CHAPTER TWO: MARKETING ENVIRONMENTS AND MARKETING

INFORMATION SYSTEM
2.1 Marketing Environment

Why Need Environment Analysis?

Organizations operate not in a vaccum rather in a complex and changing environment. Regarding
this, other actors in the environment such as suppliers, competitors, intermidiaries, customers etc
may work with or against the company. Likewise, major forces in the economic, demographic,
natural, technological etc environment may shape opportunities or pose threats, and hence affect
the organization’s ability to serve customers and develope lasting relationship with them.
Similarly, the company’s differnt departments, resources etc may act as a source of its weakness
and strength. To this end, organizations need to identify and then respond to numereous
environmental forces that may have implication on the different activities the organization is
engaged. What does marketing environment mean? A company's marketing environment consists
of the actors and forces outside marketing that affect marketing management's ability to develop
and maintain successful transactions with its target customers. The marketing environment offers
both opportunities and threats. Companies must use their marketing research and intelligence
systems to watch the changing environment and must adapt their marketing strategies to
environmental trends and developments.
The marketing environment is made up of micro and macro environment.
2.1.1 Micro (Task) Environment

These are the internal forces that are close to the company and have a direct impact on the
organization strategy. It influences the organization directly. It describes the relationship
between the firms and the driving forces that control their relationship. It is more local
relationship and the firm may exercise a degree of influence. The micro environment involves
the following stakeholders.

i. The Company: Constitutes the internal environment of the organization, which consists of
men, money, materials and machinery. If marketing has to function well it has to coordinate the
activities with all the other members/departments involved in the organization as they have a

1|Page
great impact on its functioning. The major departments which the company consists are
marketing, finance, research & development, purchasing, manufacturing, accounting and others.

Top management formulates the organization missions, vision and values. The marketing plans
have to be in coordination with those plans and need to be approved by the top management in
order to be implemented.

ii. Suppliers: Suppliers form a very important link between the company and customers and
their value delivery network. They constitute one of the five forces shaping competition in any
industry. They have their own bargaining power in the industry; they influence the costs or raw
materials and other inputs to a firm, and hence the profits a firm can take home. It is in this
context that the trade-off between integrating versus outsourcing of supplies assumes importance
for a firm because this has implications on the cost as well as quality fronts. Suppliers also keep
introducing frequent changes in their products, processes and business practices. Sometimes,
suppliers suddenly become direct competitors to a firm, by themselves becoming end products
manufacturers. Obviously, the firms have to closely monitor the supplier environment.

iii. Marketing Intermediaries: these constitute an important component of the value delivery
network of the company. It consists of the sources that are involved in promoting, selling and
distributing its goods to the final buyers. Marketing intermediaries include – resellers, physical
distributors, marketing service agencies and financial intermediaries. Resellers include
wholesalers and retailers who buy and resell the product. They deal in various brand of the same
product; hence it is very important for the company to maintain the good relations with the
resellers in order to motivate them to promote their brand.

Physical distribution firms are the one who are involved in storing the companies’ products and
moving them to the place of sale. Marketing service agencies consists of marketing research
firms, media firms, advertisement agencies that promote the companies’ product to the target
market and give information to them. Financial intermediaries constitute, insurance companies,
banks, credit companies who insure and take the risk associated with the products/services.

iv. Customers: We have already seen that a successful business strategy involves designing
products and marketing programs that incorporate attribute which provide value to consumers.
Only by studying demand and customer-related factors can firm carry out their

2|Page
business/marketing planning effectively. Next, the marketer needs to study various types of
customer markets. Consumer markets consist of individuals and households that buy goods and
services for personal consumption. Business markets buy goods and services for further
processing or use in their production processes, whereas reseller markets buy goods and services
to resell at a profit. Government markets consist of government agencies that buy goods and
services to produce public services or transfer the goods and services to others who need them.
Finally, international markets consist of these buyers in other countries, including consumers,
producers, resellers, and governments. Each market type has special characteristics that call for
careful study by the seller. Each market is different and the marketing approach towards every
market will be different, so the marketer needs to understand the market that it is catering to,
which has an impact on its strategies. Only by keeping a track of what the customers want one
can grab the opportunities emerging in the environment. That is why we give a great importance
to consumer analysis as a part of survey.

v. Competitors: To be successful, a part from meeting the needs and wants of the target markets
the marketer needs to provide the products better than its competitors. They have to answer the
question what benefit can the organization offer which is better that their competitors? So they
need to constantly keep track of competitor’s strategies and change as and when required.

vi. Publics: These are various groups of individuals who have actual or potential interest in the
working of the organization and somehow affect its working. The various publics include

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

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

3. Government public- 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.

3|Page
4. Citizen action publics- A company's marketing decisions may be questioned by consumer
organizations, environmental groups, minority groups and other pressure groups. Its public
relations department can help it stay in touch with consumer and citizen groups.

