MARKETING ENVIRONMENT

1.0 INTRODUCTION

Nigeria is now part of the ‘global economy’ and the ‘global village’. These expressions imply that the Nigerian economy and businesses are affected by things that happen throughout the world. The economic consequences of the decline of the Far-Eastern economies are already impacting on the Nigerian economy, and also on each and every business as well as on every Nigerian citizen. These consequences include a decline in exports to these countries and a drop in the Nigerian Naira exchange rate against the major currencies of the world such as the British pound and the American dollar. This will make it more expensive to import foreign products but will hopefully make Nigeria’s products cheaper when exported.

The flip side, however, is that with the devaluation of the Far East’s monetary units (e.g. the Singapore dollar, Malaysian ringgit and the baht of Thailand) exporting from these countries will also be more competitive, thus, creating an extremely competitive international marketplace. This is but one example of the influence of the marketing environment on our country, its businesses, employees, and citizens.

Some of the effects of the market environment are felt more directly by enterprises, while others have a more indirect way of influencing the business environment. For example, a major slump in the economic activity of a country such as Nigeria brought about by a poor

agricultural output as a result of inadequate rainfall will have a resounding effect on the employment figures in the agricultural industry. This will then have a knock-on effect on tertiary industries such as the tractor repair and service industry, food sales and the general economic survival of several rural towns in Nigeria. This is an example of the more indirect manner in which variables of the marketing environment may influence Nigerian enterprises and citizens.

Taking into account the effects of variables such as those discussed above, it is therefore necessary to understand the functioning of the marketing environment. Within the marketing environment there are three sub-environments (i.e. micro-environment, market environment and macro-environment) – each of which affects the day-to-day running of an enterprise. The Chief Executive Officer (CEO) of an enterprise and its management team should evaluate the effects of the marketing environment on business, and one of the ways of doing this would be by means of a SWOT analysis (i.e. identifying the Strengths and Weaknesses of, the Opportunities for and the Threats to the business). Remember that any business should be able to do a SWOT analysis, and that most enterprises are doing so on a regular basis!

table of content A

1. personal selling and sales promotion 
2. branding 
3. evolution of management theory
4. organising 
5. planning
6. recruitment and selection
7. advertising and publicity
8. channels of distribution
9. communication
10. control
11. decision-making in business
12. delegation and decentralisation of authority
13. employee training and development
14. introduction to marketing

OBJECTIVES

At the end of this unit, you should be able to:

1. explain the marketing environment 
2. explain micro-environmental variables 
3. explain macro-environmental variables 
4. differentiate between opportunities and threats 
5. explain the implications of these variables to marketing companies. 

 MAIN CONTENT

The Marketing Environment

Composition and Functioning of the Marketing Environment

The marketing environment consists of three components, also called
sub-environments, which are known as the micro-environment, market environment, and macro-environment. Each of these sub-environments consists of variables which can influence an enterprise, its workers and their families. In the market environment, for example, competition

may have a very negative influence on the enterprise, lowering the profitability of the enterprise and impacting negatively on wage

The Micro-Environment

The micro-environment of an enterprise refers to all the activities that are executed by that enterprise. An enterprise must perform diverse activities in order to function properly and to attain the profit objectives

that have been decided on. To put this into a clearer perspective, let us

look at the Hajiya Amina Florist Shop in Balogun Market, Lagos. Hajiya Amina employs two permanent flower arrangers as well as a delivery person. Her rent per month is N3,000.00. She must pay N600.00 per month on the delivery vehicle that she has leased. The flowers that she buys from the market must be paid for in cash. Within these limitations of the micro-environment, Hajiya Amina must fulfill her commitments and still earn enough to make a living for herself and her two children! This example illustrates the influence of the micro-environment on the enterprise and shows that she can control most of the activities which are part of the micro-environment (e.g. she may decide to employ less staff or to move to cheaper premises). These variables in the micro- environment must all be managed by Hajiya Amina to ensure success. These variables are also known as controllable variables.

