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MARKETING
ENVIRONMENT
By Advance Saraswati Prakashan Pvt. Ltd
Sankhamul, 01-4780359
 Learning Objectives

After comprehensive studying of this chapter, learners will be able to:

Meaning and Scope of Marketing Environment
Micro Environment Variables
Macro Environment Variables
Reactive and Proactive Marketing
Marketing environment in Nepal

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 Meaning of Marketing Environment

▪ The environment is dynamic. The nature and degree of change is not predictable. The examples
are invention of new technology of production, change in the government, changes in the
industrial policy, revision of borrowing and lending rates by the Nepal Rastra Bank and so on.
Such factors create opportunity and challenge for the marketers.
▪ Philip Kotler, “A company's marketing environment comprises all the actors and forces outside
marketing that affect marketing management’s ability to develop and maintain successful transactions with
its target customers.”
▪ Pride and Ferrell, "The marketing environment consists of external forces that directly or
indirectly influence an organization's acquisition of inputs (human, financial and natural
resources and raw materials and information) and creation of outputs (goods, services or ideas)."
Features of Marketing Environment

• Marketing environment is not static. It is always dynamic. Marketing

Dynamic environment is continuously changing.

• Marketing environment is very complex and difficult to predict. Because

Complex of the complexity, marketers face uncertainty in their business.

• Change in environmental forces has long-term positive or negative

Long-term Impact impact on marketing.

• Marketing environment is multi-faceted. Different marketers perceive

Multi-faced same environmental change differently.

• Marketing environment is related with strengths-weaknesses, and

Related with SWOT opportunities-threats.
 Scope of Marketing Environment

1. Customers: Marketing does not subsist without customers. Customers buy goods or services. The
behavior which the customer shows while buying goods or services is affected by environment.
So, the customer is included within the scope of marketing environment. Customers may be
individuals and organizations.
2. Marketing Organizations: The organizations conducting marketing activities are called
marketing organizations. Business, service and public organizations are included in marketing
organization. So, these organizations come under the scope of marketing environment.
3. Micro and Macro Elements: Both the micro and macro elements of an organization also fall
under the scope of the marketing environment. Companies, suppliers, intermediaries, customers,
competitors, etc. are micro elements. Similarly, economic, natural, socio-cultural, political-legal,
technological, etc. are macro elements.
4. Marketing Mix Element: The marketing mix is the set of controllable, tactical marketing tools
that the firm blend to produce the response it wants in the target market. Marketing mix includes
product, price, promotion and place. Types of product, design, quality, branding, packaging,
warranty, etc. are the elements of product mix.
 Classification of Marketing Environment

Companies basically interact with two types of environment that is micro and macro
environment.
Micro environment consists of the factors close to the company that affect its ability to serve its
customers- the company, suppliers, marketing intermediaries, customer markets, competitors,
and public.
The macro environment consists of the larger societal forces that affect the micro environment-
demographic, economic, natural, technological, political-legal and cultural forces.

Marketing
Environment

Macro
Micro Environment
Environment
 Micro Environment

Philip Kotler, ”Micro environment consists of the forces close to the company that affects its
ability to serve its customers the company, suppliers, marketing channels, customers, competitors
and public.“
The major components of the micro environment of marketing are as follows:

The Company Customers Competitors

Marketing
Public Suppliers
Intermediaries
 Macro Environment
▪ Philip Kotler, “Macro Environment consists of the large social forces that affect the micro environment –
demographic, economic, natural, technological, political and cultural force."
▪ Dictionary of Marketing, “Macro environment consists of the external forces which affects a
company’s planning and performance, and are beyond its control. The major uncontrollable
external forces are economic, demographic, technological, natural, socio-cultural and political-
legal forces which influence a firm’s decision making and have an impact upon its performance.”

