MARKETING ENVIRONMENT

MARKETING ENVIRONMENT
Includes all forces and institutions external to the organisation which affect the organisations ability to develop and organization has to maintain timely, relevant and appropriate adaptation to these factors so as to be successful in carrying out business operations. It is required to assess the marketing environment to help secure the right fit between the environment and the business unit; which is the crux of marketing. Due to the changing environment scenario, the product life is getting shorter and therefore, to survive longer, one has to continuously assess the environment in which the company operates and take steps to recast its marketing plan and strategy to perform optimally. Eg. BSNL was the only department in the domain of telecom till late nineties, so it had a monopoly and was providing only basic telephony. Later on, new players came into the business like Reliance Telecom, Idea, Vodafone, Tata Indicom etc. BSNL also took it as a challenge and started providing mobile phones, broadband services and latest 3G services and thus still surviving in the market.
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Hindustan Motors Ambassador is obsolete now as it didnt make any changes as per the needs of the customer.

MACRO ENVIRONMENTAL FACTORS

INFLUENCING BUSINESS
Economic Environment Demographic Environment Internal Organizational processes Political-Legal Environment Technological Environment natural Environment

Social Cultural Environment

ECONOMIC ENVIRONMENT
It has the highest influence on the marketing decisions as it affects the purchasing power of the consumer.In a declining economy, company which sells price value products has more scope to get customer as compared to a luxury brand Business fluctuations - Dynamic business fluctuations that tend to follow a cyclic pattern, composed of four stages 1. Recession 2. Depression 3. Recovery 4. Prosperity Type, direction and intensity of a firms marketing strategy depend on the economic climate and business fluctuations.Marketer should be aware about the economys relative position in the business cycle and how it will affect the position of his business.More aggressive marketing can be called for in periods of lessened buying interests so that companies can push their products through larger consumer benefits.

CONTD.
Income Distribution Income distribution of households in India has been changing significantly over time.Households belonging to the lower income segment have been steadily declining over the years and the middle income households have been showing an increase. These are the results of economic growth. Categories of Indian consumers 1. Destitute (annual household income of Rs. 16000) not active participants in market exchange for a wide range of goods. 2. Aspirants (annual household income of Rs 16000-22000) new entrants into the consumption systems due to increase in their real income. 3. Climbers (annual household income between Rs. 22000-45000) have desire and willingness to buy but have limited cash at hand. 4. Consuming class (annual household income of Rs. 45000-215000) households that form the majority of consumers, have money and are willing to spend. 5. Rich those who have money and own a wide range of products.

CONTD.
Five different income-distribution patterns : 1) Very low incomes 2) mostly low incomes 3) very low, very high incomes 4) low, medium, high incomes, and 5) mostly medium income In Mumbai rich have grown richer, the middle class has shrunk, and the poor have remained poor. This is leading to a 2-tier Mumbai market with affluent people buying expensive goods and working class people spending more carefully, shopping at 6 discount stores and factory outlet malls, and selecting less expensive store brands.

CONTD.

Lifestyle patterns Lifestyle is the way a person decides to live his/her life.Concerns ones family, job, social activities and consumer decisions.Reflection of activities, interests and opinions.Changing lifestyle influences marketing. . Eg. DINK culture affecting the demand pattern of products targeted for children segment. Retirement ages are changing very fast. People retiring early to enjoy life and travel to different parts of country, giving a scope for travel and tourism industry. Savings, Debt and Credit availability In case of High Savings, consumers are able to get loan at a much lower interest rates. High debt to income ratio Retards further expenditure on housing and large ticket items. Inflation Rising price level resulting in reduced purchasing power for the consumers.
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DEMOGRAPHIC ENVIRONMENT
Demography is the study of population and its characteristics. Population is monitored because people make up markets. Marketers are always interested in population related growth indices because eventual market growth rate in the long run depends largely on growth of population. Marketers are keenly interested in Size and growth rate of population Population Age Mix Ethnic Markets Educational Groups Household Patterns Geographical shifts in population

Size and Growth rate of population Population is showing explosive growth. Indias population was 310 million in 1947 and 1000 million in 2001, next only to China.Rural population is 74% and urban population is 26% of total population. A growing population does not mean growing markets unless these markets have sufficient purchasing power. Population growth has been a source of major concern for two reasons : Certain resources needed to support this much human life (fuels, foods and minerals)are limited and may run out at some point.Such uncontrolled growth of population will lead to insufficient food supply, depletion of key mineral and useful resources and increase in pollution level.

