Chapter Two

The Marketing Environment

Previewing the Concepts
• Describe the environmental forces that affect the
company’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 companies can react to the marketing
environment.
 What are the Common marketing problems?
• How can we identify and choose profitable
market segments?
• How can differentiate our offer from our
competition?
• How should we react to competitors?
• How can we satisfy our customers and
build brand loyalty?
• How can we measure the effectiveness of an
ad campaign?
• ??????????
• What is Environment?
• What is marketing Environment?

• What is the need of knowing marketing

environment?
• What are the marketing environmental
elements?

• What is the importance of the external

environment to marketing decision-
making?
• No business operates in a vacuum.
 Decisions are made within a context of
• Competition,
• Customer characteristics,
• Behaviour of suppliers and distributors, and
• Of course within a legislative and social
framework.
 Some environmental factors are easily
controlled by managers within the firm.
 Others cannot be changed and must
therefore be accommodated in decision-
making.
 Marketing Environment
• The marketing environment consists of actors and
forces outside the organization that affect
management’s ability to build and maintain
relationships with target customers.
• Comprised of actors and forces affecting marketing
management’s ability to develop and maintain
successful relationships with its target customers.
• External Environment offers both opportunities and
threats.
• Internal Environment offers both strengths and
weaknesses.
• Marketing intelligence and research used to
collect information about the environment.
 Components of Marketing Environment
• Includes the following.
1. Microenvironment:
Task (mediating environment)
- Actors close to the company that affect its
ability to serve its customers.
- Organisations and individuals who directly or
indirectly affect the activities of a company.
2. Macroenvironment: larger forces that affect the
microenvironment.
• Considered to be beyond the control of the organization.
• PEST Analysis, (Political-legal, economic, socio-cultural and
technological)
 3. Company’s Internal Environment: (Intra
organizational environment)
– Areas inside a company.
– Affects the marketing department’s
planning strategies.
– All departments must ―think consumer‖ and
work together to provide superior customer
value and satisfaction.
Another way of classifying the marketing
environment
Marketing Internal environment
Environment
External environment
 The Company
• With marketing taking the lead, all departments—from
manufacturing and finance to legal and human resources—
share the responsibility for understanding customer
needs and creating customer value.

Top
management

Accounting Finance

Marketing
management

Research and
Operations
development

Purchasing
Components of Marketing Environment

Demographic

Cultural Publics Economic

Suppliers

Company
Customers
Competitors
Political Natural
Intermediaries

Technological
 External Marketing Environment
External Environment
Social Ever-Changing
is not controllable Change Marketplace
Demographics

Economic
Product Physical / Natural Conditions
Distribution
Promotion
Price
Competition
Target Market
Political &
Legal Factors
Technology
Environmental
Scanning
 The micro and macro-environment

The macro-environment is the assessment of the

external forces that act upon the firm and its
customers, that create threats & opportunities.
Actors in the Microenvironment
• Marketing success requires building
relationships with
 Other company departments,
 Suppliers,
 Marketing intermediaries,
 Competitors,
 Various publics, and
 Customers, which combine to make up the
company’s value delivery network.
1. Suppliers:
– Provide resources
needed to produce
goods and services.
– Important link in the
―value delivery
system.‖
– Most marketers treat
suppliers like partners.
2. Marketing Intermediaries:
– Help the company to promote, sell, and
distribute its goods to final buyers.
– Partnering with Intermediaries
• Resellers
• Physical distribution firms
• Marketing services agencies
• Financial intermediaries
 Marketing Intermediaries
• Resellers- Reselling goods and services at a profit.

• Physical distribution firms help the company stock and

move goods from their points of origin to their
destinations.

• Marketing services agencies are the marketing research

firms, advertising agencies, media firms, and marketing
consulting firms.

• 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.
3. Customers:
– Five types of markets
that purchase a company’s
goods and services
– A company might target any
or all Markets
 Consumer market
 Business market
 Reseller market
 Government market
 International market
 Consist of individuals and households
 Consumer market that buy goods and services for
personal consumption.
Buy goods and services for further
 Business market processing or use in their
production processes

Buy goods and services to resell at a

 Reseller market profit.

Consist of government agencies that buy

 Government goods and services to produce public
services or transfer the goods and services
market to others who need them.

