MICRO AND MACRO ENVIRONMENT

BACHELOR OF COMMERCE BACHELOR OF MANAGEMENT STUDIES SEMESTER- III (2010-2011)

SUBMITTED BY7 8 FARHAN BOOTWALA 9 LABIL 10 VIVIDHA DIVSE 11 VIJAYTA DIWAKAR 12 MUSTIFA

PROJECT GUIDE: - PROF. P.K.SINHA

VERSOVA EDUCATION TRUST S SMT. KAMALA MEHTA COLLEGE OF COMMERCE
7 Bunglows, versova, Andheri (W), Mumbai 400 061.

ACKNOWLEDGEMENT

I would like to thank the teaching faculty of SMT. KAMALA MEHTA COLLEGE OF COMMERCE. Affiliated to the University of Mumbai for their excellent suggestion. A special thank to Prof. Payal Coordinator for her constant encouragement and guideline from the beginning to the end with never ending patience. Her constant support and efforts helped me to complete my project on time. I would like to take an opportunity to thank all friends for co-operating with me and to all the people who are directly or indirectly connected to the project. Above all thanks to our principal Dr. Mrs.Flory Dsouza for their co-operation during the time of completion of the project. I would like to thank our respected Prof. P.K.SINHA without whom the project would have not come to an end.

Roll No. 7 ,8 ,9 ,10 ,11 ,12. Date: Place: Mumbai

DECLARATION

ROLL NO . 7 ,8 ,9 ,10 ,11 ,12 the student of B.Com Bachelor of Management Studies Semester 3 (2010-2011) hereby declare that I have completed the project on MICRO AND MACRO ENVIRONMENT

The information submitted is true and original to the best of my knowledge.

Signature of Students
ROLL NO- 7 ,8 ,9 ,10 ,11 ,12.

MEANING OF BUSINESS ENVIRONMENT -:

Business operate in an environment and not in a vaccum.the term environment include all the factors within and outside the control of business. Business unit is micro concept and environment is macro concept.environment is always subject to changes.environmeni is complex phenomenon because it is influenced by both qualitative and quantitative factors, business and environment are interrelated. the survival and growth of business depends on how far it is competent to adapt itself to meet the environment condition .no business can act against the environment .business must learn to respond to the changes in the environment. Environment influence a business enterprise in different ways and naturally clear understanding of the environment is of crucial important to those who manage its policies and activity, business environment refer to social economic surroundings under which business activities are to be conducted such environment is net result or sum total of various political ,economic ,social technological, natural and other factors/force, environment factor are largely beyond the control of business enterprises. They are essentially givers within which business enterprise have to operate

MEANING OF MARKETING ENVIRONMENT -:

Marketing environment and marketing management are closely related and inter-dependent. Marketing activity are to be planned and conducted within the context of changing marketing environment.marketing environment is more important to management today than ever before this is mainly because of the increase in the rate of environmental change. Marketing environment is that which is external to the marketing management function ,largely uncontrollable ,potentially relevant to marking decision making changing and/ or constraining in nature . Marketing is environment should be treated as apart and parcel of total business environment marketing enterprises have to operate within the marketing environment available at a particular time. they have to monitor prevailing environment and adjust their marketing activities accordingly. Thus, marketing environment creates opportunities and challengers [threats] before marketing enterprises. they have to study such environment and adjust the marketing activities accordingly. marketing environment is the net result of various marketing forces such as market competition ,introduction of new product,

DEFINATION OF MARKETING ENVIRONMENT -:

According to Philip kotler, a company marketing environment consists of the actor and forces external to the marketing management function of the firm that impinge on the marketing managements ability to develop and maintain successfully transaction with it target customers

CHARACTERISICTS/FEATURE OF MARKETNING ENVIONMENT -

1Marketing environment is situation/surrounding with which firm have to operate -: The environment may be favourable or unfavourable .it may create new opportunities or threats to marketing enterprises. However they have appropriate marketing plans and policies

2] Marketing firms have practically no control on the marketing environment -: As it is the result of various economic,social,political and other factors and forces marketing firms have no capacity to fight with the marketing

environment. they have to study the changing marketing environment and adjust their marketing activity accordingly.

