Here is an essay on ‘Marketing Environment’ for class 8, 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Marketing Environment’ especially written for school and college students.
Essay on Marketing Environment
Essay # 1. Meaning and Concept of Marketing Environment:
Environment can be defined as everything which surrounds and influences a system. Marketing, also being one of the systems in business, has to respond to environmental change. Marketing activities cannot be carried out in isolation; instead it is constantly affected by the dynamic and every changing environment.
Marketing environment is dynamic since the firm needs to change its activities from time to time and place to place depending upon the prevailing situation. It is necessary for any business to adapt to the environmental changes in order to survive in today’s market.
These changes can be due to new competition entering into the market, or changes in political-legal-governmental scenario in a market, or changes in needs and wants of the customers, and so on.
While studying the market environment, the firm also needs to understand the threats and opportunities existing in that market in order to the gain maximum benefit; by designing and offering its products in such a way that they will satisfy the needs and wants of that particular market at that prevailing time.
According to Kotler, “A company’s marketing environment consists of the factors and forces outside marketing that affect management’s ability to build and maintain successful relationships with target customers”.
According to Biplab Bose, an organization’s marketing environment can be defined as “All institutions and forces that are external to the marketing organization that impinge or affect the term’s ability to develop and maintain timely, relevant and appropriate adaptations to such forces for successful business operation”.
A firm is influenced by internal environment as well as external environment. The environment which exists inside the firm is called as internal environmental. These include the employees, research and development, firm’s policies, firm’s finances, capital assets, firm’s structure, and the firm’s products.
Internal environmental factors affect the firm’s efficiency and can be controlled by the firm through implementation of various measures. Since these factors can be controlled by the company, these are called as controllable factors.
External environment influences the industry as a whole. Since the firm is not able to control its factors, these are called as uncontrollable factors. External environment is made up of Micro-environment and Marco-environment.
Marketers must be vigilant about both their internal and external environments. The marketers should try to make changes in the internal environment; however should change and adapt itself to external environment in order to succeed in the market.
Essay # 2. Macro and Micro Environment:
1. Micro-Environment:
Micro-environment of an organization comprises all those elements which are close to the firm and directly influence firm’s daily operations. These factors either interact with the firm or are involved in the same industry. The Micro-environmental factors include Customers, Suppliers and Vendors, Marketing Intermediaries, Competitors, and Publics.
i. Customers:
Customers are very important factor affecting any firm since customers generate profit. For any company, no customer means no business. Customers of the firm can belong to consumers markets, intermediary markets, industrial markets, resellers markets, government markets, and/or international markets. The customers’ needs and preferences keep changing and so does their loyalty toward the brand.
Therefore, the firm must be vigilant about the constantly changing needs and wants of its customers, and must make efforts to produce or improvise their products so as to satisfy these needs and wants.
This is possible through marketing research and marketing information system, in which firms can gather the information, analyze it, prepare or modify the products or services based on this analysis, and then communicate about these to the audience through different sources.
ii. Suppliers and Vendors:
Suppliers and vendors are one of the most important factors of a firm; especially for organizational selling companies. In organizational markets, suppliers of one company are most probably the customers of other companies. Raw material provided by the suppliers are further modified or assembled and then passed on to the end users.
Changes occurring in supplier’s environment affect the marketing functions of the firms. A firm should ensure availability of raw material in advance so as to ensure the timely delivery of products to its customers. Also role of suppliers is more important in those firms which operate in highly competitive markets; wherein there is very little differentiation between the products.
In such type of markets, the firm can gain a competitive advantage by passing on their goods to the customers at lower prices; however, in this case, the firm should be able to get the raw material at lowest possible price in order to pass on the benefit over cost savings to its end user. Usually in this type of markets, the buyers and sellers cooperate with each other in order to make the value chain efficient and pass on the value added products to the customers.
iii. Marketing Intermediaries:
Companies that help the firms in promoting, selling and distributing its goods to the final buyers are called as marketing intermediaries. These include physical distribution firms, middlemen, financial intermediaries, and marketing services agencies.
Role of marketing intermediaries are very important; especially in case of large-scale manufacturing firms, wherein it is very difficult, tedious, and costly proposition for the firms to take their manufactured products directly to the target market.
Physical distribution firms help the companies to stock their products and transport these from the manufacturer’s factory to its destination. Warehousing firms store and protect goods; transportation firms help the firms to move the goods.
Middlemen are businessmen who hold and sell the company’s products. These middle men help the company to find customers and/or close sales with them. The middlemen include agents, brokers, dealers, wholesalers, retailers, jobbers, etc.
