Everything you need to know about the Components of Marketing Environment – Factors Influencing Internal, Micro and Macro Environment.

Environment is not static; it is dynamic i.e., ever changing. Any change in environment brings both challenges and opportunities. The marketers should keep watching these environmental changes and devise the schemes to face as well as reap the heap of benefits.

In the words of Philip Kotler, “Marketing environment is the totality of forces and entities that surround and potentially affect the marketing of a particular product.” Continuing to opine, he says that market environment as – “Those actors and forces that affect the company’s ability to develop and maintain successful transactions and relationships with its target groups”.

Learn about:-


1. Demographic Environment 2. Economic Environment 3. Technological Environment 4. Ecological Environment

5. Political (Legal) Environment 6. Socio- Cultural Environment 7. Natural Environment 8. Factors of Environment.

Learn about Marketing Environment: Micro and Macro Environment

Components of Marketing Environment – Micro and Macro Environment

Environment is not static; it is dynamic i.e., ever changing. Any change in environment brings both challenges and opportunities. The marketers should keep watching these environmental changes and devise the schemes to face as well as reap the heap of benefits.

A business firm is a socio-economic unit; it functions amidst the environmental factors both within and outside the business firm. Marketing environment refers to the forces affecting business decisions relating to marketing activities.


In the words of Philip Kotler, “Marketing environment is the totality of forces and entities that surround and potentially affect the marketing of a particular product.” Continuing to opine, he says that market environment as – “Those actors and forces that affect the company’s ability to develop and maintain successful transactions and relationships with its target groups”.

Marketing managers should be sensitive and responsive to these changing social, economic, technical, political and international spheres. They have to monitor the marketing information, forecast the change in trends, identify opportunities and threats and develop the strategies and policies to face them successfully.

I. Micro Environment:

Micro environmental forces are those which are specifically found in a specific firm. They affect the ability of a firm to serve its customers. Of these factors, a few are fully controllable i.e., within the control of a firm and some others are partly controllable. The fully controllable forces are within an organization (Internal) while partly controllable forces belong to outside firm’s entities (External).

They can be:


1. Fully Controllable Forces (Internal):

These are the forces which are within the control of the organization. No outsider has influence on such decisions. Firm’s resources and marketing mix are within the control of marketing manager. These include production capacity, finance, manpower, research and development and managerial talents.

And the marketing mix policies are decisions relating to 4 P’s i.e., Product, Price, Promotion and Physical Distribution. These are in their control and can be manipulated in their own desire. These forces are also known as micro as these relate to a single unit (firm) and do not affect the industry as a whole.

These are:


i. Company’s Organisation:

A company is made up of various levels of management like top, middle and lower level management. These have many departments like production finance, human resources, marketing, research and development etc. Marketing strategies, policies and plans are drawn up according to the philosophy (thinking and ideas) of top management.

Top management has direct influence on such decisions, no outsider can affect. Again, the various departments are to be coordinated in order to succeed in marketing planning process. Such plans are outcomes of the cordial and harmonious working of departments such as – purchase production, finance, human resources etc.

For example- the quality, design, delivery schedules depend on production policies while advertising and promotion programmes are to be within the budget limits laid down by finance department. Therefore, these are exclusively the decisions of persons within an organization.


ii. Management:

The men in the management of all the companies are not at all same. The talent and quality of people in the management of different companies will be different and they will be influencing on the decisions. The people in management may be too rigid, moderate, liberal which certainly determine the type of decisions they take. There is no direct interference from outsiders.

iii. Resources:

Every company has its own limits in terms of the resources, especially finance. The financial resources decide the scale of a firm such as – mega unit, large scale, medium, small or micro units. The plans and programmes of a firm should be within these financial resources. Nothing can be done without capital or financial resources.


There are materials requirements (equipments, parts, raw materials, energy resources), human resources (human beings, their talent, abilities, interest, energy) information resources (organizations details, market information, research and development). These resources affect the level and quality of marketing decisions.

iv. Marketing Mix:

It is one of the key concepts in modern marketing theory. It refers to the acts done by a firm to influence the demand for its products. This decision relates to decisions of product, price, place and promotion. A market mix is to be prepared in order to make firms marketing successful. These 4 Ps are very closely inter – related. Because the decisions relating to one ‘P’ directly influences the other Ps. Marketing mix is the combination of four inputs which form the core of the marketing mix.

