TEMA 2: The marketing environment.

1. Introduction: The Marketing environment.

All organizations operate with environments.

• All organizations, whether for profit or not-for-profit, are surrounded by, and must
contend with, external forces.

• Managers, except in rare instances, cannot govern these external, or environmental,

forces; therefore the forces are called uncontrollable variables.

• Uncontrollable variables affect both consumer’s behavior and organization’s

development or effective marketing mixes.

The internal system of a company (controllable environment)

–Identify needs and tries to satisfied them.

–Analyzes needs trough the methods and techniques of the commercial research.

–The commercial research facilitates the definition of the objectives and the decisions.

–The objectives can be determined by combining the 4 P’s of the Marketing Mix.

Microenvironment - forces close to the company that affect its ability to serve its
customers.

The external system of a company (non controllable environment).

–To reach the objectives, you have to consider other marketing goals non controllable
by the company:

_Market penetration,

_Profitability,

_Brand image and

_Positioning.

Macroenvironment - larger societal forces that affect the whole microenvironment.

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Inflation provides an example. Organizations reaction to high inflation rates are easy to
spot in their pricing policies.

• Correos is a case in point. Its response to inflation was to raise their prices. Increases
postal charges, in turn, affect other organizations.
• Reacting and adapting to competition, economical forces, social trends, government
regulations, and the many other environmental influences surrounding an organization
is a major part of the marketing manager’s job.

• On the other hand, the manager may try to change the environmental in some way.

• Although, environmental forces are, for the most part, beyond the control of any
individual organization, an organization of group of organizations may be able to
influence some aspects of its environmental through political lobbying or some other
such activities.

• The Marketing Mix, on the other hand, is controlled by the organization.

• The Marketing Manager can adjust the Marketing mix to reflect changes in the
environment.

• The proper timing on a marketing decision is often the factor that determines success.

• Determining the correct time to enter and exit the market, for example, often rest of an
analysis of the external environment.

• Environmental factors affect all organizations, even the largest and wealthiest
companies. Because of their important influence on marketing decisions.

2. The marketing's microenvironment.

• Marketing manager’s job is to build relationship with customers by creating customers
value and satisfaction.

• However, marketing managers cannot do this alone.

• Marketing success will require working closely with:

–Other company department’s,

–Suppliers,
–Marketing intermediaries,
–Customers,
–Competitors and
–Various publics,
–which combine to make up the companies value delivery work.

The company:

• In designing marketing plans, marketing management takes other companies groups

into account, groups such as:

– Top management.
– Finance.
– Research and Development ( R& D).
– Purchasing.
– Operations and
– Accounting.
– All these interrelated groups form the internal
environment.

• Top management sets the company’s mission,

objectives, broad strategies, and policies.

• Marketing managers make decisions within the strategies and plans made by the top
management.

Marketing managers must also work closely with other company departments:

• Finance is concern with finding and using funds to carry out the marketing plan.

• R&D focuses on designing safe and attractive products.

• Purchasing worries about getting supplies and materials.

• Operations is responsible for producing and distributing the desired quality and
quantity products.

• Accounting has to measure revenues and costs to help marketing know how well is
achieving its objectives.
Together, all these departments have an impact on the marketing department’s plans and
actions.

Under the marketing concept, all of these functions must “think consumer”.

They should work in harmony to provide superior customer value and satisfaction.

Suppliers:

• Suppliers form an important link in the company’s overall customer value delivery
system.

• They provide the resources needed by the company

to produce its goods and services.

• Suppliers problems can seriously affect marketing.

• Marketing managers must watch supply availability.

• Supply shortages or delays, labor strikes, and other

events can cost sales in the short run and damage
customers satisfaction in the long run.

• Marketing managers also monitor the price trends of

their key inputs.

• Rising supply costs may force price increase that can harm the company’s sales
volume.

• Most marketers today threat their suppliers as partners in creating and delivering
customer value.

Marketing intermediaries:

• Help the company to promote, sell and distribute its goods to final buyers.

• They include resellers, physical distribution firms,

marketing services agencies, and financial
intermediaries.

• Resellers are distribution channel firms that help the

company find customers or make sales to them. These
includes wholesalers and retailers, who buy and resale
merchandise.

• Selecting and partnering with resellers is not easy.

• Physical distribution firms help the company to

stock and move goods from their points of origin to
their destination.
• Marketing services agencies are the marketing research firms, advertising agencies,
media firms, and marketing consulting firms that help the company target and promote
its products to the right markets.

Financial intermediaries:

• Includes banks, credit companies, insurance companies and some other businesses that
help finance transactions or insure against the risks associated with the buying and
selling of goods.

• Like suppliers, marketing intermediaries from an important component of the

company’s overall value delivery system.

• In its quest to create satisfying customer’s relationship, the company must do more
than just optimize its own performance. It must partner effectively with marketing
intermediaries to optimize the performance of the entire system.

