Composition and Functioning of the Marketing Environment

In the marketing environment, the economy and businesses of a country are affected by things that happen throughout the world. For example, the economic consequences of the decline of the Far-Eastern economies are already impacting the Nigerian economy.

These consequences include a drop in exports to these countries and a drop in the Nigerian Naira exchange rate against major currencies such as the British pound and the American dollar. 

It will make it more expensive to import foreign products but will hopefully make Nigerian products cheaper when exported.

The flip side, however, is that with the devaluation of the Far East monetary units (the Singapore dollar, Malaysian ringgit, and the baht of Thailand). 

Exporting from these countries will also be more competitive, thus, creating an extremely competitive international marketplace. It is an example of the influence of the marketing environment on some countries, and their businesses, employees, and citizens.

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Some of the effects of the market environment are felt more directly by enterprises, while others have a more indirect way of influencing the business environment. 

For instance, a drop in the economic activity of a country such as Nigeria brought about by a poor agricultural output due to inadequate rainfall with a resounding effect on the employment figures in the industry. 

However, it will then have a knock-on effect on tertiary industries such as the tractor repair and service industry, food sales, and the general economic survival of several rural towns in Nigeria. 

Effects on variables such as those discussed above, it is, therefore, necessary to understand the functioning of the marketing environment. 

Within the marketing environment, there are three sub-environments (micro- environment, market environment, and macro-environment) – each of which affects the day-to-day running of an enterprise.

The Chief Executive Officer (CEO) of an enterprise and its management team should evaluate the effects of the marketing environment on business, and one of the ways of doing this would be utilizing a SWOT analysis (identifying the strengths and weaknesses of opportunities for and the threats to the business). 

Remember that any business should be able to do a SWOT analysis.

The Marketing Environment

Composition and Functioning of the Marketing Environment

The marketing environment consists of three components, called sub-environments, which are known as the micro-environment, market environment, and macro-environment. 

Each sub-environment consists of variables capable of influencing an enterprise, its workers, and their families. 

Note that this kind of competition is not only encountered in the formal sector of the economy (For example, in the case of price competition on groceries between Shoprite Checkers and Pick and Pay). 

But can also exist in the informal sector between two electronics shops trading on the same street in Tinubu Square, Lagos, for example:

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The Micro-Environment

Micro-environment of a business is the activities that are put in place by that business. An enterprise must perform diverse activities to function well and attain profit objectives.

To put this into a clearer view, let us look at the Hajiya Amina Florist Shop in Balogun Market, Lagos. Hajiya Amina employs two permanent flower arrangers as well as a delivery person. Her rent per month is N3,000.00. She must pay N600.00 per month on a delivery vehicle.

The flowers she purchased from the market must be paid for in cash. Within these limitations of the micro-environment, Hajiya Amina must fulfill her commitments and earn enough to make a living for herself and her two children!

This example illustrates the influence of the micro-environment on the enterprise. It also shows control of most of the activities which are part of the micro-environment (The business owner may decide to employ less staff or to move to cheaper premises). 

The variables in the micro-environment must be managed entirely by Hajiya Amina to ensure success.

These variables are also known as controllable variables. Below are brief explanations of this micro-environment.

The Product

Managing the product entails planning and developing the right products and services to be marketed by the business executives. 

Guidelines are needed for changing existing products, adding new ones, and taking other actions that affect the assortment of products. 

Price

Determining the right base price for its enterprise products is one of the crucial micro-variable factors to be considered by the enterprise. 

Also, establishing policies concerning discounts, freight payments, and many other price-related variables form part of the enterprise board to ensure that all objectives are met.

Promotion

Promotion entails those weapons used to inform and persuade the markets. These include advertising, personal selling, publicity, and sales promotion.

Distribution/Place

It is concerned with the management of the marketing intermediaries for the distribution of enterprise products. Every business’s responsibility is to select and manage the trade channels through which the products will reach the right target markets at the right time and develop a distribution system.

