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No business exists and operates in a vacuum, but as a part and parcel of the environment in which it finds itself. To understand the environment in which the business operates is a major task of a product manager. Efficient and effective marketing strategy formulation depends upon it.
The marketing environment consists of a set of factors or forces that function or control a company’s performance in its chosen target market.
Jain (1981:69) defined the marketing environment to include all those factors that may affect the organization directly or indirectly in any perceptible way. Marketing environment factors affects the organization by the way of input and the organizations also affect the environment by output. The relationship between the organization and the marketing environment is often referred to as “inseparable” the organization and its environment are constantly in a state of: give and take” or homeostasis.
The marketing environment consists of two major components.
â€¢ Internal environment: the internal environment consists of the controllable variables. Controllable variables are categorized into two groups, they are; the strategy variables and unmarketable variables.
â€¢ External environment: the external environment consists of the uncontrollable variables. As the marketing manager cannot directly control any of these elements, these are called uncontrollable variables. The marketing manager has to adapt to the environment by prompt observation, analysis and forecasting of these environmental factors. The external environment can further be divided into two components, the micro environment and the macro environment.
(The Marketing Environment
By Robert W Mccormack)
â€¢ The microenvironment includes the forces in the firm’s immediate environment and affects the firm’s ability to serve its customers. It includes the company itself, its suppliers, marketing intermediaries, customer markets, competitors, and publics.
¶ The company facet of microenvironment refers to the internal environment of the company. This includes all departments, such as management, finance, research and development, purchasing, operations and accounting. Each of these departments has an impact on marketing decisions. For example, research and development have input as to the features a product can perform and accounting approves the financial side of marketing plans and budgets.
¶ Another important aspect of the microenvironment is the suppliers of a company because even the slightest delay in receiving supplies can result in customer dissatisfaction. Supply availability and other trends dealing with suppliers are critical for a marketing manager to ensure that product will be delivered to customers in the time frame essential in order to maintain a strong customer relationship.
¶ Marketing intermediaries includes resellers, physical distribution firms, marketing services agencies, and financial intermediaries. These are important because they help the company promote, sell, and distribute its products to ultimate buyers. Resellers are those that hold and sell the company’s product. They play the part of distributing the products to the customers such as Wal-Mart, Target, and Best Buy. Physical distribution firms are warehouses that store and transport the company’s product from its source to its destination. Marketing services agencies are companies that offer services such as conducting marketing research, advertising, and consulting. Financial intermediaries are institutions such as banks, credit companies and insurance companies.
¶ Another aspect of microenvironment is the customers. There are different types of customer markets including consumer markets, business markets, government markets, international markets, and reseller markets. The consumer market is made up of individuals who buy goods and services for their own personal use or use in their household. Business markets include those that buy goods and services for use in producing their own products to sell. The government market consists of government agencies that buy goods to produce public services or transfer goods to others who need them. International markets include buyers in other countries.
¶ Another important factor in the microenvironment is competitors. These are companies with similar offerings for goods and services. To remain competitive, a company should develop a strategic advantage over their competitors.
¶ The final aspect of the microenvironment is publics. Public is any group that has a concern in or force on the organization’s ability to meet its goals. For example, financial publics affect a company’s ability to obtain funds considering the level of credit a company has. Media publics include newspapers and magazines that can publish articles of interest regarding the company and editorials that may influence customers’ opinions. Government publics can affect the company by passing legislation and laws that put restrictions on the company’s actions. Citizen-action publics include environmental groups and minority groups and can question the actions of a company and put them in the public spotlight. Local publics are neighborhood and community organizations and will also question a company’s impact on the local area and the level of responsibility of their actions. The general public can greatly affect the company as any change in their attitude, whether positive or negative, can cause sales to go up or down because the general public is often the company’s customer base. And finally, the internal publics include all those who are employed within the company and deal with the organization and construction of the company’s product.
â€¢ The macro environment includes all forces of the larger society and affects the microenvironment. It includes concepts such as demography, economy, natural forces, technology, politics, and culture.
¶ Demography is the study of human populations in terms of size, density, location, age, gender, race, and occupation. As it helps to divide the population into market segments and target markets, it is very important factor to study for marketers. For example, classifying groups of people according to their date of birth. These classifications can be referred to as baby boomers, who are born between 1946 and 1964, generation X, who are born between 1965 and 1976, and generation Y, who are born between 1977 and 1994. Each of these classifications has different characteristics and causes which are important to marketers. This can be beneficial to a marketer as they can decide who their product would benefit most and tailor their marketing plan to attract that segment. Demography covers many aspects that are important to marketers including family dynamics, geographic shifts, work force changes, and levels of diversity in any given area.
