The market environment is a marketing term and refers to factors and forces that affect a firm’s ability to build and maintain successful relationships with customers. Three levels of the environment are 3: Micro (internal) environment - small forces within the company that affect its ability to serve its customers. Meso environment – the industry in which a company operates and the industry’s market(s). Macro (national) environment - larger societal forces that affect the microenvironment.[1]
Micro-Environment
The micro environment refers to the business itself and to all the
challenges that come from inside the business. Businesses can therefore take
control over all the challenges and influences in the micro environment.
Sometimes, the micro environment is also known as the internal environment. The
micro environment refers to the forces that are close to the company and affect
its ability to serve its customers. It includes the company itself, its
suppliers, marketing intermediaries, customer markets and public.
The company aspect of micro-environment 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 budget in
customer dissatisfaction. Marketing managers must watch supply availability and
other trends dealing with suppliers to ensure that product will be delivered to
customers in the time frame required in order to maintain a strong customer
relationship.
Macro-Environment (external environment)
The macro-environment refers to all forces that are part of the larger
society and affect the micro-environment. It includes concepts such as
demography, economy, natural forces, technology, politics, and culture.
Factors affecting organization in Macro environment are known as PESTEL,
that is: Political, Economical, Social, Technological, Environmental and Legal.
Demography
refers to studying human populations in terms of size, density, location, age,
gender, race, and occupation. This is a very important factor to study for
marketers and helps to divide the population into market
segments and target markets. An example of demography is
classifying groups of people according to the year they were born. 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 classification has different
characteristics and causes they find important. 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 macro-environment 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
macro-environment. This includes the natural resources that a company uses as
inputs that 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 macro-environment. 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 macro-environment 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 micro environment and to react accordingly to changes within
them.[2]