3] marketing environment is the net result of various socio economics factors-: Factors influencing environment may be macro factors [e.g., demographics, economic, technological political and cultural] or micro factors [e.g.,competitors,suppliers marketing intermediaries and customers of the various socio-economic factors and forces

4] marketing environment is always flexible/ever changing -: It may remain stable for a short period. Thereafter major or minor changes may develop due to internal and external factors .thus ,changing environment is a reality and is rightly treated as one important feature of marketing environment .

5]marketing environment and marketing management are closely related. Study of changing economics and marketing environment is a must for efficient marketing management

MEANING OF MICRO ENVIRONMENT -:

Micro environment is implies the factors/force in immediate environment which affect the companys ability to serve the market .it starts with the companys environment wherein the marketing managers are necessarily requires to handle -: 1] sales executives 2]Brand managers 3]Marketing researchers, 4]Advertising and sales promotion personnels and 5]Sales representatives Marketing management is directed towards building relationships with customers by creating customers value and satisfaction it is not possible for marketing managers to achieve this goal all alone,there are major forces working in the micro environment such as management structure ,marketing channel, competitor,stakeholders,etc in addition to this ,it is neccssaryto build relationships with other company department,suppliers,marketing intermediaries, customers,competitors and publics .compartatively,it is simple task to coordinate and organize micro environment forces

The sales personnels mentioned above constitutes the internal marketing environment . they help in developing marketing plans for the existing as well as new products,in keeping with company environment ,marketing managesrs in consultation with top management decide the marketing plans

1 THE MICRO-ENVIRONMENT -:
The term micro-environment denotes those elements over which the marketing firm has control or which it can use in order to gain information that will better help it in its marketing operations. In other words, these are elements that can be manipulated, or used to glean information, in order to provide fuller satisfaction to the companys customers. The objective of marketing philosophy is to make profits through satisfying customers. This is accomplished through the manipulation of the variables over which a company has control in such a way as to optimise this objective. The variables are what Neil Borden has termed the marketing mix which is a combination of all the ingredients in a recipe that is designed to prove most attractive to customers. In this case the ingredients are individual elements that marketing can manipulate into the most appropriate mix. E Jerome McCarthy further dubbed the variables that the company can control in order to reach its target market the four Ps. Each of these is discussed in detail in later chapters, but a brief discussion now follows upon each of these elements of the marketing mix together with an explanation of how they fit into the overall notion of marketing.

THE FOUR PS AND THE MARKETING MIX -:

The four Ps stands for: 1. 2. 3. 4. Product Price Place and Promotion

Product and price are obvious, but perhaps place and promotion need more explanation. Place, it is felt, might better be termed placement because it comprises two distinct elements. The first element is channels of distribution that is the outlets and methods through which a companys goods or services are sold. Thus a channel can be certain types of retail outlet or it can be salespeople selling a companys industrial products through say a channel which comprises buyers in the chemical industry. The other part of place refers to logistics that relates to the physical warehousing and transportation of goods from the manufacturer to the end customer. Thus, placement might be a better descriptor as it refers to the placing of goods or services from the supplier to the customer. In fact, place has its own individual mix which is termed the distribution mix.

Promotion also has its individual mix that is called the promotional mix. This comprises advertising, selling and sales promotion. In fact promotion is a misnomer, because in advertising agency circles the mention of promotion usually means sales promotion. Some writers are now separating selling away from promotion and calling it people because it is too important an element of marketing to be lumped in with promotion, although in reality it is still promotion (through word of mouth). This fifth P (people) are those who contact customers on a regular basis with the objective of ultimately gaining orders and these people comprise the sales force.

MODELS OF MARKETING -:
Attempts to sum up what is meant by marketing at a very simple level. In fact it is one of the earliest models ever attempted to explain the meaning of marketing. Information Firm Operation Customer

SIMPLE DIAGRAMMATIC REPRESENTATION OF MARKETING -:

In Figure 1 we see information coming from customers to the supplying company. This information is noted and goods or services are supplied to customers in line with customer needs. The information flow represents an exchange of ideas whilst the operation flow represents an exchange of meanings. Figure 2 is perhaps a more precise diagram of what is meant by marketing and one which we can begin to understand from what has already been said.

