Principles of Marketing

BAMK1205/BSMK1102
Spring Semester AY 2022 – 2023
Chapter Three: Marketing Environment
Elements of Macro and Microenvironment
 Learning Outcomes
At the end of the semester, the student who satisfactorily completes the course should be able
to:
✔ Describe the role and Function of Marketing within Organizations

✔ Explain the factors that influence consumer behavior.

✔ Identify the key components of the marketing environment
✔ Know-how to collect relevant information about the marketing environment
✔ Describe the concept and element of the marketing mix

✔ Know-how the marketing mix is applied in different contextual settings

Topic 1: Marketing Environment
1.Meaning of marketing environment
2.Internal Environment
3.Elements of Micro & Macro-environment
Understanding the marketing environment is very crucial for
any business organization.

Marketing strategies ore often developed as a response to

changes, trends or challenges in the marketing environment.

Information about the marketing environment are taken from

comprehensive and continuous marketing research which are
carried out by the company or through marketing research
agencies hired by the company
 What is the Marketing Environment?

“The actors and forces outside marketing that affect management's

ability to build and maintain successful relationships with target
customers.“

-Philip Kotler
 What is the Marketing Environment?

▪Marketing Environment refers to “forces outside marketing that affect top-level

management’s ability to develop and maintain successful relationships with its target
customers". This include two main levels:
1. An internal marketing environment refers to the internal factors within a company that
marketers use to create, advertise, and deliver products or services. These are the factors
marketing management can control, such as research and development, branding,
communications, and other efforts that stem from within a company.
2. The external marketing environment refers to the elements outside an organization that
may influence business operations, consumer trends, and relations. There are two
categories of external marketing—a micro-environment and a macro-environment.
 What is the marketing Environment?
Marketing environment is the combination of external and internal factors and forces that
affect the company’s ability to establish a relationship and serve its customers.

Internal Environment External Environment

company-specific and divided into two components:

includes owners, workers, micro environment and
machines, materials etc. macroenvironment
Importance of Analyzing Marketing Environment

1. To encourage innovation
Studying the business environment lets companies stay updated with trends to add
new tools to their marketing mix.
2. To compete better
Knowing how competitors act in the marketplace—and how your brand can improve
on their methods or distinguish yourself from them
3. To understand consumer behavior.
Market research and understanding consumer spending patterns allow marketers
and retailers to better refine their decision-making to target customers.
https://www.professionalacademy.com/blogs/marketing-theories-the-marketing-environment/
 The Internal Environment

An internal marketing environment consists of factors that fall

within the company’s control and impact its marketing
operations, including its organization's strengths, weaknesses,
uniqueness, and competencies

Human Resources Brand Power Technology

 Internal environment
◦ The internal environment in marketing refers to components INSIDE the firm that
are unique to the firm. An analysis of the internal environment is critical in the
development of marketing strategy to ensure to ensure that the firm’s strategy is
based upon its situation, resources and goals.

The main internal environment factors are:

1. Capital Resources
2. Human resources
3. Firms capabilities
4. Management values
Internal Environment
1. Capital resource
Capital resources are human-made resources used by a company
to create goods and services. With capital goods, companies can
remain productive and keep serving their customers. Some of the
examples for capital resources are:
▪Office buildings
▪Tools
▪Vehicles
▪Manufacturing facilities
▪Heavy machinery
▪Inventory
▪Cash
https://www.dreamstime.com/capital-vector-illustration-explained-company-financial-economic-resource-business-entrepreneurs-labeled-scheme-image135950430
Internal Environment

2. Human Resources
▪Human resource is the most important asset of the

organization.

