PM: Session9 Marketing Environment

Japanese auto major Honda, like most major car makers, experienced one of its worst performance slumps in 2008. Shrinking demand worldwide for new vehicles and a strengthening yen have had disastrous effects on the company’s bottom line. With the new CEO Takanobu Ito, the company started to focus on R&D and this became company’s new goal. 

Except for the Honda Civic diesel (majorly sold in UK), the company was only making petrol cars. With the increase in the price of petrol, many price sensitive markets like India, preferred diesel cars. In India, they were facing strong competition from local automobile companies like Maruti Suzuki, Tata Motors and Mahindra & Mahindra and also with the Japanese and Korean automobile giants. These companies were not only selling diesel cars but also small cars (B-segment) to fit the pockets of Indian consumers. Seeing the demand, Honda’s research and development team in Japan started developing diesel engines. They also brought B-segment care “Brio” in India in 2009 and finally came with diesel car “Amaze” in 2013. In 2014, they also launched “Mobilio, a compact MUV in competition to Toyota’s Innnova” and Maruti’s “Ertiga’.

As the result, year 2014 was recorded as Honda’s the best ever year in India, with record sales of crossing 1.79 lakh units.

Like Honda, even the most successful companies need to keep a watchful eye on happenings of the marketing environment. Marketing environment is consists of the forces outside the functional areas of business that affects company’s performance. These are the forces that may not be directly affecting the business (apparently), but may cause a major concern if ignored. This calls for continuous gathering, filtering & analysis of the information. The information may be regarding the changes in competition, economic and demographic conditions, customer’s tastes and preferences or any other changes that may affect the company in future. These major forces outside the company forms Macro-Environment. On the other hand, Micro-Environment consists of forces close to the company that affect its ability to serve its customers. In this session, we shall discuss macro factors affecting marketing function.

The Macro Environment

The macro environment consists of Demographic, Economic, Natural, Technological, Political and Cultural forces. 

Demographic Environment

The marketers need to study the changes in Demographic environment, i.e. majorly related to changes in population including its size and growth in cities, towns and villages, age distribution, educational levels, ethnic and regional characteristics and household patterns. Demographic environment consist of geographic distribution, density, mobility trends, age distribution, birth, marriage & death rates, racial, ethnic & religious structure, occupation, location and other statistics.

Key trends in demographic environment that affects marketing in India are:

Increasing Population:

India is world’s second largest in terms of population. The population growth in India has resulted in increasing demand of commodities and items of mass consumption. Many companies target the low income population that is also very large in numbers by providing less costly utility products. 

Age Distribution:

According to the Census of India, India is one of the most the youngest country in the world. (Demographic Dividend). Hence it is the best market for innovative and futuristic products.

Rural India:

More than 70% of Indian population lives in rural India. (Rural Population in India). The Marketers are targeting them with new range of products as they feel that this market has lots of opportunities and gaps. With increase in exposure through television, radio and now mobile and internet, the rural population has increased aspirations that is no different from urban population. A study conducted by IMRB confirms the same - Rural India

Household Pattern:

People in India are moving from a joint family system to nuclear family system. This trend has increased the number of households. Women in India now are more educated and empowered. This led to demand of new product line in almost all categories of products. 

Increased education:

According to recent research, Indians are spending more and more in the education of their children. Also, in India, primary education is free in public schools. This resulted in increased college attendance and hence increased white collar workers in offices. 

Kids Fashion

Fashion clothing is increasing becoming popular amongst kids in India. Seeing the demand, Flipkart has announced the launch of a high focus, store Li'l Stars' dedicated to kids on its platform. Due to growing exposure of working class in India, there is an in increase in demand of global brands like Pepe Jeans, US Polo and Disney. More and more parents are demanding global brands for their children not only in toys segment but also in apparels. This is a very good opportunity for other global players as kids apparel market in India stands as 20% of the total apparel market in the country.

Economic Environment

Economic environment consists of the factors that affects consumers buying ability and patterns. The analysis of key economic concerns for markets like economic development or slowdown, changes in income and savings, changes in consumer spending patterns and inflation.

Young Indian Buyers

Demographics in India is fast moving and the good news is it is growing young! Indian buyers of luxury cars are only in their 30s a decade less than the global average. Many of these are millionaire at a very young age thanks to the success with startups or they are high paid professional. The average age of Indian millionaire has come down to 35-40 rom 50. That means younger people have disposable income to buy multiple entry level models like Mercedes A Class, Audi Q3 and BMW X1. Also, overall growth in Indian economy has helped in the emergence of these new age entrepreneurs who are highly aspirational, are global travelers and are conscious about their personality.

   

Natural Environment

Businesses need to understand the importance of conserving the natural resources as they are used as an input for most of the production. There is worldwide concern over issues like industrial pollution, ecological deterioration, indiscriminately mining, use of harmful pesticides and fertilizers, deforestation, introduction of genetically modified food and pollution of rivers and underground water.

Rough Ride Ahead!

Mahindra & Mahindra a leading SUV manufacturer in India has suffered a huge blow as due to environmental concerns in the nation's capital Delhi, Supreme Court has decided to enforce a ban on more than 2 litre engine diesel vehicles. This ban is imposed till 31st March 2016. M&M, however, has decided to face the testing times with resilience. According to the Chairman, Anand Mahindra, "the company will honour the SC and develop vehicle that comply with their stipulations."

Many countries including India, are dealing with these issues by government interventions with corporate support. 