They are described as:


a. Product Mix:

It refers to the combination of goods and services a firm offers for sale in the target market. It is the most basic mixing tool in which a firm decides about what is to be supplied to customers. It includes addition, improvement, and modification of products to a market. In these, the quality, design, features, packing, branding, warranty, services, style, colour, product line, etc., are decided.

b. Price Mix:

This is very critical decision in the present context of cut-throat competition. It relates to what is expected as a reward for product from the customers. Then, the marketers have to very cautiously consider competition, quality substitutes, willingness, ability of customers etc. The price fixed must be reasonable to customers to pay and giving profit to a firm.

The marketer has to decide both wholesale and retail prices with their margin and discounts, allowances, terms of credit etc. Such a price should be in commensurable with customers’ abilities, firm’s expectation of margin and competitor’s strategies. Most of the product’s successful survival is based on the price of it.

c. Place Mix:


It is distribution related decision. This relates to the activities a marketer wishes to undertake to reach the target market. In this process, there is need to decide about identifying the available channels, searching a new method and establishing links with various agencies. They must know everything about various types of wholesalers, retailers, modes of transportation, warehousing, inventory control at various places. Away from traditional methods, many modern ways of providing these services have been developed. The accessibility and reasonableness have to be considered and decided properly.

d. Promotion Mix:

This relates to the various activities undertaken to communicate and promote its products to the target market. There is need for hiring, training and motivating the sales force. In setting up communication and promotion programmes, a firm has to decide about advertising, personal setting publicity, public relations, sales promotion, exhibition, demonstration etc.

2. Partially Controllable Forces (External):

These are the external forces, but the company is capable to exercise control to a certain extent by taking appropriate decisions and policies. For example, with the intensive advertising and publicity customers are influenced. In the same way, the dealers and middlemen (distribution channels) can be effectively handled by suitable programmes and commission terms.

These relate to:


i. Suppliers:

It is quite common that the cost, quality, pricing and delivery decisions are affected by suppliers’ policies. But, with cordial relations with suppliers, these can be partially controlled. In case, the suppliers increase the price of raw materials, a company’s price of final products also changes. Similarly, the cash term or credit period allowed by suppliers also affect cost of production and inventory decisions.

ii. Customers:

The buying behavior of customers and life style of people will also influence the marketing plans. The firm’s marketing mix decisions are made in tune with the type of customers. A firm’s customers may be individuals, industrial users, dealers, government and global customers. The requirements of these customers differ in quality, quantity, timing, price etc.

iii. Dealers:

In marketing activities, the dealers or middlemen are very important linking tools. The products reach customers through the various stages of passing through wholesalers, retailers, agents, transporters, warehousing, advertising agents etc. It is almost not possible to get direct touch with customers without the assistance of a few of middlemen. A firm’s marketing decisions are affected by their active roles, commission rate, willingness to supply, availability of vehicles, effectiveness of advertising etc.


iv. Competitors:

Every firm strives hard to have greater share in the market. Every product has many competitors in the market. Each firm has to make suitable marketing strategies by considering the competitor’s policies. Therefore, a firm’s marketing policies are affected by competitor’s policies.

v. Community:

In every society, one can find consumer forums, labour unions, trade associations, citizens’ forums, press and media agencies, and government officials have direct effect on marketing plans of a firm. These forums’ demands and expectations are to be viewed while taking decisions. Publicity has to be favourable and acceptable to social groups and labour unions influence employee attitudes which is necessarily considered while making marketing policies.

II. Macro Environment:

Macro environment forces arise from outside the organization and exist in the surrounding environment. They are considered as uncontrollable as the organization has to adjust to such situations and cannot manipulate for its favour. These affect a firm’s ability to operate in the market effectively.

A company has no power at all to exercise any control over such forces. They affect the entire society or economy at large. The micro environment has effects on an individual firm but the macro environment forces influence the whole industry itself. Its impact will be wider on number of companies at a time.


Its various dimensions are:

1. Demographic Environment:

It is the study of human population. In its study, it covers the study of size, density, location, age, sex, race, occupation, marital status, literacy etc. A market is made of people (because, market exists only when people/ customers exist), any change in population directly affects the marketing decisions of all the concerned industry. The market premises, advertising media, channel etc. are affected. Demographic forces have a profound impact on marketing decisions of entire industry.

For instance, the growing population certainly results in growing human needs and increasing demand. This may become true only when the purchasing power (ability to pay the price) of the people correspondingly increases. The growing population presses too hard the available scare resources and supplies.