Consist of these buyers in other

 International countries, including customers,
market producers, resellers, and governments
4. Competitors:
– Those who serve a target market with
products and services that are viewed by
consumers as being reasonable substitutes.

– Company must gain strategic advantage

against these organizations.
 Competitors
• Marketers also must gain strategic advantage by positioning
their offerings strongly against competitors’ offerings in the
minds of consumers.

• Each firm should consider its own size and industry

position compared to those of its competitors.

V.S
5. Publics:
– Group that has an interest in or impact on an
organization's ability to achieve its objectives.
Types of Publics
 • Influences the company’s ability to obtain funds
Financial
• Banks, investment analysts, and stockholders are the
publics major financial publics.

• This group includes neighborhood residents and

Local community organizations.
• Large companies usually create departments and
Publics
programs that deal with local community issues and
provide community support.

• Carries news, features, and editorial opinion.

Media
• It includes newspapers, magazines, television stations,
publics and blogs and other Internet media.

• Management must take government developments into

Governm account.
ent • Marketers must often consult the company’s lawyers
Publics on issues of product safety, truth in advertising, and
 • A company’s marketing decisions may be
questioned by consumer organizations,
Citizen-action environmental groups, minority groups, and
others.
publics
• Its public relations department can help it stay
in touch with consumer and citizen groups.

Internal This group includes workers, managers,

publics volunteers, and the board of directors.

• A company needs to be concerned about the general

General
public’s attitude toward its products and activities.
public • The public’s image of the company affects its buying.

3-24
 The Macroenvironment

• The company and all of the other actors

operate in a larger macroenvironment of
forces that shape opportunities and
pose threats to the company.

• Can not be controlled.

The Company’s Macroenvironment
 The Company’s Macroenvironment
• The Demographic Environment:
– The study of human populations in terms of size,
density, location, age, gender, race,
occupation, and other statistics.
– Consistently Monitors population.
– The world population is showing explosive growth.
– Demographic environment is important because it
involves people, and people make up markets.

– Marketers track changing age and family

structures, geographic population shifts,
educational characteristics, and population diversity.
Key U.S. Demographic trends
Changing Age Structure
Population is getting older

Changing Family Structure

Marrying later, fewer children,
working women, and nonfamily households

Geographic Shifts
Moving to the Sunbelt and suburbans

Increased Education
Increased college attendance
and white-collar workers

Growing Ethnic and Racial Diversity

73% Caucasian, 12% African-American,
10% Hispanic & 3.4% Asian
 The Seven U.S. Generations
Generational marketing is important in segmenting people by
lifestyle of life state instead of age.
More people are:
• Divorcing or separating
• Choosing not to marry
• Choosing to marrying later
• Marrying without intending to have children
• Increased number of working women

• Stay-at-home dads
• Growth in United States West and South and decline in
Midwest and Northeast
• Moving from rural to metropolitan areas
• Changes in where people work like Telecommuting.
 Changes in the workforce
– More educated More Professional
Population
– More white collar

 Increased diversity
Markets are becoming more diverse
– International
– National
Includes:
– Ethnicity
– Disabled
– And others.
 Geographic Shifts Population
 The shift in where people live has also caused a shift in where they
work.
 For example, the migration toward metropolitan and suburban areas
has resulted in a rapid increase in the number of people who
“telecommute”—work at home or in a remote office and
conduct their business by phone or the Internet.

 This trend, in turn, has created a booming SOHO (small

office/home office) market.
Interactive Student class discussion
• Pair with another student to discuss the
following questions:
– In what ways does the buying behavior of
you and your parents differ?
– In what ways does the buying behavior of
you and your grandparents differ?
– What selling strategies would work best for:
• You
• Your parents
• Your grandparents
 Economic Environment

Economic Changes
Development in Income
Key
Economic
Concerns for
Marketers

Changes
in Consumer
Spending
 Economic Environment
 Consists of factors that affect consumer
purchasing power and spending patterns.
• Industrial economies are richer
markets • Income
• Subsistence economies consume Distribution
most of their own agriculture and – Upper class
industrial output and offer few – Middle class
market opportunities. – Working class
• In between are developing – Underclass
economies that can offer outstanding
marketing opportunities for the right
kinds of products.
 Economic Environment
 Changes in income
 Value marketing involves ways to offer financially
cautious buyers greater value—the right combination of
quality and service at a fair price.

