Marketing Environment

Copyright 1999 Prentice Hall

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Internal and External Factors which Influence Marketing Strategies and Activities

The Marketing EnvironmentThe Marketing Environment

Module-2

Market Analysis & Selection


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Learning ObjectivesLearning Objectives

• Describe the environmental forces that affect the company’s ability to serve its customers.

• Explain how changes in the demographic and economic environments affect marketing decisions.

• Identify the main trends in the firm’s natural and technological environments.

• Explain the key changes that occur in the political and cultural environments.

• Discuss how companies can react to the marketing environment.


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Marketing EnvironmentMarketing Environment

• All the actors and forces influencing the company’s ability to transact business effectively with it’s target market.

• Includes:–MicroenvironmentMicroenvironment - forces close to the

company that affect its ability to serve its customers.

–Macro environmentMacro environment - larger societal forces that affect the whole microenvironment.


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The Marketing EnvironmentThe Marketing Environment

Company

Demographic

Economic

Natural

Technological

Political

Cultural Company

Customers

Intermediaries

Suppliers

Competitors

Publics


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The Company’s MicroenvironmentThe Company’s Microenvironment

•The forces close to the company that affect its ability to serve its customers –

• They include :

• the company, •market channel firms,• customer markets, •competitors and publics, which

combine to make up the firm’s value delivery system.


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The MicroenvironmentThe Microenvironment

CompanyCompany

CustomersCustomers

PublicsPublics Suppliers Suppliers

CompetitorsCompetitors IntermediariesIntermediaries

Forces Affecting a Company’s Ability to

ServeCustomers

Forces Affecting a Company’s Ability to

ServeCustomers


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The Company’s MicroenvironmentThe Company’s Microenvironment

• Company’s Internal EnvironmentCompany’s Internal Environment- In designing marketing plans, marketing management must take other company groups, such as top management, finance, research and development (R&D), purchasing, manufacturing and accounting, into consideration.

• SuppliersSuppliers - provide the resources needed to produce goods and services.

• Marketing IntermediariesMarketing Intermediaries - help the company to promote, sell, and distribute its goods to final buyers.( Details of intermediaries follows………)


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Intermediaries…Intermediaries…

• Resellers: the individuals and organizations that buy goods and services to resell at a profit.

• Physical distribution firms: warehouse, transportation and other firms that help a company to stock and move goods from their point of origin to their destinations.

• Marketing-service agencies: marketing research firms, advertising agencies, marketing consulting firms and other service providers that help a company to target and promote its products to the right markets.

• Financial intermediaries: banks, credit companies and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.


3-93-9The Company’s MicroenvironmentThe Company’s Microenvironment

•CustomersCustomers • - five types of markets that purchase a

company’s goods and services. (a diagrammatic rep. follows…)

• The company must study its customer markets closely and keep up to date with changing customer requirements.

• The company must communicate with its customers, and must listen to them closely.


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Customer MarketsCustomer Markets

CompanyCompany

ConsumerMarkets

InternationalMarkets

GovernmentMarkets

BusinessMarkets

ResellerMarkets


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CompetitorsCompetitors – those who serve a target market with similar products and services

CompetitorsCompetitors – those who serve a target market with similar products and services

• The marketing concept states that, to be successful, a company must provide greater customer value and satisfaction than its competitors. Thus, marketers must do more than simply adapt to the needs of target consumers.

• They must also gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers. They must strive to anticipate competitor activity and strategy.


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PublicsPublics - any group that perceives itself having an interest in a company’s ability to achieve its objectives

PublicsPublics - any group that perceives itself having an interest in a company’s ability to achieve its objectives

• Financial publics influence the company’s ability to obtain funds. Banks, investment houses and stockholders are the principal financial publics.

• Media publics are those that carry news, features and editorial opinion. They include newspapers, magazines and radio and television stations.

• Government publics Management must take government developments into account. Marketers must often consult the company’s lawyers on issues of product safety, truth in advertising and other matters.