This increases the cost of production and results in decreased margin. In such situation, the marketing becomes very complex and complicated and creates very serious problems. The series of effects are poverty; decline in birth rates etc., will have again negative effects on industries.

Therefore, the industry has to keep pace with the changing demographic situation and keep collecting the data to prepare marketing plans and household plans for the purpose of effective marketing. Again, these may be reliable in short period. The business firms are required to be alert and cautious and respond properly and quickly so as to survive in the market.


Taking another change in population such as – literacy rate. The increasing or declining literacy rate will have effect on the consumer behavior and communication strategies. Similarly, the location of population i.e., urban and rural areas, are also important factors. The needs and aspirations of people in these two areas are different and marketers have to consider these and change their plans.

2. Economic Environment:

It is concerned with the level of economic development, employment, national income, consumption patterns, standard of living, state of agriculture, industries, business cycles, money supply, interest, price levels, fiscal policies of a nation etc. Marketing is directly affected by these changes as marketing is at the core of all these economic activities. Therefore, the marketing system of the industry is governed and shaped by these changes in the economy.

The various results of economic environment are:

i. Determinant of Demand:

Demand is determined by the level of income of the people and their spending habits. It is the earning that gives purchasing capacity to people. If there is high rate of economic growth, there will be more employment, increased income of people and increasing standard of people. These will favorably push up the activities of industry and accordingly the marketing system.

ii. Price Situation:

The price level changes have the important effect on the pricing decisions, production issues and other marketing areas of whole industry. There may be inflationary trends in the economy either due to sluggish industrial growth or increased money supply. It affects the purchase decisions of middle income groups who drop the purchase or postpone for a while.

iii. Trade Cycle:

Business cycle refers to condition of boom and depression in industries indicating the state of demand and price level changes. During depression all activities will be at the lower level which affects demand, stock, working capital etc. On the other hand, the boom is featured by increased activities in all the areas. These situations will directly influence the marketing aspects of industry.

iv. Agriculture:

The changes in agriculture sector influences the industry and marketing plans. It is the main sector that supplies raw materials and creates potentialities for rural markets. The prices of agricultural raw materials influence cost of production, farmer’s prosperity, demand for finished products etc. These are to be considered by the market planners. Depending on the agricultural sector, the industries like dairy, poultry, fisheries, sericulture etc., are dependent and the marketing system undergoes total change.

v. Industrial Growth:

Marketing managers should be in touch with ever changing scenario in the industrial sector as it is easy to assess the marketing opportunities in advance. The growth rate of industrial output, structure of industry, changes in the technology ownership patterns, innovations, diversification, trade cycles, industrial locations, growth of companies, capital market, foreign capital inflows, government policies etc., affect the entire marketing sector.

vi. Industrial Policies:

Another economic environment influencing the marketing activities is the government’s industrial policies. Such industrial policies have become a powerful force in the marketing environment. Now, the whole world is undergoing the changes in the industrialization due to government’s industrial policies in the wake of LPG era. Abolition of trade restrictions, easing international trade, currency convertibility, flow of FDI, GATT, TRIPS have definitely shape effects on marketing areas of the country.

3. Technological Environment:

Technology is the application of scientific knowledge to practical commercial purpose. The 21st century is termed as the era of the technological revolution. The research and development results in innovation in products and production mechanism. These introduce new products, change manufacturing process, and create new markets, increased opportunities which definitely compel changes in marketing system and strategies.

Philip Kotler has rightly remarked that “Every new technology is the force for creative destruction. Transistors hurt the vacuum-tube industry, xerography hurts the carbon paper industry, autos hurt the rail-roads and television hurts the newspapers. When old industries fought or ignored new technologies, their business declined.”

Therefore, the marketers need to watch the following changes in the technology and devise the policies for successful continuation and survival-

i. Growing rate of technological change.

ii. Innovational opportunities.

iii. R & D budgets.

iv. Minor improvements.

Because, these changes cannot be predicted precisely, require heavy budgets, liberalized flow of technology; transformed life and living conditions etc.

The marketers should change their strategies, as Philip Kotler says, “Technological change faces opposition from those who see it as the threatening nature, privacy, simplicity and even the human race”.

4. Ecological Environment:

The phases of industrialization result in depletion of natural resources like minerals, forests etc. Along with it, the environmental pollution, hazards, shortages are created. The factory smoke, chemical wastes, erosion of ozone layer, used packing materials; plastic wastes, etc., have been creating the ecological problems. Non-renewable resources such as – oil, coal, various mineral pose various threats.

