Marketing environment is a very important element that must be critically studied and evaluated before undertaking any business. The environment where the business is situated along with other factors determines the success or failures of such business. Inability of some businessmen to understudy the business environment has made them to run into avoidable loss.
Thus, a company’s marketing system must operate within the framework of forces that constitute the system’s environment. These forces are either external or internal to the firm.
Marketing executives do not have control over external variables; but these variables can be influenced by business activities, while internal variables can be manipulated and controlled. Thus, environmental marketing variables are critical to the success of any business. This unit looks into external and internal variables that affect marketing activities.
External Marketing Environment Defined
The external marketing environment comprises variables that are referred to as uncontrollable. They are regarded as uncontrollable variables because they cannot be changed by marketing executives.
They can only influence them to their business advantage. They are also regarded as constraints and opportunities for the company. These variables are examined below.
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1. Economic Conditions
The economic system of a country determines the inflow and outflow of goods and services. That is, the economic system influences how resources are shared and deployed for production purposes. This, thus, influences the planning and price mechanism in the economy.
It, therefore implies that a company can either operate in a communist, capitalist, or mixed economy. The economy determines the purchasing power and disposable income of consumers. The economic system being practiced is not a guarantee for business survival. That is, people alone do not make the market. They must have money to spend and be willing to spend it.
The condition of the economy is a significant force that affects the marketing system of any organization- whether business or non-business. For example, during prosperity, consumers have higher purchasing powers and are more willing to buy goods and services offered in the market.
While, during recession, consumers have less purchasing power and they are less interested in spending their income on available goods and services. Perhaps, the most pervasive macroeconomic element affecting marketing is the factor of economic growth (Stanton, 1981).
Nations pass through various economic systems. These vary from subsistence to industrialized systems. The implications of these stages of economic systems cannot be under estimated. Other economic variables which can be of interest to marketing executives include interest rate, money supply, inflation, and credit facilities.
2. Demographic Environment
Demography is the statistical study of human population and its characteristics-in terms of distribution. Demography is, essentially, important to marketing managers. This is because people who have money to spend and the willingness to spend it-make up what is referred to as market.
Marketing managers are also interested in the size and growth rate of the population in different cities, regions, and nations; they are also interested in age distribution and ethnic variables.
Other variables include educational levels, household patterns and regional characteristics and movements. Marketing managers should, therefore, analyze the geographic distribution and demographic composition of the population as a first step towards understanding the consumer market.
3. Social and Cultural Environment
The society in which people grow up shapes their beliefs, values, and norms (Kotler, 1997). People absorb, almost unconsciously, a world view that defines their relationship to themselves, to others, to nature and to the universe.
The social cultural environment, really, encompasses the economic, political-legal and technological variables. People and their socio-cultural customs and beliefs are, fundamentally, what shape the economy, as well as the political legal system and technology.
The impact of the socio-cultural environment on marketing system is reflected in several sections of our communities- for example, people’s view on the society.
It should be noted that people vary in their attitudes towards their society. Some define it, some run it, some take what they can from it, some want to change it, some are looking for something deeper, while some want to get away from it.
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Some of the important socio-cultural variables that affect marketing activities include-religious beliefs, the role of marriage, peoples’ feeling and dressing, and societal festivals.
People living in a particular society hold many core beliefs and values that tend to persist over time. For example, in African culture, it is expected that a younger person should respect an elderly person. Specifically, a younger person prostrates for an elderly person in the Yoruba culture. While in Nupe culture, he/she stoops for an elder. Besides, our mode of dressing also reflects our cultural orientation.
The values held by members of the society will determine what the people want and how they expect their business to perform, or what social responsibilities business (executives) should shoulder.
For example, pork meat business cannot flourish in northern Nigeria, because of their religious beliefs. Likewise, suit business would hardly survive in northern Nigeria for instance due to their cultural orientation. Thus, marketing managers should be conscious of the variables within the society they operate.
