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 notes (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!
2.0 OBJECTIVES
At the end of this note, you should be able to:
·
explain the marketing environment
·
explain micro-environmental variables
·
explain macro-environmental variables
·
differentiate between Opportunities and threats
·
explain the implications of these variables to marketing companies.
3.0 MAIN CONTENT
3.1 The Marketing
Environment
3.1.1 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 negotiations with the labor force.
This is but one instance of how a variable beyond the control of
an enterprise can influence the running of the enterprise. Note that this kind
of competition is not only encountered in the formal sector of the economy
(e.g. in the case of a price competition on groceries between Shoprite Checkers
and Pick ‘n’ Pay) but can also exist in the informal sector between two
electronics shops trading on the same street in Tinubu Square, Lagos, for
example: 
3.2 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 microenvironment 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:
(a) 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.
(b) 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.
(c) 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.
(d) 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.
3.3 The Market Environment
The key variables in the market environment are:
·
consumers
·
competitors
·
intermediaries
·
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.
3.4 The Macro-Environment
It is important to realize 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:
·
the technological environment
·
the economic environment
·
the social environment
·
the natural or physical environment
·
the institutional/political environment
·
the international environment.
You should have identified six variables which may affect Hajiya Amina
Enterprises in different ways. Let us examine them now!
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 fibers to create
crease-resistant material.
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.
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.
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.
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.
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 realized 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.
3.5 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 specialized 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.)
3.5.1 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
4.0 CONCLUSION
In this note, you
have learnt about the micro and macro-environmental variables and their implications
for marketing firms.
5.0 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 utilize the Opportunities
and counteract the threats.
You made nice points on Micro Environment.
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