Every business firm dependent on such resources have to compulsorily adopt changes in their production and then in the marketing systems. The increased costs in the production and marketing cannot be so easily passed on to the customers. There is danger of losing market unless suitable changes are timely incorporated. Marketing strategies should be such as – to make minimum use of such resources and find better substitutes with environment friendly products.

The products which are less pollutant and environment friendly are now most preferred by the consumers. Environment friendly has become the main attractive force in the current production and marketing activities. The growing oil shortage has led to many complications as the price of final product is directly affected by it. The firms have to search for attractive energy sources to keep prices competitive and reasonable.

The alternatives found are solar, windmill, nuclear etc., which have created other business areas but with other environmental problems. The public awareness about environment protection is putting unbearable pressure on the whole economy and industry sector. This naturally compels changes in the marketing channels, packing, transportation, storage etc.

Now a days, the marketing managers have realized that customers prefer environment friendly and ecologically safe products, recycling packaging, improved pollution control techniques and energy saving equipments. The marketer’s active interest and caring for environment protection should be shown to public to convince their changed strategies. In their efforts, the marketers have to prove that their intention is to serve the consumers and not just profiteering. These changed strategies must be incorporated by marketers to be in the race as well as in market for long period.

5. Political (Legal) Environment:

This refers to the government policies and decisions affecting marketing functions of industries. This includes the laws of a nation within which business units have to work. All the businesses in a country are controlled by the government through various acts and enactments. It is expected from marketing managers that their activities are within the broad framework of various laws relating to their business.

There are laws to protect the interest of business firms from each other. Governments have enacted laws to prevent unfair trade practices. Similarly, laws are passed to protect the consumers from restrictive and unfair trade practices of business firms. For instance, MRTP Act, CP Act, Competition Act etc. The society is also protected by passing laws relating to pollution, forest, unethical advertisements etc.

In addition to laws, there are central and state government agencies, institutions, boards and commissions to enforce laws and standards. For instance, ISI, Pollution Control Board, National Green Tribunal, Drug Inspectors and Controllers etc.

There are public interest groups which fight to protect interest of whole society in general and affected consumers in particular. For example, consumer forums, Public Associations.

Political philosophy of different political parties and leaders has effect on marketing system of a firm. Total prohibition of some products by governments of a political party; compel the business firms to revise their marketing policies.

The marketing attitudes under socialist and capitalist regime totally differ. The pressure groups in society act as watch dog on marketing activities of business firms. Sometimes, the Swadeshi Movement creates awareness among consumers to use only domestically produced products. These definitely affect the marketing system and policies of firm.

6. Socio- Cultural Environment:

This environment is composed of social beliefs, values and institutions which govern life style of people. The needs and desires of consumers are shaped by their beliefs and values. Traditions, customs, beliefs, culture have strong hold on people. These are passed on to the next generation by their parents and teachers. People are not ready to give up beliefs of their religion and ethical values. Marketing policies are to be framed by considering such beliefs which shape consumers demand.

In a country like India, the religion and caste practices are dominant. They determine living styles, food habits, celebrations etc. These bring up great opportunities for variety of products and services.

There are core beliefs and values such as – schools, temples, business houses and government. People are not ready to give up these, because they are mostly religious and ethnic in nature.

Similarly, there are secondary beliefs and values which have been developed over a period of time and more open to change. For instance, generally people believe that they have to get married is a secondary belief. Though late, getting married is advocated by the society.

In socio-cultural environment, the most influencing forces are religion and caste, language, festivals, food habits, customs, family system etc. Each of these has its domination on people to demand for a particular kind of dress, food, language, fashion-style, transport etc. These give rise to the need of variety of goods and services which constitutes new opportunities in the market.

The marketers have to chalk out plans to capitalize such situations of increasing and changing aspirations, and expectation of people. In such situations, the markets are widening and marketing is becoming more complex and complicated as a profession. It has really become a challenge.

There are three aspects of socio-cultural environment. They are – (i) Changes in life styles and social values of the people (ii) Occurrence of major social problems and (iii) growing consumerism. Therefore, the marketers are required to be ready for offering best quality, highly standard and fast services with a thrust on environment protection.

These are the various environmental forces that are directly or indirectly, influencing on the market and marketing activities and functions. No doubt that these compel the changes in the policies and plans of whole marketing system.

