Radio indigo targets youth segment who like western music.

TABLE 3. 1: POPULATION IN DIFFERENT AGE GROUPS AND THEIR PROPORTIONS TO

TOTAL POPULATION

Age group Population Percentage

All Ages 1,028,610,328 100.0

0 110,447,164 10.7

5 128,316,790 12.5

10 4 124,846,858 12.1

15 19 100,215,890 9.7

20 4 89,764,132 8.7

25 44 284,008,819 27.6

45 64 139,166,661 13.5

65 9 41,066,824 4.0

80+ 8,038,718 0.8

Less Than 18 422,808,543 41.1

Less than 21 492,193,906 47.9

Age no stated 2,738,472 0.3

Source: C2 and C14 Table, India, Census of India 2001.


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Marital status of the population:

TABLE 3.2: POPULATION BY MARITAL STATUS AND SEX: INDIA 2001

Marital statusNumber of Persons ( in '000) Percentage to Total

Persons Males Females Males Females

Total 1,028,610 532,157 496,454 100 100

Never Married 512,668 289,619 223,048 49.8 54.4

Married 468,593 231,820 236,773 45.6 43.6

Widowed 44,019 9,729 34,290 4.3 1.8

Divorced /

Separated 3,331 988 2,343 0.3 0.2

Source : C2 and C14 Table, India, Census of India 2001

Half of the Indian population falls into the never married category. This provides an opportunity for

organized wedding industry. Indian wedding industry is worth Rs 1, 25,000 crore today. Vintage

group and shaadi.com are few to name in this industry. These companies are offering end to end

solution to the customers who are looking for lavish wedding in the exotic locations both in domestic

and abroad.

Geographical distribution of the population

Table 3.3 Rural urban distribution of the population

Population

Persons 1,028,737,436

Males 532,223,090

Females 496,514,346

Rural 742,617,747

Urban 286,119,689


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% Urban population 27.8%

Rural India with 74 crore population is a biggest market. Companies are trying to get a pie in this

untapped market. For example, DCM Shriram limited, opened Hariyali bazaars in rural market.

These bazaars offer quality agriculture inputs, financial services, and farm output services.

Education level: More than 3 crore people in India either have graduation or post graduation. This

has led to the growth of many sunrise sectors. This educated population fuelled the growth of

information technology (IT), information technology enabled services (ITES), and biotechnology

industries.

TABLE 3.4: NUMBER AND PERCENT LITERATES BY LEVEL OF EDUCATION: INDIA 2001

Level of educationAbsolute Numbers (000')

Persons Males Females

Literate 560,688 336,534 224,154

Literate without educational

level $20,023 11,361 8,662

Below Primary 144,831 81,148 63,683

Primary 146,740 83,525 63,215

Middle 90,227 55,940 34,286

Matriculation/Secondary 79,230 51,202 28,028

High secondary/

Intermediate/PreUnivercity/

Senior Secondary

37,816 24,596 13,220

Non technical diploma or

certificate not equal to

degree

386 259 128


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Technical diploma or

certificate not equal to

degree

3,667 2,901 766

Graduate and above 37,670 25,533 12,137

Migration: Geographical shift in the population is becoming an interesting area in the demographic

studies. The Table 6, list out the various reasons for migration.

TABLE 3.5: NUMBER OF MIGRANTS BY PLACE OF BIRTH INDIA 2001

CategoryMigrations by Place of

birthPercentage

A. Total Population 1,028,610,328

B. Total Migrations 307,149,736 29.9

B.1 Migrants within the state of enumeration 258,641,103 84.2

B.11 Migrants from within the districts 181,799,637 70.3

B.12 Migrants from other districts of the state 76,841,466 29.7

B.2 Migrants from other states in India 42,341,703 13.8

B.3 Migrants from other countries 6,166,930 2.0

Source: Table D1 India, Census of India 2001.

TABLE 3.6: REASONS FOR MIGRATION OF MIGRANTS BY LAST RESIDENCE WITH DURATION

(0 9 YEARS) INDIA 2001

Reason for

migrations Number of Migrants Percentage to Migrants

Persons Males Females Persons Males Females

Total migrants 98,301,342 32,896,986 65,404,356 100.0 100.0 100.0


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Reason for migration :

Work / Employment14,446,224 12,373,333 2,072,891 14.7 37.6 3.2

Business 1,136,372 950,245 186,127 1.2 2.9 0.3

Education 2,915,189 2,038,675 876,514 3.0 6.2 1.3

Marrige 43,100,911 679,852 42,421,059 43.8 2.1 64.9

Moved after birth 6,577,380 3,428,673 3,148,707 6.7 10.4 4.8

Moved with

households20,608,105 8,262,143 12,345,962 21.0 25.1 18.9

Other 9,517,161 5,164,065 4,353,096 9.7 15.7 6.7

Source: Table D3, Census of India 2001

Marketers started identifying the niches in the migrated communities and offered their goods and

services. For example, Nandhini, an Andhra restaurant in Bangalore catering to the food needs of the

Andhra community. Patrika, a Rajasthan based daily now available through out the country.

Occupation:

TABLE 3.7: DISTRIBUTION OF MAIN WORKED BY DIFFERENT INDUSTRIAL CATEGORIES,

INDIA 2001

Industrial category Main Workers ('000s) Percentage (%)

Total main workers * 312,972 100.0

Agricultural & allied activities 176,979 56.6

Mining & quarrying 1,908 0.6

Manufacturing 41,848 13.4

Electricity, gas and water supply 1,546 0.5

Construction 11,583 3.7

Wholesale, retail trade & repair work, Hotel and 29,333 9.4


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restaurants

Transport, storage & communications 12,535 4.0

Financial intermediation, Real estate, business activities 6,109 2.0

Other services 31,131 10.0

Source : Industrial classification data based on sample

Agriculture is the main occupation of the people in India but the share of other services is growing

rapidly. The other service category includes IT and ITES. Employees of these categories have high

disposable income. This has led to the opening of specialty stores and manufacturing of the luxury

items in the country.