Population growth is highest in countries and communities that can least afford it. Less developed regions of the world currently account for 76% of the world population and are growing at 2% pert year whereas population in more developed countries is growing at only 0.6% per year.
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Population Age Mix Population is subdivided into six age groups preschool, school age children, teens, young adults age 25 40, middle aged adults age 40-65, and older adults age 65 and up.The most populous age groups shape the marketing environment. For eg. Japan has more of old age population above 60 , and thus demand for products that support digestion, viewing and mobility and services like nursing and old age care will be high.Mexico has more young population so there is more demand of diapers, school supplies, toys etc.

Marketers are identifying age groups within age groups as possible target markets. Few acronyms used by marketer SKIPPIES School kids with income and purchasing power. MOBYS Mother Older, Baby Younger DINKS Double Income, No Kids DEWKS Dual Earners With Kids PUPPIES Poor Urban Professionals WOOFS Well off Older Folks. Each group has a known range of product and service needs and media and retail preferences, which helps marketers fine tune their market offers.
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Ethnic Markets- Countries vary in their ethnic and racial makeup. At one extreme is Japan, where almost everyone is Japanese; at the other extreme is the United States, with people from virtually all nations. People call the United States a salad bowl society with ethnic groups maintaining their ethnic differences, neighborhoods and cultures. In Indian market, the consumption, lifestyle and habits of people in different states varies significantly, putting pressure on the marketer to localize his offer for each of these markets.A consumer durable company has to offer a festive discount program throughout the year in different parts of the country. E.g. during dussehra in east, onam in the south, diwali in the north.
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Educational Groups Population in any society falls into five educational groups : illiterates, high school dropouts, high school degrees, college degrees and professional degrees. Literacy levels indicate consumption pattern and influencers of consumption decisions. Promotional activities are being designed keeping in mind the literacy level of the consumers.For eg. People of high literacy level are more brand oriented and people in rural areas take commodity based decisions. High no. of educated people in US spells a high demand for quality books, magazines and travel.

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Household Patterns Size of the family (Joint family and Nuclear family) Size of the family affects the stock keeping unit size and growth of small size, convenient products on the retail shelf. Pattern of the family (Traditional- Husband, Wife and children, Non traditional single live-alones, adult live-togethers of one or both sexes, single parent families, childless married couples, SSWD group single, separated,widowed,divorced) Need smaller apartments, inexpensive and smaller appliances, furniture and furnishings and smaller size food packets. Haier has low cost electronic appliances for bachelors. Working and non-working ladies Market for fast food, restaurants, convenience, processed and packaged foods, consumer durables like refrigerators, washing machines, vacuum cleaners for working women. MTR Ready to Eat packs, Cut vegetables, Readymade Parothas for working ladies. Geographical Shifts in Population People are migrating from rural areas to urban areas. Makers of Ready to Assemble furniture might find a strong consumer base among all the migrants.Migrants are responsible for taking urban brands to the rural markets and increasing the awareness level of rural people towards urban product. Rural market is on a rise because for villagers, urban product is a status symbol.
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TECHNOLOGICAL ENVIRONMENT
Wonders such as I-Pod, LCD, LED and 3D TV are released due to technology.Every new technology is a step for creative destruction. Xerography hurt the carbon paper business, autos hurt the rail road, and TV hurt the newspaper. New technology creates major long run consequences that should be observed minutely. Contraceptive pill for eg led to smaller families, more working wives and larger discretionary incomes- resulting in higher expenditures on vacations travel, durable goods and luxury items. Following trends in technology should be watched : Accelerating pace of technological change Time lag between new ideas and their successful implementation is decreasing rapidly and the time between introduction and peak production is shortening considerably. Advent of PCs and fax machines has made it possible for people to telecommute. i.e. work at home instead of travelling to offices. This trend will reduce auto pollution, bring the family close together and create more home centred activity and entertainment.