Components of Marketing Environment – Micro and Macro Environment of Marketing

The consumer occupies the core/central position of all business activities and hence occupies the centre of the marketing environment. The organization with its resources and having a policy and structure surrounds the consumer with its particular market offering as do its competitors, suppliers and other intermediaries. This micro-environment of marketing is again affected by the macro environment, which consists of the government, technical, political, social, economic factors.

Successful companies know the importance of constantly scanning and adopting the changing environment.

Micro Environment of Marketing:

It is the job of the marketer to establish good relationship with their micro environment as the success of the company depends upon the micro environment.

1. Company – In a company marketer must discuss all the plans and policies with the top management, R&D, purchasing, manufacturing, selling and other departments to give satisfaction to the consumer.

2. Suppliers – Suppliers are the persons who provide the company necessary raw material. If the company is not having cordial relations with the supplier then it may result into short run loss in sale and damage the customer relations

3. Marketing intermediaries – They help in promoting, selling and distributing the goods to the ultimate consumer. They include middleman like agents, dealers, whole-sellers, retailers, brokers; physical distribution firms which help the manufacturer in moving the goods from the factory to their destination; warehousing firms which help in storing and protecting the goods; transportation firms which help in moving the goods; market service agencies which help in consultancy, research, advertising etc.; financing firms provide help in insuring the risk associated with the buyer.

4. Customers – As likes of customer changes very fast so for the growth of the company the marketer must keep studying the customer related factors and their demand regular basis.

5. Competitors – It is necessary for the marketing manager to have the knowledge about the competitors’ status, strength, weakness to take the competitive advantage.

6. Public – The Company must have good public relation department to maintain good relations with the public.

Macro Environment of Marketing:

The Micro environment discussed above is controllable but the Macro environment is uncontrollable.

1. Demographic environment – It includes the life style, income, qualification, age, marital status, sex, family structure etc. so the marketer must have the knowledge about it. Teenage market, kids market, adult market etc. are based on demographic environment.

2. Economic environment – It means the purchasing power of the consumer the marketer must have the knowledge about the inflation, changing consumer pattern, real income, low saving etc.

3. Natural environment – The marketer must have the knowledge about natural resources, their shortage if any, government policies etc.

4. Technological environment – It is the technology which is changing the life of the people. So the marketer must keep an eye on the changing technology.

5. Political environment – Political stability is very important for the growth of any economy. It includes the law, government agencies etc. Marketing decisions are affected by the prevalent political environment.

6. Legal environment – The marketer must function as per the legal formalities and should not work against them.

7. Cultural environment – It includes the values, beliefs, perceptions of the consumer which also affect the marketing environment. So the marketer must have the knowledge about it.

Components of Marketing Environment – Micro and Macro Environmental Factors

Marketing environment analysis is the process of gathering, filtering and analyzes information relating to the marketing environment. Functions involved in the process are the tasks of monitoring the changes taking place in the environment and forecasting the future position in respect of each of the factors.

The analysis of the opportunities and threats in the environment pinpoints the factors that are specifically relevant to the firm. A successful organization is one, which understands, can anticipate and take advantage of changes within and outside their environment.

Marketing environment can be divided into two parts micro environmental factor and macro environmental factors:

1. Micro Environment:

Factors that on which organization has direct control, internal environment of and organization is the part of micro environment.

2. Macro Environment:

Factors on which organization has no control at all, external environment of any organization is a part of macro environment.

Micro Environment:

a. The Company:

It constitutes the internal environment of the organization, which consists of men, money, materials and machinery. If marketing has to function well it has to coordinate the activities with all the other members departments involved in the organization as they have a great impact on its functioning.

b. Suppliers:

Suppliers form a very important link between the company and customers and their value delivery network. They constitute one of the five forces shaping competition in any industry. They have their own bargaining power in the industry; they influence the costs of raw materials.

c. Marketing Intermediaries:

Also constitute an important component of the value delivery network of the company. It consists of the sources that are involved in promoting, selling and distributing its goods to the final buyers. Marketing intermediaries include – resellers, physical distributors, marketing service agencies and financial intermediaries.

d. Customers:

A successful business strategy involves designing products and marketing programmes that incorporate attributes which provide value to consumers. Only by studying, demand and customer-related factors a firm can carry out their business/marketing planning effectively.

e. Competitors:

To be successful, apart from meeting the needs and wants of the target markets the marketer needs to provide the products better than its competitors. They have to answer the question what benefit can the organization offer which is better that their competitors?