¶ Another aspect of the macroenvironment is the economic environment. This refers to the purchasing power of potential customers and the ways in which people spend their money. Within this area are two different economies, subsistence and industrialized. Subsistence economies are based more in agriculture and consume their own industrial output. Industrial economies have markets that are diverse and carry many different types of goods. Each is important to the marketer because each has a highly different spending pattern as well as different distribution of wealth.
¶ The natural environment is another important factor of the macroenvironment. This includes the natural resources that a company uses as inputs and affects their marketing activities. The concern in this area is the increased pollution, shortages of raw materials and increased governmental intervention. As raw materials become increasingly scarcer, the ability to create a company’s product gets much harder. Also, pollution can go as far as negatively affecting a company’s reputation if they are known for damaging the environment. The last concern, government intervention can make it increasingly harder for a company to fulfill their goals as requirements get more stringent.
¶ The technological environment is perhaps one of the fastest changing factors in the macroenvironment. This includes all developments from antibiotics and surgery to nuclear missiles and chemical weapons to automobiles and credit cards. As these markets develop it can create new markets and new uses for products. It also requires a company to stay ahead of others and update their own technology as it becomes outdated. They must stay informed of trends so they can be part of the next big thing, rather than becoming outdated and suffering the consequences financially.
¶ The political environment includes all laws, government agencies, and groups that influence or limit other organizations and individuals within a society. It is important for marketers to be aware of these restrictions as they can be complex. Some products are regulated by both state and federal laws. There are even restrictions for some products as to who the target market may be, for example, cigarettes should not be marketed to younger children. There are also many restrictions on subliminal messages and monopolies. As laws and regulations change often, this is a very important aspect for a marketer to monitor.
¶ The final aspect of the macroenvironment is the cultural environment, which consists of institutions and basic values and beliefs of a group of people. The values can also be further categorized into core beliefs, which passed on from generation to generation and very difficult to change, and secondary beliefs, which tend to be easier to influence. As a marketer, it is important to know the difference between the two and to focus your marketing campaign to reflect the values of a target audience.
When dealing with the marketing environment it is important for a company to become proactive. By doing so, they can create the kind of environment that they will prosper in and can become more efficient by marketing in areas with the greatest customer potential. It is important to place equal emphasis on both the macro and microenvironment and to react accordingly to changes within them. (WIKIPEDIA)
Chapter 6: Technology
Effects of technology in today’s business world:
Technology contributed a lot towards the development of today’s business world. Computers, internet and a host of other new innovations have made the business world much advanced. In marketing, internet alone has made it easier to communicate with the customers and vendors. Technology has forever changed the way businesses interact with customers, forcing them to tailor their pitches in greater detail than ever before. Many standard marketings practices-mass media advertising, sales promotion, sales force calls- were part of the old economy. They will continue to be important, but today’s businesses must adapt to the changes brought about by technological advancement. Many forces play a major role in reshaping the world economy, among them technology is one.
Much of today’s business is carried over networks connecting people and companies. These networks are called intranets when they connect people within a company to one another and to the company mainframe; extranets when they connect a company with its suppliers and distributors; and the internet when they connect users to a large worldwide “information repository”. Connectivity is further enhanced by wireless communication. This digitalization and connectivity is major drivers that underpin the new economy.
The new economy is supported by information businesses. Information has the advantages of being easy to differentiate, customize, personalize and dispatch over networks at incredible speed. As companies are becoming proficient at gathering information about individual customers, their ability to individualize their market offerings, messages and media have increased. For example, Dell computer invites customers to specify exactly what they want in a computer and delivers a custom-built one in a few days. In addition to that, companies are also able to interact with each customer personally. Another example is Nike’s Web site, where buyers can now choose many models of sneakers of different designs, colors, size, even at different price range.
Changes in Business practice:
The changes in technology and economy are eliciting a new set of beliefs and practices on the part of business firms. Such as,
â€¢ Marketing groups are being formed to address the needs of different customer groups. This means a switch from being product-centered to being customer-segment centered.
â€¢ Companies are adding a focus on estimating individual customer lifetime value and designing their market offerings and prices to make a profit over the customer’s lifetime.
â€¢ Companies now pay attention to the marketing scorecard to interpret what is happening to market share, customer loss rate, customer satisfaction, product quality relative to competitors and other measures.
â€¢ As the late David Packard of Hewlett-Packard observed, “Marketing is far too important to leave to the marketing department.” Every employee has an impact on the customer and must see the customer as the source of the company’s prosperity.
â€¢ Companies are switching from building brands through advertising to building brands through performance.
â€¢ New economy companies put much emphasis on customer retention than on customer acquisition.
â€¢ An increasing number of companies are making customer satisfaction a major priority.