▪It is particularly valuable in firms that rely on customer –

employee interaction and in organizations that rely upon

innovation and improved operations being delivered by

key staff.

https://recognition.altrum.com/en/blog/marketing-can-teach-human-resources/
Internal Environment
3. Firms capabilities:
This relates to skill sets and abilities and processes that the firm has AND is
really good at. This should be a fundamental building block of the firm’s
marketing strategy – as it will create opportunities for sustainable competitive
advantage in the marketplace.
Examples of capabilities would include:
✔Innovation skills
✔Speed to market
✔Brand building expertise
✔Data/marketing insights
✔Cost efficiencies and processes
✔Customer relationships
✔Use of new technologies, and so on.
Internal Environment
4. Management values
▪ Management values refers to the top management/executive of the organization
and how they view strategy and what is important to the organization.

▪ For example, some key people in management might see innovation and
change as critical to success, but top level management in other organizations
may be quite conservative and risk adverse.
▪ What is important to management needs to be taken into consideration, as they are
the ultimate approvers of competitive marketing strategy.

▪ Top management values are evident by the overall corporate culture of the
organization, which is influenced and guided by management views.
 Internal environment: SWOT Analysis

▪ SWOT analysis is a tool to assess a firm's internal abilities and capacities

along with forces in the external environment.
▪ SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats.

▪Environmental scanning and SWOT analysis are sometimes referred to as strategic

assessment tools which can help about where a company stands in relation to its
competitors.
▪Conducting an environmental scan involves collecting external and internal information to
assist the organization in focusing on the appropriate short- and long-term goals.
 External Micro Environment

• The External Microenvironment are the elements or factors

within the business’s immediate area of operation

• They have a direct and measurable impact on performance and

decision-making independence.

• They are all people and organizations that are in direct contact with
the business and influence day to day operations and customer
experience
Micro-environment:
The microenvironment in marketing includes all those micro factors that affect
business strategy, decision making and performance.

http://bconsi.blogspot.com/2016/05/what-is-meant-by-micro-environment.html
 Micro-environment:
1. The Company
In designing marketing plans, marketing management takes other
company groups into account.

All of 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 top management.

• Top management , Finance , R&D , Purchasing, Operations ,

Accounting
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 Micro-environment:
2. Suppliers
Actions of a supplier can influence the business strategy, as they provide the
materials for production.

For instance, if their services will not reasonable and timely that will affect the
production time and the sales due to delayed process of production.

Marketing managers must watch supply availability and costs.

Supply shortages or delays, labor strikes, and other events can cost
sales in the short run and damage customer satisfaction in the long
run

https://www.fastcapital360.com/blog/improving-supplier-relationship-management-strategies/
 Micro-environment:
3. Intermediaries:
▪ Market intermediaries are either individuals
or business houses who come to the aid of
the company in promoting, selling and
distributing the goods to the ultimate
consumers.

▪ They are Middlemen (wholesalers, retailers

and agents), distributing agencies, market
service agencies and financial institutions.
https://www.chegg.com/learn/marketing/marketing-principles-concepts/marketing%20intermediaries
 Micro-environment:
4. Competitors
The competitors of an organization can have a direct impact on business
strategies. The organization must know how to do a competitive analysis of
competitors and have a competitive advantage. An organization must
understand:
▪ what value added services their competitor is providing or the
unique selling point of their competitors?

▪ How can they differentiate from their competitors?

▪ What benefits a company can offer to the customers which

competitors does not offer?

https://www.questionpro.com/blog/competitor-research/
 Micro-environment:
5. Public:
The company’s marketing environment also includes various publics. A public is any group that has an
actual or potential interest in or impact on an organization’s ability to achieve its objectives.

A. Media publics:
Media publics possess this weapon because they take control of communication. This group brings news,
features, editorial opinions, and other content to audiences through television, newspapers, and blogs and other
social media.
Sometimes, media publics can help promote the company's image. However, media publics can also bring
down a "big brand".

B. General public:
A company needs to be concerned about the general public’s attitude toward its products and activities.

The public’s image of the company affects its buying behavior.

 Micro-environment:
6. Customers
The customers are the central part of any business as they
tend to attract and retain most of the customers to
generate revenue.