Socio-
Demographic Economic Technological
Cultural
Environment Environment Environment
Environment

Natural Political
Environment Environment
 Demographic Environment

Demography is the study of human population in terms of size, growth, density,

location, age gender, race, occupation, and other statistics. The demographic
environment is of major interest to marketers because it involves people, and
people make up markets.
1. Population Size
2. Population Growth
3. Migration
4. Urbanization
5. Age Mix
 Economic Environment

Markets require buying power as well as people. The economic environment

consists of factors that affect consumers’ purchasing power and spending patterns.
Nations vary greatly in their levels and distribution of income. Following are the
major economic factors:
1. Income Distribution: Macroeconomic indicators of the country provide the overall
health of the economy as well as the direction of economic growth.
2. Spending Trend: Consumers at different income levels have different spending
patterns. Change in major economic variables such as income, cost of living, interest
rates, saving and borrowing patterns have a larger impact on the market place.
3. Per Capita Income: Per capita income indicates the purchasing power of the
market. The higher the per capita income, the higher the purchasing power and vice-
versa.
4. Trade Cycle: Trade cycle affects the economic activities of the country. Different
stages of trade cycle are prosperity, recession, depression and recovery.
 Contd…
5. Willingness to Spend: Willingness of a customer to spend depends on her/ his
buying power, family background and the prevailing and expected economic
conditions.
6. Purchasing Power: Purchasing power of consumers directly affects marketing. The
purchasing power of the consumers is influenced by their level of income, economic
system of their country, inflation, spending style, etc.
7. Inflation Rate: Inflation decreases consumers’ purchasing power by increasing
price of goods or services. Nepal’s inflation rate is high.
8. Credit Availability: Consumers buying power can be affected by a wider
availability of credit in the market. If credit facility is available, volume of sale
increases; if it is not available, the volume of sale decreases.
9. Consumer’s Income: Consumers’ income also affects marketing activities. The
consumers’ income directly affects their purchasing. If the income of the consumers
is high, purchasing power also becomes high, and if income is low, their
purchasing power also becomes low.
 Natural Environment
▪ Natural resources that are needed as inputs by marketers or that are affected by marketing
activities. Since the natural environment does not remain under control of business organization,
marketing mix should be made accordingly.
1. Natural Resources: Raw materials, mines, land, climate, forest ,etc. are natural resources. These
resources play an important role in marketing activities.
2. Topography: Topography plays an important role in transport and distribution. If the roads are
easy and means of transport can be taken from place to place, goods can be transported at lower
cost; just the opposite if the roads are difficult and means of transport cannot be taken everywhere,
the cost of goods becomes high in such places. So, the topography affects cost of goods.
3. Climate: Climate also affects the needs of customers and marketing mix. In the place where the
climate is hot, demand of cotton clothes and cold drinks becomes high. In the places where the
climate is cold, demand of woolen clothes and hot drinks becomes high.
 Political- Legal Environment
▪ The political-legal environment consists of political environment, government
agencies, laws and regulations and public interest groups who act as watch-dogs
of interests of their members.
1. Laws
2. Increasing Legislation
3. Political System
4. Government Policies
5. Government Agencies
6. Special-interest Groups
 Socio-cultural Environment

▪ Socio-cultural environment encompasses people’s characteristics, their culture

and values and their specific social concerns.
1. Social Environment: Social environment may include total social forces within which an
organization operates. Society shapes the beliefs, values and norms that largely define peoples'
tastes and preferences. People absorb almost unconsciously a world view that defines their
relationship to themselves, to others, to organization, to society, to nature, and to the universe.
2. Cultural Environment: Cultural environment refers to the traditions, laws rules, conventions and
beliefs. The people living in a particular society hold many core beliefs and values tend to persist.
Most of the Nepalese people still believe in God, gives charity to poor and honest. Core beliefs
and values are passed on from parents to children and are reinforced by major social institutions-
school, temples, offices, etc. Secondary beliefs and values are more open to change.
 Technological Environment
Technological environment consists forces that create new technologies, creating new product and
market opportunities.
1. Level of Technology: Technology is the major determinant of marketing activities. Technology
can be manual technology as well as capital based technology. Manual technology is traditional
and simple in nature.
2. Pace of Technological Change: The technological changes in the last four decades are faster
compared to earlier years.
3. Technology Transfer: Technology transfer is the key for successful marketing activities. The
patterns of technology transfer are foreign direct investment, joint ventures, turn-key projects,
licensing and capital transfer, contract manufacturing, franchising, technical assistance, etc.
4. Research and Development Budget: Research and development activities have become essential
elements of modern marketing. Greater innovativeness in product and service are outcome of
research and development activities conducted by different company.
 Reactive and Proactive Marketing