Marketing services agencies are those independent companies which carry out other marketing related activities for the firms. These assist the firms to get their products to target market. Some of the marketing services agencies are marketing research firms, media and advertising agencies, marketing consultation firms, etc.
Financial intermediaries are the institutions which provide finance to the firms in terms of capital investment, or for buying and selling of the goods, and/or for insuring the goods against risk. Some of the financial institutions are banks, insurance companies, credit companies, etc.
iv. Competitors:
Company’s environment is always surrounded by competitors and is affected by the competitors. The level of competition in an industry plays an important role in success of any company. Every firm formulates its marketing plans and strategies by keeping its competitors’ activities in mind. The company can build its competitive advantage by studying its competitors’ position in the market as well as by analyzing competitor’s strengths and weaknesses.
When the industry is in introductory stage, the firms can easily enter the market due to less number of competitors and thus have a upper hand in the market; however, in the case of industry being in mature stage, since the competition in the industry will be high, the firm has to be more careful about its strategies as customer’s bargaining power will increase since more options will be available for the customers.
v. Publics:
There are wide range of other organizations and individuals in a firm’s micro-environment who can directly affect its marketing activities. Most of the times, these publics governs smooth functioning of the organisations. Company’s image is tarnished badly if any of these variables of the public’s propagates a negative image about the company. Therefore many companies develop a public relations department to establish constructive relations with the publics.
Some of the types of publics which surround the company are:
a. Financial – Banks, Stock brokers, Financial institutions
b. Media – Newspapers, Magazines, Radio, TV
c. Government regulatory agencies – Government departments
d. Citizen-action – Consumer organizations, Environment groups
e. Local community groups – Social groups like neighbourhood residence, community groups
f. General Public – Public perception, public opinion
g. Internal Employees – Workers, officers, board of directors
h. Pressure groups – Trade unions
2. Marco-Environment:
Macro-environment consists of all those elements which are beyond the immediate environment of the firms but even then they affect the organization. Thorough understanding of the macro-environment enables the firm to prepare its strategies in order to avail the opportunities present in the market and at the same time prepare measures against the threats in the market.
i. Economic Environment:
Economic environment plays a vital role in determining the demand of the product in a society. The firm is not only interested in the markets having high number of consumers but they are also interested in consumers with high disposable income. Disposable income of a consumer is the money which is available with him once all the taxes and expenses are paid.
The total buying power is function of gross income, take-home income, prices, savings, and credits. Gross Domestic Product (GDP) and Purchasing Power Parity (PPP) determines the economic status of a country. The demand for luxury products is more in the markets of developed countries where the economy is good and robust; however, in the markets of developing countries, where the economy is not so good, usual there is huge demand for products which are considered as necessities of life.
Economic cycle prevails in every country; and all companies operations are affected by the economic cycle prevailing in that country. Marketing firms are affected by the economic environmental variables such as monetary policy changes, business cycles, prevailing interest rates, changes in income levels, etc. Firms should always be vigilant of the four main trends in the economic environment viz. slowdown in growth of income, inflation pressure, consumers low savings tendency, and consumers changing expenditure patterns.
ii. Socio-Cultural Environment:
Socio-cultural environment is constituted of institutions and other forces that influence society’s basic values, perceptions, preferences, and behaviours. Therefore, it is important for the marketer to have a complete understanding of the cultural values of a society in which he is doing business or going to do his business.
This is especially true for those organizations which are planning to enter into markets of those countries whose cultural values are quite different from their own countries. Socio-cultural environment in a particular society moulds individual’s attitude, values, and lifestyles which lead to one’s taste and preferences. Attitudes towards specific products changes with time, and at any one time between different groups.
A product which is successful in one place might fail disastrously in other places. Buying destination also differ in different societies. The study of socio-cultural factors might help the marketer to understand the customers in terms of what do the customers buy, where they buy, when they buy, and how they use and dispose the products.
Religion, language, and upbringing are some of the socio-cultural factors. The persistent core values and secondary cultural values can affect the marketing decisions of consumers. The core cultural values of a consumer are deep rooted and do not change easily. Eg. Affinity towards locally produced products and aversion to foreign made products.
The secondary cultural values are more likely to change and can be easily shaped and manipulated, such as change in fashion trends due to influence of celebrities, etc. Marketers should have a keen interest in anticipating cultural shifts in order to spot new marketing opportunities or threats.
iii. Demographic Environment:
Demographic environment consists of characteristics of human populations such as population size; population density; geographic distribution; mobility trends; age distribution; gender distribution; marital status; racial, ethnic and religious status; changing age and family structures; geographical population shifts; educational characteristics; and population diversity.
