DPM 10013 MARKETING ENVIRONMENT

CHAPTER 2

2.0 MARKETING ENVIRONMENT

Lesson Learning Outcome:

At the end of the topic students should be able to:
 Examine company’s microenvironment
 Examine company’s macroenvironment

MARKETING ENVIRONMENT is the factors and forces outside marketing that affect
marketing management’s ability to build and maintain successful relationships with target
customers. The marketing environment may affect the organizations directly or indirectly in
any perceptible way. The marketing environment consists of microenvironment and a macro
environment. Figure 2.1 shows the relationship of an organization to the major forces and
actors in marketing environment.

Figure 2.1:- The Marketing Environment

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2.1 MICROENVIRONMENT

Microenvironment consists of the forces closest to the company that plays an important role
on the company’s ability to fulfill the customers’ needs. (Kotler & Armstrong, 2016)

The company’s microenvironments that affect the company’s ability to serve its customer are:

a. The company

 In designing marketing plans, marketing management takes other company’s groups

into account, group such as top management, finance, R&D, purchasing, manufacturing
and accounting. These interrelated groups form the internal environment.
 Marketing managers must work closely with other company departments because it has
an impact on the marketing department’s plans and actions.
 Under the marketing concept, all of these functions must “think customers” & they
should work in harmony to provide superior customer value & satisfaction.
 Top management sets the company’s mission, objectives, broad strategies and policies,
so that the marketers must depend on it for their marketing strategies.

b. Suppliers

 Suppliers are the providers of the resources needed by company to produce goods and
services.
 Any development related with supplier will affect marketing such as supply shortages or
delays, labor strikes and other events can cost sales in the short run and damage
customer satisfaction.
 Supplier affects the price, quality and supply of the product for example inferior quality
resource supplied make inferior quality goods and high priced resource make for high-
price product.
 Marketing managers also need to monitor supplier availability and monitor the price
trends.

c. Marketing intermediaries

 Known as middlemen help the company to promote, sell and distribute its good to final
buyers such as wholesaler and retailer.
 Help the company to stock and move goods from their point of origin to their
destinations.
 Company must determine the best ways to store and ship goods while balancing factor
such as cost, delivery, speed, and safety.
 They include:-

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i. Resellers are distribution channel firms that help the company find customers or
make sales to them. These include wholesalers and retailer such as Tesco,
Carrefour and Giant.
ii. Physical distribution firms help the company to stock and move goods from their
points of origin to the destinations such as Poslaju, Gdex, and Skynet.
iii. Marketing service agencies are the marketing research firms, advertising agencies,
media firms and marketing consulting firms that help the company target and
promote the products such as TV3, Astro, Era Radio and Sirim.
iv. Financial intermediaries help finance the transaction of the goods such as banks.

d. Customers

 Customers are the people who buy the products.

 The company needs to study five types of customer markets closely.

i. Consumer markets consist of individuals and households that buy goods and
services for personal consumption.
i. Business markets buy goods and services for further processing or for use in their
production process.
ii. Government markets are made up of government agencies that buy goods &
services to produce public services or transfer goods and services to others who
need them.
iii. Reseller markets buy goods and services to resell at a profit.
iv. International markets consist of these buyers in other countries, including
consumers, producers, resellers and governments.

e. Competitors

 Competitors are the organizations that are competing with the company for the same
consumers with the intention of fulfilling the same needs and wants.
 They also serve a target market with products and services that are viewed by
consumers as being reasonable substitutes.
 Firms must gain strategic advantage by positioning their offerings against competitors’
offerings.
 The marketers must gain strategic advantage by positioning their offerings strongly
against competitors offering in the minds of consumers.

f. Publics

 A public is any group that has an actual or potential interest in, or impact on, an
organization’s ability to achieve its objectives.
 Public affects the company’s ability to get funds to develop and market a product.
 A company may need to prepare marketing plan for these public as well.
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 We can indentify several types of publics:

i. Financial publics influence the organization’s ability to obtain funds; -banks,

investment houses & shareholders are the major financial publics.
ii. Media publics are those that carry news, features and editorial opinion. They
include newspaper, magazines & radio and television stations.
iii. 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.
iv. Citizen-action publics-consumer groups, environmental groups, minority groups
and other public interest groups may question an organization's marketing
decisions.
v. Local publics- this group includes neighborhood residents and community
organizations. Large companies usually appoint a community relations officer to
deal with the community, attend meetings and answer question.
vi. General publics – A company needs to be concerned about the general public’s
attitude toward its product and activities. The public’s image of the company
affects its buying.
vii. Internal publics – includes workers, managers, volunteers, and the board of
directors

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2.2 MACROENVIRONMENT?

The macroenvironment consists of the larger societal forces that affect the whole
microenvironment of a company.

