Marketing Environment| LGMW01/01
Marketing Environment – Marketing Management
Marketing, in today’s age of cut-throat competition and technological advancements, is not devoid of influences. Every decision made by the firm or the brand is a product of a range of influences and pressures. A firm’s marketing efforts are affected by numerous factors such as company policies, employees, labour laws, tax regulations, and environmental regulations, to name a few. The very environment that the firm thrives in has the ability to affect it and shape its decisions, due to the former’s dynamic nature.
According to Philip Kotler, a company’s marketing environment consists of the internal factors & forces, which affect the company’s ability to develop & maintain successful transactions & relationships with the company’s target customers. Although the definition restricts itself to describing the effects that internal forces can have on the firm’s marketing effort, it is, in fact, a sum of internal and external forces within which a firm operates, which is termed as Marketing Environment.
The marketing environment can thus be broken down internal environment, micro environment and macro environment.
Any forces that affect or have the potential to affect a business, that are inherent to the firm itself, are classified to fall under the internal environment. These are challenges that come from within the firm, and thus, can be easily dealt with and manipulated by the firm itself. It comprises of individuals and organisations that are directly connected to the company.
Consider Target Australia, a retail chain owned and operated by the Wesfarmer Group. Its internal environment would comprise of its 24,000 strong workforce across its stores, distribution centres, support offices and buying offices, its cash position and cash flow, its physical and intangible assets that include the stores, distribution centres, the stock, the logo and brand name, the structures and materials. In the case of its employees, any demands from their end with respect to pay or benefits could affect Target’s budgets, employee satisfaction and even its customer engagement . Thus, Target would carefully consider its recruitment policies and pay attention to its employees performance and their annual reviews to ensure that they affect the business positively.
The micro environment comprises of forces and factors that are directly related to the company, albeit being external. These can include internal as well as external stakeholders, suppliers, intermediaries, consumers and competition.
Target Australia’s typical consumer base comprises mostly of women, early 30s onwards, with children and with an annual household income of about AU $65,000. Any change in the consumer tastes and preferences or consumer buying patterns would directly affect Target’s marketing decisions, pricing, product assortment and other marketing related aspects.
In such an interdependent environment, Target pays close attention to building a good relationship and communication strategies with its suppliers, consumers and other stakeholders. It also focuses on the actions of its competitors in terms of their pricing, product developments, branding exercises and so on.
Using Porter’s Five Forces Model, one can evaluate the impact of micro environmental forces on one’s area of business. It not only provides an insight into the extent of the impact, but will also help the firm in designing and executing its market STP strategies .
Possibly the most uncontrollable of all environmental factors, the macro environment is a purely external force of influence to a firm. It is usually out of the control of the firm, and comprises of political, economic, social, technological, environmental and legal factors, better known as PESTEL
Consider the retail environment that Target Australia operates in. The retail sector is governed and affected by each factor that forms PESTEL. An increase in value added tax or goods tax would effectively increase the price of the store’s goods. Similarly policies on importing raw materials or finished goods could affect the retail chain’s sourcing policies. The development of RFID technology could affect the supply chain deliverables and tracking, while governmental norms on environmental aspects such as waste management and recycling could affect packaging and disposal of goods. Furthermore, Target Australia’s profitability could be affected by aspects such as changes in demographics and income levels of the consumers, the economic conditions of Australia and changes to labour laws according to the experts of ExpertAssignmentHelp
It is important to note that these forces are wider in terms of their impact, and also, largely uncontrollable. A proper analysis of these factors using tools such as PESTEL and SWOT would help a firm gain awareness and insight into the dynamic external forces, and leverage these forces to its advantage, if possible.
The marketing environment comprises of dynamic factors that affect and shape a firm’s marketing strategies. This combination of external and internal forces makes it prudent for firms to undertake a thorough analysis of the environment in which they operate, as only then will these firms be at a position to chalk out marketing strategies that can increase their profitability and investor wealth, while creating a positive space for itself in the consumers minds.
Other articles under blog series of “Marketing Management”
- Marketing environment
- Consumer behavior
- Organisational buyer behavior
- Market segmentation, targeting and positioning
- Branding and product development
- Marketing plan
- Customer relationship management (CRM)
- Consumer buying process
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