Principles of Marketing - Case Study Example

Principles of Marketing Affects of External Factors on Company Performance Submitted By: ***** Number: ****** ****** *************** Subject Code: ******* Course name: *********** University of ******** 1. Describe the environmental forces that affect the companys ability to serve its customers. Introduction: The environment plays an important role in a company’s operating strategy. This is mainly due to the reason that the environment has an immense effect on the customer behaviour and preferences. Hence a company’s capability to operate effectively in providing services and products to its customers is affected by these factors and forces. These form the marketing environment and these can be classified into macro and micro environments. The micro environment includes the actors and forces immediately outside the company and includes its customers, suppliers, distributors and competitors. There are various macro environmental forces that affect not only the company but also the micro environment in which the company is operating. Thus the macro environment has a profound role in determining the company’s ability to serve its customers. Macro Environmental Forces: The macro environment consists of the forces such as the, “Economic, social/cultural, political/legal, ecological/physical and technological” (Jobber, 2004, p 132). All these factors play an important role and affect a company’s operating as well as marketing strategy. Each of these factors will be discussed below, which will allow for a better understanding on how these factors affect the service to the customers as well. Firstly the below diagram will allow for a better understanding of the marketing environment for companies and will also allow for understanding the various microenvironment and the macro – environment factors. Figure 1: Marketing Environment (Jobber, 2004) Economic Factors: The economic factor such as the country’s growth rate, gross domestic income and the average spending power influence consumer behaviour and hence companies have to position their products and services accordingly. Also in periods of recession, the spending power of the consumers decline and in turn affects the companies. A company operating in a low income environment has to price its products and services accordingly so that they are affordable. Hence a company has to conduct full - fledged economic research in order to identify the optimum mix of the features and pricing of the products and services (Kotler, et.al, 2007). Social and Cultural Factors: The social and cultural environments of a company help the companies to determine the target segments for the services and products. The developed economies are expected to be stable or shrinking, whereas the emerging markets form the base of the consumer population increase. The other factors which affect the ability of the companies to serve the customers is the change in the demographics of the groups. Also cultural factors like the values and basic ideas and attitudes of the whole society affect the working of the companies and also how the companies can serve the customers (Kotler, et.al, 2007). Companies also require having a clear knowledge of the responsibilities they have towards the society and the basic ethics that need to be followed by them to ensure the right service to the customers and the society on the whole. As discussed by Jobber 2004, “Organisations are part of a larger society and are accountable to that society for their actions” (p. 142). Also this allows for the companies to reach out to the target customers more easily and faster. Political and Legal Factors: The political and the legal factors affect the marketing decisions and the service to the customers to a great extent. The laws and regulations that are prevalent in the various countries affect the working of the companies and thereby the service that is provided to the customers. Things like the codes of practice that require to be followed by the companies to protect the consumer’s rights are also a very strong factor that affects the service to the customers. It is the code of almost every company in the UK to try and keep the customers away from unethical activities and to deal only in legal, decent, honest and truthful advertising and marketing for the companies (Marketing Teacher, 2009). All these factors play a very important role in the management of the companies and also in the service that the companies provide to the customers. In most cases when a company is unable to keep up with the laws and regulations of a country, they tend to face working issues which thereby affects the service to the customers as well. Physical and Ecological Factors: There are a number of efforts that are being made to help protect the environment just as much as the customers and consumers. With the growing awareness of the dangers to the environment, now ecologists are taking as many steps as possible to try and reduce any kind of damage to the environment. Also the customers and consumers have a strong understanding of the various environmental friendly products and there is a strong inclination towards these types of products. Hence companies need to ensure that there is complete use of environmental friendly ingredients in the products, along with recyclable and non wasteful packaging. This is a very serious issue and customers are now giving a lot of attention to these details. Also it is now noted that the customers prefer to use products that are not tested on animals and which to a level help protect the ozone layer as well (Marketing Teacher, 2009). Alongside a lot of importance is also given to how the companies dispose their waste and the amount of pollution caused by the companies. This is majorly because people are now realising the issues that are being faced and the environment is seen to be deteriorating to a great extent. Lastly the energy consumption also plays a very essential role in how the companies can help serve the customers better. Technological Factors: With the growing technology and the constant need for better and latest technology in almost every product, this is one of the most important aspects that affect the service to the customers. The technology has in a number of ways contributed to our lives and has helped provide a much better and more organised life and quality life. According to Jobber (2004), “Monitoring the technological environment may result in the spotting of opportunities and major investments in new areas” (p. 152). When companies keep a close watch on the technological changes and ensure that their products are kept in sync with time and are constantly differentiated against their competitors, then the companies will be able to serve the needs of the customers to greater levels of accuracy and satisfaction. Conclusion: From the above discussions, it is evident that the macro environmental factors play an important role in deciding the company’s ability to serve its customers. The companies depend on these factors and have to modify their strategies with time, in order to provide their end products and services to the customers. Each of the factors has an immense effect on the services provided to the end customers. Hence, each element of the marketing mix, including product, price, promotion and place, is determined by the environmental factors. 