THE MARKET AND ENVIRONMENT PDF

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THE MARKET AND ENVIRONMENT1. THE MARKET ENVIRONMENTThe exchange relationship between the company and the market is developed within a trading system, in which there are a number of factors not controllable by the company. These factors, which constitute the environment, influence market behaviours, ...

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THE MARKET AND ENVIRONMENT

1. THE MARKET ENVIRONMENT The exchange relationship between the company and the market is developed within a trading system, in which there are a number of factors not controllable by the company. These factors, which constitute the environment, influence market behaviours, the marketing decisions of the company and ultimately condition the development of the exchange relationship. Some of the environmental factors are closer to the exchange relationship and their influence is more immediate. This is the case for suppliers, intermediaries, competitors and other commercial institutions that facilitate or promote commercial activity or endeavour the normal development of the business. These factors make up the microenvironment. Other factors, on the other hand, have a less immediate influence, and affect not only commercial activity, but also other human and social activities. Thus, demographic, economic, cultural, social, legal, political, technological and environmental changes affect both commercial activity and other activities and aspects of life and society. These factors are the macro environment. 2. THE MICROENVIRONMENT 2.1.

Commercial institutions

The analysis of the elements involved in the trading system should be completed by the study of all parties involved in the exchange relationship. This participation can be direct, giving rise to transactions, as in the case of suppliers or suppliers and intermediaries. But there are also other institutions that participate indirectly, either by facilitating and promoting the development of the commercial activity, either by providing information and consumer protection, or by ensuring compliance with the rules of the commercial activity. 2.1.1. Suppliers Few companies or organizations are fully self-sufficient and can have all the resources that make up the products they make, as well as the additional services (transportation, storage, insurance,

credit, legal and economic advice, etc.) that Need. In most cases, the supply of products made by a company depends on the proper supply of a multitude of suppliers and the existence of a large and trained labour market. It is therefore of paramount importance to carry out good purchasing management that guarantees the supplies of materials and components in the quantity and quality required. 2.1.2. Intermediaries Direct distribution between producer and consumer is not possible in many products, especially when the number of potential buyers is very high, and they are dispersed in many geographical areas. In these situations, intermediaries should be reached, to get to the market in the fastest and least expensive way the offer of the company's products. Intermediaries can be wholesalers or retailers. A wholesaler is an organization that buys the products from the manufacturer or another wholesaler and sells them to retailers or other wholesalers, but not to end consumers. A retailer or retailer also buys from the manufacturer or wholesaler, but instead sells the products to the final consumer. 2.2.

Competition

The study of the competitive structure, that is, of the market shares maintained by the companies that participate in it, is considered important because of the effect that it may have a leading position on the profitability of sales. However, from the perspective of marketing, it is in the interests of understanding, above all, of the effect of competition decisions on the business strategy and the results of the undertaking itself. Competitors act as restrictions on the design of the marketing strategy. The success of any marketing strategy may depend on the goodness of the competitive analysis carried out. A number of basic principles on competition, regarded as universal, have been determined as they apply to any competitive situation. Identifying competitors is not as simple as it may seem with the naked eye. In addition to the current ones, potential competitors should be considered. These can originate for a variety of reasons:

a) Market expansion. By modifying territorial boundaries, such as a hypothetical entry of a new country into the North American Free Trade Agreement. b) Product expansion. Any company that has some competitive advantage or detects a business opportunity can expand its offer to products other than the usual ones. For example, Walmart, a supermarket chain, expanded to create Walmart Bank recognized for the low rates it offers to the market. c) Backward integration. Customers are potential competitors. The K2 chain, after being acquiring furniture from independent manufacturers for some time, decided to produce them on its own plants. d) Integration forward. Suppliers can also become competitors. A processor manufacturer can become another computer manufacturer. The analysis of the competition, both current and potential, requires constant and permanent information about it, in order to evaluate its strengths and weaknesses that may constitute opportunities or threats to the company. Sources of information may be of different type, from reports published by competitors, to market research conducted by specialized companies, advertising issued by competitors, or personal information of sellers, intermediaries and suppliers. This way of conceiving competition analysis is called benchmarking, which is a business management technique whereby the organization compares its efficiency levels with external standards and certain internal practices of its own to emulate and correct possible gaps and, through action and continuous improvement plans, to identify innovation opportunities and make effective changes to the business, in order to try to achieve leadership positions, achieve levels of excellence and achieve desired profitability results. Rank Xerox is recognized as the creator of this business management technique.