So they need to constantly keep track of competitor’s strategies and change as and when required.

f. Public:

These are various groups having actual or potential interest in the working of the organization and some effect its working. Like media, shareholders and competitors. Then there is a general public, it consists of people who may or may not be consuming the organizations product or services but form some attitude towards the company or its products, so the company needs to be concerned about publics.

Macro Environment:

a. Government:

Government regulates and implements business polices, it decided about taxation and subsides. Government plays an important role in deciding export import policies and regulating prices in market.

b. Technology:

It impact directly or indirectly on business of a firm. Any development in technology leads to change in supply and price of products it is essential to aware about technological change in the business world.

c. Natural Environment:

Natural environment consist of different elements like seasons temperature of a geographic region, natural calamities, natural disasters these factors can influence demand and supply of products and services.

d. Legal Environment:

Business has to follow legal obligation any change in law, related to production, packaging, export and import can influence business operations.

e. Socio Cultural Environment:

Want and expectation of a customer directly influenced on his or her cultural and socio environment. As we know that socio-culture environment is dynamic in nature and varies from one country to another, therefore it is essential to study about this factor.

Components of Marketing Environment – With Factors Affecting Macro Environment

The marketing environment comprises the “non- controllable” factors and forces that have an impact on the company’s markets and marketing. Company’s marketing environment consists of the actors and forces that affect the company’s ability to develop and maintain successful transactions and relationships with its target customers.

1. The Micro-Environment:

It consists of the factors in the company’s immediate environment that affect its ability to serve its markets: the company, suppliers, market intermediaries, customers, competitors and publics. Every company’s primary goal is to profitably serve and satisfy specific needs of chosen target markets.

To carry out this task, the company links itself with a set of supplies and a set of marketing. The suppliers, company, marketing intermediaries, customer chain comprises the core marketing system of the company. The company’s success will be affected by two additional groups, namely, a set of competitors and a set of publics.

2. The Macro-Environment:

It consists of the larger societal forces that affect all of the actors in the company’s micro-environment- the demographic, economic, natural, technological, political and cultural forces. These forces represent the ‘uncontrollables’, which the company must monitor and respond to. These macro-environment forces shape opportunities and pose threats to the company.

The major components of marketing macro-environment are: the company and its suppliers, marketing intermediaries, customers, competitors and public all operate in a larger macro-environment of forces and megatrends that shape opportunities and pose threat to the company. There are six major forces effecting macro- environment, namely, demographic, economic, natural, technological, political and cultural.

(i) Demographic Environment:

Population is the first environment fact of interest to marketers because people make up markets. Marketers are keenly interested in the size of the population, its geographical distribution and density, mobility trends, age distribution, birth, marriage, and death rates and racial, ethnic and religious structure.

(ii) Economic Environment:

It consists of factors that affect consumer purchasing power and spending patterns. Markets require purchasing power as well as people. Economic conditions, economic policies and economic system are the important external factors that constitute the economic environment of a business.

For example, the economic conditions of a country, the nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets, etc. are among the very important determinants of business strategies.

The economic policy of the government has a very great impact on business. Some types or categories of business are favourably affected by government policy; some are adversely affected, while it is neutral in respect of others. The industrial, monetary and fiscal policies also affect the business in different ways by the incentives and disincentives they offer and by their neutrality.

(iii) Natural Environment:

The deterioration of the natural environment was found to be one of the major issues facing business and public in the 1990s. In many world cities, air and water pollution have reached dangerous levels. There is great concern about industrial chemicals creating a hole in the ozone layer that will produce a greenhouse effect, namely, a dangerous warming of the earth.

Marketers need to be aware of threats and opportunities associated with the following four trends in the natural environment:

(a) Shortage of raw materials.

(b) Increased cost of energy.

(c) Increased levels of pollution.

(d) Changing role of government in environmental protection.

(iv) Technological Environment:

Technology is the most dramatic force shaping people’s lives. Every new technology is a force for creative distraction. Each technology creates major long-run consequences that are not always foreseeable.

Some of the important factors and influences operating in the technological environment are as follows:

(a) Sources of technology like company sources, external sources and foreign sources, cost of technology acquisition, collaboration in and transfer of technology.

(b) Technological development, stages of development, change and rate of change of technology and research and development.

(c) Impact of technology on human beings, the marketing system and the environmental effects of technology.

(d) Communication and infrastructural technology and technology in management.

(v) Political Environment:

It is composed of laws, government agencies and pressure groups that influence and limit various organizations and individuals in a society.

The main political trends are:

(a) Substantial amount of legislation regulating business.

