Economic Factors Affecting Marketing Decision - Essay Example

?Economic Factors Affecting Marketing Decision Markets aim to discover the needs and want s and communicate the benefits of their productsand services to them. In order to do this efficiently, the management needs to understand the marketing environment in which they operate. Marketing environment consists of “the actors and forces outside marketing that affect the marketing management’s ability to build and maintain successful relationships with target customers.” (Kotler and Armstrong, 2008) The marketing environment can be broadly classified into Micro environment which consists of actors close to the company and Macro environment which involves larger societal factors. Toyota is one of the world’s leading car manufacturing companies which produce and market more than 8 million cars every year. It has a global presence with manufacturing units in more than 27 countries and vehicles sold in more than 170 countries and regions (Toyota, 2010). This paper discusses how various environmental factors affect the marketing decisions of Toyota. Influence of global economic interdependence and the impact of trade practices and agreements It is quite important that Toyota understand the importance of economic interdependence and the impact of trade practices since the current economic situation calls all the countries in the world to be highly interdependent. Toyota can efficiently procure the vehicle parts from specific countries and strategically increase the market share in the countries where they do business. On May 2009, Toyota reported a record loss of $4.2 billion due to the global financial crisis. This shows that the performance of the firm is highly related to global economic conditions. Differences in tariffs, taxes and trade agreements between different countries need to be considered while pricing the products. A high import duty will make a country less attractive to do business with. On the other hand a subsidy on international trade will make a country more attractive to trade. Importance of demographics and physical infrastructure Demographics and physical infrastructure are both macro environmental factors that affect the marketing decision of any firm. The marketing decisions of Toyota are shaped by the demographic factors of human population such as size, location, gender, occupation, race, etc. For example, Toyota cannot supply vehicles to a location where it does not get a cost advantage. So it has to decide on the feasibility of opening a manufacturing unit in that location if the consumer demand is high. The demographic environment can also be classified on the basis of generations. They are Baby Boomers, Generation X and Generation Y. The needs and aspirations of these different generations are different in the form of vehicle design, performance, mileage, pricing etc. Promotional measures should also be made in order to give the right appeal for each of these segments. Physical infrastructure also plays a major role in designing the marketing decisions of Toyota. The vehicles marketed in one country may not be apt for some other countries due to the infrastructure those countries have. In such cases, there needs to be a structural redesign on the vehicle before it can be marketed to such countries. Also the availability of good physical infrastructure will help determine whether it is beneficial to open up manufacturing units for reasons of easy availability of energy, water supply, telecommunication facility, etc. Influence of Cultural Differences Toyota has over the years developed an image of trust and value among the minds of the customers. The marketing strategies will be aimed at making people associate themselves with these qualities in order to affect their purchase decision. People perceive Toyota as a lifestyle brand in some countries whereas in some other countries they consider it as a quality brand. It is the ability of the marketing department that enables Toyota to position the vehicles in the minds of the customers effectively. Importance of social responsibility and ethics versus legal obligations Natural marketing, Green marketing, Cause related marketing etc. are some of the modern concepts in Corporate Social Responsibility. It is important that Toyota adhere to these concepts while being in the business so that it eventually helps the brand to gain a strong reputation among the customers. “Social responsibility is a commitment to improve community well being through discretionary business practices and contributions of corporate resources.” (Kotler & Lee, 2005) Toyota is committed to various CSR initiatives like Negro College Fund, Toyota Family Literacy Program, Toyota USA Foundation etc. Toyota’s new line of production includes highly energy efficient cars which is a part of green marketing initiative. Effect of political systems and influence of international relations The political environment consists of laws, government, individuals and other influential people in a society. Politics has serious impact on the economic environment of a country. The political ideology of a country and its stability conditions influence the economic growth to a great extend. Entry barriers, Tariff rates, Protectionist policies, Nationalist pursuits etc. are political factors that Toyota needs to consider while they tend to market their products internationally. The political consensus developed on issues such as labor reforms, power sector reforms, importance of infrastructure, etc. will greatly determine the accessibility and profitability of any market. Influence of Foreign Corrupt Practices Act and the influence of Local, National and International legislation Foreign Corrupt Practices Act is a United States Federal Law which addresses accounting transparency requirements. (Ethics Point, 2011) This is aimed at prohibiting frauds and illegal activities. Companies that do not comply with FCPA have been subject of civil and criminal offences that may result in huge fines and penalties. So it is very imperative for Toyota to comply to this Act while they undertake business. Political influence can operate at local, national and international levels. Conducting business in Europe is influenced by influence of European Union. There are non-governmental politically motivated interest groups that influence the business at all levels. Impact of Technology Technology is the most dramatic force that decides the future of any company. For Toyota, its technological advancements have helped them open new markets and develop better cars and offer them in to the market. Technology has also aided in eliminating the cost barrier in production. Toyota has to consider the availability of technology in the markets that they wish to start up the production units. If the technology is not available, then it has to be brought in. Also, there needs to be availability of technology in order to provide better after sales service. References Kotler, P., Armstrong, G., (2008). Principles of Marketing. (12th Ed.) New Delhi, India: Pearson Education Inc. Kotler, P., Lee, N., (2005). Corporate Social Responsibility. New Delhi, India: Wiley India. Labbai, M, M., (2007). Social Responsibility and Ethics in Marketing. Retrieved December 4 2011. From: http://dspace.iimk.ac.in/bitstream/2259/392/1/17-27.pdf Ethic Point, (2011). Foreign Corrupt Practices Act (FCPA). Retrieved December 4 2011. From: http://www.ethicspoint.com/articles/foreign-corrupt-practices-act-fcpa Read More