5. Local publics- Every company has local publics, such as neighborhood residents and
community organizations. Large companies usually appoint a community-relations officer to
deal with the community, attend meetings, answer questions and contribute to worthwhile
causes.

6. General public. A company needs to be concerned about the general public's attitude towards
its products and activities. The public's image of the company affects its buying. Thus, many
large corporations invest huge sums of money to promote and build a healthy corporate image.

7. Internal publics. A company's internal publics include its workers, managers, volunteers and
the board of directors. Large companies use newsletters and other means to inform and motivate
their internal publics. When employees feel good about their company, this positive attitude
spills over to their external publics.

2.1.2 Macro (Broad) Environment

Macro Environment includes all factors that can influence an organization but that are out of
their direct control. It consists of large societal forces that affect the companies’ micro
environment. It is continuously changing and the company needs to be flexible to adapt.

i. Demographic Environment: Demography means the study of human population in terms of

size, growth rate, gender, age distribution, race, occupation, literacy levels and other statistics.
This study is very important to be done by a marketer as his whole business depends on the
people. Demographic environment involves size & growth rate of population, age distribution
educational levels, household patters and regional characteristics & so on.

As a matter of fact, several factors relating to population, like size, growth, age, religious
composition and literacy levels need to be studied. Aspects such as composition of workforce,
households patterns, regional or geographical characteristics, migration of the population needs
to be studied, as they all are part of the demographic environment.

4|Page
ii. Economic Environment: The marketing managers need to keep track of the economic
environment, as it affects the buying power and spending patterns of consumers. While studying
the economic environment three economic areas that are of greatest concern to most marketers
are the distribution of income, inflation and recession.

All businesses are affected by economic factors nationally and globally. Whether an economy is
in boom, recession or recovery will affect consumer behavior. An economy, which is booming,
is characterized by certain variables. Unemployment is low, job confidence is high, and because
of this confidence spending by consumers is also high. At this time the organizations have to be
able to keep up with increased demand if they are to increase turnover. An economy which is in
recession is characterized by high unemployment and low confidence. The spending is low
because of high unemployment. Businesses face a tough time, as consumers will not spend
because of low disposable income. Organization starts cutting back on cost that is labor,
advertising etc. They try to improve existing products and introduce new ones that would help
the manufactures reduce production hours, waste and material costs. In this period there would
be the demand for the products that offer economy and efficiency and offer value. Businesses are
also affected by the business life cycle (Prosperity, Recession, Depression and Recovery).

Marketers may need to adjust their marketing mix as the economy passes through different
stages. Prosperity the condition where there is economic expansion and there is low
unemployment people will have money to spend and advantageous for every business.

Depression certain economic figures decline e.g. unemployment will increase and the economy
is contracted. It is not good for businesses. Recession is the economic stage where the economy
is declining to for depression. Recovery is the stage of the economic situation where the
economy is reviving. Government uses fiscal and monetary policy to control the economy.

Consumer buying power determined by income (Interest, rent, wages): Consumer demand and
spending patterns are affected by the economy and the perception of the future. Need to
determine:
 Consumer buying power
 Willingness to purchase, function of employment security etc. Credit, increase current
buying power over future buying power.

5|Page
iii. Natural Environment: The inputs needed by the businesses to carry out their production and
various activities are available in nature. The natural resources, ecology, climate etc. in the
country, constitutes the natural environment. Business depends on the natural resources for raw
materials, so the firms need to keep track of the availability of raw materials and if there is going
to be any shortage in the future. As the technology develops it causes lot of environmental
threats like increased pollution and damage of the environment.

iv. Political – Legal Environment: Economic environment is often a by-product of the political
environment, since economic and industrial policies followed by a nation greatly depend on its
political environment. Moreover, developments on the political front keep affecting the economy
all the time, industrial growth depends to a great extent on the political environment, legislations
regulating businesses are also often a product of the political configuration. The health and safety
laws introduced, has an impact on the consumers attitude as well as the running of the business.

