Marketing Environment

(c) Organizational culture and employees

The internal environment consists of factors within the organization itself — its resources, employees, organizational culture, management structure and objectives — which are within its control. Government fiscal policy, competitors' pricing and industry technology are all external factors.

Micro environment and macro environment are the two layers of the marketing environment that surround a business. The micro environment consists of the actors close to the company that directly affect its ability to serve customers, while the macro environment consists of the larger societal forces that affect all firms in the industry.

Differences between Micro and Macro Environment

Two factors of Micro Environment

1. Customers – The people who buy the firm's goods or services. A firm must study who its customers are and what they want. Example: A dairy in Kathmandu sells curd and paneer to households, while the same firm sells butter and cheese in bulk to hotels and bakeries. Each customer group needs a different price, pack size, and promotion.

2. Competitors – Rival firms selling similar products to the same customers. A firm must satisfy customers better than its rivals. Example: Ncell and Nepal Telecom compete in the mobile network market. When one reduces data pack prices or adds bonus data, the other must respond with a similar or better offer to keep its subscribers.

Two factors of Macro Environment

1. Demographic Environment – The study of population size, growth rate, age structure, sex ratio, literacy, and migration. Example: Nepal's growing urban population and rising number of young, educated consumers have increased demand for ready-to-eat noodles, instant coffee, and online shopping, so companies design small, low-priced packs for students and young workers.

2. Technological Environment – New technology changes how products are made, distributed, and promoted. Example: The spread of smartphones and mobile banking (eSewa, Khalti) has pushed Nepali firms to sell through Facebook pages and accept digital payment. A firm that ignores this shift loses customers to competitors who sell online.

Conclusion: The micro environment is close and partly manageable, while the macro environment is broad and beyond the firm's control. A marketer must scan both to find opportunities and avoid threats.

The marketing environment consists of the internal and external forces that affect a firm's ability to build and maintain successful relationships with its customers. Its study is important for the following reasons:

1. Identification of opportunities and threats. By scanning the environment, a firm can spot new opportunities (such as a growing young population, new technology, or a change in consumer taste) and also detect threats (such as a new competitor, a price war, or a change in government policy) in time. This helps the firm to grab opportunities and prepare defences against threats.

2. Basis for marketing planning and decision-making. Marketing plans, objectives, strategies and policies must fit the environment in which the firm operates. Study of the environment supplies the reliable information on which sound marketing decisions about product, price, place and promotion are based. Without it, planning becomes guesswork.

3. Understanding customer needs and behaviour. The environment reveals the tastes, preferences, buying habits, income level and lifestyle of customers. This knowledge enables the firm to design products and services that satisfy customers better, and to adjust its offer as customer needs change.

4. Keeping pace with changing technology. Technology changes rapidly and can make existing products obsolete. Study of the technological environment helps the firm to adopt new technology, improve product quality, reduce cost and remain competitive in the market.

5. Assessing competition and gaining competitive advantage. A study of the competitive environment tells the firm who its competitors are, what they offer, their strengths and weaknesses. This helps the firm to position its product differently, build a competitive edge and frame effective competitive strategies.

6. Coping with legal, political and social forces. Laws, government policies, social values and pressure groups keep changing. Their study helps the firm to remain within the law, avoid social criticism and adjust its practices to the expectations of society.

7. Effective use of resources and long-run survival. Understanding the environment allows the firm to allocate its limited resources to the most promising areas, reduce risk and uncertainty, and thus ensure its growth and long-run survival.

In short, the marketing environment is dynamic and largely uncontrollable. A firm that studies it carefully can adapt itself to change, whereas a firm that ignores it is likely to fail.

SWOT Analysis

SWOT analysis is a strategic planning tool used by a firm to assess its Strengths, Weaknesses, Opportunities and Threats before taking marketing decisions. It gives a complete picture of where the firm stands internally and what it faces externally. Strengths and weaknesses are internal factors (within the firm's control), while opportunities and threats are external factors (beyond the firm's direct control).

