MKT1003A/1705A

Analyzing the Marketing

Environment
The Importance of Understanding
Marketing Environments

The marketing environment comprises internal and

external factors that affect firms and may help or hurt a
product in the marketplace.
Environmental scanning is the act of monitoring
developments outside of the firm’s control with the goal of
detecting and responding to threats and opportunities.
A. Micro vs Macro Environments
 Micro-environment (internal)
 The forces close to the organisation that affect its
ability to serve its customers
 The company
 Suppliers
 Intermediaries
 Customers (markets)
 Publics (stakeholders)
 Macro-environment (external)
 The larger societal forces that affect
the whole microenvironment
 These forces represent “non-controllables” to
which the company must monitor and respond.
1. The Company
 Senior management sets the organisation’s
 Mission & objectives
 Broad strategies & policies
 Marketing managers must make decisions within the senior-management
plans
 Recall “hierarchy of plans”
 Companies have complex
internal structures
 Other business functions are
often influential
 e.g. finance, manufacturing
 Need others for implementation
of marketing plans
2. Suppliers
 Those companies that provide inputs (materials, parts,
payroll services, recruitment companies
 They are a critical link in the organisation’s overall
customer ‘value delivery system’ because
 supply affects availability and therefore can cause delays
in production
 when rising supply costs force price increases, less may be
sold, and lower sales volume affects efficiency and
inventory costs
 suppliers directly affect company costs and therefore
customer price
 the quality of supplier’s goods/services influences
customer responses
 Must adopt “we are all in the same boat” mentality
3. Marketing Intermediaries
These firms help an organisation to promote, sell and
distribute its goods to final buyers:
Physical distribution firms (eg. Logistics company)
 Stock & move goods from origin to destination
Resellers help the organisation find customers
or make sales to them, e.g. retailers
Financial intermediaries
 Finance transactions or provide insurance
Marketing services agencies
 Help the firm target & promote its products to the right markets
 e.g. market research companies, advertising
agencies, media firms
4. Customers: Customer Markets Types
5. Publics
 Any group that has an actual or potential
interest in, or impact on, a firm’s ability to
achieve its objectives
B. The Macro-environment
1. Political/legal environment

Legislation Enforcement
Key
Trends in the
Political
Environment

Greater
Concern for
Ethics
Examples of Regulatory Forces in Singapore
 Consumer Protection (Fair Trading) Act
 To allow consumers a recourse to civil remedies for unfair
practices
 Also provides for a “cooling off period” for direct sales and time
share contracts
 Lemon Law (amendment to the Act) (eg, cars)
 Gives consumers up to 100 days to take action for defective
products: i) replace or repair, ii) price discount, return for
refund
 Product Registration Regulations
 E.g., Health Sciences Authority (strict screening), AVA (poultry –
reduce risk of outbreak)
 Advertising Restrictions
 http://www.sph.com.sg/newspapers/
vetting_guidelines.html
 Mandatory disclaimer clauses (fine print)
 Prohibition of advertising of certain products
(cigarettes, comparative ads, medical treatments) –
more costly and longer process to sell products, not
worth considering the small domestic market
 Substantiation of claims (citations, show evidence)
 Changes in LTA’s laws on COE
 Cooling measures for real estate buying/selling
2. Economic Forces
 Affects cost of running a business
 Foreign exchange rates
 Interest rates
 Consumer spending patterns are affected by:
 Savings
 Debt
 Credit availability
 Economic outlook, unemployment rate 
consumer income, consumer confidence
The Impact of Economic Changes on
Marketing Decisions
Gross domestic product (GDP)
•The market value of all officially recognized final goods and
services produced within a country in a given period
Income distribution
Inflation
•Anincrease in the general level of prices of products in an
economy over a period of time
Consumer confidence
•Measures how optimistic consumers are about the overall state
of the economy and their own personal finances
3. Social-cultural Environment
 Forces that affect society’s basic values, perceptions,
preferences & behaviours, how and why consumers
behave the way they do
 Can be viewed as social trends
 Examples
 single-person households, DINKs, family structure
 attitudes towards health and fitness
 concern about the environment
 acceptance of minority groups and their rights
 attitudes towards education
 roles of men and women
 attitudes towards nudity
The Impact of Sociocultural Changes on
Marketing Decisions
Sociocultural refers to the combination of social and
cultural factors that affect individual development.
Sociocultural changes in the U.S.:
•From one-income families to two-income families and
single-parent households
•Increased environmental awareness and concern
•Concerns about consumer privacy and the use of big data

rmarmion/123RF
4. Demographics
Demographics are the characteristics of human populations
that can be used to identify consumer markets. Marketers
must pay attention to demographics shifts.
•Age
• Baby Boomers, Millennials
•Gender
• Female consumers account for 85 percent of all consumers.
•Education
• Number of college-educated workers is expected to increase.
•Ethnicity
• By 2050, the Hispanic population in the U.S. will almost
double.
Source: U.S. Census Bureau, https://www.census.gov/popclock.
 Demography is the study of human populations in terms
of size, density, location, age, gender, race & occupation

