CHAPTER TWO

2. Marketing Environment and Analyizing Marketing Opportunity

Chapter Objective:
At the end of this chapter you will be able to:

Describe how the internal and the external environment affect marketing

Explain how to use information and information system in marketing

Describe how to develop information for marketing decisions

Discuss how marketing research can be used in marketing management

 2.1 INTRODUCTION AND DEFINITION
Excellent companies take an outside-inside view
of the business.
 These companies monitor the changing
environment and continuously adapt their
business to their best opportunities.
 A company’s marketing environment consists of
the external actors and forces that affect the company’s ability
to develop and maintain successful transactions and
relationships with its target customers.
The marketing environment of a company is
made-up of a Microenvironment and a Macro
environment.
The Microenvironment consists of the actors close to
the company that affect its ability to serve its customer-
the company, suppliers, marketing intermediaries,
customer markets, competitors, and publics.

The Macro environment consists of the larger

societal forces that affect the microenvironment. Such
Macro environments are: demographic, economic,
natural, technological, political, and cultural forces.
The
The Marketing
Marketing Environment
Environment

Demographic

Company
Cultural Economic

Publics Suppliers
Company
Competitors
Customers
Political Natural
Intermediaries

Technological
 The
TheCompany’s
Company’sMicroenvironment-Task
Microenvironment-TaskEnvironment
Environment
1. Company’s Internal Environment- functional areas such as top

management, finance, and manufacturing, etc. It is emenated from the

organizations own teritory

2. Suppliers - provide the resources needed to produce goods and services.

They can affect organizaton‘s activity in so many ways. E.g. if suppliers

fail to meet quality requirments, it will be difficult for the company to

come up with supperior quality products (Marketing managers must

watch supply availability, supply shortages or delays)

3. Marketing Intermediaries - help the company to promote, sell,

and distribute its goods to final buyers. They are all those

parties that are involved in delivering the company’s products

to the market from where they are produced

4. Customers - five types of customer markets that purchase a

company’s goods and services.

 Types
TypesofofCustomer
CustomerMarkets
Markets

International Consumer
Markets Markets

Company
Company
Government Business
Markets Markets

Reseller
Markets
The Company needs to study five types of customer markets closely.

I. Consumer markets consist of individuals and house holds that buy goods and

services for personal consumption.

II. Business markets buy goods and services for further processing or for use in

their production process.

III. Reseller markets buy goods and services to resell at a profit.

IV. Government markets are made up of government agencies that buy goods and

services to produce public services or transfer the goods and services to others

who need them.

V. International market, which includes the all other types of markets.

5. Competitors - Those who serve a target market with similar products
and services.
6. Publics - any group that has an actual or potential interest in or impact
on organization’s ability to achieves its objectives.
 Government public : company’s must ask an advice on safety and
other matters of their product which the government might release
legislation.
e.g. The Ethiopian quality standardization authority might not be consumer of a
product but check out whether the product is up to standard.
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 Citizen action public: Minority group, for instance fights for
HIV/AIDS victims So that marketing firms consider the
victims in their marketing decision
 Local Publics: include neighborhoods residents and
communist organization.

General Publics: General public attitude toward its

product and activities. People buy product by their friend’s
recommendation
 Internal Public: like, workers, mangers, volunteers and the
board of directors

 Media publics: carry new features and editorial opinion

 Financial publics: influence the company’s ability to obtain

funds
Actors in the Microenvironment-Task environment
 2.3 Analyzing the Macro environment
The external environment is the totality of major
institutions and forces that are external and
potentially relevant to the firm.
 The Macroenvironment can be divided into six
major components:Demographic, Economic, competitive,
technological, social and cultural, and political and legal.

Within the rapidly changing global picture, the firm

must monitor these six major forces
 Cont..

Marketers must pay attention to their

interactions, because these will lead to new
opportunities and threats.
 1. Demographic Environment
 The main demographic force that marketers monitor is
population, because people make up markets.

 Monitors population in terms of age, sex, race, occupation,

location and other statistics.
 Demographic trends are highly reliable for the short and
intermediate run.
 Demographic factors are the most popular bases for segmenting customer
groups. Because consumer needs & wants are vary close with demographic
variables and easier to measure than most other types of variables.

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I. Worldwide Population Growth:
 Explosive population growth has major
implications for business.
 A growing population does not mean growing
markets unless these markets have sufficient
purchasing power
II. Population Age Mix: National populations vary in
their age mix. e.g. Japan's population would consume
many more adult products.
 For marketers, the most populous age groups
shape the marketing environment.
III. Ethnic and Other Markets: Countries also vary
in ethnic and racial makeup.
IV. Educational Groups:
The population in any society falls into five
educational groups: illiterates, high school
dropouts, high school diplomas, college degrees,
and professional degrees.
 V. Household Patterns:
 The "traditional household" consists of a
husband, wife, and children (and sometimes
grandparents)
In the United States today, 1 out of 8 households
is “nontraditional," and includes single live-
alones, adult live-together of one or both sexes,
single-parent families, and childless married
couples.
More people are divorcing or separating,
choosing not to marry, marrying later, or
marrying without the intention to have children.
 VI. Geographical Shifts in Population
• Location makes a difference in goods and service
preferences.
2.3.2 Economic Environment
Markets require purchasing power as well as
people.
The available purchasing power in an economy
depends on current income, prices, savings, debt,
and credit availability.
People alone do not make a market rather they must have
money to spend and be willing to consume it, market consist
of purchasing power inaddition to people.
Factors that affect consumer buying power and spending
patterns.
Some countries have a subsistence economy, which means
they consume most of their own agricultural and idustrial
output.
 These countries offer few market opportunities.
On the other extreme are industrial economies, which
constitute rich markets for many different kinds of goods.
Therefore, Marketers must pay close attention to major trends
and consumer spending patterns both across and within their
world markets.
 Economic
EconomicEnvironment
Environment

