The Commercial The Commercial EnvironmentEnvironment

Meaning, Concept, Significance & NatureMeaning, Concept, Significance & Nature

ObjectiveObjective

After reading this section you should be After reading this section you should be able to describe the environmental forces able to describe the environmental forces that affect the company’s ability to serve its that affect the company’s ability to serve its customers & understand the significance of customers & understand the significance of Commercial Environment in BusinessCommercial Environment in Business

Commercial EnvironmentCommercial Environment

The actors and forces outside The actors and forces outside business/marketing that affect business/marketing that affect marketing management’s ability to marketing management’s ability to develop and maintain successful develop and maintain successful transactions and relationships transactions and relationships with its target customerswith its target customers..

INTRODUCTIONINTRODUCTION

Business enterprises cannot function in Business enterprises cannot function in isolationisolation

Open systems interact with their Open systems interact with their environmentenvironment

Business enterprises exist in and are Business enterprises exist in and are surrounded by an ‘environment’ – the surrounded by an ‘environment’ – the business or commercial environmentbusiness or commercial environment

INTRODUCTIONINTRODUCTION

Society and business enterprises are Society and business enterprises are mutually dependentmutually dependent Business enterprises satisfy societal needsBusiness enterprises satisfy societal needs

Relationship between society and business Relationship between society and business enterprises takes place in a changing enterprises takes place in a changing environmentenvironment

COMPONENTS OF THE COMPONENTS OF THE BUSINESS ENVIRONMENTBUSINESS ENVIRONMENT

Different environmental variables exist Different environmental variables exist internally and externally to the business internally and externally to the business enterpriseenterprise

Environmental variables have a positive or Environmental variables have a positive or negative influence on the enterprisenegative influence on the enterprise

COMPONENTS OF THE COMPONENTS OF THE BUSINESS ENVIRONMENTBUSINESS ENVIRONMENT

Business environment consists of two sub-Business environment consists of two sub-environments:environments: Internal (micro) environmentInternal (micro) environment External environmentExternal environment

• Market environmentMarket environment• Macro environmentMacro environment

Mutual relationships exist between these Mutual relationships exist between these environmentsenvironments

Significance of Commercial Significance of Commercial EnvironmentEnvironment

First Mover AdvantageFirst Mover Advantage Warning SignalsWarning Signals Sensitize the ManagementSensitize the Management Basis of StrategyBasis of Strategy Source of intellectual SimulationSource of intellectual Simulation Image BuildingImage Building Continuous LearningContinuous Learning

The Company’s Micro - The Company’s Micro - EnvironmentEnvironment

In designing business/marketing In designing business/marketing plans, marketing management must plans, marketing management must take other company groups, such as take other company groups, such as top management, finance, research top management, finance, research and development (R&D), purchasing, and development (R&D), purchasing, manufacturing and accounting, into manufacturing and accounting, into considerationconsideration..

The CompanyThe Company

In designing business/marketing plans, In designing business/marketing plans, marketing management must take other marketing management must take other company groups, such as top management, company groups, such as top management, finance, research and development (R&D), finance, research and development (R&D), purchasing, manufacturing and accounting, into purchasing, manufacturing and accounting, into consideration.consideration.

SuppliersSuppliers

Firms and individuals that provide the resources Firms and individuals that provide the resources needed by the company and its competitors to needed by the company and its competitors to produce goods and services.produce goods and services.

Marketing IntermediariesMarketing Intermediaries Firms that help the company to promote, sell and Firms that help the company to promote, sell and distribute its goods to final buyers; they include distribute its goods to final buyers; they include physical distribution firms, marketing-service physical distribution firms, marketing-service agencies and financial intermediaries.agencies and financial intermediaries.

ResellersResellersThe individuals and organizations that buy goods and The individuals and organizations that buy goods and services to resell at a profit.services to resell at a profit.

Physical distribution firmsPhysical distribution firms warehouse, transportation and other firms that help a warehouse, transportation and other firms that help a

company to stock and move goods from their point of company to stock and move goods from their point of origin to their destinations.origin to their destinations.

Financial intermediariesFinancial intermediariesBanks, credit companies and other businesses Banks, credit companies and other businesses that help finance transactions or insure against that help finance transactions or insure against the risks associated with the buying and selling the risks associated with the buying and selling of goods.of goods.

CustomersCustomers The company must study its customer markets The company must study its customer markets

closely and keep up to date with changing closely and keep up to date with changing customer requirements.customer requirements.

The company must communicate with its The company must communicate with its customers, and must listen to them closely.customers, and must listen to them closely.

