Chapter 3: Analyzing the Marketing

Environment
Faculty of Economics and Management
International School of Thai Nguyen University
 Topic Outline

• The Company’s Microenvironment

• The Company’s Macroenvironemnt
• Responding to the Marketing Environment
 The Marketing Environment
The marketing environment includes the actors
and forces outside marketing that affect
marketing management’s ability to build and
maintain successful relationships with target
customers
• The marketing environment includes the internal
factors and external factors that surround the
business and influence its marketing operations.
• Marketing managers must stay aware of the marketing
environment to maintain success and tackle any threats
or opportunities that may affect their work.
• A marketing environment is vast and diverse, consisting
of controllable and uncontrollable factors

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 Advantages of good marketing environment

• Identify opportunities: Understanding your marketing environment helps

you notice and take advantage of market opportunities before losing your
edge. For example, say your marketing team sees an uptick in digital
buying over in-shop sales. You may decide to allocate more resources to
your online marketing funnel to drive more sales.
• Identify threats: Studying your marketing environment alerts you to
potential threats which may affect your marketing activities. For example, a
market leader could diversify their product portfolio to compete with your
organization. Foreknowledge of this can help you restrategize your
marketing efforts to maintain and grow your market share.
• Manage changes: Paying attention to the marketing environment also
helps manage changes and maintain growth in a dynamic economy.
Marketing managers can forecast and determine timely marketing
campaign strategies by monitoring their marketing environment

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 What is an internal marketing environment?

• An internal marketing environment consists of factors

that fall within your control and impact your marketing
operations, including your organization's strengths,
weaknesses, uniqueness, and competencies.
• Think of essential marketing elements such as your
people and teams, the quality of your product or service,
capital assets and budgets, and company policy. Internal
marketing environment factors are controllable.

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 What is an external marketing environment?

• The external marketing environment includes all factors

that do not fall within your organization's control,
including technological advancements, regulatory
changes, social, economic, and competitive forces.
• These factors may be controllable or uncontrollable, but
defining and studying their changes and trends gives
your business and marketing team some power to stay
the course. The external marketing environment can be
broadly categorized into micro and macro marketing
environments.

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 What is a microenvironment in marketing?

• The microenvironment in marketing is closely linked to

your business and directly affects marketing operations.
It includes factors like customers, suppliers, business
partners, vendors, and even competitors.
Microenvironment factors are controllable to some
extent.

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 What is a macro marketing environment?

• Your macro marketing environment is made up of all the

factors beyond the control of your organization. An easy
way to remember these factors is by using the PESTLE
acronym, which stands for:
• P: Political factors
• E: Economic factors
• S: Social and demographic factors
• T: Technological advancement factors
• L: Legal and regulatory factors
• E: Environmental factors

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Microenvironment consists of the factors close to
the company that affect its ability to serve its
customers -- the company, suppliers, marketing
intermediaries, customer markets, competitors,
and publics.
 The Company’s Microenvironment

The Company
Marketing must consider other parts of the
organization including finance, R&D, purchasing,
operations, and accounting.
Marketing decisions must relate to broader
company goals and strategies.
• Marketing managers must work with all
departments of a company.
• All departments have an impact on the marketing
department’s plans and actions.
• “Think Consumer”
 The Company’s Microenvironment

Suppliers
• Provide the resources to produce goods and
services
• Treated as partners to provide customer value
 The Company’s Microenvironment

Marketing Intermediaries
• Help the company to promote, sell and distribute
its products to final buyers
The Company’s Microenvironment

Types of Marketing Intermediaries

 • Customers
• Consumer markets: is a market in which customers (buyers)
are also final consumers. These customers make their
purchase for consumption, which is different from
organizational customers who make their purchase for
production.
• Business markets: are the platforms and processes of
offering your goods and services to other businesses in order
for them to be used as a raw material for the manufacturing of
additional items, or to resell them.

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• Reseller markets: Resellers buy finished products and resell
them to their customers for the purpose of making a profit.
Resellers do not modify the products they buy. Resellers can
be wholesalers who sell their products to other resellers or
retailers who sell their products to end users.
• Government markets: Governments buy goods and services
to support their internal operations; they do not transform the
goods and services or resell them to make a profit.
Government markets usually buy their goods through a
bidding process and include federal, state, county, and local
governments.
• International markets: An international market is defined
geographically as a market outside the international borders
of a company's country of citizenship.