Therefore, organizations must adopt a marketing strategy

that attracts the potential customers and retains the
existing customers by taking into consideration the wants
and needs of customers and by providing the after sales
services and value-added services.

https://www.smartkarrot.com/resources/blog/customer-base /
The External Macro Environment

The external macro environment includes all factors that do not

fall within the company's control, including Political, legal,
technological, Social, Economic, and other competitive forces.

This is commonly referred to as the PESTEL Factors

Importance of the Macro environment Analysis

• The macro environment analysis helps companies to recognize emerging

but unmet needs and trends, which can make the company more
profitable.

For example;
1. New ways to cure illnesses
2. Energy saving devices
3. Health improvement foods
4. Affordable housing

• The macro- environment analysis helps the company to identify trends

and mega trends.
What are trends?

• A trend is a direction or sequence of events that has some

momentum and durability.
• A trend reveals how the future will be like and which gives the
marketers ideas on the future needs and wants of consumers
 Examples of Trends

• Aging boomers
• Delayed retirement
• Changing nature of work
• Greater educational attainment especially of women
• Labor shortages
• Increased immigration
Elements of the Macro- Environment

• Demographic Environment
• Economic Environment
• Natural Environment
• Socio-cultural Environment
• Political and Legal environment
Demographic Environment

• Demographic trends are highly reliable for the short and

intermediate run.
• The main demographic force that marketers monitor is
POPULATION.
• Marketers are interested in the size, growth rate, age
distribution, household patters and population
movements
Economic Environment
• Markets require purchasing power as well as people.
• Purchasing power is affected by major economic trends
like;
- income
- price levels
- savings
- debt
- employment
- credit availability
Socio- Cultural Environment
• People buy goods and services based on their tastes and
preferences. The society shapes the beliefs, values and norms
that largely define these tastes and preferences.
• Marketers try to understand certain beliefs that people have
about their views of-
- Themselves e.g. self-gratification vs. selflessness
- Other people e.g. caring for others vs. giving space to others
- Nature- e.g. recycling,
- Society e.g. preserving, changing, equality
- Universe
Natural Environment
• The destruction of the natural environment is a major global
concern. The major trends about nature include the following;

1. Shortage of raw materials

2. Increased energy costs
3. Anti-pollution pressures
4. Changing role of governments on nature protection
Technological Environment
• Technology affects an economy’s growth rate. Marketers monitor
technological trends such as
- Pace of technology adoption
- Application of technology for innovation
- Changes in budgets for research and development
- Rules and regulations on technology
Political- Legal Environment
• Marketing decisions are strongly affected by developments in the
political and legal environment. This environment is composed of
- Laws
- Government agencies
- Pressure groups
TOOLS FOR ANALYZING THE
MICRO AND
MACROENVIRONMENT
Macro-environment Analysis
Will take Starbucks as an Example

https://swotandpestleanalysis.com/pestle-analysis-of-starbucks/
https://www.edrawmax.com/article/starbucks-pestel-analysis.html
https://www.wordstream.com/blog/ws/2017/12/20/swot-analysis
 Internal environment: SWOT Analysis
Strengths:

▪Strengths refer to the firm's core competencies, abilities, and capacities

that provide an advantage when meeting the needs of target customers.
▪For example, Well-known brand name , lower production costs, Superior
management talent, marketing skills, brand image, technology, design, and
financial resources represent potential strengths for a firm.
▪Strengths are meaningful only through the eyes of customers.
▪Strengths that create value for the firm's chosen customers provide
competitive advantages for the firm.
 Internal Environment: SWOT Analysis
Weaknesses

▪Weaknesses refer to the limitations a firm faces when seeking to deliver

value to customers. Like strengths, weaknesses are only meaningful
when viewed through the eyes of customers. Marketers must try to
make weaknesses seem less significant.

• Examples - Limited financial resources, Very narrow product line,

Limited distribution, Higher costs, Weak market image, Poor marketing
skills, Limited management skills, Under-trained employees.
 Internal Environment: SWOT Analysis

Opportunities

▪Favorable conditions and trends in the external environment represent

opportunities for marketers. For the company to benefit, these
opportunities must be exploited.