• Example: Coca-Cola has a 10 year deal in USA with Wendy’s that makes it the fast-
food chain’s exclusive soft provider. In the deal Coca-Cola provides Wendy’s much
more than just soft drink. It also pledges powerful marketing support.

Customers:

The company needs to study 5 types of customer marketing closely:

• Consumer markets consist of individual and

households that buy goods and services for personal
consumption.

• Business markets buy goods and services for further

processing or for use in their production process.

• Reseller markets buy goods and services to resell at

a profit.

• Government markets are made up of governmental

agencies that buy goods and service to produce public
services or transfer the good and services to others
who need them.

• International markets consists on these buyers in other countries, including

consumers, producers, resellers and governments.

Each market type has special characteristics that call for carefully study by the seller.

Competitors:
• To be successful, a company must provide greater
customer value and satisfaction than its competitors
do.

• Thus marketers must do more than simply adapt to

the needs of target consumers. They also must gain
strategic advantaging by positioning their offering
strongly against competitor’s offerings in the minds
of consumers.

• No single competitive marketing strategy is best

for all companies.

• Each firm should consider its own size and industry position compared to those of this
competitors.

• Large firms with dominant positions in an industry can us certain strategies that
smaller firms cannot afford.

• But been large is not enough.

• There are winning strategies for large firms, but there are also losing ones.

• Small firms can develop strategies that give them better rates of returns than large
firms enjoy.

Publics:

A public is any group that has an actual or potential interest in or impact an

organization’s ability to achieve its objectives.
We can identify 7 types of publics:

1. Financial publics that influence the company’s

ability to obtain funds. Bank, investment houses, and
stockholders are the majors financial publics.

2. Media publics includes media (newspapers, TV,

radio…) that carry news and editorial opinion.

3. Government publics. Marketers must often

consult the company’s lawyers on issues of product
safety, truth in advertising and other matters.

4. Citizen-action publics: a company may be questioned by consumer organizations,

environmental groups, minority groups and others. Its public relation (PR) department
can help it stay in touch with consumer and citizen groups.

5. Local publics (neighborhood resident community organizations). Large companies

usually appoint a community relation officer to deal with the community, attend
meetings, answer questions…

6. General public. A company needs to be concerned about general public’s attitude

toward its products and activities. The public image of the company affects its buying.

7. Internal publics include workers, managers, volunteers, and the board of directors.
Large companies use newsletters, intranet, and other means to inform and motivate their
internal publics. When employees feel good about their company, this positive attitude
spill over the external public.

3. The marketing's macroenvironment.

Macroenvironment:

The company and all of the other actors operate in a larger macroenvironment of
forcesthat shape opportunities and pose threats to the company.

The major forces in the company’s macroenvironment are:

• Demographic
• Economic
• Natural
• Technological
• Political
• Cultural
Demographic:

Demography is the study of human population in

terms of size, density, location, age, gender, race,
occupation, and other statistics.

The demographic environment is of major interest

to marketers because it involves people, and
people makes up markets.

It is necessary to consider:

• The changing age structure of the population.

• The changing of the family structure.

• The geographic shifts in population – this is a period of great migratory movements

between and within countries.

• The increasing diversity. Countries vary in their ethnic and racial makeup. Diversity
goes beyond ethic heritage.

Age Distribution of the U.S. Population

Baby boomer generation: (78 million people born 1946-1964) One of the most
powerful forces shaping the marketing environment, 30% of population.

Generation X: (45 million people born 1965-1976) More skeptical, cynical of frivolous
marketing pitches promising easy success.

Echo boomer generation: (72 million people born 1977-1994) Fluent and comfortable
with computer, digital, and Internet technology (Net-Gens).

Economic:

• Markets require buying power as well as people.

• The economic environment consists of factors

that affect consumer purchasing power and
spending patterns.

• Nations vary greatly in their levels and

distribution of income.

• Some countries have subsistence economies-

they consume most of their own agricultural and
industrial output. These countries offer few
market opportunities.
• At the other extreme are industrial economies, which constitute rich markets for many
different kind of goods.

• Marketers must pay close attention to major trends and consumer spending patterns
both across and within their world markets.

It is necessary to consider:

• Changes in income – Marketers need to pay attention to income distribution as well as

average income and levels of debt.

• At the top are upper-class consumers, whose expending patterns are not affected by
current economic events and who are a major market for luxury goods.

• There is a comfortable middle class that is somewhat careful about its expending but
can still afford the good life some of the time.

• The working class must stick close to the basic of food, clothing and shelter, and must
try hard to save.

• Finally, the underclass (persons on welfare and many retirees) must count their cents
when making even the most basic purchase.

• Changing consumer spending patterns.

• Food, housing and transportation use most household income. However, consumers at
different income levels have different spending patterns.

• Changes in major economic variables such as income, cost of living, interest rate, and
savings are borrowed pattern have a large impact on the market place.

• Companies watch those variables by using economic forecasting.

• Business do not have to be wiped out by an economic downtown or caught short in a

boom. With adequate warning, they can take advantages of change sin the economic
environment.

