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Introduction
Marketing environment is a term used to refer to the forces outside of marketing which have an influence on the marketing manager’s ability to create and maintain a healthy relationship with the customers he is targeting. In other words, these forces affect the demand and supply of goods and services. In this write up, focus is given on three marketing forces namely economic, competitive and socio-cultural forces.
Economic forces
These refer to prosperity, recession, depression and recovery life cycles and how they affect the consumption of a product. In any circumstance, what determines whether the consumer will use that product is whether he has the ability to purchase it. This makes economic factors key determinants or a key environmental force and the most fundamental force affecting marketing of a commodity.
Factors like employment, rate of inflation, interest rates, fiscal and monetary policies also fall under this category even though they are intricately intertwined and they eventually affect the business’ marketing activities by determining the amount of demand for the firm’s products (Franke, Hofstede & Bond, 1991).
How can the marketer use economic odds to his advantage?
Depending on how all the economic factors are addressed by the firm, they can be either an opportunity or a threat to the firm. For instance, discount stores and fast food points do better in a down economy as opposed to a vibrant and strong economy where people search for healthier foods.
Organizations will therefore need to review how economic conditions will impact on their businesses and respond appropriately. A successful marketer has to anticipate and visualize these economic factors and use them to his advantage. The focus is to get the maximum benefits at the minimum costs possible.
Often in such circumstances as downturns and recessions, there will be high unemployment, low purchasing power, and therefore low demand for products. The strategic marketer can plan to offer more value for the same or lower price than the competitor. He can increase advertising and utilize technology in cost reduction (Porter, 2008). The marketer will become a resource by providing information and tools which are needed by the prospects.
Competitive forces
Before looking at the competitive forces themselves, it is important to understand the competitive structures. They include monopoly where there is only one marketer in the market place, oligopoly where there are few marketers- say three or four, perfect competition where competitors are of equal strength and equal access to market, and eventually monopolistic competition where there are many marketers.
The monopolistic competition is the most common and marketers have to work to ensure that consumers choose their commodities and not those of their competitors (Lee, 1966).
Michael E. Porter classified the forces into five categories, namely the intensity of competitive rivalry, the threat of new entrants, the threat of substitute products and the bargaining power of customers (Porter, 1979).
The intensity of rivalry is caused by a large number of firms competing for the same customers and resources, slow market growth that causes firms to fight for the market share, high fixed costs that cause the firms to produce at near capacity and high storage costs or high perishability that cause the producer to sell as soon as possible. Low switching cost where the customer can very easily switch, and low levels of product differentiation usually have the same impact on the marketing.
If the strategic stakes are high, they intensify rivalry. When there are high exit barriers, it is another way of saying that the firm must stay and compete. The diversity of rivals where it is very difficult to predict the behavior of rivals can mean that any time rivalry can intensify. Other factors on rivalry are level of advertising expense, competitive strategy of each and competition between online and also offline firms (Porter, 2008).
Porter’s second category is threat of substitutes. In this, reference is being given to products in other industries. Price elasticity is determined by substitute products. For instance, in the tire industry for cars, pricing may be constrained by the presence of retreads because they are substitutes.
There is therefore competition arising from substitutes as opposed to rivals. In simple terms the buyer’s propensity to switch to alternatives is an important consideration. It can be influenced by switching costs, product differentiation, number of substitutes available and relative price performance of the substitute (Porter, 2008).
Another force is the buyer power. Here the buyer is the reference and the one who determines the prices. For instance economists talk of monopsony when there are many sellers but only one buyer. In such a case, the buyer is the one who sets the price. Other issues affecting the buyer are buyer sensitivity to price, switching cost, information availability, degree of dependency on the current channels of distribution and buyer volume.
Supplier power is another competitive force. A supplier is said to be powerful when he can influence the producing industry. Suppliers are powerful when it is difficult for producers to switch suppliers and are weak when there are many competitive suppliers.
Threat of new entrants as a competitive force comes in especially when there are no barriers to entry in an industry. It is not very common especially if there are several well established firms. Other than presence of powerful firms other barriers to entry are government regulation, patents and proprietary knowledge and economies of scale.
How can marketers help in facing such forces?
When the firm is faced with some or all of these forces, the marketer can take both external and internal measures to jockey for a more favorable position. One of the things he/she can do is to understand the company’s strengths and weaknesses.
The company can choose to influence the balance before they negatively affect it. A company can devise a strategy that takes the offensive. This posture is designed to do more than merely cope with the forces themselves; it is meant to alter their causes instead.
The company can also exploit the changes in the industry through staking out a position that is less vulnerable to attack from head-to-head opponents, whether established or new, and less vulnerable to erosion from the direction of buyers, suppliers, and substitute goods (John & Steven, 1983). This it can do through solidifying good relationships with good customers through marketing and establishing technological leadership so as to be on the advantage of new changes.
Social-cultural forces
These are societal factors that impact on any marketing aspect, either making it easier or challenging. They could relate to language, family, reference groups, roles and status, values and attitudes, religion, morals, education, prioritizing of wants current social trends and many more.
All these affect the preferences, perceptions and behavior. For instance, a company that focuses on exercise equipment and low calorie foods when there is a trend of weight loss is likely to sell more. Language for instance will influence the way an advertisement is perceived.
Some checklist questions a marketer can ask himself on the social cultural factors are: What is the dominant religion? How does the language of the customers influence the diffusion of the products? How much time do consumers create for leisure? What is the opinion and attitudes towards my type of product and also the company (Adler & Mortimer, 1981)?
These questions among many others will help a marketer know what issues to address, especially on the advertisement part. Advertisements are meant to create or change an impression among potential buyers. The marketer will therefore align his marketing strategies towards creating a lasting favorable impression among his potential clientele.
For instance on religion, the marketing department can promote products that show regard to the religious beliefs like banks that offer Sharia products for Muslims. Most firms try as much as they can to have products that will sell more to the bigger section of the society in regard to any social factor since it is difficult to offer a product that satisfies everybody.
The marketer should therefore be able to evaluate the quarters that will generate maximum revenue. When the marketing department works hand in hand with the production and other departments, they can create a product that gains favor among consumers while the marketing department creates brand loyalty through product promotion. The firm can take advantage of the socio-cultural factors in creating brand loyalty (Franke, Hofstede & Bond, 1991).
Conclusion
Marketers should perform a SWOT analysis to be able to understand their companies in terms of their abilities and weaknesses first before hitting the market for campaigns. In spite of all the unfavorable forces that are present in their business arena, they should struggle to use the forces to their advantage. However, before entering a market they should also conduct a PEST (political, economic, socio-cultural and technological) survey so that they understand the market and operate in a market they are sure to have less difficulties.
References
Adler, T. and Mortimer, J. (1981). Six great ideas. Journal of Marketing Management, 23, 12-17.
Franke, R. H., Hofstede, G. and Bond M. H. (1991). Cultural roots of economic performance: A research note. Strategic Management Journal, 12, 165-173.
John, R. H. and Steven, M. S. (1983). The indicators of a friendly market: Marketing Science, 2(4), 319-360
Lee, J. A. (1966). Cultural analysis in overseas operations. Harvard Business Review, 44(2), 106 114.
Porter, M. E. (1979). How competitive forces shape strategy. Harvard Business Review, 14, 3-15.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business Review, 35, 45-66.
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