These variables in the micro-environment are discussed below:

1. The Product Managing the product entails planning and developing the right products and/or services to be marketed by the company’s executives. Guidelines are needed for changing existing products, adding new ones, and taking other actions that affect the assortment of products carried. Branding, packaging and various other product features need to be considered as well.
2.  Price Determining the right base price for its (company’s) products is one of the crucial micro-variable factors to be considered by the enterprise. Also, establishing policies concerning discounts, freight payments, and many other price related variables form part of the management responsibility to ensure that the enterprise objectives are attained. 
3. Promotion Promotion entails those weapons used to inform and persuade the markets, regarding a company’s products. These include advertising, personal selling, publicity and sales promotion. 
4. Distribution/Place This is the management of the marketing intermediaries for the distribution of the company’s products. Management’s responsibility is to select and manage the trade channels through which the products will reach the right target markets at the right time and to develop a distribution system for physical handling and transporting of these goods. Note, the management or marketing executives can manipulate these variables to meet their company’s objectives. For example, the product features can be changed, prices can be increased or reduced depending on the market situation, the most appropriate promotional media can be chosen, etc. 

The Market Environment

The key variables in the market environment are:

1. consumers 
2. competitors 
3. intermediaries 
4. suppliers. 

These variables will influence the enterprise, which makes it imperative for management to react to opportunities and threats in the market environment. Consumers are the people buying your enterprise’s products and services. Identifying the target market for your product or service is therefore one of the most important management activities to be undertaken by management. Competitors are a natural part of a capitalistic society. We are accustomed to the fact that various competitors compete for our money in the case of most products and services. The example of Toyota and the competitive environment in which it operates illustrates this point.

Intermediaries: The question of the gaps that exist between the manufacturer and the final consumer was addressed in topic 

1. Intermediaries such as wholesalers and retailers evolved to bridge the gap between the manufacturer and the supplier. New developments in this field constitute opportunities for, or threats to, certain enterprises operating in this particular industry. One such example is the development of convenience shops at petrol filling stations and the resultant threat to the traditional convenience stores, such as cafes, in Nigeria. 

Suppliers: An enterprise is dependent on suppliers to run its business.
One such example of a supplier is the supplier of capital to an enterprise. Traditionally, the commercial banks are the suppliers of capital to small and medium businesses. Listed companies such as Nigerian Bottling Company, makers of Coca cola have an additional supply of capital provided by their shareholders.

The Macro-Environment

It is important to realise that the enterprise operates within a wider macro-environment, in which variables directly or indirectly influence the enterprise and its market environment. The enterprise cannot always control these variables and they must be continually evaluated to ensure that potential opportunities or threats are correctly identified. The increase in the world crude oil price during Iraq’s aggressive

expansionist period in the early nineties (i.e. during the Gulf War) is an example of the influence of a macro-variable on business in general and more specifically on the ordinary citizens of a country. (Remember the drastic increase in the price of petrol in Nigeria.)

The following six macro-variables in the macro-environment may either individually, or together, affect the enterprise at any time

1. the technological environment 
2. the economic environment 
3. the social environment 
4. the natural or physical environment 
5. the institutional/political environment 
6. the international environment. 

You should have identified six variables which may affect Hajiya Amina Enterprises in different ways. Let us examine them now!

1. The Technological Environment: This environment is affected by innovation and change. For example, new manufacturing processes and new technology may influence the type and quality of clothing being sold by wholesalers and retailers in Nigeria. One needs only to think of the new types of material available, such as those combining natural and synthetic fibres to create crease-resistant material.
2. The Economic Environment This variable is well known to everyone. An increase in the inflation rate, changes in the exchange rate and a higher rate of personal income tax are examples of how the economic environment may influence wholesales and retails in Nigeria. 
3. The Social Environment Social changes are prevalent throughout the world and Nigeria in particular. A decline in the population growth rate may eventually have a negative impact on sales of trendy imported clothing in the affected market. The changing role of women in society (e.g. more women in full-time position and more career women as experienced in this democratic dispensation) may be a positive variable in the case of Hajiya Amina Enterprises, and may result in a higher turnover. To add to the complexity of the task facing marketing executives, cultural patterns such as lifestyles, beliefs, norms, values, folkways, etc. are changing faster than they used to; therefore, management must be alert to them. 
4. The Natural or Physical Environment This variable is of great concern to people all over the world. Scarce resources for example are utilised in the packaging of clothing and wastage of packaging material must be of concern to Hajiya Amina Enterprises, for example. 
5. The Political/Governmental, also called Institutional Environment This variable in the macro-environment would be of particular concern to Hajiya Amina Enterprises. One example of the effect of this variable would be surcharges on imported clothing. This would have a direct influence on the selling price of the clothing sold by Hajiya Amina Enterprises in Nigeria. Other variables include general and fiscal policies. 
6. The International Environment As was said at the beginning of this topic, Nigeria is part of the global village. As such, our economy and its businesses are directly influenced by economic development in the Far Eastern countries, for example. In the case of Hajiya Amina Enterprises, it may benefit from a better exchange rate, enabling Mr. Audu Giya to import his clothing at a cheaper price. 