 Ernst Engel—Engel’s Law

As income rises:
The percentage spent on food declines
The percentage spent on housing remains constant
The percentage spent on savings increases
 Changes in Consumer Spending
• In turn, value marketing has become the watchword for
many marketers.
• Marketers in all industries are looking for ways to offer
today’s more financially frugal buyers greater value—
just the right combination of product quality and good service
at a fair price.
 Income Distribution
• Marketers should pay attention to income
distribution as well as income levels.
• Over the past several decades, the rich have
grown richer, the middle class has shrunk,
and the poor have remained poor.
 Natural Environment
• Involves the natural
resources that are
needed as inputs by
marketers or that are
affected by marketing
activities.
Factors Impacting the Natural
Environment

Shortages of Raw Materials

Increased Pollution

Increased Government Intervention

Environmentally Sustainable Strategies

Environmental Responsibility

The environmental sustainability is developing

strategies and practices that create a world economy
that the planet can support indefinitely.

McDonald’s has made a substantial commitment to the so-

called ―green movement.”
Technological Environment

• Most dramatic force

now shaping our destiny.
• Forces that create new
product and market
opportunities.
• Safety of new product
always a concern.
 Technological Environment
• Changes rapidly.
• Creates new markets
and opportunities.
• Challenge is to make
practical, affordable
products.
• Safety regulations result
in higher research
costs and longer time
between conceptualization
and introduction of
product.
Technological Environment
Rapid Pace of High R & D
Change Budgets

Issues in the Technological

Environment

Focus on Minor Increased

Improvements Regulation
Examples of Technological Advances

Production
Marketing
• Computer aided • Market research
design (CAD)
• Databases
• Computer aided
manufacturing (CAM) • Advertising media
• Quality assurance/ • Online ordering
control (QA) • Sales force support
• Materials handling
 Discussion Questions
• Within the last ten years, which
technological force has had the greatest
impact on marketing? In what areas of
marketing has this impact been seen?

• What technological force has impacted

you the most? In what ways has this
occurred?
 Political Environment

Includes Laws,
Increasing Legislation
Government
Agencies, and
Pressure Groups
Changing Government
that Influence or Agency Enforcement
Limit Various
Organizations and
Individuals In a Increased Emphasis on Ethics
Given Society. & Socially Responsible Actions
 Legislation Regulating Business
• Business legislation has been enacted for a
number of reasons:
– Protect companies from each other
– Protect consumers from unfair business practices
– Protect the interests of society against
unrestrained business behavior.
 Increased Emphasis on Ethics and Socially
Responsible Actions
• Socially Responsible Behavior:
– Enlightened companies encourage their managers to look
beyond what the regulatory system allows and simply ―do
the right thing.‖
– These socially responsible firms actively seek out ways to
protect the long-run interests of their consumers
and the environment.
• Caused-Related Marketing:
– Cause-related marketing has become a primary
form of corporate giving. It lets companies ―do
well by doing good‖ by linking purchases of the
company’s products or services with benefiting
worthwhile causes or charitable organizations.
– It has some controversy. Critics worry that cause-
related marketing is more a strategy for selling
than a strategy for giving ─ that ―cause related‖
marketing is really ―cause-exploitative‖ marketing.
 Cultural Environment
• Culture is the learned and shared way of
thinking and acting among a group of people or
society.
• Consists of the institutions and other forces that
affect a society’s basic values, perceptions,
preferences, and behaviors.
 Cultural Environment
• Core beliefs and values are persistent and
passed on from parents to children and are
reinforced by schools, churches, business, and
government.