In short, today’s market place is made up of traditional consumers (who do not buy online), cyberconsumers (who mostly buy online), and hybrid consumers (who do both). Hence most companies will need a presence both offline and online to cater to these hybrid consumers. Companies need to rethink and revise their overall company strategy and within that, their marketing strategy.
Changes in marketing practices:
â€¢ E-business describes the use of electronic means and platforms to conduct a company’s business. Companies can conduct their business faster, more accurately, over a wide range of time and space, at reduced cost and with the ability to customize and personalize customer offerings.
â€¢ E-commerce is more specific than e-business; it means that the company or the site offers to transact or facilitate the selling of products and services online. E-commerce has given rise in turn to e-purchasing and e-marketing. E-purchasing means companies decide to purchase goods, services and information from various online suppliers. E-marketing describes company efforts to inform, communicate, promote and sell its products and services over the Internet.
â€¢ E-business and e-commerce take place over four major Internet domains: B2C (business to consumer), B2B (business to business), C2C (consumers to consumers) and C2B (consumers to businesses).
â€¢ Business-to-Consumer (B2C, sometimes also called Business-to-Customer) describes activities of businesses serving end consumers with products and/or services. For example, Calyx & Corolla (C&C), Homeowners.com
While the term e-commerce refers to all online transactions, B2C stands for “business-to-consumer” and applies to any business or organization that sells its products or services to consumers over the Internet for its own use. When most people think of B2C e-commerce, they think of Amazon, the online bookseller that launched its site in 1995 and quickly took on the nation’s major retailers. In addition to online retailers, B2C has grown to include services such as online banking, travel services, online auctions, health information and real estate sites. Peer-to-peer sites such as Craigslist also fall under the B2C category. (Wikipedia)
â€¢ Business-to-business (B2B) describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer. The volume of B2B transactions is much higher than the volume of B2C transactions. The primary reason for this is that in a typical supply chain there will be many B2B transactions involving subcomponent or raw materials, and only one B2C transaction, specifically sale of the finished product to the end customer. For example, B2B – SoluMed.com, FreeMarkets.
â€¢ Consumer-to-consumer (C2C) (or citizen-to-citizen) electronic commerce involves the electronically-facilitated transactions between consumers through some third party. A common example is the online auction, in which a consumer posts an item for sale and other consumers bid to purchase it; the third party generally charges a flat fee or commission. The sites are only intermediaries, just there to match consumers. They do not have to check quality of the products being offered. This type of e-commerce is expected to increase in the future because it cuts out the costs of using another company. For example, eBay, Amazon.com.
â€¢ Consumer-to-business (C2B) is an electronic commerce business model in which consumers (individuals) offer products and services to companies and the companies pay them. This business model is a complete reversal of traditional business model where companies offer goods and services to consumers (business-to-consumer = B2C).
â€¢ In addition to e-marketing, companies are becoming more skillful in customer relationship marketing (CRM). CRM enables companies to provide excellent real-time customer service by developing a relationship with each valued customer through the effective use of individual account information. Based on what they know about each customer, companies can customize market offerings, services, programs, messages and media.
â€¢ The three phases in which CRM can help to support the relationship between a business and its customers are, to:
ƒ˜ Acquire: a CRM can help a business in acquiring new customers through excellent contact management, direct marketing, selling and fulfillment.
ƒ˜ Enhance: a web-enabled CRM combined with customer service tools offers customers excellent service from a team of trained and skilled sales and service specialists, which offers customers the convenience of one-stop shopping.
ƒ˜ Retain: CRM software and databases enable a business to identify and reward its loyal customers and further develop its targeted marketing and relationship marketing initiatives.
According to Patricia Seybold, a management consultant, e-business is the wave of the future and that customer service will be its banner. Those who don’t heed the importance of e-commerce in surviving the brutal business world will be seriously affected, but those who underestimate the value of it will perish.
Technological revolution of the marketplace has allowed a greater change and customization of the products, services and promotional messages than older marketing tools. It has helpsed the retailers to build up and maintain a good relationship with the consumers. Conducting commercial transaction via EDI was the first step to use technology in marketplace. Every now and then new technologies come along and replace the relatively older one or combining with it, create a new dimension and paves the way to new possibilities. Competition drives new technology.
E-commerce is a successively progressing and developing sector. It has added a new dimension in the marketplace to meet the consumers’ ever-changing demands. It makes the consumers’ way of shopping and buying much easier and consumers from any remote place can easily access the site, choose their things and begin shopping. Due to comfortablity and easiness, it has become an integral part of daily lives for some consumers.
Moreover, for some products, online purchasing is more suitable. Online sellers can sell some non-digital products and services successfully and could make a good profit out of it. These products may include embarrassing objects or may be ordered from remote places.
