1. Market Environment
This consists of factors related to the group and other organirations that compete with and have an impact on an organization markets and business. This include;
Customer’s factors like; needs, preferences, perceptions, attitudes, values, buying behavior, and satisfaction of customers etc.
i) Product factors like demand image, features, utility, lifecycle, price promotion place, availability of substitutes etc.
ii) Marketing intermediary factors, such as level and quality of customer service, middlemen, distribution channels, logistics, costs, delivery systems and financial intermediaries.
iii) Competitor related factors such as types of competitor’s relative strategic position of major competitors etc.
The market environment depends on the type of the industrial structure. In monopolies and oligopolies, the concern for the market environment is lesser than the case of the pure competition In recent times the government policy has moved towards allowing some degree of competition within the public sector like banks, radio arid TV stations etc. This has made the market environment more important in strategic management.
2. Political - Legal Environment
Marketing decisions and activities are restrained and controlled by a multitude of laws and regulations established by the political institutions. Laws have been enacted to preserve a competitive atmosphere or to protect the consumers. The extent of the impact of these laws on marketing mix variables will depend on how marketers and the court interpret such provisions. Some industries are subjected to heavy regulations, e.g. electricity, water and rail transport. This gives company’s operating iii this environment monopoly, as prices are restricted. This is justified by the large sum of money that needs to be invested in the industries — projects with long gestation periods.
Changes in law can be anticipated from governing party’s manifestos to guide the firm’s political priorities. Also the government publishes papers to consult on plan on issues like green issues, employment, wages, e.t.c. The government is also responsible for creating a stable framework for which business can be carried out, e.g. in terms of physical infrastructure, social infrastructure and market infrastructure. Some political changes can make planning of company activities difficult and political risks can damage the firm eg. wars, political chaos (Mageuzi and Mungiki, demonstrations by human rights groups, e.t.c). The concern of a strategist is to understand the political system and policies, the government’s
commitment to the rule of the game, expectations of change in government and expected changes in the business practices,e.t.c.
3. The Economic Environment
A strategist should be able to understand the economic variable present in a particular market. These forces affect the firm’s marketing decisions negatively or positively. They may include variables like, inflation rates, level of economic boom/depression, availability of natural resources, friendly business atmosphere. This is because strategic managers require purchasing power as well as the people. The available purchasing power in the market depends on current income, prices, savings, debts and credit availability. The industrial structure of the economy will determine the level and distribution of income and this will in turn impact on the business of organization.
Some of the important factors include;
1. The economic stage at which the country is in at a given point.
2. The economic structure adopted. such as capitalist, socialist, or mixed economy
3. The economic policies, such as industrial, monetary and fiscal policies.
4. Economic policies such as five-year plan, annual budget and so on.
5. Economic indices like national income, distribution of income, rate and growth of GNP, per capita income, disposable income, rate of savings, balance of income etc.
6. Infrastructure factors such as financial institution, banks, modes of transport, communication facilities, and so on
For example, the economic factors like GDP, inflation, interest rates (cost of borrowing); tax levels, government spending and business cycle need to be considered. During periods of boom, premium prices can be charged, during recession, demand for goods and services are low and prices depressed. Referring to the European Community goods are more expensive in some countries than in others e.g. Cars more expensive in UK than in German.
4. Social - Cultural Environment
The society in which people grow shapes their beliefs, values and norms. People absorb almost unconsciously a worldview that defines their relationship to themselves, to others, to the nature and to the universe. People living in a particular society hold many core beliefs and values that tend to persist, e.g. Americans believe in work, getting married, giving charity, in being honest, et,c. These core beliefs and values are passed on from parents to chidden and are reinforced by major institutions like schools, churches, businesses and government.
People’s secondary beliefs are more open to change, thus marketers can change the secondary values but have little chance of changing the core values, e.g. drinking and accidents. Those advocating for no drinking have little chance because people have cultural freedom to drink. The idea of taking a taxi when drunk can be a good strategy, also they can lobby to rise legal drinking age. In addition, cultural discipline and habits can make consumers boycott some products, e.g. Muslim community and pork, Hindus and meat. Knowledge of a culture is of value to business because marketers can adapt their products accordingly and gain sizeable markets
5.Social Environment
This involves the study of demographic factors, i.e. study of population and population trends. The factor important includes — growth of population, age of the population, geographical distribution, ethnicity, household and family structure, employment, social structure and wealth. Implications — changes in the patterns of location of advertisement, recruitment policies wealth and tax systems. The concern is the worldwide population growth, the age mix, ethnic, risks, educational groups, household patterns and shift from mass markets to micro markets.
6. Technological Environment
This involves the rate and level of change. Technology affects and changes our lifestyles. Technology in areas like mobile phones, organ transplants, teleconferencing, communication, transport, computer, energy, fabrics, metal and packaging has influenced the types of products produced. It has also influenced advertising, personal selling, market research pricing, packaging, transport and use of credit. Technology has led to invention of new products and new method of production. Technology contributes to overall economic growth. The total output can increase through increase in productivity, reduced cost and new types of products. It has created such horrors as nuclear missiles, assault rifles, e.t.c.
Titany answered the question on October 6, 2021 at 12:12