Economic
Economic Changes
Changes
Development Key
Key in
Development in Income
Income
Economic
Economic
Concerns
Concerns for
for
Marketers
Marketers

Changes
Changes
in
in Consumer
Consumer
Spending
Spending
Patterns
Patterns
 3. Natural Environment
 Market need to be aware of the threat and opportunities associated in
natural environment
 Natural resources needed as inputs by marketers or that are affected by
marketing activities.
 The natural environment should be evaluated in Wight of the following
terms.

A. The increase cost of energy

B. Increased government intervention in natural resource management.
C. Increased population levels
D. The shortage of law materials 22
 Natural Environment

More
More Government
Government
Intervention
Intervention

Factors
Affecting
Higher
Higher Pollution
Pollution the Shortages
Shortages of
of
Levels
Levels Natural Raw
Raw Material
Material
Environment

Increased
Increased Costs
Costs
of
of Energy
Energy
4. Technological Environment
 Forces that create new product and market opportunities.
Technology is a major macro environmental variable which
has influenced the development of many of the products we
take for granted today.

24
 Technological
TechnologicalEnvironment
Environment

Rapid
Rapid Pace
Pace of
of High
High R
R&&DD
Change
Change Budgets
Budgets

Issues
Issues in
in the
the Technological
Technological
Environment
Environment

Focus
Focus on
on Minor
Minor Increased
Increased
Improvements
Improvements Regulation
Regulation
5. Political Environment
The political and legal force on marketing can be grouped as follows:

1. Monetary and fiscal policies: The money supply and tax legislations

2. Governmental relation ship with industries: Financial government

regulations have an effect on financial institutions. E.g Government shifting
trends to partially sell ownership of banks, telecommunications and the power
sector.

3. Social legislation and regulation: e.g. legislation set by Ethiopia

Environmental protection agency.

4. Legislation related specifically to marketing: Executive do not have to be

26
lawyer, but they should know something about laws affecting marketing
Political
PoliticalEnvironment
Environment

Increased
Increased Changing
Changing
Legislation
Legislation Enforcement
Enforcement
Key
Key
Trends
Trends inin the
the
Political
Political
Environment
Environment

Greater
Greater
Concern
Concern for
for
Ethics
Ethics
 6. Cultural Environment
 People in a given society hold many believes, values and norms.
 The cultural environment is made up of institutions and other
forces that affect a society’s basic values, perceptions, preferences,
and behaviors.
The following cultural characteristics can affect marketing decision
making:
A. Persistence of core cultural values and beliefs
 Their core beliefs and values have high degree of persistence.
 Core beliefs are persistent/determinant.
 Core beliefs and values are Passed from parents to children and are
reinforced by society(schools, churches, business, and government)
 Shape more specific attitudes and behavior found in every day life.
 For example, most Americans believes in working, getting
married, giving to charity and being honest
B. Shifts in secondary cultural values
Secondary cultural values change and shift more easily.
 Are more open to change. E.g. believing in marriage is a
core believes but believing that people should get married
early in life is a secondary beliefs.
Marketers want to predict cultural shifts in order to spot new
opportunities or threats.
The major cultural values of society are expressed in peoples
view’s of themselves and others, as well as in their views of
organizations, society, nature and the universe.
4 - 29
 Cont…
 Marketers have some chance of changing secondary values but little
chance of changing core values.
 Fore example, family planning marketers could argue more effectively
that people should get married later than that they should not get
married at all.
 Cultural
CulturalEnvironment
Environment
people’s
people’sview:
view:

of
Oneself

of of
the Universe Views
Views Others
that
that Express
Express
of values
values of
Nature Organizations

of
Society
 Cultural Environment Includes
Marketing Management
people’s views of…

 Themselves  Society
 Identify with brands for  Patriotism on the rise
self-expression  Nature
 Others  “lifestyles of health and
 Recent shift from “me” sustainability” (LOHAS) of
to “we” society consumer segment
 Organizations  Universe
 Trend of decline in trust  Includes religion and
and loyalty to companies spirituality
 Individual Assignment(10%)
1. Analyse the consumer market and its buying behavior.
2. Analyse the business market and its buying behavior.
3. Enumerate the main difference between consumer market and
business market with respect to:
a) market structure,
b) marketing philosophy,
c) buyer behavior,
d) purchasing decisions,
e) product/ service mix, promotion, distribution mix, and price
4. Explain briefly the concept of proactive environmental Management
approach and reactive environmental Management approach
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THANK YOU!