Demographic environment has a big effect on the way people dress and consume. Eg. In present era as compared to the past, children are playing a significant role as influencer or initiator in a buying decision process. Therefore, the marketers are formulating marketing communications strategy by keeping these children in mind as their target audience.
iv. Political-Legal-Regulatory Environment:
Political environment is one of the less predictable elements in an organization marketing environment. The political environment consists of laws, government agencies, and pressure groups that limit various organizations and individuals in a given society.
Political and legal environment of a country affects the marketing systems. Government laws and legal practices depend upon the political system of the country. All businesses are directly or indirectly affected by changes in both domestic and international politics. Companies change their policies as per the changes in the political environment.
The political stability and the form of government adopted by the country are the important aspects which the marketer looks into before entering a particular market. Stability of political system affects the attractiveness of a particular national market. Government passed legislations directly and indirectly affects firms’ marketing opportunities.
Also, government laws collect revenues (taxes and duties). Companies make changes in their policies according to the laws and regulations set by the domestic and international bodies of the country. Government is responsible for protecting the public interest at large, imposing further constraints on the firm’s activities.
The government imposes the laws on marketing or businesses in order to:
i. Protect companies from each other,
ii. Protect consumers from unfair trade practices,
iii. Protect larger interests of society against unethical business behaviour.
Changing government agency’s enforcements and growth of public interest groups also brings in threats and challenges.
Other than the country’s political environment, other political organizations which can directly or indirectly affect the companies include trading blocs such as EU, ASEAN, etc. or worldwide inter-governmental organizations such as WTO, IMF, etc.
v. Technical/Technological Environment:
Technological changes have brought numerous changes in human lives in all the fields. Technology discoveries and developments create opportunities and threats in market. The marketer has to keep in view today’s technology while formulating its marketing activities.
Emergence of new technologies offer new goods and services to consumers; allows existing product to be made more cheaply, thereby widening their market through being able to charge lower prices; allows new methods of distributing goods and service; and develops new opportunities for companies to communicate with their target customers.
Since technological changes needs its own cost and investment in research and development; technological development will be more visible in those societies where financial resources are available to meet these expenses and less visible in comparatively poorer societies.
It should be also taken into consideration that technological changes have brought in artificial demand and faster obsolescence of the products. Therefore the companies have to constantly need to upgrade their products or bring new products into the market in an attempt to survive in the market.
vi. Environmental/Natural Environment:
Natural resources, which are needed by the marketers as inputs for producing their products, constitutes of environmental environment or natural environment. It also includes those natural resources which are affected by the marketing activities. In the present era, environmental issues are one of the major problems.
If appropriate measures are not taken soon then the world will have to face consequences of ecological disasters like Global warming. New legislations are being brought in, which forces the companies to invest in pollution-control equipment’s and set-ups. Under natural environment, some of the trends about which marketer should be aware of are concerns regarding shortage of raw materials and increased pollution, and increased governmental intervention in natural resources management.
The companies should understand their environmental responsibilities and commit themselves to the “green movement”. In order to cater to these needs, some of the companies have started to market eco-friendly products; while some other companies are trying to restore the ecological balance and replete the resources by taking up initiative which causes minimum damage to the ecology.
Essay # 3. Linkage of Marketing Function with all Functions in the Organisation:
It is usually believed that marketing is just concerned with its customers and competitors. However, marketing department do not work in isolation but is interrelated with other organizational functions.
a. Marketing and Finance:
Marketing and Finance are closely associated with each other. Cost and profit of a product are presented in monetary values or in terms of sales percentage. Financial tools like budgeting and profitability analysis are key aspects of marketing planning and control. Marketing decisions are viewed as investment decisions.
Different financial instruments and criteria are used to evaluate the marketing mix elements decisions in terms of investment in new products, advertising, promotion, price, and distribution. Finance also requires marketing inputs for executing and explaining various financial plans in terms of capital requirements, cash flow analysis, credit, and other financial policies. Marketing plan inputs such as sales and revenue forecasts are important for any financial planning.
Marketing approach towards financial decisions offers:
i. Marketing communication campaign uses financial tools like annual financial reports and other reports to address to the financial community regarding the firm’s annual status;
ii. Changes in financial variables such as price of product, payment methods, and discounts and credits are evaluated on the basis of markets response in terms of sales.
iii. Various financial performance indicators are applied while determining market segments for certain products;
iv. Investor’s expectations and fluctuations in market prices of the shares determine the impact of different marketing activities carried out by the firm.
b. Marketing and Production:
Marketing and production goes hand-in-hand. At one end it is necessary for the marketer to determine in advance about what can be the demand for its products in the market in order to manage production capacities efficiently; and on the other hand production capabilities determine number and type of the products which can be marketed.
Based on the fluctuations and product demand in the market, production manager can either change production capacities by making changes in current resources, or by improving inventory management, or by subcontracting; or influence the nature, level, or timing of demand in agreement with the production capacity constraints.