3. THE MACROAMBIENTE The elements that constitute the microenvironment of the exchange relationship between the company and the market have been analysed in the preceding paragraphs. All of them are characterized by being specific to the commercial activity; that is, they exist because there are exchange relationships. On the contrary, the macro environment factors do not have a cause-and-effect relationship with trading activity. They are generic and exist regardless of whether or not exchanges occur. Its influence is not limited to commercial activities and its microenvironment, but also to many other human and social activities. The following sections describe the different factors of the macro environment, consider the changes experienced in them in recent years and analyze their influence on trading decisions and market behaviors.

3.1. Demographic environment The birth rate continues to decline, while life expectancy, as a result of advances in the treatment of diseases, continues. This leads to lower population growth and investment in the population pyramid, with a higher number of older adults and lower, instead, young people. Changes in birth rates and mortality have a huge implication of the consumption of certain products. Thus, the birth rate affects the sale of toys, children's food, children's hygiene products, nurseries, schools, etc. In contrast, the reduction in the mortality rate has a positive impact on the sale of insurance, pension plans, resting places and other services for the elderly. Dimensions Demographic

Economic

Social/cultural

Legal

Policies

Technologies

Things to consider Population size: — Birth rates and mortality. — Age structure. — Family formation. — Population movements. Income and national wealth (distribution, available, etc.): — Growth/recession. — Inflation. — Unemployment. — Interest rate. — Monetary policy. — Tax policy. — Exchange rates. — Balance of payments. Changes in values: — Incorporation of women into work. — Changes in expectations. Lifestyle changes: — Trends in education. — Social issues. — Social groups. — Attitudes and behaviors of use of the products. — Crime, drug addiction, etc. Legislation: regulation/deregulation: — Jurisprudence. — International treaties Political system: — Relations between the Federation and States. — Freedoms, guarantees. — Power groups, lobbies, etc. Inventions and innovations:

— Rate of dissemination of innovations. — Patents. - Research and development There are also other important changes in the Mexican population, which have a considerable impact on the shopping and consumption habits of certain products: a) Stability in the number of marriages. The proportion of people married in Mexico (12 years and older) has been slightly upward stifled, although within some stability: in 1980 it was 53.9%, in 1990 it was down to 53.5% and in 2010 the proportion of people who were married or in free union 60% was around. The average age of marriage members in 2010 was 26.6 years in men and 23.8 years in women. b) The greatest instability in the family. In 2010, the divorce rate per 100 marriages reached 20.4%, contrasting with 7.4% in 2000. This has led to a major change in the number of people living in a household, which requires that the design, format, size or packaging of the product be adapted to these situations. c) Internal migration movements. In 2010 the statistics showed a decentralizing trend of the population, the country had an international immigration of 3.3% and an international migration rate of 4.6%. 3.2. Economic environment The economic environment analysis looks at the evolution of the main macroeconomic magnitudes: national income, interest rate, inflation, unemployment, exchange rate, balance of payments and tax burden. These variables determine purchasing capacity and influence consumption patterns: — Income is the most direct determining factor in the market's purchasing capacity. The more equal the income distribution, the greater the overall purchasing capacity of consumer products. — The level of employment determines the expectations of household income. A high unemployment rate reduces purchasing capacity and makes the market more sensitive to the price of products. — The interest rate on money influences purchasing, savings and investment decisions. An interest rate increase will reduce forward purchases and encourage savings. On the contrary, a reduction in interest rates will stimulate the purchase of homes and consumer products.