3.4.2. Political And Legal Environment.

Government policies, legislations, regulations, and stability will directly affect the business. Therefore

it is inevitable for the firm to closely monitor this environment. The political and legal forces are

grouped into the following four categories.

Monetary and fiscal policies: These policies regulate government spending, money supply and tax

legislations.

1. Social legislations and regulations. Environmental protection act which specifies the emission

level.

2. Government relationships with industries: Government subsidies and change in tariff rate will

have direct impact on the particular company.

3. Legislations related to marketing: Following are the list of legislations which affect marketing

activities of the company.

Table 3.8

Companies act 1956. Industrial dispute act 1957

Consumer protection act Minimum wages act

Payment of bonus act. Environmental protection act


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Changes in income: The rise in the salaries of the employees, improved performance of stock

market and better industrial growth led to the change in the income pattern in India. Many Indians

became millionaires and billionaires. Percentage of below poverty line is decreasing, but the concern

is rich and poor divide is growing.

Natural Environment:

Environmental concerns are growing over the years. Governments increased regulations to manage

the natural resources. Marketers should aware of such trends in the natural environment. Some of

the factors which organizations should keep a vigil are

a. Inadequate raw materials

b. Global warming and pollution levels andc. Regulatory world.

a. Inadequate raw materials: We are over depending on Middle East countries for petroleum

products. Automobile companies are improving their technologies and also planning to come out

with hybrid cars which use alternative fuels.

b. Global warming is a big issue today.

c. Regulatory world The Indian government through environmental protection act, making stringent

rules on emission and environment standards. Companies, particularly in automobiles should

adhere to those norms, which are expensive and time consuming.

3.4.4. Social and cultural environment:

1. Working women and rise of metro sexual man.: Number of women who are working in India is

increasing. This segment is looking towards products which help them in bringing better work life

balance. MTR a fast food giant in south India started offering ready to eat products to this segment.

These products are instant in nature where a woman dips a product in the hot water for 2 3 minutes

and serves. Metro sexuality is another new phenomenon, wherein a man also assumes the role of

women like purchasing household items and helping in kids education etc. It made marketers taskmore difficult on positioning their products.

2. Time short people: This segment involves people who work long hours and have less personal

time. These people are looking for products which satisfy them quickly and conveniently. For


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example, Easy bill, from Hero group offers one stop solution to consumer to pay their utility bills and

do other financial transactions.

3.4.5. Technology environment

1. Growth of information technology and biotechnology industries: Information technology has

revolutionized the lives of the people. It bought dramatic changes in the way organizations operates.

It helped in cost reduction, automation, better communication and efficiency in the organizations.

Indian banks few years ago use to take lengthy time to process the customer requests reduced it to

few hours because of information technology.

2. Nano technology: The technology in waiting, which is expected to reduce the size and cost of the

materials.


1. Demographic environment is the study of characteristics.

2. Inflation is studied in environment.

3. Ready to eat product is targeted to working women segment

a. Yes b. No

4. Which of the following is not the macro environment variable?

a. Technology environment

b. Competitive environment

c. Social and cultural environment

d. Demographic environment

5. is the major occupation in India.


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3.5. Difference between Micro environment and Macro environment.

Table 3.9

Macro environment Micro environment

Size Large small

Control Cannot be controlled Can be controlled to some

extent

Uncertainty Very high low

complexity High low

Examples Political, social, cultural,

technology, demography andnatural environment

Customer, publics, competitors,

suppliers and intermediaries.

PEST (Political and legal, economic and natural, social and cultural, and technology

environment) Analysis:

Table 3.10

Factors Opportunity Threat

1. Political and legal environment

a. Monetary policy

b. Fiscal policy

c. Environmental policy

d. Lobby groups

2. Social and cultural environment

a. Gender

b. demographics

c. work culture

3. Economic and natural environment

a. Income

b. Spending power

c. Inflation


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d. Interest rate

e. Raw materials

f. Taxation

4. Technology environment

a. Entry barriers

b. Growth of technology

c. Transfer of technology

3.6. Summary

1. Environment scanning is necessary to understand opportunities and threats faced by the

company.

2. Micro environment factors like marketing intermediaries, suppliers, competitors, publics and

customers influences companys strategies. These are controllable to some extent.

3. Population variables like age, gender, marital status and occupation helps the company to

assess the market and change or develop their offerings

4. Shortage of raw material and increase in the income disparity are immediate concerns of the

organizations.

5. Working women and time short people changing the socio cultural environment of the country.

6. Technology is helping company to reduce cost, increase the efficiency and save time.

7. Micro and macro environment are differentiated on the basis of size, complexity, and uncertainty.

Terminal Question

1. Explain the need of environment scanning.

2. Discuss the forces in micro environment and their influence on companys strategies.

3. Bring out the difference between Macro environment and micro environment.

4. Write a note on demographic environment in India.

5. Discuss the importance of political and legal environment study with examples.


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Answers To Self Assessment Questions


1. Macro

2. False

3. Media publics

4. Reseller market.

5. Company and customers


1. Population

2. Economic and natural environment.

3. Yes

4. Competitive environment.

5. Agriculture.

Answer to Terminal Questions

1. Refer 3.2

2. Refer 3.3.

3. Refer 3.5.

4. Refer 3.4.1

5. Refer 3.4.2.

3 marketing environment

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