IMM FUNDAMENTALS OF MARKETING M.

MUDIMU

CHAPTER 2

THE MARKETING ENVIRONMENT OF BUSINESS

Introduction

Every business operates within the context of the Marketing Environment. The marketing
environment are those external and internal forces that affect the growth and survival of the
organization. The marketing environment is ever-changing, hence the need for the business to
monitor the changes so as to adjust its activities to suit the changing environment.
Components of the marketing environment

1. Micro-Environment
This refers to all the internal variables that management can control. The variables include:
a. Strategic Direction
The overall direction that the business takes consist of factors which include:
i. Mission Statement
This defines the fundamental purpose for which the organization is in business, identifies its scope
and sets it apart from other businesses. The mission of the marketing department is defined by
the customers satisfaction with its products and or services, hence defining the mission starts
with a clear description of its customers. Questions to be answered when formatting the
mission are:-
- Who is the customer?
- What does the customer buy?

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- Where is the customer located?
- How does the customer buy?
- How can the customer buy?
- What does the customer regard as value for money?
ii. Selection of Target Market
The mission and objectives of the organization will guide in the selection of target markets to
be pursued by the organization. There is need for the target market to be big enough to enable
profitability and growth of the organization.
iii.Marketing Objectives
An objective is something the organization wants to achieve over a set period of time.
Objectives provide direction and a target to which to aim. Objectives relate to all functional
areas such as marketing, finance, human resources, product development and others. However
there is need for the objectives to meet the following criteria:-
- They must be simple, clear and concise
- Objectives should be measurable
- Objectives should have a specific time frame
- Objectives should be consistent with the overall mission and strategy of the business/
organization
- Objectives should be realistic and achievable
- Objectives should be compared to a benchmark baseline against which they will be measured.

Business or long term objectives

There are eight major areas in which business objectives cab be set and these are:-

Market standing - deciding which products and services to sell, and share of the target aimed
at.

Productivity – this refers to output per given input and objectives can be set in this area.

Innovation – setting objectives on new products

Physical and financial resources – generation of financial resources and plant and equipment
objectives

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Profitability- how much profit to be achieved e.g return on investment.

Manager performance and development – setting objectives that relate to the development of
people and the quality of management performance

Worker performance and attributes – objectives on output per employee and quality of
performance.

Public and social responsibility – objectives that address public and social initiatives of the
organization.

Functional or short-term objectives

These are set in the different functional areas and include profit, customer orientation, survival
and growth, increase in sales and market share, efficiency motive and marketing instruments
objectives.

b. Resources, skills and abilities

These are controllable elements of the Micro environment which are applied to take advantage
of the opportunities and reduce the impact of threats. Financial, physical, human capital,
technology capital are resources that an organization should have to enable it to compete
effectively in the market. Abilities relate to the capacity of the organization to deploy the
resources in a more effective manner.

c. Marketing mix
These are controllable marketing instrument that the organization blends together to meet the
needs of the target market. Commonly referred to as the four P’s they are:
- Product – a tangible or intangible offering put on the market to satisfy the needs of the
target market
- Price – the monetary value attached to the product or service. The price should be set
taking into account customers willingness to pay, economic climate, competitors’ products
and prices.

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- Promotion – this relate to the marketing communication methods used to inform the target
market of the product. Advertising, sales promotion, personal selling, public relations are
some of the promotional mix elements
d. Marketing management
There are four key variables that should be considered and these are sales, profit, customer
relationships and target market selection.
2. The variables in the market environment
The market environment are those variables within the immediate environment of the
organization that the business can influence but cannot directly control.

a. Customers
These are the individuals and groups who purchase the goods and services of an
organization. Customers should be assessed in terms their needs and wants incomes,
perception, attitudes and requirements. Customers are the engine for the business without
which the business cannot function. As customers are dynamic, it is important to monitor
the changes and adapt marketing strategies to suit those changes. There are five different
types of consumer markets that need to be analyzed and these are consumer markets,
business markets, Reseller markets, government markets and international markets.

b. Competitors
These are the individuals and groups that provide similar goods and service to the same
target group. Competitors should be assessed in terms of their objectives, strategies,
strength and weaknesses. Level of competition should also assessed in terms of the
following.
Pure competition-existence of many small to medium firms
Oligopoly- existence of large and few suppliers or firms
Monopolistic- existence of few to many and large to small suppliers, who similar but
differentiated products.
Monopoly-existence of a single supplier.