Every now and then market researches and surveys are conducted thoroughly by collecting consumers’ information observing their actions. Information from point-of-sales systems within stores help greatly in assuming buyer needs and achieving the goals.
Advantages of E-commerce:
Technology gives the consumers ability to research on the products they cherish to buy. With this new technology, they have the power they never had before- the power to review and recheck the products endlessly along with videos and demos and to compare prices from thousands of other vendors. Vendors also take advantage of the e-commerce since it doesn’t need any live salesman and s/he can keep it open for business purpose 24/7 hours. Additionally, even retailers with small capital can establish an international or global reach with a simple website.
E-business has made the international business door open to all. Internet has changed the way of business through targeted advertising. Companies can direct certain consumers/customers to their business site specifying some keywords and all these are possible by using Google.
Reasons for slow-taking of new technology:
Despite the importance, flexibility and potentiality of the e-commerce and e-business, people has taken more time to adopt with this new environment than expected. There are several reasons behind this fact.
Accessibility and availability are the major key concern regarding this fact. Though it might be accessed from remote places, yet its accessibility and availability are extremely lows in the poor, under-developed and developing countries. There are also transaction and delivery problems which greatly decreases the potential of e-commerce and e-business.
Security concerns come to mind whenever people go for any money-costing occasion like shopping and buying over internet. Many consumers hold back their shopping or buying, even after having good impression on the product, just thinking about the safety of the money. They feel awkward to use the credit card due to concern about theft and fraud.
Lack of instant gratifying reaction on behalf of vendors often decreases the buyer number and amount of visitors.
Social status of the consumer and the social aspect of online and offline shopping influences the consumers profoundly. Many consumers prefer talking to salesman about the staff or to their cohorts for real which are not quite the same in online auction.
Sources of problems:
Steps need to be taken to implement the market segmentation in e-commerce and e-business effectively to avoid the casualties, or it might raise problems. Failing to understand the consequences will eventually lead to that situation. Origins behind these problems are-
1. Failure to understand the customers. Failing to do so will hurt the consumers’ feeling and push back the potential customers.
2. If one fails to realize the competitive situation and is unable to predict environmental reaction, the market share will surely fall down and it will raise problems in future.
3. Both over-estimation of resource competence and under-estimation of time requirements are detrimental to marketing plan.
4. Improper co-ordination and inability to follow a plan. It will downturn the market. Failure to obtain senior management and employee commitment is another key source.
5. Failure to understand the ongoing changing pattern of the world and predict its nature and acting accordingly.
6. Becoming the victim of organized crime. The company might be infected by an organized group of criminals and its conspiracy will harm the overall situation.
7. Inadequacy of e-valiability. Customers’ demands have increased profoundly along with the entrance of new technology in the marketing over the year. Consumers intend to get it available all the time and if they don’t, even for once, they will go for alternatives. So to grab the attraction of the consumer and sustain it, availability must be ensured.
There are also quality and business to business (B2B) relation issues. To keep pace and compete with others, quality has to be ensured along with the consumer service. Otherwise, retailers will lose their share.
To have a successful role in e-commerce venture, one has to do some additional deeds to have a better platform in this competitive business world and one has to rethink of the strategies and if needed, to modify those to match with the ever-changing consumer needs and cope up with their demands in this modern digital world. These tasks include the following facts-
â€¢ First of all, to attract the customers and to retain them, we have to make the website very attractive and we need to provide the customers with a responsive and user-friendly environment so that they feel as if they are doing everything in a real market and thus, providing customers a better service as well as performance.
â€¢ We should provide value to customers by offering them a product-line that attracts potential customers at a competitive price just like in non-electronic commerce.
â€¢ There has to be a tracking system which will record anyone entering the website and any deeds done by anyone with every single detail so that vendors can track down the customer info, analyze and review it, understand the people’s demands and act according to it.
â€¢ We may provide incentives for customers to buy and return. It may include coupons, special offers and discounts, cross-linked websites and advertising affiliate programs. Besides this, providing personalized website, purchase suggestions and personalized special offers may make the customers feel like home.
â€¢ We may also provide additional facilities such as chat rooms, discussion boards, soliciting customer input, loyalty schemes and other affinity programs which will support the customers if needed. There has to be an instant mail support service available to customers all the time. Besides, different customer oriented services like poll and survey need to be implemented on a regular basis to review and check the market demands and cope up with it.
â€¢ Reliability and Security are just other crucial and undeniable facilities that have to be ensured so that the customers need not to worry for anything else besides his/her primary needs. Ensuring security includes technological support as well as money insurance issues. Fail-safe technology, information encryption, firewalls, risk-free and guaranteed money-back option in case of unexpected hazards might satisfy those demands and will surely increase customers in number. There has to be also a home-delivery facility so that the customers don’t have to do anything except ordering via internet.
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