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Elements Influencing the Business Environment, Supply and Demand
The economy is significantly essential for one nation’s development. If the economy was depressed, many individuals and organizations would suffer seriously. In this essay, I am going to present factors that affect the business environment, explain the factors that drive supply and demand. The environmental forces that impact on company’s ability to serve its customers are the micro-environment and macro-environment.
Firstly, micro-environment is the factors that affect its ability to serve its customers – company, suppliers, marketing intermediaries, competitors, public and customer. In designing marketing plans, marketing managers have to work closely with other departments in the firm. At the end of the day, all of these departments must think about consumers. For example, Xerox did really well at providing great customer experience because creating customer delight is the duty for all the departments such as Finance, human resources and legal, not only for the marketing department. Next the suppliers are one of the crucial elements in a company’s overall customer value delivery network. They provide the materials that a company needs to produce its services or products. The marketer must observe the supply availability and costs. Cost of sales and customer satisfaction can be damaged by labor strive, delays and shortages of supply. Upsurging supply costs may force price increases that can harm the company’s sales volume. Most marketers today need to treat their suppliers as partners in creating and delivering customer value. For instance, Toyota really understands the importance of building a mutual relationship with their suppliers. The phrase ‘achieve supplier satisfaction’ is in their mission statement.
Next, marketing intermediaries help the company promote, sell and distribute its products to the final buyers. They consist of resellers, physical distribution firms, marketing service agencies and financial intermediaries. Like suppliers, marketing intermediaries are the essential elements in a company’s overall value delivery network. The company not only enhances and creates a customer satisfaction relationship but also optimizes its own performance of the entire system when partnering effectively with marketing intermediaries. For example, Coca-cola enrolls as the exclusive provider for a fast-food chain like McDonald’s, and not only supplies soft drinks but also powerful marketing support.
Next, to be successful, the company must bring greater customer value and satisfaction than its competitors do. They must take strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers. When the firm also faces the public, they’d need to design an offer that is interesting enough to get the desired response. For example, a firm can be a leader in environmental campaigns like recycling plastic bags and bottles as well as planting trees in the cities.
Finally, the most important factor is the customers. The whole value delivery network is to serve targeted customers, create delight and greater value for them. There are 5 types of customer consumer: business, reseller, government, and international market. Each of them has specific characteristics so the firm needs to adapt and innovate appropriate marketing campaigns as well as products to meet their demands.
Secondly, the macro-environment includes societal factors that have an effect on the micro-environment: cultural, demographic, economic, natural, technological and political factors. They will shape opportunities and pose threats for the firms. The economic environment creates more frugal consumers and also distribution income shifting. Frugal consumers demand the right combination of good quality and service with a fair price while shifting income distribution leads to a gap between the rich, the middle class and the poor. When rich people grow richer, the middle class shrinks and the poor remain poor, a two-tiered market in many countries is established.
The demographic environment consists of the changing age distribution of the human population, shifting family structure, geographic distribution, and level of education. For instance, I’ve found that the young prefer cool, innovative and interesting products, no matter the price. Meanwhile the elder they prefer something that is for daily use and necessary at a good price.
Next, the natural and technological environment also has major trends in the firms. The technological environment brings opportunities and challenges. If the firm fails to catch up with the tech changes, they will miss new products and opportunities in the market. The natural environment has three main trends: the lack of certain raw materials, higher population levels and government intervention in managing natural resources. The concern about the environment brings marketing opportunities for alert firms.
Finally, the political and cultural environment impact enterprises fundamentally. The political environment includes laws, agencies, and groups that restrict marketing actions. Three changes have an effect on the marketing of firms: increasing legislation, strong government agency enforcement and emphasis on ethics and socially responsible actions. The cultural environment consists of institutions and forces that have an impact on a society’s values, beliefs, and behaviors. According to the current understanding in academia the environment shows rising patriotism, sustainable environment visions and the search for more meaningful and enduring values.
Thirdly, there are several factors that have an impact on the demand for goods. First of all is the taste and preferences of the consumers. If the tastes and preferences of the consumers about a product are greater, its demands would be significant. One example in fashion clothing, unless the clothes can bring an enchanting, prosperous or stylish feeling for the customer at a good price, they definitely buy it. The result for that is remarkable growth.
Next, the income of people, when the income of people goes on an uptrend, they can afford to buy more which means the greater demand for goods. For example – farmers, as long as their crop grow well and sell more rice for the retailers or other distribution companies than previous period, they will buy more cotton or manufactured food products in the shopping mall. Another component that affects demand for products is the price of goods. The customer won’t buy products if their price is too high, and there will be a downtrend in demand. In contrast, supposing the demand of customers for product will become greater while the price is low. Then the company might miss out on potential profits.
Finally, the firm using marketing campaigns to promote the sales of its products is a crucial element in determining demand for goods. The reason behind the advertisement is to ensure the consumers are in favor of a product. When the firm is successful in marketing in terms of delivering superior value to customers, the demand for a product grows extraordinarily.
Fourthly, there are also many impacts on supply. If the price of a product rises sharply, the supply of a product also rises and vice versa. Also, providing the cost of production increases, the supply of a product would decrease and vice versa. For example, in some rare cases, the firm would provide less quantity of goods on the market, when the cost of production is higher than the market price of the goods. Next, natural conditions can directly impact the supply of certain product, especially the climate. For instance, the supply of some products grows remarkably in monsoon while for others lessen in drought period. Some of the crops need specific weather to grow like Karif and Rabi. The production of Rabi upsurge in the winter season meanwhile Karif produces well in the summer. Later, Technology plays an important role in terms of supply products. Higher and newer tech can accelerate the production of a product, and the supply of a product will increase significantly. For example, manufacturing fertilizers and good quality seeds raise the production crops. This further soar the supply of food grains in the market. Finally, the impact of government policies on the supply of a product does count. For example, if the government tax for manufacturing a product is high, the supply of a product decreases. However, the supply of a product expands providing the tax is too low.
In conclusion, there are a lot of complexities to macro and micro economics and understanding their effects on supply and demand is important to any company.
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