For implementing such strategies, detailed information about market responses to such strategic moves are required. Interdependency between marketing and production is mostly important in case of new product development in which the relationship between the design of new products and production facilities is based on demand for the new product, time, and space distribution. Also scheduling the launch of new product is also important so that it does not cannibalize the company’s existing product.
c. Marketing and Procurement:
In the era of shortage of raw material, procurement has become an important function.
Many companies are forced to either modify their products to cope with lack of raw materials, or replace them with more easily obtained or cheaper materials. Marketing research helps the procurement department to study whether the consumers will accept the product which is used by using modified goods.
On the other hand, marketing plans requires inputs from the procurement in order to identify new suppliers of raw materials or anticipated changes in production activities due to changes in supply of raw material.
d. Marketing and Research and Development:
Marketing and research and development are closely related in any organization. Major link between R&D and marketing revolve around the new product development efforts of the organisation. Each of the new product development stage requires close interaction between marketing and R&D.
Marketing research rarely gives innovative product ideas; however, engineers can generate and evaluate new product ideas by studying consumer’s unsolved problems and needs, or expectations which is collected during the market survey.
e. Marketing and Personnel:
Personnel department deals with hiring, training, and management of the appropriate marketing personnel. Marketing should collaborate with the personnel department for developing job descriptions, screening candidates, and designing training programs and incentive systems. Marketing research, as a specialized marketing activity, could provide valuable help in the design and implementation of a number of personnel research projects.
Essay # 4. Concept of Marketing Potential and Market Share:
Marketing Potential:
“Market potential is the valuation of the sales revenue from all the supplying channels in a market during a certain period.” In order to determine the economic viability of the project, the estimation of market potential is important.
Estimation of market potential enables to marketer to evaluate whether his business is capable of fulfilling the needs of the market segment which they have decided to target. Market potential analysis leads to projection of sales and profits of a company.
While estimating the market potential, the marketer should take the following points into consideration:
i. Estimated number of customers to be targeted.
ii. Targeted customers characteristics.
iii. Geographical location of these targeted customers.
iv. Price that these customers are willing to pay for a particular product or service.
v. Usage frequency of the product by the prospective customers.
vi. Further scope for development of this market.
vii. Share of the company.
Steps involved in estimating market potential are:
i. Determination of target market and market segments.
ii. Determination of market size.
iii. Determination of geographic boundaries of product market.
iv. Study the competitors.
v. Estimation of market share.
vi. Determination of average annual consumption of the product.
vii. Arriving at an average selling price.
Market Potential can be calculated as:
MP = N*MS*P*Q
Where;
MP = Market potential
N = Total number of potential consumers
MS = Market share i.e. percent of consumers buying from you.
P = Average selling price
Q = Average annual consumption
Market Share:
“The percentage of an industry or market’s total sales that is earned by a particular company over a specified time period” is called as market share”. Market share is calculated by dividing the company’s sales over the period by the total sales of the industry over the same period.
Market Share = Company’s Sales/Total Market Sales
The term market share is used by companies to determine their competitive strengths in a sector as compared to other companies in same sector and also to evaluate annual performance.
To determine the true performance of a firm in a particular time period, the marketers use market share instead of sales figures. This is done, since the later cannot be the true indicator of firm’s performance as increased sales can also be a result of improvement in overall market condition.
Following are the reasons due to which the companies try to increase their market share:
i. By increasing the market share, the company can continue to grow even if the industry stops growing,
ii. Higher market share helps the company to achieve greater economies of scale,
iii. Higher market share increases the company’s bargaining power with suppliers as well as customers,
iv. Increased market share helps to increase the Brand reputation.
Ways to increase market share:
Market Share = Share of Preference*Share of Voice*Share of Distribution
Therefore Market share can be increased if:
i. Share of preference can be increased by better product or pricing,
ii. Share of voice can be increased through better advertising and communication efforts,
iii. Share of distribution can be increased through more intensive distribution.
Reasons for a company for not increasing the market shares can be:
i. If increase in market share may lead to spending too much on advertising which might result in fall in the net profit of the company then in this case the market share will not be increased by the company.
ii. If price reduction strategy of a company makes the company to lose ground in front of bigger competitors during the price wars then the company might think of not increasing its marketing share.
iii. If niche player increases its market share, then bigger companies may get attracted to enter that niche market. Due to this the niche players do not go for increasing the market share in order to avoid the invasion of bigger market players.
iv. If a firm increases its market share beyond the production capacity, it may have to add facilities, if the additional facilities are underutilized, then the company incurs losses. Due to this the firm might not think of increasing its market share.