Examples - Rapid market growth, Rival firms are complacent, Changing

customer needs/tastes, New uses for product discovered, Economic
boom, Government deregulation, Sales decline for a substitute
product .
 Internal environment-SWOT Analysis

Threats
 Conditions, trends, and barriers in the external environment that
hinder firm performance represent threats. Marketers manage
threats by either acting upon them or avoiding them.

Examples - Entry of foreign competitors, Introduction of new substitute

products, Product life cycle in decline, Changing customer
needs/tastes, Rival firms adopt new strategies, Increased government
regulation, Economic downturn.
https://swotwizard.com/apple-swot-analysis/
 PESTEL ANALYSIS FOR STARBUCKS/Political

• Political factors are all about how and to what degree a government
intervenes in the economy. They include things like government
stability, peace and order, laws, rules and regulations in the country.

Organisations need to respond to the current and anticipated future

legislation, and adjust their marketing policy accordingly.

EXAMPLE:

• Starbucks Corporation is operating in Specialty Eateries in more than

dozen countries and expose itself to different types of political
environment and political system risks.
https://www.superheuristics.com/learnmarketing/pestel-analysis/
 PESTEL ANALYSIS FOR STARBUCKS/ Economic

Economic factors include all those factors which

determine the performance of an economy.

These factors directly or indirectly affect the company

as they determine the purchasing power of the
consumer, which can change the demand and
supply model of an economy.

https://www.superheuristics.com/learnmarketing/pestel-analysis/
PESTEL ANALYSIS FOR STARBUCKS/ Economic

Economic factors that Starbucks Corporation should consider are:

Type of economic system in countries of operation – what type of economic system

there is and how stable it is , Income level of people, number and type of jobs,
inflation, savings and spending capacity.

• Example:

If purchasing power of people is low, then number of customers in Starbucks may be less.

Additionally , an increase in the inflation rate may drop the buying power of consumers. As a result,
the demand for coffee declines.
 PESTEL ANALYSIS FOR STARBUCKS/Social
It is also known as socio-cultural factors, these are areas that involve the
shared belief and attitudes of the population.

These factors are of particular interest as they have a direct effect on how marketers
understand customers and what drives them.

Social factors that Starbucks Corporation should analyze for PESTEL analysis include;

• Demographics and skill level of the population and generational shifts

• Education level as well as education standard in the Starbucks Corporation ’s
industry
• Culture (gender roles, social conventions etc.)
• Attitudes (health, environmental consciousness, etc.)
• Leisure interests

https://www.superheuristics.com/learnmarketing/pestel-analysis/
PESTEL ANALYSIS FOR STARBUCKS/Social

EXAMPLE:

- There is a growing coffee drinking culture.

- The generation that was the primary customer base of Starbucks, the
‘baby boomer’ generation, is almost at an end. The company needs to
reinvent themselves to fit the needs of the millennials and the Gen-X &
Gen-Z. Since both these generations mostly middle income tier
individuals, Starbucks will need to diversify their product range and
include cheaper items

https://www.marketingtutor.net/pestle-analysis-of-starbucks/
Generational marketing is important in segmenting people by lifestyle,
life stage and common values, rather than by age
example: Generation-Z

Baby
born between 1946 and 1964.
They're currently between 57-75
• The first generation to have grown up
Boomers years old (71.6 million in the surrounded by digital communication
U.S.) • The largest generation (approx. 32% of
the global population)
born between 1965 and 1979/80
and is currently between 41-56 • consumes content more and prefer to
Gen X years old (65.2 million people in
the U.S.)
communicate with images
• Spending nearly 11 h reading, liking
born between 1981 and 1994/6. and sharing material across all their
Gen Y They are currently between 25 devices daily
(Millennials) and 40 years old (72.1 million in
the U.S.) • Highly exposed to digital advertising
on SM
Gen Z born between 1997 and 2012. • Checking Instagram at least five times a
They are currently between 9
(Digital and 24 years old (nearly 68 Characteristics: day
Natives) million in the U.S.) • Considered to be the most materialistic
children born in 2012 and will
• They are less loyal to brands and fast
Gen A continue at least through 2025, consumers of fashion
(Alpha) maybe later (approximately 48
53
million people in the U.S.)
 PESTEL ANALYSIS FOR STARBUCKS/ Technological

Technological landscape changes very fast and that’s impacts the way
companies market their products.