By now you should have realised that the macro-environment is an active force which influences each and every enterprise operating in Nigeria and which no business, whether big or small, can ignore. Since it cannot be controlled, but influenced to the company’s advantage, then management should be alert to changes in the macro-environment.

Determining the Strengths and Weaknesses of Opportunities for and Threats to the Enterprise (SWOT Analysis)

In order to ensure the success of an enterprise, the management must take a careful look at the marketing environment. This can be done by means of a SWOT analysis. This means that the enterprise’s strengths and weaknesses must be identified, as well as the opportunities and threats that exist in the environment. Strengths may include specialised management skills, a productive and well-trained workforce, enough capital, and so on.


Weaknesses within the microenvironment may include an obsolete product range, unacceptable levels of pilferage and lack of capital. Lack of capital is one of the major problems experienced by small and medium enterprises (SMEs) in Nigeria. One of the greatest strengths of SMEs is their management adaptability to a changing business environment. Hawkers selling groceries in the major towns and cities of Nigeria are able to adapt to changes in consumer demand almost immediately, whereas the village seller for example, would take longer to do so
Opportunities for the enterprise can be found in the market and macro- environment. For instance, look around you and you will see that there has literally been an explosion of fast-food businesses in Nigeria. It would therefore seem that quite a number of budding entrepreneurs in Nigeria have identified opportunities in this sector.

Threats are also found in the market and macro-environment. For example, a drastic fall in the Naira/dollar exchange rate is a threat to importers of luxury goods such as cars. At the same time such a decline may be seen as an opportunity for exporters of Nigerian products to African countries, European Union and the USA. (They will be able to obtain a higher price in naira for their products.)

SWOT Analysis

Executing a SWOT analysis is a must for any enterprise that wants to be successful in the business world. The following Self-Assessment Exercise will help to familiarise you with the elements of the SWOT analysis.

SELF-ASSESSMENT EXERCISE

You are the owner of Fati’s Pizza Shop in Umuahia in Abia State of Nigeria.
Your business has been operating for the past four years and made a handsome profit, in the first three years. However, the current year’s sales figures are bad with a 20 per cent decline in turnover. Yesterday evening you listened to the news at seven and heard about the following major developments in the economy:

1. A decline in the inflation rate of 2 per cent for the year. 
2. A decrease in the interest rate of 2 per cent for the past year. 
3. An increase in unemployment of 5 per cent, with specific reference to the high level of unemployment in the country. 
4. A growth in fast-food enterprises of 20 per cent over the last year. 
5. A decline in the per capita personal disposable income of 10 percent during the last year. 
6. New legislation whereby more females must be employed in the existing workforce. 

After listening to this news you spent the whole night thinking about it and the implications for your business. This morning you phoned the nearest branch of the Small Business Development Corporation (SBDC) for advice. The consultant advised you to do a SWOT analysis of your  business. Draw up a list of its strengths and weaknesses, and current opportunities and threats.

 CONCLUSION

In this unit, you have learnt about the micro and macro-environmental variables and their implications for marketing firms.

 SUMMARY

An enterprise functions within certain marketing environmental variables. These variables are known as controllable and uncontrollable variables. These variables influence the activities of an enterprise. Therefore, it is the task of management to evaluate these variables and their impact on the enterprise and to recommend strategies to utilise the opportunities and counteract the threats.

TUTOR-MARKED ASSIGNMENT

Why are the 4ps (promotion, price, product and price) referred to as controllable variables?