• Secondary beliefs and values are more

open to change and include people’s views
of themselves, others, organizations, society,
nature, and the universe.
 The Persistence of Cultural Values
• People in a given society hold many beliefs and
values. Their core beliefs and values have a high
degree of persistence.
• Secondary beliefs and values are more open to
change. Believing in marriage is a core belief;
believing that people should get married early in life
is a secondary belief.
• Marketers have some chance of changing secondary
values but little chance of changing core values.
Cultural Environment
Themselves Society’s Major
Cultural Views Are
Others Expressed in
People’s Views of:

Organizations

Society

Nature

The Universe
 Shifts in Secondary Cultural Values
• People’s Views of Themselves.
– People vary in their emphasis on serving
themselves versus serving others.
– People use products, brands, and services as a
means of self-expression, and they buy
products and services that match their views of
themselves.
• People’s Views of Organizations.
– In recent years, some analysts have voiced concerns that
the Internet age would result in diminished human
interaction, as people buried their heads in their computers
or e-mailed and texted rather than interacting
personally.
– Instead, today’s digital technologies seem to have
launched an era of what one trend watcher calls ―mass
mingling.”
– Rather than interacting less, people are using online
social media and mobile communications to connect
more than ever.
– And, often, more online and mobile interactions result in
more offline mingle.
• People’s Views of Organizations.
– People vary in their attitudes toward
corporations, government agencies, trade
unions, universities, and other organizations.
– The past two decades have seen a sharp
decrease in confidence in and loyalty toward
America’s business and political organizations and
institutions.
– Many people today see work not as a source of
satisfaction but as a required chore to earn
money to enjoy their non-work hours.
– This trend suggests that organizations need to
find new ways to win consumer and
employee confidence.
• People’s Views of Society.
– People vary in their attitudes toward their society—
patriots defend it, reformers want to change it, and
malcontents want to leave it.
– People’s orientation to their society influences
their consumption patterns and attitudes toward
the marketplace.
– Marketers respond with patriotic products and
promotions, offering everything from orange juice
to clothing to cars with patriotic themes.
• People’s Views of Nature.
– People vary in their attitudes toward the natural world—some
feel ruled by it, others feel in harmony with it, and still
others seek to master it.

– A long-term trend has been people’s growing mastery over

nature through technology and the belief that nature is
bountiful.

– More recently, however, people have recognized that nature

is finite and fragile; it can be destroyed or spoiled by
human activities.
• People’s Views of Universe.
– People vary in their beliefs about the origin of
the universe and their place in it.
– In recent years, some futurists have noted a
renewed interest in spirituality, perhaps as a part
of a broader search for a new inner purpose.
– This affects consumers in everything from
television shows they watch and the books they
read to the products and services they buy.
What is Sustainable marketing?

 Is the establishment, maintenance, and

enhancement of customer relationships
so that the objectives of the parties
involved are met without compromising
the ability of future generations to
achieve their own objectives.
 Environmental Scanning
• What is environmental scanning?
• How to analyze all these types of environments
in a systematic manner?

 Environmental Scanning is the collection

and evaluation of information from the
wider marketing environment that might affect
the organisation and its strategic marketing
activities.

 Base for strategic marketing of an

organization.
 The algorithm of the environmental
scanning
Identify Potentially relevant Environmental Changes

Monitor: Determine Nature, Direction, Rate of Change,

and Magnitude of forces

Forecast Probability of impact and timing of potential

consequences

Develop and implement strategic responses

• The external environment can be audited in
more detail by using the following.
 SWOT Analysis,
 Michael Porter's Five Forces Analysis or
 PEST Analysis.

PEST Analysis of Macroenvironment.

P- Political Factors
E- Economic Factors
S- Sociocultural Factors
T- Technological Factors
Analyzing the environment - Five Forces Analysis
SWOT Analysis
• SWOT is an abbreviation for Strengths,
Weaknesses, Opportunities and Threats
• SWOT analysis is an important tool for
auditing the overall strategic position of a
business and its environment.
• SWOT analysis is a tool for auditing an
organization and its marketing environment.
• It is the first stage of planning and help
marketers to focus on key issues.
 Responding to the Marketing Environment

Uncontrollable Proactive Reactive

• Adapt to forces • Aggressive • Watching and

in the actions to affect reacting to
environment forces in the forces in the
environment environment
• Environmental Management Perspective
• Taking a proactive approach to managing
the environment by taking aggressive (rather
than reactive) actions to affect the publics and
forces in the marketing environment.
• This can be done by:
– Hiring lobbyists
– Running ―advertorials‖
– Pressing lawsuits
– Filing complaints
– Forming agreements to control channels
 THANK YOU
FOR YOUR
ATTENTION!!!