Technological factors affect marketing in different ways including new ways

of producing and distributing goods and services and in communicating with
target markets.

Starbucks Corporation’s need to make technology analysis that involves

understanding the impact of recent technological developments by competitors and
Technology's impact on product offering

https://www.superheuristics.com/learnmarketing/pestel-analysis/
 PESTEL ANALYSIS FOR STARBUCKS/ Technological

EXAMPLE:
- Now, there are so many available coffee makers that are sold to ordinary consumers
so they can prepare their own coffee. This takes away some Coffee shop customers.

- Starbucks has recently launched a new service by the name of the online shop
locator. The purpose of this application is to help the customer to find the nearest
online Starbucks café and to order online by using this app. The company also offers
a home delivery service.

- Starbucks is working on the latest biotechnology for the quick growth of the coffee
plants.
 PESTEL ANALYSIS FOR STARBUCKS/
Environmental

Evaluating the environmental standards that are required to operate in markets. Some of the
environmental factors that a firm should consider beforehand are -

• Weather & Climate change

• Laws regulating environment pollution
• Recycling & Waste management
• Attitudes toward “green” or ecological products

EXAMPLE: Good coffee production of farmers depend on favorable weather.

- Starbucks used to serve coffee with paper cups and they weren’t recyclable and hazardous to the
environment but the brand started using cups made of biodegradable and you can recycle them.

https://www.superheuristics.com/learnmarketing/pestel-analysis/
 PESTEL ANALYSIS FOR STARBUCKS/Legal
It is clear that companies need to know what is and what is not legal in order to
trade successfully.
If an organisation trades globally this becomes a very tricky area to get right as
each country has its own set of rules and regulations.

Some of the legal factors that Starbucks Corporation leadership should

consider while entering a new market are :
• Discrimination law
• Copyright, patents / Intellectual property law
• Consumer protection, Data Protection and e-commerce
• Employment law
• Health and safety law

https://www.superheuristics.com/learnmarketing/pestel-analysis/
PESTEL ANALYSIS FOR STARBUCKS/Legal

EXAMPLE:

Some countries have very strict taxation and consumer protection laws that
will make it difficult for Starbucks to operate.

Trade laws and import taxes are very important to the company.

The brand has to maintain good relationships with local politicians so that they make
suitable laws for the company. It also makes it easier for the company to get the
license and trade permission.
Video

How to do a PEST, PESTEL, or PESTELE

analysis: A simple guide!

https://youtu.be/roC_srnexr4
 Class Discussion

• Watch the following videos case with student (they can

watch using their mobiles if necessary) and conduct in-
class discussions
• Zara Case Study | PESTLE Analysis
https://www.youtube.com/watch?v=TtBTvg_QyCY
 References
Books:
Marketing Management (Eleventh Edition by Philip Kotler)
Essentials of Marketing (Fourteenth Edition by Perreault / Cannon / McCarthy)
Marketing Management (Third Edition by Russel S Winer)
Websites:
https://www.geektonight.com/marketing-environment/
https://swotandpestleanalysis.com/pestle-analysis-of-starbucks/
https://www.superheuristics.com/learnmarketing/pestel-analysis/
https://www.geektonight.com/marketing-environment/
https://www.ukessays.com/guides/marketing/pest-pestel-analysis-8906.php
https://www.marketingtutor.net/micro-environment-definition-factors-example/
https://app.myeducator.com/reader/web/1114/topic1/mx6op/
https://www.marketingstudyguide.com/internal-environment-factors/