The Marketing Environment

Internal and External Factors which Influence Marketing Strategies and Activities

Learning Objectives

Describe the environmental forces that affect the companys ability to serve its customers. Explain how changes in the demographic and economic environments affect marketing decisions. Identify the main trends in the firms 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.

Marketing Environment
All the actors and forces influencing the companys ability to transact business effectively with its target market. Includes:
Microenvironment - forces close to the company that affect its ability to serve its customers. Macro environment - larger societal forces that affect the whole microenvironment.

The Marketing Environment

Demographic
Company

Cultural
Publics

Economic Company
Suppliers
Customers

Political

Competitors

Natural

Intermediaries

Technological

The Companys 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 firms value delivery system.

The Microenvironment
Company
Publics
Forces Affecting a Companys Ability to Serve Customers

Suppliers

Competitors
Customers

Intermediaries

The Companys Microenvironment

Companys 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.

Suppliers - provide the resources needed to produce goods and services. Marketing Intermediaries - help the company to promote, sell, and distribute its goods to final buyers.( Details of intermediaries follows)

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.

The Companys Microenvironment

Customers
- five types of markets that purchase a companys 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.

Customer Markets
International Markets Consumer Markets

Company
Government Markets Reseller Markets Business Markets

Competitors
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.

Publics - any group that perceives itself having an interest

in a companys ability to achieve its objectives

Financial publics influence the companys 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 companys lawyers on issues of product safety, truth in advertising and other matters.
continued .,

Publics
Citizen action publics A companys 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 publics attitude towards its products and activities. The public image of the company affects its buying. Internal publics A companys internal publics include its workers, managers, volunteers and the board of directors.

Companys Macro environment

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

The Companys Macro environment

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

The Macro environment

Demographic Socio-Cultural
Forces that Shape Opportunities and Pose Threats to a Company

Economic

Political Technological

Natural

The Companys Macro environment

Demographic - monitors population in terms of age, sex, race, occupation, location and other statistics. Economic - factors that affect consumer buying power and patterns. Natural - natural resources needed as inputs by marketers or that are affected by marketing activities.

Key Demographic Trends

Changing Age Structure
Population is getting older

Changing Family Structure

Marrying later, fewer children, working women, and nonfamily households

Geographic Shifts
Moving to the Urban and suburbs

Increased Education
Increased college attendance and white-collar workers

Growing Ethnic and Racial Diversity

Economic Environment

Economic
Development

Key Economic Concerns for Marketers

Changes in Consumer Spending Patterns

Changes in Income

General 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.

Consumer 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. contd..

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.

Natural Environment
More Government Intervention

Higher Pollution Levels

Factors Affecting the Natural Environment

Shortages of Raw Material

Increased Costs of Energy

Natural 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

The Companys Macro environment

Technological - forces that create new product and market opportunities. Political - laws, agencies and groups that influence or limit marketing actions.

Cultural - forces that affect a societys basic values, perceptions, preferences, and behaviors.

Technological Environment
Rapid Pace of Change High R & D Budgets

Issues in the Technological Environment

Focus on Minor Improvements

Increased Regulation

Technological 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

Political Environment

Increased
Legislation

Key Trends in the Political Environment

Greater Concern for Ethics

Changing Enforcement

Socio-Cultural Environment
Religion

Festivals Socio-Cultural Factors Music

Language

Eating Habits

Dressing Habits

Environmental Analysis .
PEST (STEP) analysis
POLITICAL ECONOMIC SOCIAL/CULTURAL TECHNOLOGICAL

SLEPT analysis
SOCIAL/CULTURAL LEGAL ECONOMIC POLITICAL TECHNOLOGICAL To be continued..

Environmental Analysis .
BPEST analysis
BUSINESS POLITICAL ECONOMIC SOCIAL/CULTURAL TECHNOLOGICAL

PESTLE analysis

POLITICAL ECONOMIC SOCIAL/CULTURAL TECHNOLOGICAL LEGAL ENVIRONMENTAL/ECOLOGICAL

Examining 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.

Responding 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.

The 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