Chapter 2

MARKETING ENVIRONMENT

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 OBJECTIVES

Main objectives:

1. Describe the environmental factors that affect the

company’s ability to serve its customers
2. Discuss how companies react to the marketing environment.

2
 OVERVIEW
In this chapter, we’ll look deeper into the first step of the marketing process
– understanding the marketplace and customer needs and wants.

We’ll discover that marketing operates in a complex and changing

environment.

The actors in this environment – suppliers, intermediaries, customers,

competitors, publics & others – may work with or against the
company.
Major environmental forces – demographic, economic, natural.
Technological, political and cultural – shape marketing opportunities, pose
threats and affect the company’s ability to build customer relationships.

To develop effective marketing strategies, we must first understand

the environment in which marketing operates.

Marketing environment is made up of microenvironment and 3

macroenvironment.

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 MARKETING ENVIRONMENT
Definition:
The actors and forces outside marketing that affect marketing
management’s ability to build and maintain successful
relationships with target customers.

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 THE COMPANY’S
MICROENVIRONMENT
Microenvironment can be defined as “ the actors close to the
company that affect its ability to serve its customers – the
company, suppliers, marketing intermediaries, customer
markets, competitors and publics.

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THE COMPANY’S
MICROENVIRONMENT
Company

Customers Suppliers

Micro
environment

Publics Intermediaries

Competitors

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 THE COMPANY’S
MICROENVIRONMENT
The SIX (6) elements of a company’s microenvironment:

1. The Company
- In designing marketing plans, marketing management
takes other company group into account.
- They are top management, finance, R&D,
purchasing, operation and accounting.
- All of these interrelated groups from the internal environment.
- Top management sets the company’s mission,
objectives, broad strategies and policies for the
company.
- Then, marketing managers make decisions within
the strategies and plans made by top management.
- Marketing managers must work closely with other
company’s departments.
- All the department must works together in order to achieve
the company objective – to provide superior customer value
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THE COMPANY’S
& relationships.
MICROENVIRONMENT

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 THE COMPANY’S
MICROENVIRONMENT
2. Suppliers
- Suppliers provide the resources needed in
producing goods and services.
- Marketing managers must watch supply availability
and costs.
- Supply shortages or delays, will seriously affect marketing.
- Most marketers nowadays treat their suppliers as partners
in creating & delivering customer value.

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 THE COMPANY’S
MICROENVIRONMENT
3. Marketing Intermediaries

- Intermediaries are firms that help the company to

promote, sell and distribute its goods to final
buyers.
- They include:

a) Resellers
- They are distribution channel firms that help
the company find customers & make sales to
them.
- These include wholesalers and retailers who buy
and resell merchandise.
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 THE COMPANY’S
MICROENVIRONMENT
b) Physical Distribution Firms
- Help the company to stock and move goods
from their points of origin to their destinations.
- E.g. warehouses.

c) Marketing Services Agencies

- Marketing research firms, advertising agencies,
media firms & marketing consulting firms that help
the company target & promote its products to the
right markets.

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 THE COMPANY’S
MICROENVIRONMENT
d) Financial Intermediaries
- Financial intermediaries are institutions such as
bank, credit companies and insurance companies.
- These institutions helps finance transactions or
insure against the risks associated with the buying
and selling of goods.

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 THE COMPANY’S
MICROENVIRONMENT
4. Competitors

- Competitors are companies with similar offerings in the

same marketplace.
- To be successful, a company must provide greater
customer value and satisfaction than its competitors
do.
- Company must gain strategic advantage by positioning
their offerings strongly against competitors’ offerings
in the minds of consumers.

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 THE COMPANY’S
MICROENVIRONMENT
5. Publics
- Public is any group that has an actual or potential interest in
or impact in an organization’s ability to achieve its objectives.
- There are seven types of publics:

a) Financial public
- Influence the company’s ability to obtain fund.
- E.g. banks, investment houses.

b) Government public
- Affect the company by passing legislations and laws that
put restriction on the company’s actions.
- Public municipality and other government bodies.
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 THE COMPANY’S
MICROENVIRONMENT
c) Media public
- This group carries news, feature and editorial opinion that
may influence customers’ opinion towards the business.
- E.g. Newspapers, magazines and television station

d) Citizen-action public
- Include environmental group and minority group that can
questioned the actions of the company and put them in
the public spotlight.
- E.g. Consumer organizations.

e) Local public
- Neighborhood and community organizations that will
question a company impact on the local area and the level of
responsibility of their action.
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 THE COMPANY’S
MICROENVIRONMENT
f) General public
- Can greatly affect the company as any changes in their
attitude will affect the company.
- Its consists population at large

g) Internal public
- Consists of those who employed within the organization and
deal with the organization and construction of the
company’s product.
- When employees feel good about their company, this
positive attitude spills over to external public.

