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Fundamentals of Marketing
BBA 4th semester
-Assist.Prof.Pramila Shrestha
 Unit 2: Marketing environment LH 4
• Meaning of marketing environment
• Scope of marketing environment (Micro and Macro environment
variables)
• Reactive and proactive marketing
• Marketing environment in Nepal
 Meaning of marketing environment
The environment that affects or influences the marketing activities, growth,
expansion and development of business is known as marketing environment.
It refers to all the internal and external forces which provide positive and
negative atmosphere for business and also provide opportunities and threats
to the business. Success and failure of business depend upon the marketing
environment.
• Philip Kotler, “A company's marketing environment comprises all the
actors and forces outside marketing that affect marketing management’s
ability to develop and maintain successful transactions with its target
customers.”
• Pride and Ferrell, "The marketing environment consists of external forces
that directly or indirectly influence an organization's acquisition of inputs
(human, financial and natural resources and raw materials and information)
and creation of outputs (goods, services or ideas)."
Features of Marketing Environment

• Marketing environment is not static. It is always dynamic. Marketing

Dynamic environment is continuously changing.

• Marketing environment is very complex and difficult to predict. Because of

Complex the complexity, marketers face uncertainty in their business.

• Change in environmental forces has long-term positive or negative impact

Long-term Impact on marketing.

• Marketing environment is multi-faceted. Different marketers perceive

Multi-faced same environmental change differently.

• Marketing environment is related with strengths-weaknesses, and

Related with SWOT opportunities-threats.
 Scope or components of marketing
environment
• Internal environment • External environment
Objective of the firm Micro environment
Policies of the firm Customers
Resources of the firm Suppliers
Intermediaries
Organizational structure
Public
Macro environment
Economic environment
Socio-cultural environment
Geo-political and legal environment
Technological environment
Competitive environment
Natural environment
 Internal environment (controllable)

i. Objective of the firm : Objective of the firm can effect the marketing
activities. So it is included as an internal component of marketing
environment. For example, a manager may not give after sale services, if
any firm has the objective to ascertain amount of profit.
ii. Policies of the firm : other component of marketing environment is the
policies, rules and regulations formulated by top level management or
Board of Director. All marketing activities should be conducted according
to the policies. For example, if the firms have no policy of giving
discount then managers cannot give discount.
iii. Resources of the firm : Resources of the firm are also taken as the internal
component of the marketing environment because the marketing activities
depend upon the availability of resources of the firm. Example: by
considering resource factors like financial capacities, availability of capable
manpower, a marketer can make a good plan for the expansion of product
line.
iv. Organizational structure : Organizational structure defines functions, roles
and ability of every employee. As organizational structure also can affect
the marketing activities it is included in internal component of marketing
environment. Example : Marketers cannot ignore and change the
organizational structure. They have to do the work within the limitation of
organizational structure.
 External environment (Uncontrollable and
partially controllable)
a. Micro environment : It includes the direct components that affect the
marketing activities directly and they are uncontrollable and partially
controllable.
i. Customers : Customers are the external components of marketing environment
because supplying of goods or services can be done by satisfying the need of the
customers. In order to satisfy the need of the customers, a marketer should
consider the need, want, buying capacity and buying behavior of the customers.
ii. Suppliers : Other component of external marketing environment is supplier.
Because suppliers are the persons who supply the essential raw material,
machinery, human resources etc. to the business organization.
iii. Intermediaries : Different intermediaries are also external component of
marketing environment because they can affect the marketing system in the
process of supplying the produced goods to the customers. Example:
wholesalers, retailers, transport companies etc. are involved in physical
distribution. Moreover, bank, financial institutions, insurance etc. are also
playing the role of intermediaries.
iv. Public : Public can also affect the marketing activities. So, it is also included
in external component of marketing environment. Example: public means
media group, general people, local people, governmental group, pressure
group etc.
b) Macro environment : The external environment forces located outside the
organization and are uncontrollable by the firm that can affect the marketing
activities indirectly which is beyond the company’s marketing system.
i. Economic environment : One of the external component is economic environment of
the nation that affects the marketing system. It consists of
• Economic system
• Economic policy of the government
• Fiscal policy
• Monetary policy
• Level of employment
• Rate of inflation
• Level of income
• Purchasing power
• Consumer’s income
• Employment opportunities
ii. Socio-cultural environment : Socio-cultural environment is an important external
component of marketing environment. It consists of
• Tradition
• Culture
• Custom
• Festival
• Religion
• Belief
• Human values and norms
• Language
• Lifestyle
• Social class
• Attitude
iii. Geo-political and legal environment : Next component of external
environment is geo-political environment because it affects the marketing
activities. It consists of :
• Geo-structure
• Topography
• Climate
• Land-locked or sea-locked
• Political instability
• Power of government bodies
• Government policies like industrial and commercial policy
• Legislation
• Human right organization
• Consumer’s right
• Women’s right
• Senior citizen’s right
• Animal’s right
• Company act
• Contract act
iv. Technological environment : Technological environment is also an
important component of external marketing environment. It affects the
marketing activities. Technology brings opportunities and threats at the
same time. It consists of :
• Level of technology
• Pace of technological change
• Trend of technology
• Technology transfer
• Research and development budget
v. Competitive environment : A competitive environment also affects the
marketing activities. So, it is included in external component of marketing
environment. In market, many competitors are supplying the same kind of
goods or more qualitative goods. It consists of :
• Monopoly market
• Competitive market
• Monopolistic market
• Oligopoly market
vi. Natural environment : Natural environment can also affect on marketing
activities. For example : the nature has not distributed means and resources
in equal proportion to every country. Similarly, the resources found in any
country may be gradually finished. So, a marketer should consider the
availability of natural resources. Natural environment consists of :
• Availability of natural resources
• Unstable cost of energy
• Increased levels of environment pollution
• Increased global warming
• Government intervention in natural resource management
 Reactive marketing
Reactive marketing believes that marketing environmental forces are totally
uncontrollable and difficult to predict. This is passive approach under which,
marketer or organization tries to adjust its marketing mix and program
according to the changes in environment. Adjustments take place after the
occurring of changes in environment. The organization analyses the
environmental changes and find the way to avoid the threat and utilize the new
opportunities in the market.
In reactive marketing, organization waits for the change in environment
to react. The organization adjusts the plan and program according to the changes
occur in the marketing environment to face the challenges and grab the
opportunity. This is called reactive marketing.
 Proactive marketing
Proactive marketing believes that all the marketing environmental force
are not uncontrollable. Though, many environmental forces such as
economy, culture and natural factors etc. are uncontrollable, the
environmental forces such as politics, law and technology can be
influenced for the organization’s benefit. This technique to influence the
marketing force in favour of organization are political lobbying,
political parties and election, using publicity to shape public opinion and
many others.
In other words, however the proactive marketing, it is possible to
identify, forecast and predict the changes and little preparation can be
done. Plans and programs are made to face the changes.
Marketing Environment in Nepal