(b) Growth of public interest groups.

(c) Changing government agency enforcement.

(vi) Cultural Environment:

The basic beliefs, values and norms shape the society of the people. People almost unconsciously absorb a worldview that defines their relationship to themselves, to others, to nature, and to the universe.

Even when people of different cultures use the same basic products, the modes of consumption, conditions of use, purpose of use or the perceptions of the product attributes may vary so much so that the product attributes, method of promoting the product may have to be varied to suit the characteristics of different markets, even the values and beliefs associated with colour vary significantly between different cultures.

Components of Marketing Environment – Factors Influencing Internal, Micro and Macro Environment (With Examples)

The key to understanding any topic or term is to try and understand the true meaning of that term or word. From a language dictionary the meaning of the term ‘Environment’ refers to the surroundings or conditions in which a person, animal, and plant lives and operates.

We can use this same meaning substituting the words ‘person’, ‘animal’ and ‘plant’ with the words ‘Organization’ and ‘Marketing’, this will thus give us the meaning of the term ‘Marketing Environment’.

“Marketing Environment” refers to the surroundings or conditions in which an organization functions or operates its marketing activities. It includes all the internal and external forces that have an impact on the marketing activities of the organization. The forces are directly or indirectly responsible for the relationship between organization and customers.

According to Philip Kotler, “A company’s marketing environment consists of the internal factors & forces, which affect the company’s ability to develop & maintain successful transactions & relationships with the company’s target customers.”

The Marketing Environment can be classified as follows:

1. Internal Environment

2. Micro Environment

3. Macro Environment

1. Internal Environment:

The internal environment consists of all those factor that are completely internal or within the organization. These factors affect the overall performance of the organization and also have an impact on the marketing activities of the organization. The internal environment factors can be controlled by the organization. The factors include- Labour, Capital, Budget, Company Policy, Code of Conduct, Logistics and Inventory.

Internal environment factors are:

i. Labour:

It is the human resource that an organization employs to carry out its operations. The type and kind of human resource has a great impact on the functioning of the organization and its mar­keting activities.

Example- Google is famous for hiring people who think and work differently which makes the Company so popular.

ii. Inventory:

It is all those materials that an organization possesses in order to run its business operations. Inventory management is the key in reducing functional costs. A good inventory management system will help the organization to function in a more affective and productive manner.

Example – The best example in inventory management is Toyota. Toyota Production systems has set stan­dards for many Companies across industries.

iii. Company Policy:

The rules and regulations set by the organization for achieving its goals and complying with the law of the land greatly influence the marketing and business functions of the organiza­tion. This is because all the stakeholders have to perform their du­ties in accordance with the company policies. This may reduce the flexibility of dealing with customers and other parties who are con­nected with the organization and its business activities.

Example- Again Toyota would be a good example because it has very good policies that take into consideration the interests of all stake hold­ers.

iv. Budget:

The budget plays an important role in formulating market­ing strategies and executing marketing activities. In reality the com­plete scope of marketing is directly dependent on the budget.

Ex­ample- We can see this in the recent advertising campaigns of many online retailers like Amazon, Snapdeal, Flipkart etc. They have huge budgets that support their marketing initiatives.

v. Code of Conduct:

This refers to the things that are acceptable to the organization and those things that are not acceptable to the organization. The code of conduct specifies all those activities that can be done ethically and legally by the organization. Therefore even the marketing activities are highly influenced by the organization’s code of conduct.

Example- Companies like Infosys and Tata have laid out path breaking code of conduct by which they have been successful in doing their business in the most ethi­cal way.

vi. Logistics:

It involves all those activities that transport goods to con­sumers. The logistical environment is very crucial because this is the activity that brings the goods to the customer’s place of con­sumption. Logistical changes can have a great impact on marketing activities.

Example- We have seen how the logistics sector has un­dergone a drastic change with the growth of online retailers. Today the logistics arm of many famous online retailers determines their success or failure in a highly competitive market.

2. Micro Environment:

The micro environment consists of all those factors that are not completely internal or within the Company, but are, closely related to the functions or operations of the business. The micro environment has an impact on the customer relationship and marketing functions of the organization. The factors under the micro environment include-Customers, Employees, Suppliers, Retailers, Shareholders, Competitors, and General Public.

Micro environment factors are:

i. Customers:

Customers constitute one of the most important fac­tors in the micro marketing environment. The satisfaction of the customer is the ultimate goal and all marketing activities revolve around the customer. Changes in consumer behavior will result in changes in marketing decisions.

