Marketing Principles for Business - Essay Example

MARKETING PRINCIPLES FOR BUSINESS: PESTEL by Marketing Principles for Business: PESTEL Introduction The external environment of any business is considerably important. The customer requirements are at the heart of any business, and in consequence, it is inevitable for the marketer to stretch its analysis beyond the internal situation and access the external environment. This helps the marketer in anticipating the customer requirements better. Additionally, having a good understanding of the external environment and the effects of the changes that take place in the external environment has far-reaching benefits in the present and the future of the business, in terms of profitability (Luck 2010, p.3). Marketers ought to take a bold approach in their attempt to understand the external environment of the business and the PESTEL model emerges as the most comprehensive approach to the external environment. PESTEL is a mnemonic that denotes Political, Economic, Social, Technological, Legal and Environmental aspects of the external environment. This framework helps marketers in checking and keeping track with the external environment when planning to execute a given strategy. As much as the external environment is not under the control of a business, it is possible to tailor the marketing approach to suit the prevailing economic factors (Koumparoulis, 2013, p.32). The categorization of the external environment aspects by the PESTEL model is ideal since it aligns the environmental assessment to the strategy of the business. The political factors of the external environment concern the possibility of the economy or industry to be influenced by the state government. The government can intervene through trade tariffs, tax policies, and restrictions to trade, environmental regulations, labor regulations and fiscal policies. For instance, the imposition of a new tax may have the effect of changing an entire revenues generating unit of a business (Koumparoulis, 2013, p.33). These interventions are intended to protect either the consumers or the businesses. For instance, the Sherman Act (1890) serves to inhibit firms in U.S. to restricting trade through the creation of cartels and monopolies. To that end, marketers need to anticipate and respond effectively to political factors by adjusting the marketing policy in an appropriate manner. The economic factors significantly influenced the manner in which a business is conducted and its profitability. Economic factors include exchange rates, interest rates, and patterns of economic growth, inflation rate and the disposable income of the consumers. For instance, an increase in inflation has the effect of altering the pricing of the products of the business since high inflation decreases the purchasing power of the consumers and hence the demand and supply of the products. The economic factors can also be categorized as either macro-economic, which relates to the manner in which demand and supply is managed in the economy, or micro-economic, which relates to the way in which individuals make decisions on the expenditure of their disposable income (Koumparoulis, 2013, p.34). A perceptive marketer will benefit from such factors by anticipating and making the appropriate alterations to the marketing strategy. The social or socio-cultural factors of the external environment concern the attitudes and beliefs that a population shares. These factors include career attitudes, attitudes towards nutrition and fitness, income, level of education, marital status, cultural trends, demographics, age distribution and population growth. For instance, people in the U.S. spend more money during the summer holiday, and hence there is a high demand for products. In addition, the nutrition and fitness attitudes of the population are greatly affecting the manner in which products are being marketed. Pepsi Company, for instance, produces both soft drinks and vitamin water to take advantage of the market population that is against soft drink consumption. Marketers have to be aware of the ever-changing composition of a given population by accessing the socio-cultural factors form time to time (Koumparoulis, 2013, p.34). Marketers need to assess such factors since it is only through them that the marketer can understand customers well and the force that drives one to make a purchase. Technological factors concern the technological innovations that may have an impact, either negatively or positively, on the operation of the market or the business. Technology changes in a vast way and this influences the marketing policy of the marketers. For instance, technological changes may bring about new ways of: producing, distributing and marketing products through the advent of ATMs, mobile phones, the internet, video displays, among other factors that facilitate the marketing efforts of marketers. The extent to which technological changes influence marketing of a product greatly depends on the research and development, automation and the technological awareness of a product’s market. In recent years, consumers have an increased access to information. For instance, they use text messages to a greater degree, and prefer online shopping. This has made some marketers to pay more focus to mobile marketing and online ads as opposed to the traditional way of considering the print media, such as magazines and newspapers, ads only (Koumparoulis, 2013, p.34). Being adept in such factors means that a marketer will be able to anticipate and make correct adjustments to the policy of marketing. The legal factors concern the legislation put in place to various aspects of conducting business. These factors include labor laws, consumer laws, advertising standards, safety standards and product labeling standards. It is inevitably essential for a business to be aware of what is legal and what is not to conduct business successfully. Different countries set their own rules and regulations and multinational businesses have a relatively difficult task in assessing the legal factors in the various countries of operation. The varying laws and regulations affect the strategy of the business. For instance, a company that operates is planning to expand the market for its products to countries such as France, the marketers ought to be aware that the regulations that concern the working conditions of employees do not allow for employees to work for more than thirty-five hours in any given week (Koumparoulis, 2013, p.33). Marketers who embrace the importance of comprehending the legal factors are able to avoid heavy fines and at worst, they are able to avert business closure because of conducting illegal business or failure to abide by the set rules and regulations. The environmental factors encompass all the other factors that are determined by the environment that surrounds the business. These factors may include the climate changes, limited natural resources, recycling procedures, waste disposal and geographical location. In recent years, the efforts of marketers have been influenced by the increased scarcity