Demographical Economic
Environment Environment

Socio-Cultural
Natural Environment
Environment

Technological Political- Legal

Environment Environment
 Economic Environment
• An economic environment is one of the most important factors to affect
the Nepalese marketing. It is so because, if the nation has economic
strength then the business organization will catch opportunities. But if the
economic status is weak, then business organizations have to face different
threats. Economic environments include following factors:
a. Income and Its Distribution
b. Structure of Economy
c. Trade Policy
d. Economic Condition
 Demographic Environment
• The demographic environment affecting Nepalese marketing are
population growth, population size, urbanization and migration.
a. Population Size
b. Urbanization and Migration
c. Population Growth
 Socio- Cultural Environment
A Socio-cultural environment includes both tangible and intangible factors. House, foods,
cloths, etc are tangible factors and religion, belief, language, ethnicity, etc are intangible factors.
In Nepal, socio-cultural factors are the powerful factors. It is so because in Nepal there are
many types of cultural groups who have their own language, religion, belief and norms. With
socio-cultural environment we can discuss about the following factors:
• a. Social Factors:
i. Social Class ii. Family
iii. Reference Group
• b. Cultural Factors:
i. Attitude ii. Value and Beliefs
iii. Religion iv. Language
 Political-legal Environment
• Nepalese marketing is broadly affected by the political-legal environment. Following
environment can be discussed under political legal factors:
a. Political System
b. Government Policy
c. Pressure Group
d. Law
 Natural Environment
• Natural environment also affect marketing. In Nepal, natural factors include
natural resources, beauty, and topography.
a. Natural Resources: In Nepal, there are various types of natural resources.
Here, there is no oil and raw material but Nepal is rich in forest and water
resources. Nepal has the capability of 83 thousand megawatt but only 3% has
been used.
b. Natural Beauty: Nepal is a naturally beautiful country. Highest peak of the
world, Mt. Everest, lies in Nepal. The beautiful Himalayas, river, lakes, and
beautiful landscape always attract tourists to Nepal. Such a natural beauty is the
blessing for tourism business because lakes, mountains and rivers are the gifts of
nature for beautiful country Nepal if used wisely.
c. Topography: Nepal is a land-locked country. Nepal’s topography consists of high
Himalayas, Hill and the Terai. Topography affects transportation, storing, and
packaging.
 Technological Environment
• Technological development has positive impact on industrial development. Technological
environment can be described in the context of Nepal in a following ways:
a. Level of Technological Change: Level of technology is labour based and capital based. There is
a massive use of manpower in labour based technology and massive use of modern machine in
capital based technology. Nepal is a labour based country. But the new industries are using
capital oriented technology by replacing the labour oriented technology.
b. Pace of Technological Change: Technology is dynamic. So, its changing pace is speedy. But the
development of technology is very slow in Nepal. Nepal has adopted the policy of technology
transformation. Therefore, through some multinational companies foreign technology is being
transformed. Surya Nepal company, NABIL Bank, Bottlers Nepal Ltd. etc., are some examples.
c. Research and Development Budget: Huge budget should be allocated for the research and
development. So, any of the business organizations is not capable for this. Therefore, the
government should be involved in this work. No any organization allocates the budget for
research and development in Nepal. But in the government level, many organizations with the
modern technologies are opened for the research and development.