Use of CNG-powered vehicles, solar power and other forms of green energy, recycling activities are some initiatives to name a few.

ITC - The Green Company

ITC's YC Deveshwar recently has won the Smart Green Leader award for Lifetime Achievement. In his leadership ITC has become the only company in the world with carbon positive (10 years), water positive (13 years) and solid waste recycling positive (8 years). Apart from it's numerous initiatives for sustainable development and empowerment of rural India, ITC has pioneered in using renewable energy resources. Many ITC hotels, factories and buildings have LEED (Leadership in Energy and Environmental Design) certificate.

In India, Central Pollution Control Board is working towards prevention and control of water and air pollution and improvement of the quality of air. Eco-mark is a scheme on labeling of environment - friendly products. An earthen pot has been chosen as the logo for the Ecomark scheme in India. The familiar earthen pot uses a renewable resource like earth, does not produce hazardous waste and consumes little energy in making. Its solid and graceful form represents both strength and fragility, which also characterizes the eco-system. 

Electric Cars in China

While many countries are testing and launching their version of electronic cars, the real happening in the sector is taking place in China. The deteriorating climatic conditions and government subsidies have encouraged many car companies to launch e-vehicles. The biggest factor in fuelling this surge is the cost factor which is becoming lesser due to heavy government subsidy. Apart from this, Chinese government is also planning to subsidize the installation of charging centers and free parking and registration of electric cars.

Technological Environment

Every company needs to be updated about the happenings in technological environment. These are the forces that create new product and market opportunities. Apple Inc. has all its success attributed to its R&D and technological updation. Samsung, IBM and many other companies keeps their employees on toes to continuously update and upgrade the technology. 

Marketers need to follow the trends like, accelerating pace of change, unlimited opportunities for innovation, R&D budgets of competitors and increased regulation.

Political-Legal Environment

Political-legal environment consists of laws, governmental agencies and groups that influence or limit marketing actions. It includes policies regarding liberalization, globalization, decontrol, de-licensing, FDI Policy and similar matters. Marketers needs to keep an eye on the following:

Government may impose legislation with an aim to protect companies and consumers from unfair trade practices. Key regulations are related to environmental concerns, export and import issues, occupational health and safety concerns, manpower issues and protection from competition.

Changes in legal environment like new taxes, restrictions in age limits for consumption, bans and other mandatory measures requires close monitoring as they affect the marketing activities immensely.

Looney Tales

Google's project Loon may see the light of the day in India. Indian government with all their privacy concerns over spectrum, is now ready to approve the pilot run of the project. Google's Indian chief Sunder Pichai has managed some support for the project Loon, Google has proposed to provide internet connectivity in hard to access areas of the country from balloons floating at a height of 20 km using LTE (Long Term Evolution Technology) or 4G technology .Meanwhile, RailTel Google's project to connect 400 Indian railway station is on track and around 100 stations will be connected by the end of next year. Google's Internet Saathi, a tie up with Tata is also announced. This project will help women get online by providing 1,000 bicycles equipped with internet devices.

Many companies are converting their processes into green and environment friendly. Some other companies, are taking up causes like, safe driving, save water and electricity and save wildlife, say no plastic and so on. 

The paper-work, documentation and other mandatory obligations are to be fulfilled as per the Company Law.

To Be or Not To Be

Net neutrality is one of the most trending topic in India. Telecom Regulatory Authority of India (TRAI) is once again attempting to address the question of net neutrality and exploring whether zero-rating plans and schemes such as Facebook’s ‘Internet.org’ are in violation of the principle of net neutrality. Like last time they are inviting comments on differential pricing for data services. The concerns are that these zero-rating plans may result in discriminatory, anti-competitive, predatory or misleading in favour of some telecom service providers.

In a zero-rating plan, the cost of browsing will be borne by the content providers of a website and the subscriber browse the website free of charge. Bharti Airtel had faced criticism when they launched such program and later put off. 

Talking about Facebook's strategic tie-up with Reliance Communications, Internet.org, it aims at allowing access to certain websites along with Facebook without mobile data charges. Latest news is facebook has pulled out free basics in India.

Socio-Cultural Environment

Socio-cultural forces affect a society’s basic values, perceptions, preferences, and behaviours that reflects in their purchasing and preferences. Culture reflects individual consumer’s relative emphasis they place on self-gratification. Their motivations and behavioural patterns are influenced by their own specified needs and wants. Different cultures have different concerns about others. Currently these is lot of commonality in most cultures as people are moving from being social to being social on social networking sites. People vary in their attitudes toward corporations, government agencies, trade unions, and other organizations. Joining some organizations like army, Navy or Airforce is a dream of every young boy or girl in India. Some universities like Delhi University, NMIMS University are very prestigious in India and worldwide. These attitudes comes from general learning from the society. Their celebrations and customs are driven by the norms of society and very closely observed.

Cultural belief also determine consumer’s attitudes toward nature.  Growing demand of organic food shows that people prefer natural products. Also there is an increasingly favourable attitude towards green products and green marketing. Overall people are also deeply involve in their beliefs about the origin of the universe and their place in it. Movies like PK, OMG and similar are popular because of their content on view of universe.

Smart Toys - Rama Rama

Gamaya, a Sunnyvale based gaming company is launching a virtual game based on Ramayana. The centrepiece of the game is a book that serves as the gaming console, a portal into the great Indian epic. A toy character from the Ramayana has to be placed on this Bluetooth-enabled book for the game to come alive on Android and iOS devices, allowing children to transport the character into a virtual world.