Competitor analysis therefore involve:-

 Identifying who the competitors are
 What are their objectives?
 What competitive strategies are they pursuing?
 What are their strength and weaknesses?
 How are they likely to respond to competitors actions?

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c. Suppliers
This relate to individuals and organizations who provide the inputs, components parts
and raw materials used in the production of goods and service. Suppliers should be
monitored in terms of supply availability and supply shortage and this impact on
marketing operations.

d. Intermediaries Distributors
These are the institutions through which goods move from point of origin to their
destination. Intermediaries play an important role as they enable accessibility of goods and
services by the consumers Intermediaries such as wholesalers and retailers have their own
demands and requirements which should be known to enable effective marketing. Dealers,
Agents and physical distribution firms should all be understood in terms of their
requirements and needs.

3. Macro-Environment
These are forces outside the organization which bring out opportunities and threats.

a. Economic Environment
This relates to economic conditions which influence the economic health of an economy
such factors include interest rates, taxation changes, economic growth, inflation and
exchange rates monetary policy, fiscal policy. Favourable economic conditions promote
growth and expansion of the business, whilst unfavourable economic conditions retard
growth of the business for example high inflation leads to higher prices and consumers
shift to substitute goods and services, whilst low inflation leads to price stability.

b. Technological
This relate to advancement of equipment and machinery. Technological advancements
influence the quality of goods and services and production processes. Technology is changing
at an accelerating pace, hence the need to embrace new technologies. Online shopping, bar
coding, internet are all improvements to the way we do business as a result of better technology.
Technology can reduce costs, improve quality and lead to innovation. These developments can
benefit consumers as well as the organizations providing the products. Technology
environment therefore influence marketing activities as it lead to the introduction of new or
improved products and services, improvement in production processes, improvements in the
way markets are identified and services are provided.

c. Political and Legal Environment

The Political conditions of a country such as stability, changes in government policies,
government intervention, subsidies impact on various areas of the business for example
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political instability restrict the movement of goods and services in a country. Consumerism
which refers to a social movement which advance and protects the rights of consumers and
Nationalism, a feeling of national ride, where national interests are put first are political
factors which influence the business. The legal environment relate to the laws and
regulations that regulate business. Local government and national regulations should be
monitored. Labour laws, competition laws will influence the marketing of goods and
services.

d. Cultural and Social Environment

Culture relate to the values, beliefs, customs, language, within a particular society. Culture
influence the buyer behavior of consumers and this affects the purchase of goods and
service. Social relate to how people live and this influences the goods and services they
demand. HIV/AIDS is also a social factor that poses threats to an organization.

e. Natural environment
The organization derive its inputs and raw materials from the natural environment, hence
the need for marketers to assess it. Environmental problems such as global warming, land
degradation, soil erosion, and water and air pollution should be monitored by marketers.

f. Demographic Environment
This involves population variables such as population size, geographical distribution, age,
structure, educational levels and income distribution. Changes in these demographic
variables have an impact on strategy formulation.

Environmental Scanning

This refers to the systematic monitoring of an organizations marketing environment whereby

information is gathered, analyzed and evaluated to identify threats and opportunities. Importance
of environmental scanning include:-

i. The business is able to capitalize on early opportunities, and thereby gain a first mover
advantage before competition.
ii. Early signals of impending problems or threats can be established and defused.
iii. The business is sensitized to the changing needs of customers
iv. Objective information about threats and opportunities is obtained
v. The image of the business is improved as it shows that it ii responsive to the changing
environment.

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