Each society contains subcultures, various groups with shared values emerging from their special life-experiences or circumstance. To the extent that sub cultural groups exhibit different wants and consumption behavior, hence they serve as marketing opportunity.
Marketers sometimes reap unexpected rewards in targeting subcultures. Although core values are fairly persistent, cultural swings do take place. Thus, marketers should have a keen interest in sporting cultural shifts that may create new marketing opportunities or threats.
4. Political and Legal Environment
Marketing decisions are strongly affected by developments in political and legal environment. The environment is composed of laws, government agencies, pressure groups, and government policies that influence and limit the affairs of organizations and individuals.
The political environment is determined by the type of government in a country and ideology of the ruling party in power. It is the government that dictates the commercial policy of any country.
Government makes laws to ensure proper operation of business in a country. Sometimes, these laws also create new business opportunities. For example in Nigeria, the government of Umar Shehu Yar’adua lifted the tariff on rice importation, thus, creating opportunity for Nigerian businessmen. This is the reason why marketing managers should, critically, study and evaluate government policies. However, business legislation has three main purposes namely-
- To protect companies from unfair competition.
- To protect consumers from unfair business practices, and
- To protect the interests of society from unbridled business behavior.
Some of the agencies which help to facilitate and implement these laws and policies are-the Nigerian Custom Service, Nigerian Immigration, and Standard Organization of Nigeria, Nigerian Consumer Protection Council, and some others.
The main concern of these business laws is to determine the point at which the costs of regulations exceed the benefits. The laws are not always administered fairly by those responsible for enforcing them.
Regulators and enforcers may be overzealous and capricious; the agencies are dominated by lawyers and economists who often lack a practical sense of how business and marketing work (Kotler, 1997).
Although, each new law may have a legitimate rationale, it may have the unintended effect of sapping initiative and restraining economic growth. This therefore implies that marketing managers should have a good working knowledge of the major laws protecting competition, consumers and society.
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5. Technological Environment
One of the most dramatic forces shaping people’s lives is technology. Technology has a tremendous impact on our lives-for instance our life-style; our consumption pattern; and economic well-being. It also affects the methods of production of goods and services.
Every technology is a force for ‘creative destruction’ (Kotler, 1997). For example, transistors hurt the vacuum-tube, xerography hurts the carbon-paper business and autos hurt the railroads and television hurts the print media.
Also, advancement in information technology has brought a lot of opportunities to Nigerians and has also transformed ways of doing business both within the country and abroad.
Changes in technology are so fast, these days, that ‘appropriate technology’ becomes difficult to determine, especially for developing nations like Nigeria (Akanbi, 2002). Companies without a Research and Development(R &D) department are often lost in the race for growth and profitability.
A change today is very fast, especially in data processing and analyses, which have a profound effect on marketing decisions and activities. That is, new technology creates major long-run consequences that are not always foreseeable.
It should, however, be noted that technological breakthroughs are not evenly distributed across nations. Thus, marketing managers should make effort to monitor new technologies as a way of protecting their business activities. Kotler (1997) observes that instead of moving into new businesses, many old industries fought or ignored them, and their businesses declined.
6. Natural and Competitive Environment
Nations varies in natural endowments. Some nations are blessed in natural resources; for instance Nigeria, Saudi-Arabia, Kuwait, etc. are rich in oil. Since these natural resources are not evenly distributed, it is expected that marketing managers should critically study these natural resources as they affect business activities.
In virtually all socio-economic systems, competition is a strong environmental force to reckon with. People/consumers, generally and basically, want satisfaction in the form of product or service benefits.
Thus, marketing experts should endeavor to study consumers’ needs and wants, purchasing power, socio-cultural values, competitors’ product/services offered into the market etc., before producing intended goods and services.
Having discussed macro environment variables, it is essential also to examine the microenvironment variables. Before you do that, pause and attempt this activity.