Marketing

sales forecasting

buyer behaviour

Suppliers

customers

Product price distribution promation personnel segmenSelling tation Targeting &possi

oning channels logistics advertising sales promation

MODEL OF THE PROCESS OF MARKETING -:

This more complex model better explains what we are now beginning to understand about marketing. The bottom line represents the elements of the marketing mix over which a company has control. These elements are manipulated in such a way as to best suit customers needs and tastes and this represents an operational flow where things have to be done in order to arrive at the optimum marketing mix. Remember that there are sub-mixes within the individual elements of the marketing mix. This bottom line also equates to the earlier notion of the four Ps, or rather the five Ps, as personal selling has been separated from promotion and becomes people. The top line represents an information flow from the market to the firm. Data is collected through discussions and interviews with customers on and informal and formal basis. A whole range of techniques is available for this process and this is collectively termed marketing research. A more advanced strategic model that incorporates marketing research is embodied in a marketing information system (MkIS) and this is dealt with in a later lecture. In addition, data is collected from customers in relation to their likely future purchases and this is known as sales forecasting. Another raft of techniques is available for the subject of sales forecasting which lies at the very heart of marketing and business planning.

Thus we begin to see how marketing orientation works. Customers are the starting point and sales forecasting and marketing research determine their likely requirements and tastes. This information is processed internally within the organisation and products and promotional messages are devised to suit customers needs, to allay their purchasing fears and to reinforce their expectations. Goods and services are supplied as and when required in the quantities needed and when they are requested - not later and not earlier.

THE PLACE OF MARKETING ALONGSIDE OTHER ELEMENTS OF BUSINESS -:

Marketing is but one function within business. Arguably it is the most critical function because it interprets customers needs and requirements into products and services and repeat business without which a business cannot continue. In fact a modern view of marketing puts customers in the centre and marketing as the interpretative function surrounding the customer with other major functions of business around this as shown in Figure 3. The idea is that all functions of business should be geared towards the satisfactions of customers requirements and this has led to the new notion of customer care. Production Marketing Finance Customers Human Resource Management Research & Development

FACTORS OF MICRO ENVIRONMENT -: THE SUPPLIER ENVIRONMENT -:

This consists of other business firms or individuals who provide the marketing firm with raw materials, product constituents, services or, in the case of retailing firms, possibly the finished goods themselves. Firms, whether they be retailers or manufacturers, will often depend on numerous suppliers. The buyer/supplier relationship is one of mutual economic interdependence, both parties relying on the other for their commercial well-being. Although both parties are seeking stability and security from their relationship, factors in the supplier environment are subject to change, such as industrial disputes which will affect delivery of materials to the buying company, or a sudden increase in raw material prices which forces suppliers to raise their prices. Whatever the product or service being purchased by the marketing firm, unexpected developments in the supplier environment can have an immediate and potentially serious effect on the firms commercial operations. Because of this, marketing management, by means of the marketing intelligence component of its marketing information system, should continually monitor changes and potential changes in the supplier environment and have contingency plans ready to deal with potentially adverse developments.

COMPETITORS :
Management must be alert to the potential threat of other companies marketing similar and substitute product whether they are of domestic or foreign origin. In some industries there may be numerous world-wide manufacturers posing a potential competitive threat and in others there may only be a few. Whatever the type, size and composition of the industry, it is essential that marketing management has a full understanding of competitive forces. Companies need to establish exactly who their competitors are and the benefits they are offering to the market. Armed with this knowledge, the company will have a greater opportunity to compete effectively. The success of a business largely depends on the study of competitors regarding their policy on product, price promotion and distribution and advertising. when relevant information is called about the competitors .it helps to strengthen the business to face on the weakness of the competitors .the businessman can capitalise on weakness of the competitors, there are host competitors who surround and affect the marketing system of the company.

STAKEHOLDERS -:
Person, group, or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization's actions, objectives, and policies. Key stakeholders in a business organization include creditors, customers, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources. Although stake-holding is usually self-legitimizing (those who judge themselves to be stakeholders are de facto so), all stakeholders are not equal and different stakeholders are entitled to different considerations. For example, a firm's customers are entitled to fair trading practices but they are not entitled to the same consideration as the firm's employees. See also corporate governance

MACRO-ENVIRONMENT FACTORS -: THE POLITICAL AND LEGAL ENVIRONMENT -:

To many companies, domestic political considerations are likely to be of prime concern. However, firms involved in international operations are faced with the additional dimension of international political developments. Many firms export and may have joint ventures or subsidiary companies abroad. In many countries, particularly those in the so-called Third World or more latterly termed Developing Nations, the domestic political and economic situation is usually less stable than in the UK. Marketing firms operating in such volatile conditions clearly have to monitor the local political situation very carefully. Many of the legal, economic and social developments, in our own society and in others, are the direct result of political decisions put into practice, for example the privatization of state industries or the control of inflation. In summary, whatever industry the marketing firm is involved in, changes in the political and legal environments at both the domestic and international levels can affect the company and therefore needs to be fully understood.

