Enterprise Environmental Factors in Marketing Explained

External Environment of Marketing

External factors are beyond the control of a firm; its success depends to a large extent on its adaptability to the environment.

The external marketing environment consists of:

• Micro Environment
• Macro Environment

Micro Environment

The micro environment consists of the environmental factors that are in close proximity to the company. These factors influence the company’s ability to produce and serve the market.

Key Micro Environment Factors:

• Suppliers - Suppliers can alter a firm’s competitive position and marketing capabilities. These include raw material suppliers, energy suppliers, and suppliers of labor and capital. According to Michael Porter:

Bargaining power of suppliers is maximized when:

• The seller firm is a monopoly or an oligopoly.
• The supplier does not face competition from substitute products.
• The buyer is not an important customer.
• The supplier’s product is crucial for the buyer’s business and finished product.
• The supplier poses a real threat of forward integration.

• Market Intermediaries - Producers need intermediaries to promote, sell, and distribute goods and services to ultimate consumers. Intermediaries may be individuals or business firms, including wholesalers, retailers, agents, distributing agencies, market service agencies, and financial institutions.
• Customers - Customers can be classified as:

• Ultimate customers: Individuals and households.
• Industrial customers: Organizations buying goods/services to produce other goods/services.
• Resellers: Intermediaries who buy goods to resell at a profit (wholesalers, retailers, distributors).
• Government and non-profit customers: Purchase goods/services for consumption or service purposes.
• International customers: Individuals or organizations from other countries buying goods/services for consumption or industrial use.

• Competitors - Competitors sell goods/services of similar descriptions in the same market. Apart from price competition, product differentiation is key. Efficient marketing systems help build confidence and achieve better results.
• Public - Companies must consider the interests of the public along with competitors and consumers. Public relations are a crucial aspect of marketing, influencing future growth. A public is defined as:“Any group that has an actual or potential interest in or impact on a company’s ability to achieve its objective.”

Macro Environment

Macro environment factors act external to the company and are largely uncontrollable. They do not directly affect marketing ability but indirectly influence marketing decisions.

Key Macro Environment Factors:

• Demographic Forces - Marketers monitor the population because people form markets. They focus on population size, growth rate, age distribution, ethnic mix, educational levels, household patterns, regional characteristics, and movements.
• Economic Factors - The economic environment consists of macro-level factors related to production and distribution that impact an organization’s business.
• Physical Forces - Physical forces include natural resources: **Renewable resources: Forests, agricultural products, sea products, etc. **Non-renewable resources: Oil, coal, minerals, etc. The availability and type of resources directly affect production and marketing.
• Technological Factors - The technological environment involves applied knowledge, materials, and machinery used in producing goods/services, which influence business operations.
• Political and Legal Forces - Political and legal developments significantly impact marketing decisions. Sound marketing requires considering government agencies, political parties, pressure groups, and laws. Regulations influence production capacity, product design, pricing, and promotion. Governments often intervene in marketing processes regardless of ideology.
• Social and Cultural Forces - Social forces aim to make marketing socially responsible. Businesses are expected to eliminate harmful products and produce goods beneficial to society. Various societal pressure groups impose restrictions on the marketing process.

Also Read - Enterprise Environmental Factors & OPA in Project Management