AECP 223 – Agricultural Marketing

Chapter 3
Analysing the market environment

Ernst Idsardi
More on the Dutch…

Agriculture in the Netherlands

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Chapter 3: Analysing the market environment

Learning outcomes

After studying this chapter, students should be able to:

• Describe the environmental forces that affect the firm’s ability to serve its
customers
• Explain how changes in the demographic and economic environments affect
marketing decisions
• Identify the major trends in the firm’s natural and technological environments
• Explain the key changes in the political and cultural environments
• Discuss how firms can react to the marketing environment.

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Chapter 3: Analysing the market environment

Key topics

1. The marketing environment

2. The firm’s micro-environment

3. The firm’s macro-environment

4. Responding to the marketing environment

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The market environment

Marketing does not operate in a vacuum

• It operates in a complex and changing marketing environment with various forces
at work.

Marketing environment: the actors and forces outside marketing that affect
marketing management’s ability to build and maintain successful relationships.

• Marketers can use marketing research and intelligence to collect information

about the marketing environment.
• Successful firms constantly watch and adapt to the changing marketing
environment.

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The firm’s micro-environment

Micro-environment: the actors close to the firm that affect its ability to serve its
customers.

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The firm’s micro-environment (2)

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The firm’s micro-environment (3)

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The firm’s micro-environment (4)

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The macro-environment of the business

Macro-environment: the larger societal forces that affect the micro-

environment.

1. Demographic environment

Demography: the study of human populations in terms of size, density,

location, age, gender, race, occupation and other statistics.

• This is important because it involves people, and people make up markets.

• For example – China’s one-child policy led to the ‘Me generation’ and a rapidly
ageing population.

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The macro-environment of the business (2)

1. Demographic environment

Trends in South Africa:

• Changing age structure and population has led to distinctive generational groups
(according to birth dates).

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The macro-environment of the business (3)

1. Demographic environment

Trends in South Africa:

• The changing South African family – ‘non-traditional’ households with
distinctive needs and buying habits are much more common.

For example – single-parent families and same-sex relationships; an increase

in women who work.
• Geographic shifts in population, especially movement from rural to ‘micropolitan
areas’ (small cities located beyond congested metropolitan areas  Potchefstroom).
• Increasing diversity in terms of language, culture and sexuality.

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The macro-environment of the business (4)

2. Economic environment

Economic environment: factors that affect consumer buying power and

spending patterns.

Major economic trends in South Africa  Changes in income

• The ‘squeezed consumer’ carries increased financial burdens.

For example – repaying debt acquired during earlier spending sprees,

increased household and family expenses.
• Marketers need to offer value (quality and good service at a fair price) to these
consumers and pay attention to income distribution and average income.

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The macro-environment of the business (5)

Major economic trends in South Africa  Changing consumer spending patterns.

• Consumers at different income levels have different spending patterns.
• Changes in major economic variables (e.g. income, cost of living and interest
rates) have a significant impact on the marketplace.

Engel’s law: differences in how people shift their spending across food,
housing, transportation, healthcare and other goods/services as income rises
(for example, as income rises, proportional spending on food declines,
spending on housing remains constant and spending on all other categories –
including saving – proportionally increases.)

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The macro-environment of the business (6)

3. Natural environment

Natural environment: natural sources that are needed as inputs by marketers or

that are affected by marketing activities.

Major environmental trends:

• Shortages of raw materials, especially air and water.
• The use of non-renewable resources such as oil and minerals especially pose a
serious threat.
For example – water restrictions in South Africa.
• Increased pollution.

For example – disposal of chemicals and nuclear waste.

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The macro-environment of the business (7)

3. Natural environment

Major environmental trends:

• Increased government intervention in natural resource management.

For example – imposing fines for littering.

• Many firms are developing environmentally sustainable strategies and practices.

For example – biodegradable packaging

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The macro-environment of the business (8)

4. Technological environment

Technological environment: forces that create new technologies, creating new

product and market opportunities.

• This is the most dramatic force shaping our destiny.

• Innovation in research and development is crucial.
• Every new technology replaces an old one (for example, digital photography
replaced film cameras) – firms must keep up with this ever-changing technology
to identify new product and market opportunities.
• The challenge is to make practical, affordable products

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The macro-environment of the business (9)

5. Political environment

Political environment: laws, government agencies and pressure groups that

influence and limit various organisations and individuals in a given society.

An increase in legislation regulating business:

• This legislation aims to protect the interest of society, protect businesses against
each other, and protect consumers from unfair business practices.

For example – the Consumer Protection Act 68 of 2008 that stipulates certain
marketing standards.
• Marketers must know and understand the content and implications of the relevant
legislation.

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The macro-environment of the business (10)

5. Political environment

An increased emphasis on ethics and socially responsible actions:

• Industries are developing their own standards of behaviour through self-regulation,
for example the Advertising Standards Authority of South Africa (ASASA).
• Companies are motivated to ‘do the right thing’ by seeking to protect consumers,
the market and environment.
• Marketing is a key focus point of ethical issues, for example concerns about online
privacy.
• Many firms are linking themselves to a worthwhile cause through cause-related
marketing (for example the MySchool card), but there are concerns that this may a
strategy for selling rather than giving.

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The macro-environment of the business (11)

6. Cultural environment

Cultural environment: institutions and other forces that affect a society’s basic
values, perceptions, preferences and behaviours.

• Core values and beliefs, these are carried over from generation to generation and
are hard to change.
• Secondary values, for example that children should be home-schooled by their
mother, can be changed.

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The macro-environment of the business (12)

6. Cultural environment

Shifts in secondary cultural values:

• People’s view of themselves – people use products, brands and services as a means
of self-expression.

For example, adrenaline junkies looking for dangerous activities.

• People’s view of others.

For example, the ‘cocooning’ trend of staying home instead of going out
with others.
• People’s view of organisations – different attitudes towards businesses,
government institutions, trade unions and universities.

For example, employees viewing their employer only as a source for their
salary.
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The macro-environment of the business (13)

6. Cultural environment

Shifts in secondary cultural values:

• People’s view of society – influences their consumption patterns and attitudes
towards the marketplace.

For example, patriotic people that buy only local.

• People’s views of nature – increased recognition that nature is finite and fragile
has created ‘lifestyles of health and sustainability’ (LOHAS).

For example, the increasing popularity of organic foods.

• People’s view of the universe – the origin of the universe and our place in it.
For example, the renewed interest in spirituality.

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Responding to the marketing environment

Marketers can respond in one of two ways to the marketing environment:

Some firms follow a react and adapt approach.

• They passively accept the marketing environment and do not try to change it.

Some firms follow a proactive approach.

• They take aggressive actions to affect the publics and forces in their marketing
environment.
• Taking action can enable firms to overcome seemingly uncontrollable
environmental events.

For example – if a firm is victim to the online spread of rumours, they can
minimise damage by responding appropriately, taking corrective action if
necessary and setting policies in place to avoid a similar incident in future.

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• Read Chapter 4

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