Factors affecting Marketing environment of the country

Published Date: 23 Mar 2015

A business operates in an environment which affects the way in which it functions due to external and internal forces. While the impact of the micro environment on the business can be effectively controlled by monitoring the activities of marketing intermediaries, the company, the customers, the suppliers, and the competitors, the external environment is complex and rapidly changing. While the marketing strategy of the business cannot control the external forces in the marketing environment, it can identify, monitor and forecast changes in those forces that are more relevant and impact its organization the most, by aligning its marketing plans and strategies with the forecasts.

Demographic factors

India with over 1.18 billion people (estimated) is projected to be the world's most populous country by 2025. India has an astonishing demographic dividend where more than 50% of its population is below the age of 25 and more than 65% below the age of 35. This is the single most important demographic trend.

While migration to larger cities has led to the exponential rise in the urban population, 70% of Indians still reside in rural areas. Women constituting 50% of the population are playing a more significant role in the present era. Young children are more aware and influential about the choice of product.

Increasing literacy implies a more aware and demanding consumer. Indian consumer has also acquired new values and tastes due to the exposure to global trends as a result of technological advances in the field of communication.

Economic environment

Economic reforms post 1991 brought foreign competition and led to an expansion in the production of fast-moving consumer goods. Post-liberalization, the Indian private sector was faced with foreign competition, including the threat of cheaper Chinese imports. Since then the FMCG sector has had to handle squeezing costs, changing management, with constant focus on designing new products and on low labour costs and technology.

Technological Environment

With increasing economic interdependence of national economies across the world, there is a rapid increase in cross-border movement of goods, service, technology and capital. This recent boom has been largely accounted by developed economies integrating with less developed economies due to foreign direct investment, the reduction of trade barriers, and the modernization of these developing cultures.

Political and Legal Environment

Organisations increasingly are expanding globally and face different government structures worldwide. They must operate within the framework of governmental legislation and regulations. Increased subsidies, reduced tariffs, import quotas, and deregulation of industries have been the key drivers for the Indian marketing scenario in the past two decades.

Social / Cultural Environment

Social and cultural environment is so diverse in India with so many cultures. Marketing strategies have always considered the cultural sensitivities and appealed to the wide ranging consumer base by appealing at their own cultural roots and sentiments.

Environmental Management

The shifting of focus from being a reactive to a proactive stakeholder has been the significant development with respect to Environmental management for the businesses worldwide. Marketers have responded to this with green marketing initiatives, the use of recyclable or biodegradable packing materials as part of their marketing strategy.

Issues faced by the company

Focusing on the production concept and improving operational efficiencies to achieve revenue generation has been a thing of the past due to the ever present intense competition. Shifting to third party production to move away from high-cost areas such as Mumbai City is a good strategy in this direction but with increasing competition, this will not be beneficial in the long run.

Since HUL already are the market leaders in their respective categories for Washing Powder (86.1%), detergent powder (88.6%) and Toilet soap (91.5%), even a marginal increase in the prices can drive up revenues considering that they serve 2 out of 3 people in these segments. The price wars initiated by competitors need not be addressed every time and can be downplayed. HUL should stop being a price taker but decide prices. Improved technologies for both production, distribution may assist HUL in setting a price that can give it an edge.

HLL's strong distribution system must be complemented with building and innovating different products that are needed by the customer. It's entry into new markets will be faced with intense competition from the existing players but its distribution systems will help achieve its goals in the long run

Recommendations

Predominantly a market leader in Toilet soaps category with closer to 98% and 90% in urban and rural areas respectively and holds greater than 90% and 80% market share in urban and rural areas for Washing powder and Detergent bar categories. It should consider acquiring the local brands and merge them into the HUL product portfolio.

Focus areas of Skin cream and Deodorants, the key market segment is the young Indian generation of both men and women between the age group of 20 to 25 years. Looking at the figure of 31% penetration in urban areas for skin cream, more efforts are required to appeal to an even wider consumer base of 35 to 50 years age group with Ayurvedic and Anti-ageing creams that helps protect their skin and nourishes their skin.

Focus on increasing beverage consumption away from the colas by marketing the health benefits of coffee and tea could be a key focus area as the consumers have become more health conscious.

With 70% of over 1.18 billion Indians living in rural areas (which is closer to 770 million), HLL must focus on improving its penetration in the toothpaste category from 37.6% to higher levels. Remaining 289 millions are potential customers for the tooth paste segment. Though introducing low volume, low price packs is a viable option, focus on Neem or herbal varieties of tooth paste may appeal to the consumers in this segment.

Utensil cleaner, Skin creams and Instant coffee in rural areas are the primary areas that needs to be worked upon as this will amount to huge revenue generation.

With cornflakes industry growing at over 20 per cent, HUL must consider getting into this market and tap the urban market with innovative varieties even though Kellogg's is a major competitor in this segment. With Kellogg's also now looking at further segmenting, HUL can choose categories where it has its major consumers of other products in HUL portfolio. Since HUL is witnessing 40% increase in Sales from Foods between year 2006 and 2007.