Sunday, 10 July 2011

Understanding Marketing Environment

A company's marketing environment is made up of actors and forces that affect the company's ability to develop and maintain successful transactions and relationships with its target customers.

Various environmental forces influence an organization's marketing system.
Some are external to the firm and thus are largely uncontrollable by the organization. Others are within the firm and generally controllable. A firm needs to be aware that there are favourable and unfavourable trends in its external environment. Unfavourable trends negatively influence market demand and have a devastating effect on the performance of the firm in the market. Conversely, favourable trends exert positive forces that make it easier for firms to perform well.

Thus, decisions about whether to enter or invest in a new business or a new market, whether to continue to serve the firms current market, or whether to adopt new strategies to take advantage of favourable trends or mitigate the effects unfavourable ones require that such trends be identified and understood.

Uncontrollable Variables
External macro environmental variables such as demographic, economic, social- cultural, political and technological variables are described as uncontrollable because no firm have control over them the way they have control over its marketing mix variables. The best a firm can do is to respond to these variables.

Political and Legal Variable
Marketing decisions are mainly affected in various ways by happenings in the political/legal environment. The factors that are of utmost interest to marketers are: types of government, legislative structures, political orientations, political and government stability, taxation policies, monopolistic restrictions, employment legislation, pressure groups and trade unions power. Legal variable involves control over such issues as competition, unfair trading practices and consumer protection. A wise firm relies upon experienced lawyers or a legal department to ensure that actions taken comply with regulations.

It is an established fact that democracy remains the best form of government because it encourages participation; it offers the greatest stability. Therefore, country under democracy offers more market attractiveness to firms than country under dictatorship.

Various Jaws and regulations, policies and actions by the Federal, State and Local Governments also affect marketing activities.

Economic Variable
The economic performance of a country is measured by gross domestic product (GDP) - usually on per capital basis after accounting for inflation. For instance, while Nigerian economy achieved 5.6% growth of GDP in 2005, Botswana had 4.5% in the corresponding period. The implication is that Nigerian economy offers greater opportunity for investors than Botswana's. A marketing programme is also affected such economic considerations as business cycles, inflation rates, interest rate money supply, investment levels, unemployment levels, wage levels, energy costs and so on.

Business Cycle (prosperity, recession, depression, and recovery) greatly determines the success or otherwise of a firm. While many Western economies are prospering, many of third world economies are either receding or depressing.
Marketers should recognize which stage of the business cycle the economy is currently in because each stage offers different opportunities.

Interest Rate also Influences the level of demand in most markets. Higher Interest rates increases the cost of borrowing resulting in higher prices of goods and services, lower demand and rising inventory. For instance, while Nigerian Banks In preconsolidation era in 2005 charged interest rate of 30.5%, their counterpart In Japan, Greece and Gambia charged less than 1%, 6% and 19% respectively. Post-consolidation interest rate (21-25%) in Nigeria is still considered very high.

Inflation Rate can either be a favourable trend (low level) or unfavourable trend (high level). High inflation rate depresses consumer demand and stifle industrial growth. While inflation rate in Nigeria was 11.6% in 2005, it was 3.5% in Greece and 1.5% in Cameron. The implication is that consumers' purchasing power is more enhanced in Cameron and Greece respectively than in Nigeria and this results in greater marketing activities in these countries.

Social-Cultural Variable
This variable represents the values, attributes, and general behaviour of the individual in a society. Compared with economic, political and technological changes, the socio-cultural environment evolves slowly. People grow up in a system of values they tend to carry throughout their lifetimes. Socio-cultural variables include: changing demographic structures, changing family structures shifting values, major lifestyle changes, a greater willingness to accept technology, changing family roles and greater emphases on value for money.

Niger-Delta in the recent times has been characterized by the traditional values of restiveness, violence, assassinations and other social vices that pose serious threats to the operating business organizations in the region. Also, changing family roles in Nigeria is another socio-cultural phenomenon that influences marketing activities. As a result of the difficult economic situation in the country, greater number of women and children are now working to sustain the family. In the process, some women have emerged the bread winners in such families.

Demographic Variable
The statistical study of human population and its distribution is called demography. It is of special interest to marketers because people make up markets. Marketers need up-dated information on the size and growth rate of population in different cities, regions, states and nations; age distribution and ethnic mix; educational levels, household patterns' and other variables. The marketing implication of this is the rapid growing market for a diverse array of products and services for a high rapidly growing population, For instance, Lagos market, with over 12 million populations offers more attractiveness than any other market in Nigeria. Similarly, Nigeria's population has more female than male and this represents a favourable trend for companies producing and marketing product targeted at female segment. . . .

Technological Environment

For instance, the development of Xerography copier destroyed the market for carbon paper, while the development of cars damaged the demand for railways, in much the same way that vinyl records were replaced by compact discs and video tapes by VCD, DVD and other coming high fidelity variants.

Such technology as Automatic Teller Machine (ATM), Internet, GSM, Vending Machines Cable Televisions are all posing greater challenges companies in Nigeria.

Relationship between Controllable and Uncontrollable Variables
Customers are the target because they are the focus of the firm's activities. Their satisfaction is achieved through simultaneous adjustments in the elements of the marketing mix, but the results of these adjustments are uncertain because the marketing task takes place within an uncontrollable environment

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