Natural environment:

• The natural environment involves the natural

resources that are needed as inputs by marketers
or that are affected by marketing activities.

• Environmental concerns have growth steadily

during the past three decades.
• Some trend analysis labeled the 1990s the “Earth decade”, claiming that the natural
environment is the major worldwide issue facing business and the public.

• World concern continues to amount about depletion on the Earth’s ozone layer and the
resulting “greenhouse effect”, a dangerous warming of the Earth.

• Marketers should be aware of several trends in the natural environment..

Technological environment:

Need to consider:

•Shortage of raw material:

•Air pollution and water shortage are already a big

problem.

•Renewable resources, such forest and food, also

have to be used wisely.

•Non renewable resources, such as oil, coal, and

various minerals, pose a serious problem.

•Environmental trend is increased pollution:

•Industry will almost always damage the quality of the natural environment

•Increased government intervention in natural resources management.

•Vary from one country to another.

Political environment:

Marketing decisions are strongly affected by

developments in the political environment. The
political environment consist of laws, government
agencies, and pressure groups that influence or limit
various organizations and individuals in a given
society.

It is necessary to consider:

•Legislation regulation business: even the most

liberal advocates of free-market economies agree that
the system works best with at least some regulation.
Well conceive regulation can encourage competition
and ensure fair markets for goods and services. Business legislations have been enacted
for a number of reasons:

•To protect companies from each other.

•To protect consumers from unfair business practices.

•To protect the interest of society against unrestrained business behavior.

•Increased emphasis on ethics and socially responsible actions.

•Written regulations cannot possibly cover all potential marketing abuses, and existing
laws are often difficult to reinforce. However, beyond written laws and regulations,
business is also governed by social code sand rules of professional ethics.

Cultural environment:

• The cultural environment is made up of institutions

and other forces that affect a society’s basic values,
perceptions, preferences and behaviors.

• People grow up in a particular society that shapes

their basic believes and values.

• They absorb a worldview that defines their

relationship with others.

The following EIGHT cultural characteristics can

affect marketing decisions making:

1. Persistence of cultural values: people in a given society hold many believes and
values.

• Their core beliefs and values have a high degree of persistence.

• Core believes and values are passed from parents to children and reinforced by
schools, churches, business and government.

• Secondary believes and values are more open to change.

• Example: believing in marriage is a core believe. Believing that people should get
arried early in life is a secondary believe.

• Marketers have some chance of changing secondary values but little chance of
changing core values.

2. Shifts in secondary cultural values: although

core values are fairly persistent, cultural swings do
take place.

• Consider the impact of popular music groups,

movie personalities, and other celebrities on young
people’s hairstyling, clothing, etc.
• Marketers wants to predict cultural shifts in order to spot new opportunities or threats.

3. People’s views of themselves: people vary on their emphasis on serving themselves

versus serving others.

• Some people seek personal pleasure on serving themselves versus serving others.

• Some people seek self realization through religion, recreation, or the avoid pursuit of
careers or other life goals.

4. People views of others: recently observers have noted a shift from a “me society” to
a “we society” in which more people want to be and serve others.

• This trend suggests a greater demand for “social support” products and services that
improve direct communication between people, such as health clubs and family
vacations.

5. People's views of organizations: people vary in their attitudes towards corporations,

government agencies, trade unions, universities, and other organizations.

• Many people today see work not as a source of satisfaction but as a required chore to
earn money to enjoy their nonworking hours. This trend suggest that organizations need
to find new ways to win consumer and employee confidence.

6. People’s views of society: people's vary in their attitudes toward their society;
patriots defend it, reformers want to change it, malcontents want to leave it.

• People’s oriented to their society influences their consumption patterns and attitudes
toward the market place.

7. People’s views of nature: people vary in their attitudes towards the natural world:
some feel ruled by it, others feel in harmony with it and others seek to master it.

• People have recognized that nature is finite and fragile, that it can be destroyed ort
spoiled by human activities.

• Marketing communicators are using appealing natural background in advertising their

products.

8. People's People’s view of the universe: finally, people vary in their beliefs about the
universe and their place in it.

• Religious.
• Family.
• Community.
• Earth.
• Faith.
• Right.
• Wrong…
4. Responding to the marketing environment.
There are 3 kinds of companies:

1. Those who make things happened.

2. Those who watch things happen.

3. Those who wonder what happened.

• Many companies view the marketing environment as an uncontrollable element to

which they must adapt. They passively accept the marketing environment and do not try
to change it. The analyze the environmental forces and design strategies that will help
the company avoid the threats and take advantage of the opportunities the environment
provides.

• Other companies take the environmental management perspective. Rather than

simply watching and reacting, these firms takes aggressive actions to affect the publics
and forces their marketing environment.

• Marketing management cannot always control environmental forces. In many cases, it

must settle for simply watching and reacting to the environment.

For example:

• A company would have little success trying to influence geographic population shifts,
the economic environment, or major cultural values. But whenever possible, smart
marketing managers will take a proactive rather that reactive approach to the
marketing environment.