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Unlimited opportunities for innovation Exciting work is being done in biotechnology, robotics, computers, microelectronics. Researchers are working on AIDS vaccines, nonfattening tasty nutritious foods. Virtual Reality Companies are already harnessing the power of Virtual Reality, the combination of technologies that allows users to experience three dimensional, computer generated environments through sound, sight and touch. Already been applied in medicine, entertainment and architecture. Varying R & D Budgets Increasing opportunities emerging as a result of globalization are forcing many companies to increase their R&D efforts. In India, as a result of economy opening up to global competition, all large pharmaceutical companies have started putting greater vigor into R&D.
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Increased regulation of technological change Govt. has expanded its agencies powers to investigate and ban potentially unsafe products . Under the Drug and Cosmetics Act, manufacture, sale and distribution of drugs in India is regulated by the state and the central govt. agencies. Label of Agmark for food products, ISI mark for Consumer Durables and Hallmark for Jewellery.

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Educational Groups Population in any society falls into five educational groups : illiterates, high school dropouts, high school degrees, college degrees and professional degrees. Literacy levels indicate consumption pattern and influencers of consumption decisions. Promotional activities are being designed keeping in mind the literacy level of the consumers.For eg. People of high literacy level are more brand oriented and people in rural areas take commodity based decisions. High no. of educated people in US spells a high demand for quality books, magazines and travel.

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Household Patterns Size of the family (Joint family and Nuclear family) Size of the family affects the stock keeping unit size and growth of small size, convenient products on the retail shelf. Pattern of the family (Traditional- Husband, Wife and children, Non traditional single live-alones, adult live-togethers of one or both sexes, single parent families, childless married couples, SSWD group single, separated,widowed,divorced) Need smaller apartments, inexpensive and smaller appliances, furniture and furnishings and smaller size food packets. Haier has low cost electronic appliances for bachelors. Working and non-working ladies Market for fast food, restaurants, convenience, processed and packaged foods, consumer durables like refrigerators, washing machines, vacuum cleaners for working women. MTR Ready to Eat packs, Cut vegetables, Readymade Parothas for working ladies. Geographical Shifts in Population People are migrating from rural areas to urban areas. Makers of Ready to Assemble furniture might find a strong consumer base among all the migrants.Migrants are responsible for taking urban brands to the rural markets and increasing the awareness level of rural people towards urban product. Rural market is on a rise because for villagers, urban product is a status symbol.
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POLITICAL LEGAL ENVIRONMENT

Consists of laws, govt. agencies and pressure groups that influence and limit various organization and individuals. Sometimes it gives new business opportunities. For eg. Mandatory recycling laws gives recycling industry a major boost and spurred the creation of dozens of new companies making new products from recycled materials.

Increase in Business Legislation Business legislation has four main purposes to protect companies from unfair competition, to protect consumers from unfair business practices, to protect the interests of society from uncontrolled business behaviour, and to charge businesses with the social costs created by their products or production processes. Political environment affecting marketers includes supernatural organizations which can directly or indirectly affect companies. Trading Blocs like EU, ASEAN, NAFTA, SAARC, BRIC etc. allow trading between certain countries only. Worldwide Inter govt. organisations like WTO, IMF, ILO etc. protects the legal rights.

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Deal with issues as competition , product safety and liability, fair trade and credit practices and packaging & labelling. In India, food companies need special approval to launch brands that duplicate what already exists on the market., such as another cola drink or brand of rice. Govt. has made mandatory that all packaged food products should carry the green dot to denote pure veg and red dot to indicate non veg. Packaged products should mention MRP and ingredients and nutritional value in the packaging itself.
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GROWTH OF SPECIAL INTEREST GROUPS

1. 2. 3. 4. 5. 6.