• To be continued ….,


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Publics…Publics…Publics…Publics…

•Citizen action publics A company’s marketing decisions may be questioned by consumer organizations, environmental groups, minority groups and other pressure groups.

• Local publics Every company has local publics, such as neighborhood residents and community organizations.

•General public A company needs to be concerned about the general public’s attitude towards its products and activities. The public image of the company affects its buying.

• Internal publics A company’s internal publics include its workers, managers, volunteers and the board of directors.


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Company’s Macro environmentCompany’s Macro environment

•The larger societal forces that affect the whole microenvironment - demographic, economic, natural, technological, political and cultural forces.


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The Company’s Macro environmentThe Company’s Macro environment

• The larger societal forces that affect the whole microenvironment - demographic, economic, natural, technological, political and cultural forces.


3-163-16The Macro environmentThe Macro environment

DemographicDemographic

TechnologicalTechnological

CulturalCulturalEconomicEconomic

PoliticalPolitical NaturalNatural

Forces that ShapeOpportunities

and Pose Threatsto a Company

Forces that ShapeOpportunities

and Pose Threatsto a Company


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The Company’s Macro environmentThe Company’s Macro environment• DemographicDemographic - monitors population in

terms of age, sex, race, occupation, location and other statistics.

• EconomicEconomic - factors that affect consumer buying power and patterns.

• NaturaNatural - natural resources needed as inputs by marketers or that are affected by marketing activities.


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Key Demographic TrendsKey Demographic Trends

Changing Age StructurePopulation is getting olderChanging Age StructurePopulation is getting older

Changing Family StructureMarrying later, fewer children,

working women, and nonfamily households

Changing Family StructureMarrying later, fewer children,

working women, and nonfamily households

Geographic ShiftsMoving to the Urban and suburbs

Geographic ShiftsMoving to the Urban and suburbs

Increased EducationIncreased college attendance

and white-collar workers

Increased EducationIncreased college attendance

and white-collar workers

Growing Ethnic and Racial DiversityGrowing Ethnic and Racial Diversity


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Economic EnvironmentEconomic Environment

Changesin Consumer

SpendingPatterns

Changesin Consumer

SpendingPatterns

EconomicDevelopment

EconomicDevelopment

Changes in Income

Changes in IncomeKey

EconomicConcerns for

Marketers

KeyEconomic

Concerns forMarketers


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General Economic ConditionsGeneral Economic Conditions

• Business cycle: fluctuations in the economy that follow the general pattern of prosperity, recession, depression and recovery.

• Prosperity: A period during which unemployment is low and total income is relatively high.

• Recession: A period during which unemployment rises and total buying power declines.

• Depression: A period during which unemployment is extremely high, wages are very low, total disposable income is at a minimum and consumers lack confidence in the economy.

• Recovery: The stage of the business cycle in which the economy moves from depression or recession to prosperity.


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Consumer Demand and Spending BehaviourConsumer Demand and Spending Behaviour• Buying power: Resources such as goods, services and

financial holdings that can be traded in an exchange situation.

• Income: The amount of money received through wages, rents, investments, pensions and subsidy payments for a given period.

• Disposable income: After-tax income, which is used for spending or saving.

• Discretionary income: Disposable income that is available for spending and saving after an individual has purchased the basic necessities of food, clothing and shelter.

• Wealth: The accumulation of past income, natural resources and financial resources.

• Willingness to spend: A disposition towards using buying power, influenced by the ability to buy, expected satisfaction from a product and numerous psychological and social forces. To be cont’d…..


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Consumer Demand and Spending Behaviour…Consumer Demand and Spending Behaviour…

• Consumer spending patterns: Information indicating the relative proportions of annual family expenditures or the actual amount of money spent on certain goods and services.

• Comprehensive spending patterns: The percentages of family income allocated to annual expenditures for general classes of goods and services.

• Product-specific spending patterns: The annual monetary amounts families spend for specific products from within a general product class.