Political environment has several aspects. Form of government adopted by the country is the
first. Political stability as such is another for whatever is the form of government adopted;
stability of government is an essential requisite of economic growth. Elements like social and
religious organizations, media and pressure groups, and lobbies of various kinds are also a part
of the political environment.

v. Technological Environment: Consists of the forces that create new technology, new products
and market opportunities. A change in technology is changing the way business operates. It has
a very profound impact on the marketing mix of the organization. The marketers need to
continuously trap the technological developments taking place so as to be in the business. For
example internet has changed the way the business used to be carried out previously. Consumers
have a choice to shop 24 hrs a day through net, the challenge to the firms is to perform and reach
up to the expectations of the consumers. Companies which do not move with the change in
technology will soon be out of business as their products won’t be accepted in the market.
Consumers’ technological knowledge influences their desires for goods and services.

6|Page
Examples of positive results of changing technology.

 Change in transportation methods has enabled the development of out of town

shopping centers.
 Inventory control systems make companies more efficient, this cost efficiency can
be passed onto the consumer.
 Improved standard of living achieved by increased leisure time.
 Fax machines
 Medicine

Examples of Negative consequences of technological change include:

 Environmentally unclean pollution

 Unemployment (employment shifts leading to temporary unemployment).
 Misuse of information

Patent protection leads to a barrier to entry, monopoly. Without it companies may be unwilling
to launch new products that incorporate new technologies for fear of copying, therefore nothing
is gained.
vi. Socio-Cultural Environment: Culture, traditions, beliefs, values and life-style constitute the
socio-cultural environment. The forces such as family, friends, and media affect the attitude,
interest and opinions of the people and the way they behave and ultimately what they purchase.
As society and behaviors change organizations must be able to offer products and services that
aim to complement and benefit people’s lifestyle and behavior.
Since marketing activities are vital part of the total business structure, marketers have a
responsibility to help provide what members of society want and to minimize what they don’t
want. Societal forces pressure political forces to create legal forces governed by regulatory
forces.

The societal forces include all societal concerns like culture, values, attitudes, demographic
structure.

Culture is shared beliefs and options of a community with regard to something. For example in
Ethiopian culture eating pork meat is insane. In America it is delicious food. Eating beef is

7|Page
normal and acceptable in most part of the world but for Indian Hindu it is completely
unacceptable. The marketing implication is that company’s product offer to target market should
be in line with culture of the country.

2.2 Marketing Information System

What is marketing information system? Marketing information system (MIS) consists of people,
equipment and procedures to gather, sort, analyze, evaluate and distribute needed, timely and
accurate information to marketing decision makers.

Companies are required to study their manager’s information needs and design the flow of
marketing information system to meet these needs. The marketing information will be illustrated
in the following figure here under. Accordingly, to carry out their analysis, planning,
implementation and control responsibility (shown at the far left in the figure), marketing
managers need information about developments in the marketing environment (shown at the far
right).The role of MIS is to assess the managers’ information needs, develop the needed
information and distribute the information in a timely fashion to the marketing managers. The
needed information is developed through internal company records, marketing intelligence
activities, marketing research and marketing decision support analysis.

8|Page
Marketing information system diagram

Developing Information

The information needed by marketing managers comes from internal company records, marketing
intelligence, marketing decision support analysis and marketing research. The information analysis
system then processes this information to make it more useful for managers.

Internal Records system

Most marketing managers use internal records and reports regularly, especially for making day-
to-day planning, implementation and control decisions. Internal records information consists of
information gathered from sources within the company to evaluate marketing performance and to
detect marketing problems and opportunities. The company's accounting department prepares
financial statements and keeps detailed records of sales, orders, costs and cash flows.

Manufacturing reports on production schedules, shipments and inventories. The sales force
reports on reseller reactions and competitor activities. The customer service department provides

9|Page
 information on customer satisfaction or service problems. Research studies done for one
department may provide useful information for several others. Managers can use information
gathered from these and other sources within the company to evaluate performance and to detect
problems and opportunities.

Marketing Intelligence System

What is marketing intelligence system? A marketing intelligence system is a set of procedures

and sources used by managers to obtain their everyday information about pertinent developments
in the marketing environment. Marketing managers often carry on marketing intelligence by
reading books, newspapers, and trade publications; talking to customers, suppliers, distributors
and other outsiders; and talking with other managers and personnel within the company. Yet if
the system is too casual, valuable information could be lost or arrive too late. When this is the
case, managers might learn of a competitive move, a new customer need of a dealer problem too
late to make the best response.

A well-run company takes four steps to improve the quality and quantity of marketing
intelligence.

1. It train and motivates the sales force to spot and report new developments. sales representatives
are the company’s “eyes and ears”, they are in an excellent position to pick up information
misused by other means yet they are very busy and often fail to pass on significant information.
For this reason, the company must “sell” its sales force on their importance as intelligence
gatherers. Sales reps should know which types of information to send to which managers.