2. Explain how changes in the demographic and economic environments affect marketing decisions. Introduction: Demographic and economics are two extremely essential elements that affect the marketing decisions of a company. Study of the characteristics of human population is referred to as demography. This is extremely essential for the company to decide while making the any strategies for the marketing of the products. This is majorly because the marketing strategy requires to be focused on the people, who will eventually be the end users of the product. With the constant changes that are seen in the population, like the age structure, shifting family profiles, geographic population shifts, education levels, diversity and also working class, the need for a more focused and correctly targeted marketing strategy is very essential. Having discussed the various elements of demographics that affect the marketing strategies, now we discuss about the how these affect the marketing strategy. Effect of Demographic and Economic Factors: a) Demographic Forces: The Demographic forces as discussed mainly deal with the changes in the population. There are three major forces that normally affect the marketing decisions, these are: i. World Population Growth: It has been studied that the developed countries will have a population growth which will become stable or will shrink. The other developing countries on the other hand are expected to contribute to almost 90% of the projected population increase during the 21st century (Jobber 2004).With an increase in population of the world there is a growing pressure on the marketers as well. Since there is an increase in the population in the developing countries and a stability or reduction in the population growth of the developed countries, the strategies used for marketing in the countries will differ to a great extent. Also there will be an increased need for different products will be increased across the world. ii. Age Distribution: This is another very essential demographic force which affects marketing. As mentioned in the previous point, the population of a developed country will be lessened and this would thereby mean that there will be a decline in the younger age groups in the country. This will also lead to an increase in the proportion of people who fall into the 45 years and older age groups. This however, to an extent is very beneficial as the marketers as these groups to a great extent are more mature. This also means that the level of per capita income is higher as well. This mainly implies that these trends will allow the consumer focused companies to reposition their products and services and thereby will also take account of the rise in the grey purchasing power (Jobber, 2004). iii. Two Income Households: This is a very common sight in the current times. Most of the houses in the UK are mostly dual incomes. This simply means that the families have a higher disposal income and they also have reduced price sensitivity (Marketing Teacher, 2009). Families with dual incomes are considered to have a higher capacity to buy luxurious goods and also expensive services. This allows the marketers to easily attract these members and also they seem to be successful. This is majorly because there is a boom for a number of different products as these families have relatively busier lives. b) Economic Forces: The economic environment has a critical impact on the success of a business. There are a number of different factors that can affect the buying power and patterns. However there are three main factors that affect the marketing strategies of a company. These are as discussed below: Economic Growth and Unemployment: It is a natural fact that economies tend to fluctuate according to the business cycle. One of the biggest and most intense issues of marketing is the ability to rightly predict the next boom or slump. Any investments that are made at a certain period can either end up being very useful or could end up being a complete waste and loss for the company (Kotler, et.al., 2007). Also the slow growth rates of the economy could also lead to the lower consumer spending power which in turn would reflect on the profits of the company. Hence the companies require considering this as a serious factor and making all their plans accordingly so as to make up for the investments as well as make a decent profit (Jobber, 2004). Development and Implications of the Single European Market: With the introduction of the Single European market there have been a number of benefits that have been gained for companies. Firstly companies have reduced physical barriers, which mean that the restriction on movement of goods and people is now easier and this can be positively used to improve its marketing strategy. Secondly, the fiscal barriers have been removed as well which has led to greater freedom in capital movement (Kotler, et.al., 2007). Similarly the technical barriers have also been removed which allows a better usage of the technology all across the market. All these form a very essential part of the company and have a strong effect on the marketing strategy of the company. Also the single market has led to the number of customers becoming much higher than what there were thereby providing a higher scope for the companies to market their goods. Also the foreign investments are now higher thus allowing for better performance by the companies. Central and Eastern Europe: These markets are centrally planned and form a major part of the entire markets. These markets alone add up to around 15 percent of the gross national product of the world and thereby provide higher chances for companies (Kotler, et.al., 2007). This also provides a strong marketing point for the companies and allows for higher responses and better profitability of the company. Conclusion: From the above discussions, it is evident that the economic and demographic factors play an important role in deciding the company’s marketing strategies. All the strategies made by the company require keeping this in mind and according plan as these forms a base for all the strategies and planning of companies. Hence looking at the above discussion it is clear that these factors play a very essential role in the strategic planning of companies and the company’s success. Each of these factors has an immense affect on the working and success of the company and this is majorly through the demand and supply. Bibliography Jobber, D., 2004, Principles and Practice of Marketing, 4th Edition, McGraw – Hill, Berkshire Kotler, P., & Armstrong, G., 2007, ‘Principles of Marketing’, 12th edition, 9 March 2007, Prentice Hall Marketing Teacher, 2009, ‘The Marketing Environment’, Accessed on 28 February 2009, Retrieved from http://www.marketingteacher.com/Lessons/lesson_marketing_environment.htm Read More