Example- The change in the Indian consumer’s mind set can be very distinctly seen in the FMCG sec­tor with special reference to the ‘Patanjali’ brand. Indian consum­ers today are more concerned about their health and national sen­timents due to which the brand has seen tremendous success in the Indian market and is on the way to become an Indian MNC.

ii. Employees:

Employees are also known as internal customers. The organization treats its employees as its customers. The satisfaction of employees results in the satisfaction of customers. Therefore changes in employee behavior or thinking, has an impact on the consumer perception and behavior.

iii. Suppliers:

No product can be produced unless the material is re­ceived from suppliers. On time receipt of material, quality of mate­rial, cost of material etc. helps the organization to function in an economical manner. The consumer can get products at reasonable price and good quality if the suppliers provide good quality mate­rial and reasonable price. Again we can see that the marketing environment is affected by this key factor.

Example- Most of the online retailers are totally dependent on their suppliers for prod­ucts that are reasonable and of good quality.

iv. Retailers:

A retailer is the last link in the distribution channel. It is the retailer who is responsible in providing the product to the cus­tomer in small and individual quantities. The first point of contact for the customer is the retailer. The retailer’s activities and actions towards the consumer, is very critical in building loyalty and in­creasing satisfaction levels.

Example- This can be seen in our daily purchases from any store near our homes. It is the retailer with whom we interact and share our satisfaction or dissatisfaction. We very rarely speak to the Company executives.

v. Shareholders:

Shareholders are all those people who have a share in the Company’s business. The shareholders take important deci­sions and because of their decisions there may be changes in the marketing functions and activities.

vi. General Public:

The general public, are all those people who may or may not be associated with the organization but their percep­tions, thinking, behavior, attitudes etc. can alter or bring about changes in the business of the organization and also changes in specific marketing activities.

Example- The general public may popu­larize vegetarian food and as a result people start to accept this food more and more.

vii. Competitors:

There is no market without competitors. The num­ber of competitors, the type of competitors, the competitors mar­keting strategy and philosophy is a part of the marketing environ­ment.

Example- Online retailing is witnessing one of the most in­tense competitions in the Indian market. There is an ever increas­ing number of online retailers and as a result the marketing envi­ronment always remains dynamic with constant change. This is the reason why consumers are pampered with offers and new prod­ucts on a daily or even hourly basis.

3. Macro Environment:

This is the environment which lies completely outside the domain of the organization and the factors of macro environment cannot be controlled by the Organization. The factors are completely out of organizational control. The macro environment factors include-The Social Structure, Economic Environment, Political & Legal Forces and Technological Developments.

Micro environmental components are related specifically to the organization, whereas macro environmental components are broader in nature & affect the entire industry, region or country. Micro environment are controllable but macro environment are uncontrollable. While formulating the marketing plan, a marketer has to be smart enough in dealing with the flexibility of macro environment.

Macro environment factor are:

i. Society:

This includes the group of people we live among in a par­ticular region or nation. The culture of the group and the value system influences the tastes and preferences of the people and due to this the marketing activities will also vary from region to region.

Example- McDonald’s has changed its menu and made it suitable to the likes of the Indian society. Every marketing activity of McDonald’s is in line with the Indian sentiments.

ii. Economic Factors:

The marketing environment consists of the eco­nomic factors like development, foreign direct investment, GDP, agriculture, manufacturing, services, utilization of resources etc. The economic factors are not in the control of the organization and therefore the changes cannot be controlled by the organization.

The organization can only alter and modify its strategies in market­ing or other departments only to suit the economic changes. Ex­ample- Presently in India we are witnessing a prosperous economy and as a result of this many Companies have adopted the ‘Make in India’ concept and adapted their marketing activities to suit the economic development.

iii. Political and Legal Factors:

Every Nation has a political and legal setup that helps in governance of the region. Within Nation, every region may have a different political and legal set up. The type of political party forming the government and their legal policies etc. forms an integral part of the marketing environment.

iv. Technological Development:

At present this is the most dynamic macro environment factor that is impacting the marketing environ­ment to a great extent. Technological development is the fuel to new product development and birth of new companies. This gives rise to more competition in the market which again fuels innova­tion. Today the trend line is “Innovate or Perish” and this is very true with the changes in technology.

Example- The best example is the mobile phone market technology has greatly impacted the mar­keting environment of many mobile manufacturers, some have sur­vived and some have perished.