It is obvious that no business organization is isolated. They operate in the environment. The factors of this environment affect the functioning of the organization. Some factors are within the organization whereas others are outside it and they affect the marketing activities of the firm. Both outside and inside factors make up the marketing environment of the business.
What is Marketing Environment?
The marketing environment is the combination of internal and external factors that influence the ability of organizations to serve customers and achieve marketing goals.
These internal and external forces, directly and indirectly, affect the marketing activities of the organization. While internal factors are manageable by the management, external factors are uncontrollable.
Marketing Guru Phili Kotler defined it as – A company’s marketing environment consisting of actors and forces that affect the company’s ability to develop and maintain successful transactions and relationships with its target market.
The marketing environment provides both threats and opportunities to the organization. It is the duty of marketing managers to be up-to-date with the changes in the environment and apply the best marketing strategies to gain the benefits of market changes.
Characteristics of Marketing Environment
The following are the key features of the marketing environment.
It is dynamic in nature. The components of marketing environments change as time passes. The change can be seen in government policies, customer preferences, competitors’ strategies, etc.
The forces of marketing environments are also uncertain. It is very difficult for marketers to predict the future condition of the environment. Even though, you as a marketing manager, constantly study and analyze the market you may face unexpected situations.
It is also relative in nature. It means that the same factors of the environment do not have the same effect all over the world. For example, a product that is famous and liked by most people in India might not be liked when offered to American people. It is relative to place, market, and situation.
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The interaction and combination of its different factors make it complex which influences the company’s ability to serve customers and establish good relationships.
Opportunities and Threats
Marketing environments provide both opportunities and threats to your organization. Opportunities are positive factors if exploited properly provide benefits. Whereas, threats are negative factors that prevent your firm from achieving marketing goals.
Types of Marketing Environment
There are two significant types of marketing environments – internal and external environment. While the internal environment has a direct impact on the firm, the external environment has mostly an indirect effect.
Internal Marketing Environment
The internal environment of an organization includes all the factors within the organization that influence its marketing activities. These factors have a direct impact on organizational marketing operations yet they are controllable to the manager.
Some of the internal environmental factors include:
- Objectives – Objectives are expected outcomes your business wishes to achieve within a specified period of time from the marketing operations. The objective may be to achieve customer satisfaction, increase profitability, meet competition, etc.
- Structure – Organizational structure defines what everyone’s roles, status, and responsibilities will be in order to achieve desired marketing goals.
- Resources – Resources are necessary to create and implement marketing plans. This may include people, information, capital, and other physical resources.
External Marketing Environment
The external environment of marketing can be further categorized as micro and macro environments. Factors of both micro and macro marketing environments are uncontrollable by the marketing manager.
The micro-environment is made up of factors close to the company. These forces affect the company’s ability to serve customers. The components micro-environment consist of suppliers, customers, competitors, the public, marketing channels, etc.
- Customer – Customers are the users of your product.
- Suppliers – Suppliers include the organizations or some people who are responsible for providing your raw materials.
- Marketing Channels – These include the parties who make possible the distribution of products to final consumers.
- Competitors – These are the parties who are involved in the same business your organization does and even target the same audience.
- Public – This can be any group of people who are interested in your business and may affect your firm’s ability to serve customers.
The macro-environment operates at a broader level and affects the marketing operations of the business as a whole. External environment variables are located outside the organization and include forces like demography, economy, technology, politics, and natural environment.
- Political Environment – This includes factors like government laws, rules, and policies that influence the working of the companies. For instance, if the tax rate is changed, the marketing manager must look into it.
- Economic Environment – This environment constitutes factors like the income level of customers, living standards, level of employment, the economic policy of a government, GDP, and other economic variables.
- Socio-Cultural Environment – This consists of people i.e. society’s values, traditions, culture, lifestyle, beliefs, etc. Since business operations in society, it must respect such factors.
- Technological Environment – Development in technology has changed how companies used to promote products. Now marketing activities have shifted from physical to digitalization.
- Demographic Environment – It is composed of the individuals who make up the market. It is defined as the factual analysis and division of people into groups based on factors such as size, density, geography, age, gender, race, and occupation.
- Natural Environment – Changes in the natural climate, availability of natural resources, pollution, etc. factors also affect a company’s marketing activities.
- Global Environment – Now businesses are in a global age. Products or marketing activities of a business are now directly and indirectly affected by the global market.
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Importance of Marketing Environment
Having the right understanding of what is going on in the environment of your business will provide various benefits to your company. Every business operates in some environment, the difference may be that the environment will be small and big and the competition level will be different.
A proper understanding of the marketing environment will help businesses in the following ways.
Provide the Opportunities and Threats
A careful understanding of the factors of marketing environments will help you to be aware of probable opportunities and threats. As such, it enables your business to be ready to exploit opportunities and identify strategies to get less affected by probable threats.
Helps in Planning
An effective plan is necessary to get the desired results. When you are aware of the current scenario, dynamism, and future conditions of the market you will be able to set the right marketing plans that generate satisfactory results.
Understand Strengths and Weaknesses
The marketing environment also consists of the internal environment of the organization. It helps to identify the business’s strong and weak points also.
With an understanding of the marketing environment, you also be able to understand your competitors. This lets you better understand what the competitors are doing, what their product is, how they are serving, and what their next plan will be.
Such sufficient information about the competitors enables companies to better design their marketing strategy, implement it better than competitors, and realize the competitive advantage.
In a changing economy, keeping an eye on the marketing environment also aids in managing changes and maintaining growth. By observing their marketing environment, you may foresee and choose marketing methods that best fit that situation.
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