There are several factors which affect a firm. All the factors which affect the operations of a firm are known as marketing environment. Few of these factors can be controlled by the firm but not all. In order to deal with these factors, firm must understand their market environment so that positive and negative factors would be managed accordingly.
“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
In other words, a firm is surrounded by internal and external force which have a great effect on firm’s ability to maintain lasting relations with target customers.
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The internal marketing environment of a firm comprises all those factors which are inside firm marketing activities, including the firms' employees, firms policies, firms capital assets, firms organizational structure and its products and services. The firm can control these factors.
External environment consists both Micro environment and Macro Environment. These external factors are not controlled by a firm, but they greatly influence the decision of marketers when developing the marketing strategy. There are two types of the external environment of a business.
Please also read the 3 Cs of marketing is a very useful concept for marketers that examine Customers, Competitors and Company.
Micro Environment Factors
The Supplier: Business success depends on the suppliers when they enjoy an authority. The supplier of a company holds the power when they are the only one in the market or when they are the largest supplier of the goods. The buyer is not essential to the suppliers business, as the supplier’s good is the core ingredient of the finished product of buyer.
The Resellers: The success of companies marketing strategy also depends on resellers if the finished goods of a company is taken to market by market intermediaries or any other third party. These forces include wholesaler, retailers etc. For example, If the retail seller holds a reputable name in the market then their reputation can impact the marketing of company’s product.
The Customers: The success of marketing strategy also depends on the customers of company’s product. The nature of customer such as b2c, b2b, international or local and the reason for buying the product will play a role in establishing the marketing strategy of company and how they approach the customers and serve them.
The Competition: Market competition exists when two or more firms sell same or similar products and services. The companies must take into account the way they approach the customers and sell their products to the customer, what price and product differentiation they have for their customer. These factors can be taken into account to get edge over their competitors.
The General Public: The satisfaction of general public is a duty of organization. Company must take decisions while taking the perspective of general public into consideration and how they will get affected by their decision. The customers hold the power to make a win-win situation for a company by helping it reach the goals.
Macro Environment Factors
Demographic Factors: Demographic forces do impact the different market segments, which includes region, country, age, educational level, ethnicity, lifestyle, cultural norms and values.
Economic Factors: The organization production and decision making process of customer also affected by the economic environment.
Natural/physical Factors: The Company must take into account the renewal of the natural resources of the earth such as agricultural product, forest, marine resources etc. The organizations production can also be affected by the non renewable resources which includes coal, oil mineral.
Technological factors: The organization must consider the technological factors as the knowledge and skills used in production of goods. The technology and materials used in production of goods and services helps in smoothing the process of business.
Political and Legal Factors: The organization should take into consideration the political and legal development relating to market and organization during decision-making process.
Social and Cultural Forces: The impact of your organization’s services and products on the society must be taken into consideration. If there is any element used in production process or product that is harmful to society should be avoided as it is a social responsibility of an organization. A most recent example is the environment and the organizations and sectors who have reviewed their services and products to be considered environmentally friendly.
Example of Marketing Environment
The study of decisions that people and businesses make for resource allocation and prices for services and goods is known as Microeconomics. The governmental regulations and tax policies are also taken into consideration. Microeconomics solely focuses on marketing environmental forces that determine the level of price, supply and demand in an economy. For e.g. microeconomics factors see how a company would do to maximize the production and capacity in order to lower the prices of its products and to compete in the industry in better and efficient way.
Macroeconomics, on the other hand, is the study of whole economy which includes the study of complete industry and economies, not just of a specified company. This involves the phenomenon’s which are economy-wide, such as Gross National Product (GDP) and how changes in the economical factors such as national income, unemployment, growth rate and level of price affects it. For instance, the impact of net- exports on nation’s capital account or effect of unemployment rate on GDP.
The macro and micro economics is considered as the study of two diverse divisions of economy. Whereas there are several issues in both fields that make them inter-reliant to each other. For instance, the price of end product would increase with the increase of inflation rate, as with the increase of inflation rate, the price of raw material will increase that will end up with increase in price of finished goods.
The microeconomics adopts the bottoms-up approach whereas macroeconomics has a top-down tactic to analyze the economical situation.
Studying Macroeconomics factors and microeconomics factors concurrently plays a vital role in establishing a successful business as it provides elementary means for professionals to operate the business in an efficient and effective way to generate sound revenue.
Strategic marketers must take into consideration the micro-economic factors and macro-economic factors during decision-making process as these forces have a major effect on the marketing campaigns success. Thus marketing environment forces can play a vital role in the success of a business, its marketing strategies, marketing campaigns and its branding.