CompetitorsCompetitors The marketing concept states that, to be The marketing concept states that, to be

successful, a company must provide successful, a company must provide greater customer value and satisfaction greater customer value and satisfaction than its competitors. Thus, marketers must than its competitors. Thus, marketers must do more than simply adapt to the needs of do more than simply adapt to the needs of target consumers.target consumers.

They must also gain strategic advantage They must also gain strategic advantage by positioning their offerings strongly by positioning their offerings strongly against competitors’ offerings in the minds against competitors’ offerings in the minds of consumers. They must strive to of consumers. They must strive to anticipate competitor activity and strategy.anticipate competitor activity and strategy.

PublicsPublics Any group that has an actual or potential interest Any group that has an actual or potential interest in or impact on an organization’s ability to in or impact on an organization’s ability to achieve its objectives.achieve its objectives. Financial publics:Financial publics: Influence the company’s ability to Influence the company’s ability to

obtain funds. Banks, investment houses and obtain funds. Banks, investment houses and stockholders are the principal financial publics.stockholders are the principal financial publics.

Media publics:Media publics: Are those that carry news, features Are those that carry news, features and editorial opinion. They include newspapers, and editorial opinion. They include newspapers, magazines and radio and television stations.magazines and radio and television stations.

Government publics:Government publics: Management must take Management must take government developments into account. Marketers government developments into account. Marketers must often consult the company’s lawyers on issues must often consult the company’s lawyers on issues of product safety, truth in advertising and other of product safety, truth in advertising and other matters.matters.

PublicsPublics Citizen action publicsCitizen action publics A company’s marketing A company’s marketing

decisions may be questioned by consumer decisions may be questioned by consumer organizations, environmental groups, minority organizations, environmental groups, minority groups and other pressure groups.groups and other pressure groups.

Local publicsLocal publics Every company has local Every company has local publics, such as neighborhood residents and publics, such as neighborhood residents and community organizations. community organizations.

General publicGeneral public A company needs to be A company needs to be concerned about the general public’s attitude concerned about the general public’s attitude towards its products and activities. The public towards its products and activities. The public image of the company affects its buying.image of the company affects its buying.

Internal publicsInternal publics A company’s internal publics A company’s internal publics include its workers, managers, volunteers and include its workers, managers, volunteers and the board of directors.the board of directors.

The Company’s Macro-The Company’s Macro-EnvironmentEnvironment

The larger societal forces that affect the The larger societal forces that affect the whole microenvironment - demographic, whole microenvironment - demographic, economic, natural, technological, political economic, natural, technological, political and cultural forces.and cultural forces.

General

Environment

General

Environment

General

Environm

ent

EconomicEconomic

Political/Legal

Political/Legal

TechnologicalTechnologicalGlobal

Global

Demographic

Demographic Sociocultural

Sociocultural

The External EnvironmentThe External Environment

IndustryIndustryEnvironmentEnvironment

Threat of new entrantsThreat of new entrantsPower of suppliersPower of suppliersPower of buyersPower of buyers

Product substitutesProduct substitutesIntensity of rivalryIntensity of rivalry

CompetitorCompetitorEnvironmentEnvironment

General EnvironmentGeneral Environment

Sociocultural SegmentSociocultural Segment

Women in the workplaceWomen in the workplace Workforce diversityWorkforce diversity Attitudes about quality of worklifeAttitudes about quality of worklife Concerns about environmentConcerns about environment Shifts in work and career preferencesShifts in work and career preferences Shifts in product and service preferencesShifts in product and service preferences

Economic segmentEconomic segment

General EnvironmentGeneral Environment

Inflation ratesInflation rates Interest ratesInterest rates Trade deficits or surplusesTrade deficits or surpluses Budget deficits or surplusesBudget deficits or surpluses Personal savings ratePersonal savings rate Business savings ratesBusiness savings rates Gross domestic productGross domestic product

General EnvironmentGeneral Environment

Political/Legal SegmentPolitical/Legal Segment Antitrust lawsAntitrust laws Taxation lawsTaxation laws Deregulation philosophiesDeregulation philosophies Labor training lawsLabor training laws Educational philosophies and policiesEducational philosophies and policies

General EnvironmentGeneral Environment

Technological SegmentTechnological Segment Product innovationsProduct innovations Applications of knowledgeApplications of knowledge Focus of private and government-supported Focus of private and government-supported

R&D expendituresR&D expenditures New communication technologiesNew communication technologies

General EnvironmentGeneral Environment

Global SegmentGlobal Segment Important political eventsImportant political events Critical global marketsCritical global markets Newly industrialize countriesNewly industrialize countries Different cultural and institutional attributesDifferent cultural and institutional attributes

General EnvironmentGeneral Environment

Demographic SegmentDemographic Segment Population sizePopulation size Age structureAge structure Geographic Geographic

distributiondistribution Ethnic mixEthnic mix Income distributionIncome distribution