of raw materials, heightened pollution regulations and the increased need for ethics and sustainability in conducting business (Koumparoulis, 2013, p.33). Marketers who are adept in this aspect of the external environment are successful and bring about compliance and customer loyalty. Examination of the external environment is very important to marketers for various reasons. The major components of the external environment are; the industry and the competitors; the market and the customers; and the general environmental factors. Marketers are able to understand the competition by assessing the external environment. By identifying the actual and potential competitors, the marketers can plan on how to position themselves strategically to be advantaged as regarding to the competition. Moreover, the marketers are able to select those competitors who are a major threat to the business, study their strengths, weaknesses, reaction patterns, objectives and even strategies, and formulate marketing policies while keeping these factors in mind. It is important for marketers to only concentrate on those competitors who pose a greater treat because it is not practical to consider all the competitors to the market. External environment assessment helps the marketer determine how much a competitor is likely to spend on promotion, research and development and new locations. In essence, conducting a competitor analysis involves the seeking for crucial information about a competitor through mystery shoppers (Moseley, 2009, p.56). This examination is crucial for marketers because businesses are competing for the customers’ dollar and it pays to know what the others in the market are doing and take advantage of their weaknesses to win customers from them. External environment assessment helps the marketer to predict future trends and hence position strategically. First, it enables the marketer to determine how the environment will influence the customers’ demand for their products. Secondly, the marketers are able to align their marketing policy with the environment and hence increase the productivity of their marketing efforts. Thirdly, marketers who assess the external environment are able to institute marketing strategies that are responsive to the anticipated environmental changes. This leads to the effectiveness of marketing policies. Fourthly, assess the external environment helps the marketers identify the opportunities that exist in the environment. Lastly, the marketers are able to get early warning signs through the anticipation of certain adverse environmental changes and preparing on how to tackle them (Moseley, 2009, p.55). It is better to anticipate and prevent a situation rather than trying to correct it after it has happened. External environment examination helps in identification of opportunities and threats. Conducting the assessment of the external environment through the PESTEL model displays the factors that the business cannot control and this include opportunities and threats. This will help the marketer to assess the internal environment the SWOT analysis, which matches its internal strengths to external opportunities and hence creating core competencies that are aimed at achieving the needs of the customer (Koumparoulis, 2013, p.35). Without doubt, marketers ought to be adept in the external environment as the basic point of formulating the marketing policy. Even though the external environment is not under the control of the business, the approach used for the marketing function can be tailored according to the economic factors. In other words, it is beneficial to understand the market and the impact the economy is expected to have on it. The economy plays a key role in influencing the manner in which consumers spend on products and services. For instance, during periods of high economic growth, the disposable income of consumers is high and hence they are more willing to spend on goods and services. This means that the consumers are less sensitive to changes in price and the marketer can take advantage of this opportunity and increases the prices of products. However, during recession periods, the consumers’ power of spending is reduced and hence they become sensitive to price changes. In addition, during period of high inflation, which translates to high interest rates, the purchasing power of money is eroded and consumers need more money to purchase commodities. High inflation leads to recession since higher prices causes the economic growth to slow down or even negate. Marketers ought to reduce prices or maintain them in order to suit this situation. Moreover, the marketers should use effective promotional tools, such as discounts and offers, during the economic downturns so as encourage the economically crippled consumers to make purchases; otherwise, the prices will be unaffordable to them (Vrontis, 2009, p. 294). Marketers need to pay close attention to the external market to align their marketing policy with the anticipated economic situation. Conclusion Marketers find it inevitable to conduct a thorough analysis of the external environment since that is where the business is operating in. The PESTEL model serves as the ideal approach in examining the external environment. it encompasses the political aspects which involve the interventions of the government, the economic aspects which involve the manner in which the economy may change and hence impact marketing. In addition, it explores the social aspects that involve the cultural and attitudes of the population, the technological aspects that involve the technological innovations that affect the manner in which marketing is conducted, and the legal aspects that involve the rules and regulations of conducting business. As well, there are the environmental factors, which involve the recycling procedures, climate changes, scarcity of natural resources and waste disposal. Marketers benefit from examining the external environment through identification of competitors, anticipating environmental changes and hence responding appropriately. They also benefit by knowing the opportunities and threats that the business faces. Marketers are able to align their marketing policy to the economic situation that is anticipated after conducting the external environment assessment through changing prices and increasing their promotional efforts. Indeed, objective marketers need to embrace the importance of examining the external environment given its benefits; otherwise, the marketing policy bares no fruits. Reference List KOUMPAROULIS, D. N., 2013, PEST Analysis: The case of E-shop. International Journal of Economy, Management and Social Sciences, 2 (2), p. 31-36 LUCK, D., 2010, CIM Course book 08/09: Assessing the Marketing Environment. Jordan Hill, Oxford: Butterworth-Heinemann MOSELEY, G. B., 2009, Managing health care business strategy. http://site.ebrary.com/id/10788525. VRONTIS, D., 2010, The External Environment and Its Effect on Strategic Marketing Planning: a Case Study of McDonald. International Business and Entrepreneurship Development, 2(3), p. 289-306. Read More