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 The Company’s Microenvironment

Competitors
• Firms must gain strategic advantage by
positioning their offerings against competitors’
offerings
• To be successful, a company must satisfy needs
and wants of consumers better than competitors.
The Company’s Microenvironment
 The Company’s Macroenvironment

Demographic Environment
Demography is the study of human populations in
terms of size, density, location, age, gender,
race, occupation, and other statistics
• Demographic environment is important because
it involves people, and people make up markets
• Demographics change over time and companies
must keep up with them.
 Demographic Environment
• Changing age structure of the population
– Baby boomers include people born between
1946 and 1964
– Most affluent Americans
 Demographic Environment

Generational marketing is important in

segmenting people by lifestyle of life state
instead of age
 Demographic Environment

More people are:

• Divorcing or separating
• Choosing not to marry
• Choosing to marrying later
• Marrying without intending to have children
• Increased number of working women
• Stay-at-home dads
 Demographic Environment

• Changes in the workforce

– More educated
– More white collar
 Demographic Environment
Increased Diversity
Markets are becoming more diverse
– International
– National
• Includes:
– Ethnicity
– Gay and lesbian
– Disabled
 Economic Environment
Economic environment consists of factors that
affect consumer purchasing power and spending
patterns
 Economic Environment
• Changes in income
• Value marketing involves ways to offer financially
cautious buyers greater value—the right
combination of quality and service at a fair price
 Economic Environment
Changes in Consumer Spending Patterns
• As income rises:
– The percentage spent on food declines
– The percentage spent on housing remains
constant
– The percentage spent on savings increases
 Natural Environment
Natural environment involves the natural
resources that are needed as inputs by marketers
or that are affected by marketing activities
• Trends
– Shortages of raw materials
– Increased pollution
– Increase government intervention
– Environmentally sustainable strategies
 Technological Environment
• Most dramatic force in changing the marketplace
• Creates new products and opportunities
• Safety of new product always a concern
 Political Environment
Political environment consists of laws,
government agencies, and pressure groups that
influence and limit various organizations and
individuals in a given society
 Political Environment
• Legislation regulating business
– Increased legislation
– Changing government agency enforcement
• Increased emphasis on ethics
– Socially responsible behavior
– Cause-related marketing
– For ex: Consumer protection law
 Cultural Environment
Cultural environment consists of institutions and
other forces that affect a society’s basic values,
perceptions, and behaviors
 Cultural Environment
Persistence of Cultural Values
Core beliefs and values are persistent and are
passed on from parents to children and are
reinforced by schools, churches, businesses,
and government
Secondary beliefs and values are more open to
change and include people’s views of
themselves, others, organizations, society,
nature, and the universe
 Cultural Environment
Shifts in Secondary Cultural Values
• People’s view of nature
– Some feel ruled by it
– Some feel in harmony with it
– Some seek to master it
• People’s view of the universe
– Renewed interest in spirituality
 The Marketing Environment and
Competitor Analysis

• SWOT ANALYSIS
• PEST ANALYSIS
 SWOT Analysis

• Strengths (Internal)
• Weaknesses (Internal)
• Opportunities (External)
• Threats (External)
• Strengths
• What advantages does your organization have?
• What do you do better than anyone else?
• What unique or lowest-cost resources can you
draw upon that others can't?
• What do people in your market see as your
strengths?
• What factors mean that you "get the sale"?
• Weaknesses
• What could you improve?
• What should you avoid?
• What are people in your market likely to see as
weaknesses?
• What factors lose you sales?
• Opportunities
• What good opportunities can you spot?
• What interesting trends are you aware of?
• Threats
• What obstacles do you face?
• What are your competitors doing?
• Are quality standards or specifications for your
job, products or services changing?
• Is changing technology threatening your
position?
• Do you have bad debt or cash-flow problems?
• Could any of your weaknesses seriously threaten
your business?
 PEST Analysis

• Political factors
• Economic factors
• Socio-cultural factors
• Technological factors
• What is PEST analysis? This analysis is essential
for an organization before beginning its marketing
process.
• Consists of internal environment and external
environment.
 Political factors

• This is the most important influence on the

regulation of any business.
- How stable is the political environment
- Influence the government policy/law on your
business
- Government’s policy on the economy
- Political system is responsible for law marketing
 Political factors – Contd..

• Control on Pricing – like sugar, drugs, etc.

• Government Policies on the Economy
- Role of Public Sector
- Role of Private Sector
- Role of Joint Sector
 Economic factors

• Government Outlook Towards

- Bank financing
- Interest Rate
- Incentives for Exports
- Restrictions for Imports
- Inflation
- Labour policies
 Economic factors – Contd..

• Level of Government Spending

• Business Cycles
 Socio - cultural factors

• Demographics and distribution of income

- Division of Population – Male/Female
- Age group of the population
- Disposable Family Income
*) Disposable Income in the hands of the different
age groups
*) Education level of the age groups
• Life style changes & consumerism
- Attitude to living
*) Different age, groups
*) Joint living and nuclear families
*) Reach of the media to the population
 Technological factors

• New discoveries & innovations

• Speed & Cost of technology transfer
 Responding to the Marketing
Environment
• Many companies feel the marketing environment
is uncontrollable.
• An environmental management perspective takes
action to sway the marketing environment.
• Take a proactive rather than a reactive approach.