Market environment
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Market environment – it is defined as a whole of physical and social factors which are having regard to while individuals in the organization makes the decision. This is a term directly related with marketing and pertain to factors and forces which have an impact to build and maintain customer relations by companies. The market environment can be split for three levels. Can distinguishes:
- Internal environment – concerns the internal part of the organization practiced (used) to create, share the information or deliver market offers.
- External micro environment – it is small forces external the business which factor into its ability to serve the clients.
- External macro environment – it is much bigger (concerning external micro environment) societal forces affected on the survival of the company. The scrutiny of macro marketing environment it is helpful to better comprehend some factors like: the environment, adaptation to the social environment or changing, and to goal the purpose of corporate marketing.
The division of internal and external market environment
Referring to internal environment – it is made up of crucial social and physical factors inside the company or specific decision unit which are directly considered while the decisions are being made by individuals in that system. It regards to all departments the like management, finance and accounting, research and development, purchasing or Business operations. Each of these departments have an impact for marketing decisions. As far as all of departures are concerned the research and development division have input as to the characteristics a product can performed, the mission of accounting is approval the finance of marketing plans in not meeting customer satisfaction. Marketing managers are responsible for controlling supply chain flow and watching trends concerning suppliers to ensure that clients will be supplied with goods right on time to maintain positive relationships with clients. The company can control up to a point these internal factors.
External environment relates of those pertinent physical and social elements outside the company or specific decision unit which are directly considered. There is a split the external environment for micro and macro environment. The micro environment is composed by customers, partners and competitors. The micro environment is focused mostly on customer markets (for example: business, customer or government markets, globalization international or reseller markets). The macro environment includes all of the units which have an impact on the micro environment. It refers to fields like economy, demography, politics, technology , natural forces and culture. The organization has no impact for the macro environment, because it is uncontrollable factor of the company. Macro environment is majorly concerning on the demographic, technological or economic aspects of the markets. All of the factors which exist outside the organization can be called PESTEL framework. This abbreviation indicates factors which have an impact for organization in macro environment like: Political, Economic, Social, Technological, Environmental and Legal.
Environmental Scanning
Environment scanning is a process that involves monitoring external and internal environment in perpetual and detailed way. The goal of this process is to identify risk and chances which can impact for the company's expectance or trend.
Examples of Market environment
- Macro environment: This level of the market environment refers to the external factors which are out of control of the company. Examples of macro economic factors include political, economic, social, technological, legal and environmental factors.
- Meso environment: This level of the market environment refers to the factors that influence the market by making it more or less favorable for companies. Examples of meso environment factors include competition, industry structure, government regulations, customer segmentation and demographic trends.
- Micro environment: This level of the market environment refers to the factors that affect the company directly. Examples of micro environment factors include suppliers, customers, distributors, stakeholders and employees.
Advantages of Market environment
The market environment provides several advantages for organizations. These benefits include:
- Increased efficiency – Market environment can help organizations to optimize their production and distribution processes, leading to cost savings and improved customer service.
- Improved customer experience – Market environment can help organizations to better understand customer needs and preferences, leading to improved customer satisfaction.
- Increased competitiveness – Market environment can help organizations gain a competitive advantage in the marketplace by understanding market dynamics and developing effective strategies.
- Improved market access – Market environment can help organizations gain access to new markets and customers, leading to increased sales and profits.
- Increased innovation – Market environment can help organizations to explore new ideas and technologies, leading to new and innovative products and services.
Limitations of Market environment
The limitations of the market environment can be divided into three main categories:
- Political environment – This refers to political factors like government regulations, taxation policies, and trade restrictions that could have an impact on the consumer and the business.
- Economic environment – This refers to economic factors like inflation, interest rates, currency exchange rates, and economic growth that can impact consumer spending and business operations.
- Social environment – This refers to social factors like culture, population growth, and consumer preferences that can influence consumer behavior and demand.
Other limitations include technological environment, legal environment, and environmental environment. All these factors can have an effect on the consumer and the business, and it is important for companies to be aware of and monitor these factors in order to make informed decisions.
- Macro Environment – can be described as external and uncontrollable factors which may have an effect on the organization and its strategies. It includes such elements as political, economic, social and technological.
- Micro Environment – is created by the interaction of the organization with its direct environment. It includes suppliers, competitors, customers and other stakeholders.
- Internal Environment – encompasses all the factors inside the organization’s boundaries which influence its strategies and operations. It includes resources, culture, organization structure, staff and other factors.
In summary, the market environment can be divided into three levels: macro environment, micro environment and internal environment. Each of these levels encompasses different elements which affect the company and its strategies.
References
- Albright KS. (2004), Information Management Journal, Citeseer
- Duncan, R. B. (1972), Characteristics of organizational environments and perceived environmental uncertainty, Administrative science quarterly
- Elliott G., Rundle-Thiele S., Waller D., Smith S., Eades L., Bentrott I. (2017), Marketing, 4th Edition”, John Wiley & Sons Australia, Limited
- Holmm M, Kumar V. & Rohde C. (2012), Measuring customer profitability in complex environments: an interdisciplinary contingency framework, Journal of the Academy of Marketing Science, vol. 40, no. 3
- Indris S., Primiana I. (2015), International journal of scientific & technology research, ijstr.org
- Lings I. (1999), Balancing internal and external market orientations, Journal of Marketing Management, 15( 4), pp. 239-263
Author: Klaudia Pawlik