Consumerist movement an organized movement by the citizens and govt. to strengthen the rights and powers of buyers in relation to sellers. In order to protect the interest of consumers, govt. of India has passed legislation under the Consumer Protection Act 1986. Six rights of consumers are recognized Safety Right to be protected against the marketing of goods and services that are hazardous to life and property. Information Protection against unfair trade practices, and the right to be informed about the quality, quantity, purity, standard and price. Choice Right to choose a variety of products and services at competitive prices. Representation The right to be heard and be assured that the consumers interests are received due considerations at appropriate forums. Redressal Right to seek redressal against unfair and restrictive trade practices and exploitation of consumers. Consumer Education Right to consumer education.

Legislation ensures establishment of consumer dispute redressal forums such as District Forums and prescribes specific processes to address consumer complaints with speed and in an inexpensive manner.
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SOCIAL-CULTURAL ENVIRONMENT
Society shapes the beliefs, values and norms that largely define consumer tastes and preferences. India is a land of diversity with different languages, cultures and religious beliefs. Regional differences in languages, customs social systems, values, habits, religions and caste system make the social cultural environment complex. Languages Different languages are being spoken. Decision concerning Marketing Communication. Dress Code Different dresses are being worn in different parts of the country. Food Habits Marketer has to keep in mind the food habits of different parts of the country. For eg. HUL markets different blends of tea under the same brand name to address the regional preferences of consumers. Mc Donalds has introduced Mc Aloo Tikki made of potatoes for Indian consumers instead of pork and beaf.

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Core cultural values and secondary cultural values Core cultural values passes on from parents to children and by institutions like schools , churches, govt. etc. Secondary beliefs are open to change.Believing in the institution of marriage is a core belief and believing that people ought to get married early is a secondary belief. Existence of subcultures Various groups with shared values emerging from their special life experiences or circumstances. Eg. Teenagers Common beliefs, preferences and behaviours.

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Indian Women Traditionalism & Self sacrifice (Lower socioeconomic class )

Westernization & Individualism(Higher socioeconomic class) Based on shopping habits of women1. Liberated Youngsters (13%) Mobile phones 2. Modern Mums(18%) Diapers , Sippers 3. Behind the times (20%) No fast foods 4. Rebellious Youngsters(22%) Bars, Electronic Gadgets 5. Orthodox Mothers (27%) Cloth Nappy In India, Dettol has a high impact due to burning sensation, whereas Savlon does well in Europe due to mild nature. Rural India Black Shampoo as it makes hair look glossier.
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NATURAL ENVIRONMENT
Corporate Environmentalism is the recognition of the importance of environmental issues facing the firm and the integration of those issues into the firms strategic plans.Four major trends in the natural environment Shortage of raw materials The earths raw materials consist of the infinite, the finite renewable and the finite nonrenewable. Finite nonrenewable resources oil,coal, platinum, zinc pose a particularly serious problem as the point of depletion approaches. Firms making products that require these increasingly scarce minerals face substantial cost increases.

Increased energy costs As oil prices soar to record levels, companies are searching for practical means to harness solar, nuclear, wind and other alternative forms of energy. The Indian Railways, which is one of the largest consumers of high-speed diesel, is looking to develop sustainable fuels such as Jatropha oil to power its locomotives. Reva an electric driven car has been launched.

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Increased Pollution Levels Some industrial activity will inevitably damage the natural environment. Littering of environment with non-biodegradable plastic, bottles etc. Factories are mixing DDT and chemical pollutants in the soil and food supplies. A large market has been created for pollution-control solutions such as scrubbers, recycling centers and landfill systems. McDonalds and Burger King eliminated their polystyrene cartons and now use smaller recyclable paper wrappings and paper napkins. Changing role of Government in environmental protection In India, the Union Government of Delhi implemented the rule that public transportation vehicles like autorickshaws and buses use only compressed natural gas (CNG) as fuel instead of diesel and petrol.They have set up a separate industrial area away from residential area. Judiciary of India has been active in enforcing antipollution norms.
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FADS, TRENDS AND MEGATRENDS

A fad is unpredictable, short lived and without social , economic and political significance. Eg A particular hairstyle, dress. Trend is a direction or sequence of events that has some momentum and durability.eg Percentage of people who value physical fitness has risen steadily. Megatrends are large social, economic and political and technological changes that are slow to form and once in place , they influence us from 7-10 years.eg. Boom in IT sector leads to rise in consumption and purchasing power.

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