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 THE COMPANY’S
MICROENVIRONMENT
6. Customers
- Customers are the most important factor in the
microenvironment because they made up
markets.
- There are FIVE (5) types of customer market:

a) Consumer markets
- Consist of individuals and households that buy goods
and services for personal consumption
- e.g. End user

b) Business markets
- Buy goods and services for further processing to produce their
own product
- Restaurants, tailors, etc.
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 THE COMPANY’S
MICROENVIRONMENT
c) Reseller markets
- buys goods and services to resell at a profit.
- E.g. wholesalers, retailers, etc.

d) Government markets
- Consists of government agencies that buy goods to
produce public goods or transfer the goods and
services to others who need them
- E.g. hospitals, bus-stops, etc.

e) International market
- Buyers in other countries, including consumers,
Producers, resellers & governments.

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 THE COMPANY’S
MACROENVIRONMENT
Macro environment is “a larger societal forces that affect the
microenvironment – demographic, economic, natural,
technological, political and cultural forces.

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THE COMPANY’S
MACROENVIRONMENT
Demographic

Cultural Economic

Political Natural

Technological
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 THE COMPANY’S
MACROENVIRONMENT
1. Demographic Environment
- The study of human populations in terms of size, density,
location, age, gender, race, occupation and other
statistics.
- Demographic is one of the most important elements in
marketing macro environments because it involves people
and people make-up markets.
- Marketers will depend on this factors to produce or
improve the products as these factors will influence the
buying behaviors

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 THE COMPANY’S
MACROENVIRONMENT
2. Economic Environment
- Factors that affect consumer buying power and
spending patterns.
- Changing in income poses influences on how consumers
Spend their money.
- For examples, if consumer’s income increases, they will
buy luxurious goods more, spending on convenience
products will decrease at the same time.
- Changing in consumer spending pattern also influences
on how consumers spends their money.
- E.g. With the increase awareness on healthy living,
consumers tend to spend more on health products
and services than other things.
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 THE COMPANY’S
MACROENVIRONMENT
3. Natural Environment
- Natural resources are the elements that are needed as
input by the marketers or the elements that are affected by
marketing activities.
- Marketers should be aware of several trends in the
natural environment.
- The trends are:

a) Shortages of mineral
- Shortages of mineral resources will affect the prices
of the products.
- E.g. shortages of oil will increase its price and demand for
motor vehicles may drop as well/

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 THE COMPANY’S
MACROENVIRONMENT
b) Increased pollution
- Government will intervene if the production
activities endangered the environment.
- Example, government promotes no plastics bags days
because plastic is known as a non-biodegradable
material which can be hardly be disposed.

c) Increased government intervention

- Happens in natural resource management.
- E.g. Limiting logging activities may reduce timber supply.

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 THE COMPANY’S
MACROENVIRONMENT
4. Technological Environment

- Forces that create new technologies, creating new product

and market opportunities.
- The R&D used in production activities can be considered as
one of the technological effort as the process will
improvise the product.
- Technology may help a company to increase its productivity,
thus company should pay a close attention to the
technology as this elements will help them to flourish.
- If a business doesn’t pay a close attention to technology,
they may be left behind.

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 THE COMPANY’S
MACROENVIRONMENT
5. Political & Social Environment

- Includes laws, government agencies & pressure groups

that influence and limit various organizations & individuals
in a given society.
- Marketers should be aware of the law and legislation
imposed by the government, agencies and regulating
bodies.
- This element could give good or bad influences to
the marketers.
- E.g. Government imposes the usage of helmets.
This regularity increased the demand for helmets.

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 THE COMPANY’S
MACROENVIRONMENT
6. Cultural Environment

- Institutions & other forces that affect society’s basic

values, perceptions, preferences, and behaviors.
- Marketers should be aware with the cultural values of
their target market.
- Some persistent values like core values cannot be
changed while secondary can be changed.
- Core beliefs are passed on from parents to children.
E.g. everyone should get married.
- Secondary beliefs are more open to changes. E.g.
everyone should get married in early age tend to change
nowadays, people are no longer engaged in marriage at
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 THE COMPANY’S
MACROENVIRONMENT
younger age.

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 COMPANY’S REACTIONS TOWARDS
MARKETING
ENVIRONMENT
Company/organizations react to marketing environment in two
ways:

1) Proactive approach
2) Reactive approach

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 COMPANY’S REACTIONS TOWARDS
MARKETING
ENVIRONMENT
Proactive approach

- Company takes aggressive actions to affects the publics

and forces in their marketing environment.
- Such companies even hire lobbyist to influence
legislation affecting their industries & stage media events
to gain favorable press coverage.

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 COMPANY’S REACTIONS TOWARDS
MARKETING
ENVIRONMENT
Reactive approach

- Companies that view the marketing environment as

uncontrollable elements to which they must react and
adapt.
- They passively accept the marketing environment and do
not try to change it.
- They analyze the forces and design the strategies to avoid
the threats and taking the advantages of the
opportunities the environment provides.

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The end!!!

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