The environment can be defined as all the circumstances, people, things and events around all the marketing activities. A business performance is often dependendant on how the enterprise influences and is influenced by its environment. The environment is mainly classified into two main forms;
It usually consists of forces affecting a business directly and for which a business person can manipulate to suit the objectives of the organization. The variables includes;
- Customers-all enterprises rely on external customers for survival.the customers may be an individual/an institution/government/another firm. The manager must understand customer needs inorder to satisfy them.
- Suppliers-this are institutions/people who supply materials to the organization.they must provide quality inputs at competitive prices and offer fast delivery
- Employees/H.R-they are also the internal customers of the business who should be satisfied first.they supply labour to the organization and on their part,employees work to meet their own personal,social and economic needs.the management must ensure a harmonious working relationship so that employees are satisfied and the organization achieves its objectives.
- Trade unions- this is a group of employees come together to fight for their rights within an organisation.the management must maintain good relationship with unions for effective running of their organization.some organisations allow their employees to belong to some unions while others put stringent rules and regulations to bar them from joining this unions.
- Owners/shareholders-this are technically the owners of the organization through stock ownership.those with majority shares have the ability to influence the running of the organization.the management must ensure that the shareholders intrests are protected in terms of cutting down of costs and maximizing profits.they usually exercise their powers through voting in general meetings.
- Financial institutions/Resouces-they supply the much needed capital to run the business and include commercial banks,investment banks,insurance firms etc which advance loans,provide investment opportunities and insure business against risks.the management must ensure a good working relationship with them.
- Company policies and objectives-this are rules and regulations necessary to govern business operations the management can change the policies and objectives to suit what it wants to achieve at a particular time.
- Business structure-this refers to the formal arrangememt of functions and relationships of people and work and is divided towards achievement of the set objectives.
- Physical resources-these are the tangible facilities which belong to the business e.g. buildings, furniture etc.
- Personal aspects-this includes things like labour relations, recruitment practices appraisal system etc.
This is the environment prevailing outside the organization for which a business can not manipulate but has to try and fit within the prevailing factors.it takes the advantage of opportunities and tries to avoid the threats.
- Social-cultural factors-relates to changes in the society in terms of beliefs, values, norms ,customs,traditions, religion, literacy, lifestyle differences, changes in consumption pattern, a business person must take care of this factors in order to succeed in business within a particular locality. The advancement in technology has seen so many changes in consumer preferences. Kenyans are no longer buying cassette tapes with the advent of CDs, DVDs, and USBss. (Madura 2007)
- Demographic factors-this are the characteristics of the population in terms of; age, total population,geographical dispersion,dependency ratio,birth rate,level of education,gender,marital status,religion,occupation,social class,incomea business person must target each group of consumers with the products they like. Ie a growing population creates a wider market for goods and services,better education and jobs for consumers who has improved taste and preference and demanding for high quality goods and services.
- Legal factors-this relates to changes in the laws and regulations that govern business operations.businesses must be careful to keep laws and anticipate ways in which change in this laws will affect their businesses e.g. tobacco law,media bill,mututo law etc.
- Political factors-this relates to ways in which changes in government and government policies can influence business.in a county with political instability,businesses are threatened.business may also influence government actions through lobby groups and in some countries,the business community fund their preferred candidate/party to form the next government ie capitalist/free,command /central/command and mixed economy.
- Economic factors-this relates to changes in the wider economy and influences the consumers willingness and ability to buy goods and services.a counrys economy will go through decline, recession,recovery and boom.a business has also to consider the purchasing power of consumers in order to offer affordable products to them and also the nature of demand for their products. Other economic variables to consider include; interest rates, level, level of inflation, consumers, inflation, consumers income, borrowing rates, tax rates, business cycles at particular times this economic factors will help a business to decide when to invest and when not to invest in a business.
- Technological factors-technology is the level of know how, available for doing specific things managers need to be aware of changes in technology taking place in environment so as to update themselves and their organization technology changes provide opportunities for business to adopt new breakthroughs, innovations, inventions to cut costs and to develop new products.
- Competitors-this are businesses that offer similar products to what the organization is offering businesses that do not compete effectively are often confronted with a likelihood of being eliminated from business customers are usually the beneficiaries of stiff competition in the industry e.g. Kenyan telephone users are benefiting greatly from competition between safaricom, airtel, orange and yu. The competitors issues can be clearly viewed using a model developed by Michael porters five forces model
- Rivalry among firm-this is where firms come together and rival so as to attain the highest market share.
- Bargaining power of consumers-this is a case where there are many consumers who have different bargaining powers and thus consumers will buy goods in the places they wish to.
- Bargaining power of suppliers-this is a case where there are numerous buyers and few suppliers.therefore dictating the price to charge e.g. the case of oil.
- Threat of substitues-this is where one can either opt one substitute instead of the other e.g. coffee/tea.when one adopts one substitute good, the other good is faced with a threat.
- Threats of new entrants-when one experiences great profits, other firms may come in so as to enjoy the same profits causing one to be faced with a serious challenge.