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Environmental Factors Which Influence Marketing Decisions Marketing Essay

“The Micro environment includes all factors which impact directly on a firm and its activities in relation to a particular market in which it operates and also any internal aspects of the organization which influence the development of a marketing strategy”.

“The Macro environment is concerned with the broad trends and patterns in society as a whole which may affect all markets, but will be more relevant to some than others”. Macro environment is very important for any organization by monitoring it carefully organization can identify opportunities for and threats to its business and will enable it to adopt a proactive rather than a reactive approach in the action it takes.

Micro environment:

The main thing in Micro environmental factor is the market environment which “comprise of all aspects of a market which affect the company’s relationship with its customers and the patterns of competition. It is important because it has a major impact on the operation of a business and businesses in part can control and change it. The key elements of the market environment are suppliers, distributors, consumers, competitors and interest groups.

Micro environment can be shown through diagram constructed below:

The micro environment

Firm

Culture Skills

Organization EmployeesSuppliers

Customers

Intermediaries

Competitors

Interest Groups

Fig 4.1 the micro environment

(Reference: HND subject marketing course book page number 93)

Internal Macro environment:

The internal environment is where the firm can exercise greatest control and should possess the greatest knowledge. The internal capabilities of the organization are a key factor in generating marketing success. The analysis of the internal environment depends on an understanding of the nature of the corporate culture- the attitude and beliefs of personnel at all levels. An understanding of the strengths and weaknesses of the structure of the company and of the personnel within the company is equally important.

The macro environment:

The macro environment can be described in terms of four key components: political/legal, economic, social/cultural, and technological (PEST factors). The diagram below shows these factor. The total environment

Materials Pollution

Politics Technology

Suppy Goods Labr Wage

Cap Profit

Economy Society

Fig 4.5 the macro environment

PEST is macro environmental factors that affect market. The four environmental factors are:

Political/Legal factors.

Economic factors. PEST

Social/Cultural factors.

Technological.

Political/Legal factors:

Businesses have to work within the law. Laws are made by parliament for the goods and services as whole. What laws are made depends on which political party holds power. Therefore the political environment has importance to any business. Most European countries have experienced violent revolution in their political systems which have seriously disrupted their economies. Most businesses need to worry about the risks of dramatic changes in government policies. A shift in political policies can change a particular market overnight.

Economic Factors:

Economic factors are very important for any business. It shows how the economy is doing but the term “recession” give us vague information’s. We will therefore identify a number of key measures, and look at why they are important for businesses.

The rate of growth: of the economy is the rate of increase in total economic activities. It can be measured using the gross national products, which is roughly the total amount of goods and services made in a year. The rate of growth matters to businesses because the faster the economy grows the better off people becomes and the more they will buy.

The rate of inflation: This is the rate at which prices are rising, business must take into account of how their costs might increase, what wage rises they might have to pay and the extent to which competitors might increase their prices, these factors have direct affects on businesses.

The level of Unemployment: The more people unemployed, the less money they would spend in the shops which affect the sales of those shops.

Social factors:

In order to get success businesses need to be accepted by others for this purpose they should behave in certain ways. Businesses need to consider the following aspects.

Norms and values, such as sharing, families influence people strongly.

Lifestyles.

The influence of peers groups.

Demographic factors.

Technological factors:

Technology can affect businesses in the following ways.

The types of products that are made have changed.

The manufactures of products have changed.

The quality of products has improved.

Technology is the most challenging for the marketing manager.

The competitive environment:

Porter’s Five Forces “are external influences upon the actual and potential competition within any industry, which in aggregate determine the ability of firm within that industry to earn a profit”.

(Reference: HND subject marketing book page number 98)

(Porter Competitive strategy 1996) identifies five competitive forces which influence the state of competition in an industry. These five forces are as follows:

The threat of new entrants to the industry.

The threat of substitute products and services.

The bargaining power of Customers.

The bargaining power of Suppliers.

The rivalry among current competitors

The new entrants are threat to the company because they will bring extra competition to an existing companies

The new entrants will also provide substitute products which satisfies the same customer needs. They threat for an industry products.

The availability of substitute’s products will increase customers choice and hence, customer bargaining power increases which reduce the industry profits as a whole, because Customers will want better quality products and services at lower prices.

If the profitability of the industry is decreasing then suppliers will exert pressure for higher prices, this would be more effective, if there are one or two dominant suppliers, and if the switching cost for customers would be high.

The condition above could lead to intense competition within an industry which will affect the profitability of the industry as whole. The competition can be in the form of price competition, advertising battles, sales promotion campaigns, introducing new products etc.