▪ Reactive Marketing : This approach says that marketing environmental forces

are totally uncontrollable and difficult to predict their nature and degree of
changes. In this sense, it appears to be a passive approach. The firm waits for
environmental changes to take place.
▪ Proactive Marketing: This approach allows the firm to analyze past and present
trends in environmental changes and predict their future trends. This is so
because this approach says that although many of environmental forces aren’t
controllable, efforts can be made to influence them by correct and calculated
efforts.
Marketing Environment in Nepal

Demographical Economic
Environment Environment

Socio-Cultural
Natural Environment
Environment

Technological Political- Legal

Environment Environment
 Economic Environment

▪ An economic environment is one of the most important factors to affect the Nepalese marketing.
It is so because, if the nation has economic strength then the business organization will catch
opportunities. But if the economic status is weak, then business organizations have to face
different threats. Economic environments include following factors:
a. Income and Its Distribution
b. Structure of Economy
c. Trade Policy
d. Economic Condition
 Demographic Environment

▪ The demographic environment affecting Nepalese marketing are population growth, population
size, urbanization and migration.
a. Population Size
b. Urbanization and Migration
c. Population Growth
 Socio- Cultural Environment

A Socio-cultural environment includes both tangible and intangible factors.

House, foods, cloths, etc are tangible factors and religion, belief, language,
ethnicity, etc are intangible factors. In Nepal, socio-cultural factors are the
powerful factors. It is so because in Nepal there are many types of cultural
groups who have their own language, religion, belief and norms. With socio-
cultural environment we can discuss about the following factors:
▪ a. Social Factors:
i. Social Class ii. Family
iii. Reference Group
▪ b. Cultural Factors:
i. Attitude ii. Value and Beliefs
iii. Religion iv. Language
 Political-legal Environment

▪ Nepalese marketing is broadly affected by the political-legal environment.

Following environment can be discussed under political legal factors:
a. Political System
b. Government Policy
c. Pressure Group
d. Law
 Natural Environment

▪ Natural environment also affect marketing. In Nepal, natural factors include natural resources,
beauty, and topography.
a. Natural Resources: In Nepal, there are various types of natural resources. Here, there is no oil
and raw material but Nepal is rich in forest and water resources. Nepal has the capability of 83
thousand megawatt but only 3% has been used.
b. Natural Beauty: Nepal is a naturally beautiful country. Highest peak of the world, Mt. Everest,
lies in Nepal. The beautiful Himalayas, river, lakes, and beautiful landscape always attract
tourists to Nepal. Such a natural beauty is the blessing for tourism business because lakes,
mountains and rivers are the gifts of nature for beautiful country Nepal if used wisely.
c. Topography: Nepal is a land-locked country. Nepal’s topography consists of high Himalayas,
Hill and the Terai. Topography affects transportation, storing, and packaging.
 Technological Environment

▪ Technological development has positive impact on industrial development. Technological

environment can be described in the context of Nepal in a following ways:
a. Level of Technological Change: Level of technology is labour based and capital based. There is
a massive use of manpower in labour based technology and massive use of modern machine in
capital based technology. Nepal is a labour based country. But the new industries are using
capital oriented technology by replacing the labour oriented technology.
b. Pace of Technological Change: Technology is dynamic. So, its changing pace is speedy. But the
development of technology is very slow in Nepal. Nepal has adopted the policy of technology
transformation. Therefore, through some multinational companies foreign technology is being
transformed. Surya Nepal company, NABIL Bank, Bottlers Nepal Ltd. etc., are some examples.
c. Research and Development Budget: Huge budget should be allocated for the research and
development. So, any of the business organizations is not capable for this. Therefore, the
government should be involved in this work. No any organization allocates the budget for
research and development in Nepal. But in the government level, many organizations with the
modern technologies are opened for the research and development.
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Assignment

▪ Short Answer Questions

1.Point out the differences between micro and macro environment.
2. Mention any four elements of economic environment.
3. What are the components of political environment?
4. Mention any four elements of technological environment.
5. What are the components of natural environment?
 Long Answer Questions
1. Explain the demographic environment of marketing.
2. What is marketing environment? Describe the economic environment of marketing with suitable
example.
3. What is a socio-cultural environment of marketing? Explain its impacts on firms' marketing
activities.
4. What do you know about technological environment? Describe the components of technological
environment with suitable example.
5. Describe the political environment of marketing.
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