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Natural EnvironmentNatural Environment

Factors Affecting

the Natural

Environment

More GovernmentIntervention

More GovernmentIntervention

Shortages of Raw Material

Shortages of Raw Material

Increased Costsof Energy

Increased Costsof Energy

Higher PollutionLevels

Higher PollutionLevels


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Natural EnvironmentNatural Environment

•Natural resources that are needed as inputs by marketers or that are affected by marketing activities.

•Issues•Shortage of raw materials•Increased cost of energy•Increased pollution•Government intervention in natural resource management


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The Company’s Macro environmentThe Company’s Macro environment

• TechnologicalTechnological - forces that create new product and market opportunities.

• PoliticalPolitical - laws, agencies and groups that influence or limit marketing actions.

• CulturalCultural - forces that affect a society’s basic values, perceptions, preferences, and behaviors.


3-263-26Technological EnvironmentTechnological Environment

Rapid Pace of Change

Rapid Pace of Change

High R & D Budgets

High R & D Budgets

Focus on MinorImprovements

Focus on MinorImprovements

IncreasedRegulationIncreasedRegulation

Issues in the TechnologicalEnvironment

Issues in the TechnologicalEnvironment


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Technological EnvironmentTechnological Environment

• Technology: the knowledge of how to accomplish tasks and goals.

• Forces that create new technologies, creating new product and market opportunities.

• Issues

• Fast pace of technological change

• High R&D budgets

• Concentration on minor improvements

• Increased regulation

• Effect of technology on society

• Effect of technology on marketing

• Technology assessment


3-283-28Political EnvironmentPolitical Environment

GreaterConcern for

Ethics

GreaterConcern for

Ethics

IncreasedLegislation

IncreasedLegislation

Changing Enforcement

Changing Enforcement

KeyTrends in the

PoliticalEnvironment

KeyTrends in the

PoliticalEnvironment


3-293-29Cultural EnvironmentCultural Environment

OfOrganizations

OfNature

OfOneself

OfSociety

Ofthe Universe

OfOthers

ViewsThat Express

Values

ViewsThat Express

Values


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Environmental Analysis ….Environmental Analysis ….

•PEST (STEP) analysis• POLITICAL

• ECONOMIC

• SOCIAL/CULTURAL

• TECHNOLOGICAL

•SLEPT analysis• SOCIAL/CULTURAL

• LEGAL

• ECONOMIC

• POLITICAL

• TECHNOLOGICAL

• To be continued…..


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Environmental Analysis ….Environmental Analysis ….

•BPEST analysis• BUSINESS• POLITICAL• ECONOMIC• SOCIAL/CULTURAL• TECHNOLOGICAL

•PESTLE analysis• POLITICAL• ECONOMIC• SOCIAL/CULTURAL• TECHNOLOGICAL• LEGAL• ENVIRONMENTAL/ECOLOGICAL


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Examining and Responding to the Marketing EnvironmentExamining and Responding to the Marketing Environment

•Environmental scanning: the process of collecting information about the forces on the marketing environment.

•Environmental analysis: the process of assessing and interpreting gathered through environmental scanning.

•Environmental management perspective: the firm takes aggressive actions to affect the publics and forces rather than simply watching it and reacting to it.


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Responding to the Marketing EnvironmentResponding to the Marketing Environment

•Reactive: Passive Acceptance and Adaptation –Companies design strategies that avoid threats and capitalize upon opportunities.

•Proactive: Environmental Management–Use of lobbyists, PR, advertorials, lawsuits, complaints, and contractual agreements to influence environmental forces.


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The marketing Environment and Strategic OpportunitiesThe marketing Environment and Strategic Opportunities

•Strategic windows: major developments or opportunities triggered by changes in the marketing environment.

– new technology

–new markets

–new distribution channels

–market re-definition

–new legislation and regulation

–financial and political shocks


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Additional ReadingAdditional Reading

• Dibb, Simkin,Pride & Ferrell, Marketing Concepts & Strategies, 4th Euro ed,, Houghton Mifflin, 2001, chapter 2

• Kotler, Armstrong,Saunders & Wong, Marketing Principles, 3rd Euro ed, FT Prentice Hall, 2001, chapter 4

Marketing Environment

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