Internal environmental factors

These are factors inside the firm that it can control and modify:

• Strengths: Strong brand image, skilled manpower, modern technology, adequate finance, efficient distribution, low cost of production, loyal customers. Example: A firm with a well-known brand like Wai Wai can launch new flavours easily because customers already trust it.
• Weaknesses: Poor management, outdated machinery, weak financial position, high employee turnover, limited product range, weak distribution network. Example: A small local dairy with no cold-storage facility cannot sell milk products over a wide area.

Other internal factors include the firm's marketing mix (product, price, place, promotion), organisational structure, company culture and research and development capability.

External environmental factors

These are factors outside the firm that it cannot control but must adapt to:

• Opportunities: New markets, changing customer tastes, government subsidies, removal of trade barriers, new technology, growing income of consumers. Example: Rising health awareness creates demand for organic and low-sugar products.
• Threats: Strong competitors, price wars, economic recession, inflation, changing government policy, substitute products, natural calamities. Example: Cheap imported Chinese goods pose a threat to small Nepali manufacturers.

The broader external environment includes micro factors (customers, suppliers, competitors, intermediaries, public) and macro factors (economic, political-legal, socio-cultural, technological, demographic and natural).

Using SWOT to formulate marketing strategies

A firm matches its internal factors with external factors to design strategies:

Conclusion

SWOT analysis thus helps a firm know its capabilities and limitations, read the market environment, and choose the right marketing mix and strategy — whether to expand, improve, defend or withdraw. It converts scattered information into clear, actionable marketing decisions.

Internal environment of marketing (5 marks)

The internal environment consists of the factors inside the organization that the marketing manager can largely control and that affect marketing decisions and performance. It is also called the controllable environment.

1. Marketing mix: product, price, place and promotion decisions made by the marketing department.
2. Top management: its vision, mission, objectives and policies set the direction of marketing plans.
3. Other departments: finance supplies funds, production decides quality and quantity, and R&D and HR affect innovation and skilled staff. Marketing must coordinate with them.
4. Organizational structure and culture: the authority structure, values and working style influence how quickly and well marketing decisions are carried out.
5. Resources: financial strength, physical facilities, technology and human skills decide what the firm is able to do.

These are strengths and weaknesses of the firm, and the manager can adjust them to match opportunities in the external environment.

Macro (uncontrollable) environment of marketing (8 marks)

Concept

The macro environment consists of the external forces that affect all firms in the industry and that an individual firm cannot control. Marketers can only monitor them and adapt. They shape opportunities and threats.

Main components

1. Economic: income levels, inflation, interest rates, employment and remittance affect purchasing power.
2. Demographic: population size, age structure, family size, migration and urbanisation.
3. Socio-cultural: values, religion, customs, festivals and lifestyle.
4. Political and legal: government policy, taxes, trade rules, consumer protection law and political stability.
5. Technological: new products, digital media, e-commerce and production methods.
6. Natural (physical): climate, resources, pollution and disasters such as the 2015 earthquake.

Features

• It lies outside the firm's control.
• It is dynamic and keeps changing.
• It is complex, as the factors are interrelated.
• It affects every firm in the industry, though to different degrees.
• It creates both opportunities and threats.

Why the manager must study it

1. To identify opportunities, such as growing demand for online services, and to avoid threats such as new taxes.
2. To adapt the marketing mix to changing conditions.
3. To forecast and plan for the future.
4. To stay ahead of competitors and survive.
5. To act within the law and in a socially responsible way.

OR: Organizational buying process

Stages: (1) problem recognition, (2) general need description, (3) product specification, (4) supplier search, (5) proposal solicitation, (6) supplier selection, (7) order routine specification, (8) performance review.

Major determinants: environmental (economy, technology, law), organizational (objectives, policies, structure), interpersonal (roles and influence of users, buyers, deciders, gatekeepers) and individual factors (age, position, attitude to risk).