2. The competitive company motivates distributors, retailers and other intermediaries to pass along
important intelligence-from which the company can learn about end-uses characteristic and help
its distributors improve their marketing programs.

3. The company purchases information from outsiders such as the research firms.

4. Some companies have established an internal marketing information center to collect and
circulate marketing intelligence. The staff scans major publications, abstracts relevant news, and
disseminates a news bulletin to marketing managers. It collects and files relevant information and
assists managers in evaluating new information.

10 | P a g e
Marketing Research

Marketing managers often commission marketing research, formal studies of specific problems
and opportunities. They may request a market survey, a product reference tests, sales forecast by
region, or research on advertising effectiveness.

Marketing research may be defined as, Marketing research is the systematic design, collection,
analysis and reporting of data and findings relevant to a specific marketing situation facing the
company.

The Marketing Research Process

Effective marketing research involves the five steps, which are shown as follows:

Step1: Define the Problem and Research Objective

Here management must define the problem and research objective very clearly. Management
must not define a problem too broadly or too narrowly. If the problem is defined too broadly, a
lot of unnecessary information will be collected and it is likely to be very difficult to screen the
relevant and vital information from unnecessary ones. On the other hand, if the problem is
defined too narrowly, the necessary information will not be incorporated and the decision-
making will be very difficult as there is the lack of information. A well-defined problem is half-
solved problem. The nature of the problem will determine whether the research is Exploratory,
Descriptive or Causal.

Step 2: Develop the Research Plan (Methodology)

The second stage of marketing research calls for developing the most efficient plan for gathering
the needed information. The marketing manager needs to know the cost of the research plan
before approving it.

Designing a research plan calls for decisions on the data source, research approaches, research
instruments, sampling plan and contact methods.

11 | P a g e
Step 3: Collect the Data

The data collection phase of marketing research is generally the most expensive and the most
prone to error. In the case of surveys, four major problems arise:

1. Some respondents will not be at home and must be re contacted or replaced.

2. Other respondents will refuse to cooperate.

3. Still others will give biased or distorted answers.

4. Finally, some interviewers will be biased or dishonest.

Step 4: Analyze the information

At this stage, the researcher will have to analyze all collected data. The researcher tabulates the
data and develops frequency distributions. Averages and measures of dispersion are computed
for the major variables. The researcher will also apply some advanced statistical techniques and
decision models in the hope of discovering additional findings.

Step 5: Present the findings

At the last step in marketing research, the researcher presents his/ her findings to the relevant
parties. The researcher should present major findings that are pertinent to the major marketing
decisions facing management. A well-defined marketing research project and its findings would
help managers make a better decision than they would have without research.

12 | P a g e
Marketing Decision Support System

A Marketing Decision Support System (sometimes abbreviated as MKDSS/MDSS) is a decision

support system for marketing activity. It is a system or method that can be employed to aid in
evaluating possible marketing strategies and ultimately arriving at the decision considered in the
best interests of the company. This strategy will pull on a number of resources in order to identify
and project the outcome of several different business scenarios. Resources such as the information
technology available to the company, marketing data that is gathered over a period of time, and
even the modeling techniques used to come up with the projects are all part of this type of system.
It consists of information technology, marketing data and modeling capabilities that enable the
system to provide predicted outcomes from different scenarios and marketing strategies.

A MKDSS is used to support the software vendors’ planning strategy for marketing products. It
can help to identify advantageous levels of pricing, advertising spending, and advertising copy for
the firm’s products. This helps determines the firms marketing mix for product software.

A system used to manipulate a collection of data to interpret and explore potential business
scenarios in order to make management decisions. MKDSSs are considered by some businesses a
key tool in gaining the edge over competitors. MKDSS can be used to assist, rather than
supersede, employee decision makers in the complicated scenarios which are common in
marketing.

The type of data collected for use in a marketing decision support system will vary slightly, based
on the type of goods and services sold by the client, and the configuration of the markets in which
those products are sold. In terms of the market data that is collected, just about every approach
will include gathering data regarding the cost of advertising using different forms of media, the
impact of different unit prices on the sale of the products themselves, and even ideas on how to
structure the advertising copy that serves as the basis for the campaign. Various types of software
are used to allow easy input of the collected data, and then arrange that data into useful packets of
information that can be applied to a variety of different scenarios. Using this method, it is possible
to predict with a great deal of reliability what would happen if a particular scenario were chosen
and pursued.

13 | P a g e