Environmental Factors and Marketing Decisions
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Environmental Factors and Marketing Decisions
Will a successful marketing plan in one country work in another country? This is unlikely to occur due to many different cultural, political, economic, technological, and competitive environments. Marketing mixes require adjustments to meet local conditions and companies that understand these environmental factors can create advantages when positioning their products or services. Wal-Mart is a global organization and uses market research to understand the market environments before making marketing decisions.
Introduction
Wal-Mart operates over 6,100 stores worldwide, employs 1.8 million associates, and operates in 15 different countries (Annual Report, 2006, p. 12). Lee Scott, Chairman and CEO stated, “Today, we find ourselves operating 2,285 international stores, buying products from 70 countries, and doing 20% of our business abroad. Wal-Mart’s marketplace is clearly the world” (Annual Report, 2006, p. 13).
Wal-Mart stores are primarily service providers that include tangible goods. Without offering these tangible goods at everyday low prices, sales would probably decrease significantly. The domestic branding Wal-Mart advertises is “Everyday Low Prices.” Yet, if Wal-Mart stocked the same products in every store around the globe, it would not generate the sales and profits it realizes today. Wal-Mart must adjust the marketing mix based on the major elements of the marketing environment.
Environmental Factors
Environmental factors around the globe impact the organization’s marketing decisions. These factors that are important to marketers include social, economic, political/legal, technological, and competitive environments. The social environment focuses on groups of people, their number, characteristics, behavior, and growth projections (Bearden et al, 2003, p. 26). The economic environment includes issues surrounding the purchasing power of consumers to satisfy their wants and needs (Bearden et al, 2003, p. 33). The political/legal environment includes issues related to government activities and specific laws and regulations that affect marketing practices (Bearden et al, 2003, p. 34). The technological environment encompasses factors and trends related to innovations that affect new product development and how marketing activities are performed (Bearden et al, 2003, p. 37). The competitive environment surrounds all organizations that attempt to serve similar customers with brands or products (Bearden et al, 2003, p. 38).
Cultural diversity is an important part of the social environment and companies must adjust their product “P” in the marketing mix. For instance, McDonalds includes items that reflect local tastes, including the Maharaja Mac (made of mutton) in India, the Tatsuta Burger in Japan, the McPork Burger with Thai Basil in Thailand, and the McTempeh Burger (made from fermented soybeans) in Indonesia (Armstrong-Kotler, 2005, p. 528). McDonald’s successfully changed the product “P” by not selling hamburgers to cultures that do not eat them. As Wal-Mart enters new regions, it must determine the proper marketing mixes to meet the wants and needs of potential consumers.
Technology
Technology allows Wal-Mart to monitor the marketing environment and identify trends in specific areas and develops appropriate responses to generate profits. This market research can be used both in existing areas of business and potential future locations. Technology certainly impacts the organization’s marketing decisions as business intelligence tools can turn data into valuable marketing information that can be used to create a perfect marketing mix in each location. Marketers can utilize technology to view GDP data by country and change marketing strategies if there is a recession or increased growth rates. Internationally, offering everyday low prices on products that the local consumers do not desire will result in failure.
International Segment
The international segment of Wal-Mart currently represents 20% of revenues but marketers see much more future growth. In fact, out of 600 new store openings planned for 2007, one-third will be international location (Annual Report, 2006, p. 12). How is Wal-Mart expanding so fast and successfully in the global market? Wal-Mart elected to purchase existing grocery store chains instead of entering into a new market without brand identification.
The competitive environments in Central and South America shaped the way Wal-Mart expanded. Instead of building new stores, Wal-Mart purchased existing retailers and kept their same name. Wal-Mart does business under Seiyu in Japan, Bodega Aurrera in Mexico, Asda Living in the United