The Marketing Environment

The Organization as a System

It is useful to conceptualize the organization as a system with interdependent parts. The systems approach solves problems by diagnosing them within a framework of inputs, transformation processes, outputs, and feedback.

Inputs are the labor (human), money (financial), materials, and equipment resources. Transformation processes comprise the technologies used to convert inputs into outputs. Outputs are the original inputs as changed by a transformation process into products and services. Feedback is information about a system's status and performance.

The Marketing Environment

The marketing environment surrounds and impacts upon the organizational system. It is necessary for organizations to understand the environmental conditions because they interact with strategy decisions.

The larger environment of an organization consists of all the factors and variables external to it, and are operating largely out of the organization's control.

Three Groups

The Core factors which have an immediate effect The Publics Organizations and institutions which have short and longer term effects.

The Macro longer term, often qualitative factors

Three Frequencies
Irregular crisis initiated, ad hoc and reactive
Periodic problem solving, proactive Continuous - problem avoidance, longer term, proactive

Recent Environmental Trends

Pace of environmental change Environmental volatility Environmental complexity Extended and intensified competition Increased collaboration and alliancing Windows of fleeting opportunity Sectoral growth and segmentation Internationalisation of markets Customization of demand Technology of mass-customisation New technologies and sciences Insecurity due to wider recognition of politico-economic imbalance of wealth, resources and political influence

The Internal Environment

All factors that are internal to the organization are known as the internal environment. The internal environment is as important for managing change as the external. Marketers call the process of managing internal change internal marketing. Internal marketing is an important implementation tool. It informs and involves all staff in new initiatives and strategies. It is simple to construct, especially if the marketer is familiar with traditional principles of marketing. Internal marketing obeys the same rules as, and has a similar structure to, external marketing. The main difference is that the customers are staff and colleagues from the organization.

The Micro-environment
This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence.

The Macro-environment
The macro-environment includes all factors that influence an organization but are out of its direct control. The market or environment is continuously changing, and the company must be able to adapt. There may be aggressive competition or rivalries in a market. The trend towards globalization means that there is always the threat of substitute products and new entrants. The wider the environment is for the product, the more is the need to compensate for changes in culture, politics, economics and technology.

Economic

Public versus private ownership Centralization or decentralization of economic planning Banking system and fiscal policies Disposable income Consumption patterns Inflation Employment Business cycles Natural resources and climate Energy availability and cost

Demographics

Nature of resources available Number, distribution, age and sex Industrialization and urbanization Distribution of income Levels of education

Socio-cultural

Class structure and mobility Social roles Development of social institutions Historical Background and ideologies Values and norms Views on authority relationships Leadership patterns Interpersonal relationships Nationalism Lifestyle changes

Political / Legal

General political climate Power concentration Political party system Legislation Constitutional considerations Nature of legal system Jurisdiction of governmental units Monopolies legislation Environmental protection laws Taxation policy Employment laws Government policy Regulatory bodies

Technological

Physical base Knowledge base New discoveries and innovations Speed of technology transfer Rates of obsolescence Internet Information technology

Cherished assumptions now thought obsolete

Import penetration of home markets will never exceed 15 per cent.

Workers do not have an important impact on productivity or quality.

Frequent styling changes are more important to customers than product quality. The consumer rights movement does not represent the concerns of a significant portion of the public.

Cherished assumptions now thought obsolete contd.

The primary aim of business is to make money.

Strict financial control is the secret to good administration.

Market growth of 10 percent p. a.

Energy will always be cheap and abundant.