In Peshawar during the government of MMA the marketing strategies (girls’ pictures on billboards) for designer cloths were badly affected by the political/legal macro environmental factor. Another example is carpets, bad economic condition of Pakistan has cause inflation which has increased the prices, ultimately this affects consumer spending and they spend on basic food stuff more than buying carpets. So it has affected the marketing decision of carpet owners.

P6: propose segmentation criteria to be used for two products in different markets?

MARKET SEGMENTATION: “Is the sub-dividing of a market into distinct and increasingly homogeneous subgroups of customers, where any subgroups can conceivably be selected as a target market to be met with a distinct marketing mix.” (Kotler, 1994)

(Reference: HND subject marketing book page number 168)

Segmentation enables firms to make the best use of the opportunities in the market for products and services. The marketing mix (4p’s) is shaped to provide for special needs of the target segment. Effective segmentation requires a great deal of information to be available and so the process is very strongly connected to market research. The main reason for segmenting your market is to improve your marketing efficiency by allowing you to tailor and target your marketing efforts. This is a worthy goal and there are many excellent case studies illustrating the benefits of market segmentation.

Segmentation Criteria for World Call:

GEOGRAPHIC SEGMENTATION: Geographic segmentation, approach markets are divided into different units, these units may include nation’s states or even neighborhood consumers often have different buying habits depending upon where they reside geographically. World Call can use its strong supply chain to deliver its Wireless sets and Usb broadband device to its target market. A large segment belongs to the northern and rural areas of Pakistan can be covered by World call through its strong distribution networks.

DEMOGRAPHIC SEGMENTATION: Dividing the markets on the basis of demographic variables such as age, sex, family size, education, income and social class. World call should be targeting teenage student as well for its Usb broadband who use fast internet for study purpose not just businessmen. They should reduce Usb broad band price keeping in view income of students.

BEHAVIORIST SEGMENTATION: Dividing consumers into group according to their uses loyalties or buying responses to products. For example product of brand usage and degree of usage are combined with demographics and psychographic criteria to develop profiles of market segments. World Call has got an advantage that they have already got a strong brand image. People are loyal to this brand, making use of which Worldcall can specially target this segment and offer them the new products by getting advantage of their current customer’s behaviors.

P7: outline the factors which influence the choice of targeting strategy?

The choice of targeting strategy is influence by the following factors given below:

Concentrated marketing: In which company attempts to produce the ideal products for a single segment of the market, for example Rolls Royce cars. Mother care mother and baby shops.

Differentiated marketing: In which the company attempts to introduce several products versions, each aimed at different market segment for example the manufacture of different styles of the same article of clothing.

When the cost of differentiation of the markets exceed the benefits from further segmentation and target marketing a firm is said to have over differentiated. While the problem with concentrated marketing is the risk of relying on a single segment of a single market

Positioning Products and Brands: “is the act of designing the company’s offer and image so that it offers a distinct and valued place in the target customer’s mind”. Brands can be positioned in relation to competitive brands on product maps in which relative positions are defined in terms of how buyers perceive key characteristics.

High price

Cowboy brands Premium brands

Low quality High quality

Economy brands Bargain brands

Low price

Fig 6.11: A Perceptual Map

(Reference: HND marketing business book page number 193)

A high price is associated with high quality; low price is associated with low quality. Thus, while everybody would like to buy a bargain brand.

Segmenting industrial markets: A number of methods for segmenting the industrial market exist. Improved databases provide additional intelligence information allowing much tighter targeting of industrial customers.

By location: many business section are concentrated in particular locations.

Customer size: the size of a company either by turnover or employees numbers can give broad indication of their needs for certain products.

Usage rate: customers can be segmented as heavy, medium or light users; this is most relevant in raw material and parts markets.

Industry classification: this classification indicates the nature of the business.

P8: Explain how buyer behavior affects marketing activities in two different buying situations?

Consumer Buying Behavior:

It can be defined as “the decision processes and acts of individuals involved in buying and using products or services”. (Dibb: Marketing concepts and strategies, 2001)

Consumer buying behavior is important to the marketing manager for the following reasons:

The buyer reaction has a major influence on the success of the organization.

In order to successfully implement the marketing concept, organization must examine the main influences on what, when, how customers buy.

Buying know these factors, organization will be able to predict the effectiveness of their marketing activities.

