5. Explain Marketing Environment. What are its contents?

“It is useless to tell a river to stop running; the best thing is to learn swimming in the
direction it is flowing.” – Anonymous

Introduction
No business operates in a vacuum; any organisation is surrounded by laws and
liabilities, pressure groups and public bodies, customers and competitors. These are part
of the marketing environment that the organisation works within, and since marketing is
at the interface between the organisation and the outside world, dealing with this
environment is a major part of the marketer ‘s work.
This means that the marketing policy of a firm (or any organisation) should be viewed
as operating within a complex and rapidly changing environment. These external factors
must be monitored and responded to if the organisation is to meet its goals.
The marketing activities of the business are affected by several internal and external
factors. While some of the factors are in the control of the business, most of these are not
and the business has to adapt itself to avoid being affected by changes in these factors.
These external and internal factors group together to form a marketing environment in
which the business operates.
Meaning of Marketing Environment
Marketing Environment is the combination of external and internal factors and forces
which affect the company’s ability to establish a relationship and serve its customers.
Definition
1. “A company’s marketing environment consists of the factors and forces outside of
marketing that affect marketing management ability to build and maintain successful
relationships with target customers”. – Philip Kotler
Components of Marketing Environment
The marketing environment is made up of the internal and external environment of
the business. While internal environment can be controlled, the business has very less or
no control over the external environment. The internal environment is company specific
and includes owners, workers, machines, materials etc. The external environment is
further divided into two components: micro & macro. The micro or the task environment
is also specific to the business but external. It consists of factors engaged in producing,
distributing, and promoting the offering. The macro or the broad environment includes
larger societal forces which affect society as a whole. The broad environment is made up
of six components: demographic, economic, physical, technological, political-legal, and
social-cultural environment.

1
 Marketing Environment

Internal Environment Internal Environment

(Fully controllable)

 Mission and Micro Environment Macro Environment

objectives
Task Environment (Uncontrollable)
 Value system (Partially controllable)
 Organizational  Demographic
structure  Suppliers
 Economic
 Corporate  Market
 Physical
structure intermediaries
 Political-Legal
 Quality of human  Partners
 Technological
resources  Customers
 Socio-Cultural
 Labour unions  Competitors
 Global
 Physical resources  Public
and technological
capabilities

2
Internal Environment
The internal environment of the business includes all the forces and factors inside the
organisation which affect its marketing operations. These components can be grouped
under the Five M’s of the business, which are:

 Men
 Money
 Machinery
 Materials
 Markets

The internal environment is under the control of the marketer and can be changed
with the changing external environment. Nevertheless, the internal marketing
environment is as important for the business as the external marketing environment. This
environment includes the sales department, marketing department, the manufacturing
unit, the human resource department, etc.
External Environment
The external environment constitutes factors and forces which are external to the
business and on which the marketer has little or no control. The external environment is
of two types:
a) Micro Environment
The micro component of the external environment is also known as the task
environment. It comprises of external forces and factors that are directly related to the
business. These include suppliers, market intermediaries, customers, partners, competitors
and the public.
a) Suppliers: Suppliers include all the parties which provide resources needed by the
organisation.
b) Market intermediaries: Market intermediaries include parties involved in
distributing the product or service of the organisation.
c) Partners: Partners are all the separate entities like advertising agencies, market
research organisations, banking and insurance companies, transportation companies,
brokers, etc. which conduct business with the organisation.
d) Customers: Customers comprise of the target group of the organisation.

3
e) Competitors: Competitors are the players in the same market who targets similar
customers as that of the organisation.
f) Public: Public is made up of any other group that has an actual or potential interest or
affects the company’s ability to serve its customers.

b) M
acro Environment
The macro component of the marketing environment is also known as the broad
environment. It constitutes the external factors and forces which affect the industry as a
whole but don’t have a direct effect on the business. The macro environment can be
divided into 6 parts.

a) Demographic Environment: The demographic environment is made up of the people

who constitute the market. It is characterised as the factual investigation and

4
 segregation of the population according to their size, density, location, age, gender,
race, and occupation.
b) Economic Environment: The economic environment constitutes factors which
influence customers’ purchasing power and spending patterns. These factors include
the GDP, GNP, interest rates, inflation, income distribution, government funding and
subsidies, and other major economic variables.
c) Physical Environment: The physical environment includes the natural environment
in which the business operates. This includes the climatic conditions, environmental
change, accessibility to water and raw materials, natural disasters, pollution etc.
d) Technological Environment: The technological environment constitutes innovation,
research and development in technology, technological alternatives, innovation
inducements also technological barriers to smooth operation. Technology is one of the
biggest sources of threats and opportunities for the organisation and it is very
dynamic.
e) Political-Legal Environment: The political & Legal environment includes laws and
government’s policies prevailing in the country. It also includes other pressure groups
and agencies which influence or limit the working of industry and/or the business in
the society.
f) Social-Cultural Environment: The social-cultural aspect of the macro environment
is made up of the lifestyle, values, culture, prejudice and beliefs of the people. This
differs in different regions.
g) Global Environment: With the advent of globalization, the world has become one
market. An enterprise can produce and sell goods and services anywhere in the world.
Therefore, any change in the situation of one country affects others.