CHAPTER 2: MARKETING ENVIRONMENT

Learning Objectives:
1. Macro Environmental Factors
2. Micro Environmental Factors

1) Overview of Marketing Environment:

a) Definition:
i) The marketing environment includes the actors and forces outside marketing that
affect marketing management’s ability to build and maintain successful
relationships with customers
b) Categories of Environmental Factors:
i) Macro-environmental:
(1) Large-scale, pervasive forces that are not typically controllable by the
organization
(2) Changes may come gradually to shape opportunities or threats
(3)

ii) Micro-environmental:
(1) Actors close to the company that affect its business ability
(2) Typically may interact and/or be influenced by the company
(3)

2) Understanding the Marketing Environment:

a) Environmental Scanning: is the collection and interpretation of information about
forces, events and relationships in the marketing environment that may affect the
future of an organization or implementation of a marketing plan
 i) Understanding the external environment involves understanding:
(1) Current customers
(2) What drives customer decisions
(3) The most valuable customers and their needs
(4) The competition
b) The Environment Analysis (Situation Analysis):
i) The first step in developing the Marketing Plan is to conduct an Environment
Analysis
ii) In the business surrounding:
(1) What are the trends?
(2) How will they impact upon my customers?
(3) What anticipatory actions can I plan to take to address threats and create
opportunities for my brand?
iii) Analysis Framework:
(1)

c) Part 1: Macro: DENT-PC:

i) The Macroenvironment consists of the larger societal forces that affect the
microenvironment
(1) Demographic
(2) Economic
(3) Natural
(4) Technological
(5) Political
(6) Cultural
ii) Demographic factors:
(1) Demography is the study of human populations in terms of size, density,
location, age, gender, rave, occupation etc.
(2) Demographic developments often move at a predictable pace but can have
massive impacts on consumer and products
(3) Key Demographic changes:
(a) Growing ethnic diversity
(b) Age structures
(c) Changing family structures
(d) Education
(e) Geographic shifts
(4) The demographic environment: the changing character of families
(a) Growth in the number of working women
(b) Increase in dual-career families
 (c) Greater household incomes
(d) Increasingly time-poor
(e) Greater reliance on home entertainment
(f) Family membes’ roles, responsibility and purchasing patterns are changing
(5) Marketing by Generation
(a) Baby boomers: 1943-1963
(b) Generation X: 1964-1981
(c) Generation Y: 1981-2000
(d) Generation Z or iGeneration: 2000-Present
iii) Economic environment:
(1) The Economic environment consists of factors that affect consumer buying
power
(a) Total buying power depends on current income, prices, savings and credit
(b) Marketers should be aware of major trends in income and of changing
consumer spending patterns
(2) The 3 economic areas of greatest concern to most markets are:
(a) Distribution of consumer income: as disposable (or after-tax) incomes rise,
families and individuals have more money to spend on non-essential items
(b) Inflation: a general rise in prices, without a corresponding increase in
wages, resulting in decreased purchasing power
(c) Recession: a period of economic activity when income, production and
employment tend to fall, reducing demand for goods and services
(3) Changes in Income:
(a) Over the past several decades, the rich have grown richer faster than the
poor. Consequently, income inequality has widened
(b) Industrial economies are richer markets
(c) Typically richer markets have more expensive labor costs
iv) Natural Environment:
(1) Involves natural resources that are needed as inputs by marketers or that are
affected by marketing activities
(2) Trends:
(a) Shortages of raw material
(b) Increased cost of energy
(c) Increased pollution
(d) Government intervention in natural resource management
v) Technological environment:
(1) The technological environment is perhaps the most dramatic force that is
changing the marketplace
(2) Technology has allowed for the development of new products and new
opportunities
(3) There is also a concern regarding the safety of new products
(4) Trends:
(a) Fast pace of technological growth
(b) High R&D budgets
(c) Increased regulation
(5) Technology is driven by research and development:
 (a) Primary research: pure research that aims to confirm an existing theory or
to learn more about a concept or phenomenon
(b) Applied research: attempts to develop new or improved products
vi) Political environment:
(1) Marketing decisions are strongly affected by developments in the political
environment which consists of laws, government agencies and pressure groups
that influence and limit various organizations and individuals in a given
society
(2) Every aspect of the marketing mix is subject to laws and restrictions. It is the
duty of marketing managers and their legal advisers to understand these laws
and conform to them
vii) Cultural environment:
(1) Institutions and other forces that affect society’s basic values, perceptions,
preferences, and behaviors
(2) Shapes their basic beliefs and values
(3) Absorption of worldviews that defines their relationships between themselves
and others
(4) The following cultural characteristics can affect marketing decisions:
(a) Persistence of cultural values
(b) Subcultures
(c) Shifts in secondary cultural values
(5) Persistence in cultural values:
(a) People in a given society hold many beliefs and values
(b) Their core beliefs and values have a high degree of persistence
(6) Shifts in secondary cultural values: people’s view of:
(a) Themselves
(b) Others
(c) Organizations
(d) Society
(e) Nature
(f) The universe

3) Micro-environment SIP-CCC:
a) The microenvironment consists of the actors close to the company that affect its
ability to serve its customers: the company, suppliers, marketing intermediaries,
customer markets, competitors, and publics
b) The company’s micro-environment:
i) The Company: Marketers need to coordinate the work of the other Company
departments to implement the marketing strategy, which is to create customer
value and relationships
(1) Top management
(2) Finance
(3) Research and development
(4) Purchasing
(5) Operations
(6) Accounting
ii) Suppliers: provide the resources needed by the company to produce its goods and
services
(1) Marketing managers must watch supply availability – supply shortages or
delays, labor strikes, and other events that can cost sales in the short run and
damage customer satisfaction in the long run
(2) Marketing managers must also monitor the price trends
iii) Marketing Intermediaries: help the company to promote, sell and distribute its
products to final buyers
(1) Resellers: are distribution channels firms that help the organization find
customers or make sales to them
(2) Physical distribution firms: help the organization stock and move goods from
their points of origin to their destinations such as transportation firms
(3) Marketing service 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
(4) Financial intermediaries: include banks, credit companies, insurance
companies, and other businesses that help finance transactions or insure
against the risks associated with the buying and selling of goods
(5) Marketers recognize the importance of working with their intermediaries as
partners rather than simply as channels through which they sell their products
iv) Competitors:
(1) Every organization faces a wide range of competitors
(2) The marketing concept state that, to be successful, an organization must
provide greater customer value and satisfaction than its competitors
(3) No single competitive marketing strategy is best for all organizations. Each
marketer should consider its own size and industry position compared with
those of its competitors
(4) Organizations are facing competition from international competitors as well as
opportunities in international markets
v) Publics:
(1) A “Public” is any group that has an actual or potential interest in, or impact on,
an organization’s ability to achieve its objectives
(2) Every organization is involved with seven types of publics:
(a) Financial publics
(b) Media publics
(c) Government publics
(d) Citizen-action publics
(e) Local publics
(f) General publics
(g) Internal publics
vi) Customers:
(1) The marketing organization must study its customer markets closely
(2) There are at least 3 types of customer markets:
(a) Consumer markets
(b) Business markets
(c) Reseller markets
 (3) Different motivations lead to different behavior

4) Summary:
a) Marketing environment includes the actors and forces outside marketing that affect
the company
b) Macro-environment consists of the larger societal forces: Demographic, Economic,
Natural, Technological, Political, and Cultural
c) Micro-environment consists of the actors close to the company that affect its abilty to
serve its customers: the company, suppliers, marketing intermediaries, customer
markets, competitors, and publics