The company’s macroenvironments that affect the company’s ability to serve its customer are:

a. Demographic

 Demographic is the study of human populations in terms of size, density, age, gender,
race, origin, occupation, location and other statistics.
 The demographic environment is the major interest to marketers because it involves
people, and people make up markets.
 Marketers will depend on the demographic factors to improve the products markets
whereby these factors will influence buying behavior.
 Demographic trends change constantly. Some of the interesting changes include;
worldwide explosive population growth, changes in age structure, migration from rural
to urban areas, higher education level trend and further diversity in ethnicity.
 Changes in the world demographic environment have major implication for business.
 The changing age structure of the population :

o The baby boomers

The peoples born during the years following World War II (1946) and lasting until
1964.
The baby boomers have been one of the most powerful forces shaping the
marketing environment.
They spending more carefully and rethinking the purpose and value of their work,
responsibilities, and relationships as they reach their peak earning and aging.

o Generation X
The peoples born between 1965 and 1976 in the birth dearth” following the baby
boom.
They are increasing displacing the lifestyle, culture and value of the baby boomers.
They are moving up their career, seek success, they are less materialistic and they
prize experience, not acquisition.
They are first to grow up in the internet era and generation that embraces the
benefits of new technology.
They tend to research products before they consider a purchase, prefer quality to
quantity.
For many gen Xers who are parents, family comes first-both children and their
aging parents-and career second.

o Generation Y (Millennials)
The children of baby boomers born between 1977 and 2000.
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Gen Y is the largest populations that make up a huge and attractive market both
now in the future.
They are first generation to grow up in a word filled with computers, mobile
phones, satellite TV, iPod and iPads, and other social media.
They are comfort with digital technology as their way of life.

o Generation Z
Young people born after 2000 (although many analysis include people born after
1995) who make up the kids, tweens and teens markets.
They are comfort with digital technologies making this group highly mobile,
connected and social.
Gen Z blend the online and offline worlds seamlessly as the socialize and shop.
They are now forming brand relationships that will affect their buying well into the
future.
They do product research before buying a product, or having their parents buy it for
them.
Companies in almost all industries market products and services aimed at
Generation Z.

b. Economic

 Factors that affect consumer buying power and patterns.

 Nation/country varies greatly in their levels and distribution of income.
 At the top upper-class consumers whose spending patterns are not affected by current
economic event.
 The middle class that is somewhat careful about its spending but can still afford the
good life some of the time.
 The workings class must stick close to the basics of food, clothing and shelter and must
try to save.
 The underclass must count their money when making even the most basic purchase.
 Food, housing and transportation use up most household income. However consumers
at different income levels have different spending patterns.
 Changes in major economic variables such as income, cost of living, interest rates and
savings and borrowing patterns have a large impact on the market place.
 There are three economic areas that will affect consumer purchasing power and
spending patterns:
 Income distribution – rising in consumer income give greater power to spend
thus create demand for more quality products, better services and experience
goods.
 Inflation – the situation whereby they a rising in price without corresponding
increase in salaries. It will results in decrease in purchasing power. Marketers
cannot control the situation but they can adapt by giving discount or price
reduction.

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 Recession – the period whereby there are a decrease in demand for products as
a result of economic downturn and leads to fail in consumer income and
increase in unemployment. So, marketers need to suits their offering to ensure
their products survive in the market by improving the products more economical
and offer better value for money.

c. Natural

 Natural resources needed as inputs by marketers or that are affected by marketing

activities include raw materials used such as mineral extracts and infrastructure.
 Environmental concerns have grown. In many cities around the world, air and water
pollution have reached dangerous levels.
 Marketers should be aware of several trends in the natural environment.

i. Shortages of raw materials –minerals deposits which take millions of years to form
slowly depleting without the possibility of being renewed. Firms engaged in research
and development can help by developing a new resources and material, and look
into energy-efficient operations.
ii. Increased pollution – air and water pollution have reached to dangerous levels.
iii. Increased government intervention – government policies and rules regarding the
natural resources.
iv. Environmentally sustainable strategies – marketers must respond to these situation
with social conscience, producing products that are environment friendly and safe,
promote a universal message of environmental preservation like recyclable product,
recyclable packaging and biodegradable packaging.

d. Technological

 The technological environment is perhaps one of the fastest changing factors in the
macro environment. This includes all developments from antibiotics and surgery to
nuclear missiles and chemical weapons to automobiles and credit cards.
 As these markets develop it can create new markets and new uses for products. It also
requires a company to stay ahead of others and update their own technology as it
becomes outdated.
 Our attitude toward technology depends on whether we are more impressed with its
wonders or its blunders.
 Marketers need to understand the changing technological environment and the ways in
which the new technologies can serve the human needs. They need to work closely with
R&D people to encourage more market oriented research.
 Marketers must alert to the possible negative aspects of any innovation that might harm
users or arouse opposition.

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e. Political
 Includes Laws, regulations and social pressure affecting the marketers.
 Cover many areas relevant to marketers including packaging, pricing, advertising and
sales to minors.
 Many marketing decision depend on the political development in nation’s environment.

a. Cultural

 The institutions and other forces that affect a society’s basic values, perceptions,
preference, and behaviors, includes codes of manners, dress, language, religion, rituals,
norms of behavior such as law and morality and systems of believe as well as the art.
 Cultural values affect marketing in several ways for example; different cultures have
strong ties and preferences for certain types of food.
 Marketers must be able to predict the cultural shifts in order to spot new opportunities
or threats.

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