Question

How did The Cradle evaluate and respond to the changing environment? Which environmental factors most affected their marketing strategy?

Answer 1

ANS. The market environment or business environment is a marketing term and refers to factors and forces that affect a firm's ability to build and maintain successful customer relationships. The business environment has been defined as "the totality of physical and social factors that are taken directly into consideration in the decision-making behaviour of individuals in the organisation.

The three levels of the environment are as follows:

1. Internal environment – the internal elements of the organisation used to create, communicate and deliver market offerings.
2. External Micro environment – small forces external the company that affect its ability to serve its customers.
3. External Macro environment – larger societal forces that affect the survival of the organisation.

The six environmental factors

Political factors

The company/organization needs to consider the political environment when creating business strategies. The entire political environment includes looking at government policies and the risk and instability of current political factors. Political risks can include an unexpected loss of ownership due to government takeover (nationalization), or changes in labour laws which might increase the cost of the company's workforce. However often business can anticipate issues by performing a political risk analysis. The political instability can influence the business and the duration of time that business/ organization is profitable.

• Taxation Policy
• Trade regulations
• Governmental stability
• Unemployment Policy, etc.
• political stability

Economic factors

The economic factors of the business environment are all the variables that impact how the consumer spends their money and the power of that purchase. There are multiple factors that exist at any time. An example of an economic factor is the recent recession influenced people to spend less and save more which has impacted current consumer spending patterns. The economic development of a country Is an important element when scanning the economic environment. Countries are often categorized as either 'developing' or 'developed'. The exchange rate of a country can have an extensive impact on the profitability of a business. Relatively small changes in the exchange rate may be the difference between profit and loss. When promoting, selling a product it is important for an organization to consider the extra financial information including current rates, taxes etc. in the economy of the country.

• Interest rate
• Inflation rate
• Growth in spending power
• Rate of people in a pensionable age
• Recession or Boom
• Customer liquidations
• Balances of Sharing

Technological factors

The technological environment is becoming a lot more important in the modern day business environment. New technology produces new opportunities for companies and organizations to create, sell and promote a product. Technology is rapidly growing and forever changing. Telecommunication technology e.g. cellphones and laptops are increasing the opportunity within an organization to promote and sell a product. The internet has made information available to the consumer to easily compare current prices of a product or service with the price of the competitors of the same product or service. The internet has also created more opportunity to market the product or service via the use of social media.

• Internet
• E-commerce
• Social Media
• Electronic Media
• Research and Development
• Rate of technological change.

Environmental factors

The environmental factors of the PESTLE analysis include natural resources that are affected by the processes of selling and marketing products or services. The two main environmental trends that need to be considered when evaluating the natural environment is the increased pollution and growing shortage of raw materials, Government regulations are creating practices that encourage environmental sustainability. A business might for example utilize recyclable and biodegradable packaging, thus making the most of the environmental opportunities to create a sustainable organizational in the current natural environment.

• Competitive advantage
• Waste disposal
• Energy consumption
• Pollution monitoring, etc.

Legal factors

The legal environment includes the laws and regulations of a state. The laws and regulations will influence the way in which an organization will market or sell the product and services. The legal factors influence trade agreements between different governments and states. The governments that have a well developed public policy about selling and marketing goods may limit competition and place other obligations on retailers.

• Employment law
• Health and safety
• Product safety
• Advertising regulations
• Product labeling
• Labour laws etc.