The management or marketing executives can manipulate these variables to meet the enterprise objectives. For example, the feature of a product can be re-attained, and prices can be increased or reduced depending on the market situation.

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The Market Environment

The main variables in the market environment are:

• Consumers
• Competitors
• Intermediaries
• Suppliers.

These variables will influence the enterprise, which makes it imperative for management to react to opportunities and threats in the market environment.

(1) Consumers

Are the people buying your products and services? Identifying the target market for your product or service is one of the most crucial management activities to be undertaken by management.

(2) Competitors 

Are a natural part of a capitalistic society. We are accustomed to the fact that various competitors compete for our money in the case of most products and services. 

The example of Toyota and the competitive environment in which it operates illustrates this point.

(3) Intermediaries 

Intermediaries such as wholesalers and retailers evolved to bridge the gap between the manufacturer and the supplier. 

New developments in this field constitute opportunities for, or threats to, certain enterprises operating in this particular industry. 

An example is the development of convenience shops at petrol filling stations and the effect on traditional convenience stores, such as cafes, in Nigeria.

(4) Suppliers 

An enterprise is dependent on suppliers to run its business. One such example of a supplier is the supplier of capital to an enterprise. 

Traditionally, commercial banks are the suppliers of funds to small and medium businesses. 

Listed companies such as (Nigerian Bottling Company) and makers of Coca-cola have an additional supply of capital provided by their shareholders.

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The Macro-Environment

It is crucial to realize that the enterprise operates within a bigger macro-environment.

The enterprise cannot always control these variables and must be evaluated to identify potential opportunities.

The increase in the world crude oil price during Iraq’s aggressive expansionist period in the early nineties (during the Gulf War) is an example of the influence of a macro-variable on business in general and specifically on the ordinary citizens of a country.

(Remember the drastic increase in the price of petrol in Nigeria).

The following six macro-variables in the macro-environment may affect the enterprise at any time:

• The technological environment
• The economic environment
• The social environment
• The natural or physical environment
• The institutional/political environment
• The international environment.

You should have identified six variables that may affect Hajiya Amina Enterprises in many ways. Let us examine them now!

The Technological Environment

This environment is affected by innovation and change. For example, new manufacturing processes and the latest technologies may influence the type and quality of clothing sold by wholesalers and retailers in Nigeria. 

One needs only to think of the new types of material available, such as those combining natural and synthetic fibers to create crease-resistant material.

The economic environment

This variable is well known to everyone. An increase in the inflation rate, changes in the exchange rate, and a higher rate of personal income tax are examples of how the economic environment may influence wholesalers and retailers in Nigeria.

The social environment

Social changes are prevalent throughout the world. A decline in the population growth rate may eventually harm sales of trendy imported clothing in the affected market. 

The changing role of women in society (more women in full-time positions and more career women as experienced in this democratic dispensation) may be a positive variable in the case of Hajiya Amina Enterprises and may result in a higher turnover. 

To add to the complexity of the task facing marketing executives, cultural patterns such as lifestyles, beliefs, norms, values, folkways, etc. 

The natural or physical environment

This variable is of great concern to people all over the world. Scarce resources are integral in the packaging of clothing. 

Wastage of packaging material must be of concern to Hajiya Amina Enterprises, for example.

The political/government is also called the institutional environment

This variable in the macro-environment would be of particular concern to Hajiya Amina Enterprises. One example of the effect of this variable would be surcharges on imported clothing. 

It will influence the selling price of the clothing sold by Hajiya Amina Enterprises in Nigeria. Other variables include general and fiscal policies.

The international environment

As was said at the beginning of this topic, Nigeria is part of the global village. As such, our economy and its businesses are directly influenced by economic development in the Far Eastern countries, for example.

 In the case of Hajiya Amina Enterprises, it may benefit from a better exchange rate, enabling Mr. Audu Giya to import his clothing at an affordable price.

Now you should know that the macro-environment is an active force that influences each enterprise operating in Nigeria, which no business, big or small, can ignore. 

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