The competitive environmental force affects the number of types of competitors that the marketer must face – and how they behave. Marketers cannot always control such situations, but they can choose strategies that avoid head on competition, and where competition is foreseeable, they can prepare for it.
Price is one of the key elements of the ‘marketing mix,’ which also affects the annual income of the company. The pricing behaviour reflects the structure of the market that firms operate in. Economists have developed labels to describe the 4 types of competitive market situations: Monopoly, Monopolistic Competition, Oligopoly, and Pure Competition.
In monopolistic competition a number of firms offer marketing mixes (price, promotion product, and place), which at least a number of consumers view as different. Each rival tries to get a monopoly i.e. a greater share of the market. Nonetheless competition still exists as consumers see the various alternatives as substitutes. Most marketers face monopolistic competition. In monopolistic competition marketers try to identify their products as different by relying on other elements of the marketing mix. Yet there have been occurrences when potential consumers have viewed the “different offerings” as essentially similar. This has forced the market to become more competitive consequently as firms have had to rely on lower costs to gain a comparative advantage.
In the long run most product-makers move towards pure competition or oligopoly. In such situations, competitors are also offering similar products, and marketers are competing with lower prices and profit margin shrinks. This is because consumers see the different available products as close substitutes.
In monopoly situations where one firm completely controls and has an above 25 per cent share in the market, is rare in a market-directed economy like the UK. Furthermore governments across the world have imposed legislations and regulations upon certain firms. This may determine how much the government purchases from a particular supplier or how much it helps to secure foreign markets. In which the consumer may benefit from certain goods available at a lower prices due to the lower cost of production for foreign firms relative to domestic firms.
Government in the UK introduced regulatory units, such as the Monopolies and Mergers Commission and the Director General of Fair Trading can enforce specific laws and some discretion in establishing operating rules and drawing up regulations to guide certain types of industry practices also control one of the marketing mixes in price. These regulatory units are imposed to protect consumer interests. They are breaking up monopolies and therefore making the customer the ultimate decider on what will be produced and what will not.
There have been occurrences where a firm has taken initiatives itself without having to wait upon government enforcing new laws or fines. For instance considerations of environmental issues in both short and long run. Then again having an ethical and moral approach for ‘green issues’ may be a way of adopting further customers. An example of this is the Body Shop, and its promise not to produce animal tested products. This tells us that a major cosmetic firm is making its consumers central to the marketing mix, which in this case is the product.
Environmental issues are inter related with social issues as movements can have a profound affect on the market. The roles played by family, friends, peers in society along with religious beliefs, race of the consumer do affect the demand of a product. Carlsberg would not sell their larger to a Muslim country like Pakistan because for religious purposes such brewery is forbidden and also there would be a lack of demand for the commodity. As a society we tend to conform to such influences of friends, family and to society in general. We look at trends, ‘the latest in thing to have,’ and many other characteristics, it is then we as consumers contemplate on having such a product, which in turn can have a major impact on the external environment.
Marketers learn about such trends by conducting consumer based surveys. They use demographic variables such as population around a certain area and the average age, then find out the average annual income which the consumer has available and then maybe look at the latest trends and find out if there is a demand for the product in and around that area. A practical example of this maybe Porsche may be thinking about opening up a garage in Bangor, but realistically they would have to look at the population of Bangor, the general average age and equally as importantly the average annual income, because it would be no good to them if the average annual income was roughly around £20,000.
Similarly another variable to consider is the economic environment of the country. Of particular concern to marketers are fluctuations related to household income and expenditure that affect expenditure that affect a household. To measure the status of an economy marketers turn to indicators like the unemployment rate disposable income of the consumer, economic growth and the interest rate. Marketers make such indicators part of a sales forecasting model. The economy goes through four major stages: boom, depression, recession, and recovery. Marketers direct their marketing mixes via these stages and analyse the disposable income available to their consumers. Low unemployment rates occur during the period of ‘boom’ and ‘recovery’ in the economy and marketers see this as a positive because the more people who have jobs, the higher the consumer spending.
Likewise a high disposable income means the more money people bring home, the more they can spend. In the example above it can be illustrated that the product price of ‘the luxury car’ would generally be far too high for the ‘locals’ in Bangor, as their disposable income is probably lower than the average cost of a Porsche. For this reason setting up a Porsche garage in Bangor would be viewed upon as a bad idea. The interest rate is another important indicator as it is usually set lower in time of economic downturns. This decrease of the cost of money inclines people to take out loans and in turn use the money for cars (not always Porsches) and homes. In spite of this during economic boom the interest rate is usually set higher.
Marketers need to be aware of the constant changes occurring in the environment. Businesses need innovative strategy planning to survive in dynamic markets. The whole environment is circled around consumers and the marketing mix which are the basic tools and techniques that the marketer can control to make available the desired product and service offerings. This substantiates the marketing assumption that the ‘Consumer is King,’ and firms and the government base all their research around, the marketing mixes and consumer needs and in turn both want to see them as central to their marketing activities.