Aging Examples of Growing

populations Demographic ethnic
Trends diversity

Changing
family & Geographic
household population Higher levels
structures shifts of education
4. Technological Environment
 Technology changes affect:
 The marketspace
 How businesses are conducted
 How consumers assess value
 Obsolescence  Opportunity or
Challenge?
The Impact of Technology Changes
on Marketing Decisions
Rapidly evolving technology represents one of the most
significant challenges, as well as one of the most significant
opportunities, for marketing professionals.
Technology affects how consumers satisfy their wants and
needs.
•From CDs to iTunes
Technology changes the way firms promote their products.
•Apps that track consumer locations, electronic coupons

Shutterstock / lOvE lOvE

5. Competitors
 Marketing successfully means that an organisation
provides greater customer value & satisfaction than
its competitors
 Competitors: all players in the relevant industry
 Defined subjectively by the firm
 Decided by the sphere of operations in which the firm wishes to
compete
 Competitors influence the perception & behaviour of the
marketplace
 New products can impact existing product perceptions

 No single competitive marketing strategy is best

 Each firm must consider its own size & industry position
The Competitive Environment
Marketers adapt marketing strategy based on actions of their
competitors.
Direct competitors: firms that compete with products
designed around the same or similar characteristics
•Toyota’s direct competitors = Ford, Chrysler, Honda
Indirect competitors: firms that compete with products
that have different characteristics but serve a similar function
•Toyota’s indirect competitor = mass transportation

Left: mevans/Getty Images; Right: bbsferrari/123RF

Porter’s Five Forces
 To determine competitive intensity and hence,
market attractiveness
 Analyzing the Environment
 SWOT Analysis

24 © 2012 Principles of Marketing: An Asian Perspective

How Macro-environment Changed Forces
Affect Actors in the Micro-environment
Macro force
e.g. a demographic change

Effects on actors in micro-environment

e.g. customers, channel members, competitors

Changes in marketing plan (strategy)

e.g. growth in new target market

Action plan for changes.. How we do it?

e.g. What (product)? Where (place)? How
(promotion, price, place, personal service)?
Competitive advantage is the superior position a product
enjoys over competing products if consumers believe it has
more value than other products in its category.
A product that exhibits characteristics that are rare,
valuable, and hard to imitate is likely to have a
sustainable competitive advantage. There are four
elements of excellence:
Customer

Operational

Product

Locational
Customer Excellence
Customer excellence is a strategy designed to put the
customer at the center of all marketing activities.
•Companies produce products that provide value, satisfaction,
and quality to customers.
•Goalof marketers is consistent delivery of value, satisfaction,
and quality, which result in customer loyalty.
•Customer relationships provide reciprocal benefits for both
the firm and customer.

Juice Images/Getty Images

Operational Excellence
Operational excellence is a strategy of focusing
operational principles, systems, and tools on improving
customer satisfaction with the firm’s products and services.
Firms can improve how they manage their employees,
supply chain, and/or manufacturing processes to maximize
customer value and sustain competitive advantage.

Shutterstock / Bojan Milinkov

 Key Factors for Creating an
Environment for Maximum Performance

Leadership Should be committed to sustained organizational

excellence.
Adequate Resources Resources such as staffing, tools, technology,
and so on help to achieve operational excellence.
Clear Company Objectives A clear understanding of company objectives by
all functional aspects of the firm contribute to
maximum performance.
Non-Conflicting Conflict-free relationships between those working
Relationships in the firm help to achieve objectives.
Specific, Measurable, and Specific, measurable, and realistic objectives for
Realistic Objectives each functional unit within the firm contribute to
maximum performance.
Product Excellence
Product excellence is a strategy that focuses on the
importance of high-quality and value-adding products.
Ultimately, product excellence is determined by perceptions
of the customers and the market.

Jurgita Vaicikeviciene / Alamy Stock Photo

Locational Excellence
“Location, location, location”
Locational excellence is a focus on having a strong
physical location and/or Internet presence.
•Walgreens = pharmacies on corners in high-traffic areas
•Starbucks = locations within blocks of one another
•McDonald’s = restaurants in high-traffic areas that allow for
convenient parking and highly visible signage

© McGraw-Hill Education/Andy Resek