— The tax burden determines the purchasing capacity available by the market, once the corresponding taxes have been deducted from its gross income. The exchange rate, on the other hand, will make foreign products cheaper or more expensive. — Inflation also affects the market's purchasing capacity and may alter consumption patterns. If it increases, the consumer can purchase fewer goods and services per monetary unit. The behavior of national economic indicators is influenced by economic policies aimed at complying with the agreements of the various free trade agreements that Mexico has signed in recent years; mainly by the NAFTA, which involved an opening in all economic sectors and an attempt to approve labour criteria and manage incentives and subsidies to avoid unfair competition between the three signatory countries: USA, Canada and Mexico. 3.3. Cultural and social environment The cultural and social changes experienced in Western society have been substantial in recent decades. The pace of these changes in Mexico has accelerated since the beginning of the 1990s, during the so-called "salinism" period, and have been helped by Mexico's immersion in world markets through free trade agreements and others agree economic cooperation that the country has signed in recent decades. There has been a greater incorporation of women into productive activities in Mexico. Women now have less time, but more resources for shopping, while increasing family incomes. With women having less time, products need to be easier to use (e.g. prepared foods) and more convenient to purchase, requiring new and more efficient distribution systems, with hours adapted to working times. The increase in economic resources and cultural level, as well as the gradual availability of more free time for increasingly numerous groups in Mexican society, has led to a change in lifestyles. In general, the average Mexican plays more sports, cares about his physique, becomes more interested in fashion and cares more about nature and the environment. This results in higher consumption in quantity, but at the same time, more selective in quality. Gradually the movement of food consumption of high nutritional value takes hold, and sometimes there are those who prefer a light product, which does not fatten, or rich in fiber; people want to wear "branded" clothing and buy more sporting goods. 3.4. Legal and political environment On the one hand, on the one hand, there is less commitment than before the public authorities to establish controls and standards of conduct in multiple economic sectors. What has been called "deregulation" is produced, which gives greater prominence to market laws and promotes competitiveness. On the other hand,

there is also a process of privatization of sectors or activities that had traditionally been in the public sector. Privatization of telephony, rail services, banking and other monopolies are examples of this process. While deregulation provides new market opportunities, it also poses new challenges for businesses. Deregulation can make it more difficult to predict competitors' strategies, consumer behaviors, and the evolution of legal and social changes. 3.5. Technological environment Advances and innovations in the fields of electronics and computing have revolutionized production processes, communications and the transmission and processing of information. Nowadays, several television channels can be available, either by transmission by conventional antenna, cable or satellite, that make available to the user the information and programs broadcast from anywhere in the world. In the 1960s, the photocopier was an instrument of restricted use; today, on the other hand, it is used on a daily basis by countless users. On the other hand, scientific advances in the fields of biology, chemistry, physics, energy, etc., allow to develop new and better products that can more effectively meet current demands and meet the unmet or latent needs of the Market. The technology is also being applied to many services that were previously done only by people. Nowadays you can make multiple banking operations through an ATM, make purchases from home through a computer, send a remote written message via email and interact with companies through networks Social. The Internet network allows access to countless databases of different types (libraries, cultural, service companies, etc.) and other users, to exchange messages, data and programs. Today the Internet has expanded considerably, modified many of the schemes of consumer interaction and caused countless changes in the field of marketing. 3.6. The environment The environment has become increasingly important in recent years, not only because of the defence by environmental movements and by 'green' parties in some countries, especially in the European Union, but also because of the increased social awareness there is damage caused by some industrial products and processes. News, commentary or articles on the depletion of natural resources, pollution of rivers and seas, toxic waste, polluting gases from engines, the decreased ozone layer, progressive disappearance of plant or animal life, etc. This progressive degradation of the environment has created a collective awareness of the

importance of protecting the planet and has led public authorities and entities of various kinds to promote energy savings and product recycling, as well as to establish regulations on the use of natural resources, the development of industrial processes or the use of polluting products. In Mexico, there is legislation that includes standards for environmental protection and obliges companies to adapt their products and manufacturing processes to the appropriate specifications to reduce their negative impact on the environment. This legislation includes the federal level and extends to states, with a number of laws and regulations supported primarily by the General Law on Ecological Balance and Environmental Protection. Apart from legal restrictions or impositions, a growing number of companies are adopting policies and implementing environmentally friendly actions; especially those whose sales are directed to external markets add to compliance with international standards or common practices today for the correct use of resources. Some companies have been recognized in this regard and are immersed in the transition to the 'green' economy or even to the so-called 'blue' economy, in which companies are subjected to increasingly strict self-control for compliance with responsibility to society and the planet. A significant number of companies continue to associate environmental protection with the higher rise of their manufacturing processes. However, many others find that an effort in this regard will result in the supply of better products, which, in the long term, will provide greater consumer satisfaction and improved social welfare....