Industrial buyers and sellers operate in a dynamic environment. One constantly poising new opportunities and threats. The industrial environment could be divided into three levels namely the interface level, the public’s level and the macro environment level.
The Interface Level
This involves those key participants who immediately interface with an industrial firm (buyer or seller) in facilitating production, distribution and purchase of firm’s goods and services. Supply inputs are transformed by a company and its competitors into outputs with added value that move on to the end markets, the move being made through the firms interface with industrial distributors and dealers, manufacturers representatives and the company’s own sales people. That move is made possible by a firms interface with facilitating institutions such as banking, transportation, research and advertising firms.
Participants in the interface level include:
- Input supplier- Input goods such as the raw materials, labor and capital are supplied by organizations to industrial firms for use in producing output goods and services. The survival and success of a firm depend on the knowledge and relationship with its input suppliers. Interruptions in the flow of inputs cause repercussions in the entire industry affecting not only production and marketing plans but also the production and marketing plans of the suppliers.
- Distributors- Most organizational buyers buy from five or more industrial distributors. Industrial distributors, contact potential buyers, negotiate orders, provide buffer inventories, credit and technical advice to potential buyers. They are particularly important when joint demand is present because they bring together the heterogeneous inputs needed for the production of end products .
- Facilitators- Advertising agencies and public relations firms provide the necessary communication flow between the sellers and buyers through the formulation of meaningful information and media strategies. The use of advertising in reaching potential buyers and the multitude of buying influencers is vital in the overall communication strategy. Transportation and warehouse companies facilitate the free flow of goods that must be delivered in usable condition to industrial customers and distributors when and where they are required. When goods are not delivered on time and in usable solutions, buyers can be forced to shut down production lines. Resources as they move from the supply inputs to end users must be financed and insured.
- Competitors- Competitors actions whether domestic or foreign, ultimately influence the company’s choice of target markets, distributors, product mix, and in fact its entire marketing strategy.
The Publics Level
Publics are distinct groups that have actual or potential interest or impact in each firm’s ability to achieve its respective goals. Publics have the ability to help or hinder a firms effort to serve is markets.
- Financial publics- Financial institutions such as investments firms and stock brokerage firms and individual stakeholders invest in an organization on its ability to return profits. When they become unhappy with the management or dissatisfied with a company’s social polices, they sell their shares.
- Independent press – Industrial organizations must be accurately sensitive to the role that the mass media play and how they can affect the achievement of the marketing objectives. The independent press is capable of publishing news that can boost or destroy the reputation of a firm as well as the sales [potential of a product.
- Public interest groups- Industrial marketing decisions are increasingly affected by public interest groups. Clearly, these various public interest groups limit the freedom of the suppliers and buyers in the industrial market. While some organizations respond by fighting, others accept these groups as another variable to be considered in developing strategic planning, working through public affairs departments to determine their interests and to express favorably the company’s goals and activities in the press. The impact of these groups however is felt by all participants in the interface level.
- General public— Although the general public does not react in an organized way towards a firm or an industry, as interest groups do, when sizeable portion of a population shifts attitude towards a firm or industry, there is definite impact.
- Internal public- The board of directors and managers as well as blue and white colour workers are important emissaries between an organization and other participants in the interface and public levels. Corporate policy must give consideration to employees and others who are held responsible for the overall operation of the firm. Employee morale is an important factor in all business decisions. And when morale is low, organizational efforts suffer. A firms employees spend more than two thirds of their time off the job, interacting with their families and the community , so employees attitudes do influence the public.
This level of the organization is made up of components that have less specific and less immediate implications for managing the organization effectively.
1. Economic component
Economic conditions greatly influence an organizations ability and willingness to buy and sell. Thus emerging changes in the economic environment both at home and abroad, must be closely monitored. It includes the following factors;
- Inflation rates
- Balance of payment position
- Debts and spending
- Taxation rates
- Interest rates
- Consumer’s income
- Corporate profits
2. Social component
This describes the characteristics of the society where an organization exists. It includes factors such as;
- Literacy levels
- Values of people
- Educational levels
- Geographical distribution
- Customs and believes
3. Legal component
This consists of legislation’s that have been passed. It describes the rules or the laws that all the company members must follow. They include all laws affecting the organization e.g.
- Consumer health policy
- Energy policies and conservation Acts
- Employment Acts, etc.
4. Political component
Comprise those elements related to the government affairs. This includes;
- Type of government
- Government attributes towards certain issues
- Lobbying efforts from interest groups
- Progress towards passing of laws affecting certain industries, etc.
5. Technological component
Given the rate of technological change in industries such as telecommunications, computers, and semi conductors, large buying firms are developing forecasting techniques to enable them to estimate time periods in which major technology developments might occur. Marketers must also monitor technological change if they hope to adapt marketing strategy with sufficient speed and accuracy to make the more scientific breakthroughs. This includes;
- New procedures
- Approaches to new plan of goods and services
- Addresses the issues of new equipments and new ways of improving production through the use of computers /robots.
6. Demographic component
Industrial firms cannot ignore the demographic environments because of the derived nature of industrial demand. World population explosion and changing population structure of the world has a major impact on industrial demand.