THE ECONOMIC ENVIRONMENT-:

Economic factors are of concern to marketing firms because they are likely to influence, among other things, demand, costs, prices and profits. These economic factors are largely outside the control of the individual firm, but their effects on individual enterprises can be profound. Political and economic forces are often strongly related. A much quoted example in this context is the oil crisis caused by the Middle East War in 1973 which produced economic shock waves throughout the Western world, resulting in dramatically increased crude oil prices. This, in turn increased energy costs as well as the cost of many oil-based raw materials such as plastics and synthetic fibres. This contributed significantly to a world economic recession, and it all serves to demonstrate how dramatic economic change can upset the traditional structures and balances in the world business environment. As can be seen, changes in world economic forces are potentially highly significant to marketing firms, particularly those engaged in international marketing. However, an understanding of economic changes and forces in the domestic economy is also of vital importance as such forces have the most immediate impact. One such factor is a high level of unemployment, which decreases the effective demand for many luxury consumer goods,

adversely affecting the demand for the industrial machinery required to produce such goods. Other domestic economic variables are the rate of inflation and the level of domestic interest rates, which affect the potential return from new investments and can inhibit the adoption and diffusion of new technologies. In addition to these more indirect factors, competitive firms can also pose a threat to the marketing company so their activities should be closely monitored. It is therefore vital that marketing firms continually monitor the economic environment at both domestic and world levels.

THE SOCIO-CULTURAL ENVIRONMENT

This is perhaps the most difficult element of the macroenvironment to evaluate, manifesting itself in changing tastes, purchasing behaviour and changing priorities. The type of goods and services demanded by consumers is a function of their social conditioning and their consequent attitudes and beliefs. Core cultural values are those firmly established within a society and are therefore difficult to change. They are perpetuated through family, the church, education and the institutions of society and act as relatively fixed parameters within which marketing firms are forced to operate. Secondary cultural values, however, tend to be less strong and therefore more likely to undergo change. Generally, social change is preceded by changes over time in a societys secondary cultural values, for example the change in social attitude towards credit. As recently as the 1960s, personal credit, or hire purchase as is sometimes known, was generally frowned upon and people having such arrangements tended not to discuss it in public. Today, offering instant credit has become an integral part of marketing, with many of us regularly using credit cards and store accounts. Indeed, for many people it is often the availability and terms of credit offered that are major factors in deciding to purchase a particular product.

Marketing firms have also had to respond to changes in attitude towards health, for example, in the food industry people are now questioning the desirability of including artificial preservatives, colourings and other chemicals in the food they eat. The decline in the popularity of smoking is a classic example of how changes in social attitudes have posed a significant threat to an industry, forcing tobacco manufacturers to diversify out of tobacco products and into new areas of growth. Changes in attitudes towards working women have led to an increase in demand for convenience foods, one-stop shopping and the widespread adoption of such time-saving devices as microwave cookers. Marketing firms have had to react to these changes. In addition, changes in moral attitudes from the individualism of the permissive society of the 1960s and early 1970s to the present emphasis on health, economic security and more stable relationships, are all contributory factors to a dynamically changing socio-cultural environment that must be considered by companies when planning for the future.

THE TECHNOLOGICAL ENVIRONMENT

Technology is a major macro-environmental variable which has influenced the development of many of the products we take for granted today, for example, television, calculators, video recorders and desk-top computers. Marketing firms themselves play a part in technological progress, many having their own research department or sponsoring research through universities and other institutions, thus playing a part in innovating new developments and new applications. One example of how technological change has affected marketing activities is in the development of electronic point of sale (EPOS) data capture at the retail level. The laser checkout reads a bar code on the product being purchased and stores information that is used to analyse sales and re-order stock, as well as giving customers a printed readout of what they have purchased and the price charged. Manufacturers of fast-moving consumer goods, particularly packaged grocery products, have been forced to respond to these technological innovations by incorporating bar codes on their product labels or packaging. In this way, a change in the technological environment has affected the products and services that firms produce and the way in which firms carry out their business operations.