In case of World call, the marketing activities for their two products i.e. wireless sets and Usb broadband can also get affected by consumer behavior. For example customers see what they expect to see. People expectation are based on past experience, the knowledge derived from it (by learning) and the social and cultural influences associated with it. Similarly for Usb broadband people perceive it as a high quality product and are more willing to respond in a learned way/accustomed and will buy it happily. This readiness to respond is called the individual’s perceptual set. While when expectation leads a person to buy this product and with experience consumers know that the product is not as effective as they perceived it, it will affect the future consumer buying behavior because if a consumer tells another consumer that they don’t have good experience with the product, will be not to buy Usb broadband. Similarly for wireless set the consumer perceive it a low quality product so they will be willing to pay low price for it, if the company increase its price than it will affect the buying behavior of future consumers.

The marketing activities of these two products are different from each other, the company have presented Usb broadband uniquely in their advertisement, showing an office and businessmen using this product. It means the company has targeted high class people for this products and in response they charge skimming price for Usb broadband. On the other hand, World call wireless set has been shown in local PCO shop, showing that it is best suited for low class people using it for their PCO in turn, they are charging low price for wireless sets. Major affect on consumer buying behavior are of personal income, age, attitude etc.

Part of the effect of expectation is that we catogorise or classify people and objects according to experience. We learn categories or concepts such as male or female, animal, vegetables and mineral, good and bad, as we go through life and absorb cultural values. This help us in identifying things and people in our perception.

P9: describe how products are developed to sustain competitive advantage?

New Product Development: It can be defined as a “process which is designed to develop, test and consider the viability of products which are new to the market in order to ensure the growth or survival of an organization”.

(Reference: HND marketing Subject book page number 230)

There is a particular process in developing new product, steps are given below;

Original concept: (this is the primary data)

Screening Process

Business analysis

Concept definition

Product Development

Marketing mix issues

Marketing testing

Pilot launch

Full launch

Developing product means building of concept into a production reality. It include test runs of products to ensure that the demands of the market can be met smoothly without causing inordinate pressure on other parts of the firms system. Products are develop from two distinct organizational activities, research and development (R&D) and NPD. There are risks associated as well with the development of a new product such as the financial restrictions may hold the product back, the standing of the organization in the market may be weak, the pace of development may be too fast. Never the less with the possibilities of these risk organization try to improve or develop new product, to get competitive advantages.

World call was facing a lot of competition from other telecom companies such as Ptcl wireless, Go CDMA etc. They have always threatens world call sales by introducing products like wireless sets and new packages, that’s why world call decided to introduce a product, totally different from their competitors, therefore they developed USB wireless internet device 512 kbps speed, their competitive edge over others was that the device could be taken any where in Pakistan and it will keep people connected to the internet. In response to world call product Wateen Telecom Company introduced their Usb broadband device (1MB) speed, faster as compared to World call company and hence they got competitive edge back from World call.

P10: explain how distribution is arranged to provide customer convenience?

Distribution: “a key marketing function: the process of getting products to consumer, some companies do sell directly to the customers”.

(Reference: HND subject marketing book page number 249)

The customer’s access to the product is a prime factor in the exchange process. The purpose of distribution is to facilitate purchase. Companies distribute their products through the following means;

Chain of distribution: the process which enables the flow of goods between the producer and the consumer.

Distribution Channel: the means of getting the goods to the consumer such as the transport, stock holding and storage, local knowledge, promotion and display..

Intermediaries: any firm which buys from one post of the chain and sells to another in the process of transforming the goods from the producer to the consumer.

It is important for any organization, the product they are launch should be the right product, which customer ask for. The product should be in right place, where customers want to buy the product. The product should be launched at the right time, here it relates to seasons for particular products. The product should be available at the right quantity, according to the demands of consumers. At last, price should suit the price, if it’s a high quality product, charging high price is acceptable and vice versa.

For distributing their products such as wireless calling sets, USB internet and other accessories World call have open their franchises all over Pakistan. We can take the example of Peshawar where there are two franchises of World call one is in university road and the second one is in the city. They have opened these franchises so that we do not have to go here and there in search of their products. It shows customers where they can get their products. Increasing the number of outlets in different parts of Peshawar is a good effective distribution strategy not only it will increase the sales of world call but also an easy access to consumer can raise their popularity in a sense that every one will know what world is providing and from where they can get their products.

P11: Explain how prices are set to reflect an organization’s objectives and market conditions?

Price: can be defined as a” measure of the value exchanged by the buyer for the value offered by the seller”.

(Reference: HND subject marketing book page number 274)

Price reflects the costs to the seller of producing the product and the benefit to the buyer of consuming it. Pricing affect the profits (after cost is covered and extra margin is left to the company) through their impact on revenues (total sales) rather than costs, so pricing must be consistent with other element of the marketing mix since it contributes to the overall image created for the product.

In classical economic theory, price is the major determinant of demand. The equilibrium market price is the price at which supply and demand balance each other. Competitors copy price cut in shot term, but much difficult to copy a successful brand image based on a unique selling proposition (USP). Pricing policy of any organization is the outcome of management decisions about price which derive from the internal operational considerations about costs and external, customer-focused consideration about value.Organizations use different pricing strategy such as price skimming(high price) and price penetration (low price) strategies. price skimming strategy, takes place when a company offers variations in the prices of the same product in accordance with the high-quality product to the not-so-high-quality product.

World Call has also adopted a pricing skimming strategy for USB broadband. They have set price of 12, 99 for it plus other charges depending upon the packages. Customers choose it in order to show the quality of their product, because in Peshawar people perceive high price to be high quality, keeping in mind the fact World Call has targeted businessmen for USB broadband because, businessmen were always demanding such kind of features which USB broadband is offering. Telecom industry is small with two or three Wireless companies so WORLDCALL and other can set monopoly prices as well in future.

P12: Illustrate how promotional activity is integrated to achieve marketing objectives?

Promotion is concerned with communication between the seller and the buyer (marketing commnunication). It’s the most interesting aspect of marketing, it help in building brands.

Promotion include advertising, sales promotion activities, publicity or public relations, and sales force (Personal selling). The promotion method depend on the nature of the product, the market and customers.

Personal selling is not only the communication medium available to the organization. They use different marketing tools (marketing mix) to boost sales. An effective communication require the following :

A sender

A receiver

A message

A communication channel

A feedback mechanism

Promotion work is exciting because the aim is to influence customers favorably towards your organization’s product and services. Integrated marketing communications respresents all the elements of an organization’s marketing mix that favorably influence an organization’s customer. In order to achieve their marketing objectives World call has not worked so hard on promoting their products because they have on aired their ads on local cd,s cable channel instead of on airing them on famous channels. They have not sponsored any event on TV which many companies do like lux , Pepsi sponsoring film awards , cricket matches in order to promote their products I-e Pepsi and lux soap. They have done this may be because of lack of finance, because advertisement on good channels require a lot of money that can be the reason why their promotional campaign has not been so good and why their sales are low.

P13: analyze the additional elements of the extended marketing mix?

Product is a generic term and can in many cases include “services” for the practical purpose of marketing. There are certain basic characteristics of service industries which differentiate them from other business operations. These characteristics mean that the successful marketing and delivery of services require attention to areas not really covered by 4’ps: who gives the service (people), how the service is given (process), the environment in which the service is given (physical evidence) which will be discussed later in detail.

There are five characteristics of services which differentiate it from goods, these are:

Intangibility

Inseparability

Heterogeneity/variability

Perishability

Ownership

The three extra Ps are: Process (User friendly), Physical evidence and People which are discussed bellow:

PROCESS: WORLDCALL Broad band is user friendly because customers will not face inconveniences from World call service in connecting the internet even while traveling, they just need to insert their USB Broadband in the USB port their laptops and they can keep connected as long as they want all over the Pakistan

PHYSICAL EVIDENCE: WORLDCALL have clean and air conditioned franchises during summers for providing good environment for their customers.

PEOPLE: WORLDCALL have well trained and well dressed employees working in their respective departments. They deal customers in very politely manner. That is the reason why most of their customers are satisfied from world call whenever they visit them.

P14: recommend marketing mixes for two different segments in consumer markets?

WORLD CALL has segmented students and business class people for their products in the market for example they are offering wireless set internet speed of 115 kbps for the students for their study and home purposes at just 500 Rs per month and for businessmen they are offering USB broadband at an affordable price of 12.99 per month. They have two franchises in Peshawar from where people can get these products. My recommendation to WORLDCALL would be as follows:

They should show the usage of USB internet in the offices in their advertisements on TV in order to attract businessmen. Because as discussed in the promotion section they do not have good promotional campaign for their products

They should add wifier wireless net connectivity system for their wireless calling sets so that with one connection it can provide connectivity to the other computers and laptops; this will further increase their competitive advantage to attract more customers.

They should also increase the numbers of outlets in Peshawar for the easy accessibility of customers to their products. In this way they can target different segments easily such rural area and city

They need to increase the number of employees in their outlets so that they can deal so many customers at the same time because I have witnessed that their staff in their Peshawar outlets are less to handle too many customers.

They needed to adopt penetration pricing strategy during the launch of Usb broad band in order to attract more customers and then they could have set skimming price.

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