The Hong Kong Management Association-

HK Hong Kong Polytechnic Joint Diploma

MA in Management Studies

Module: Marketing P-37

Chapter 2
The Marketing Environment
I. Introduction
A. A company's marketing environment consists of the actors
and forces outside of marketing that affect management's
ability to develop and maintain successful transactions
with its target customers.
B. The environment is uncertain and can change suddenly and
drastically.
c. The environment consists of:
1. The microenvironment: the company, suppliers,
marketing channel members, customers, competitors, and
publics,
2. The macroenvironment: demographic, economic, natural,
technological, political, and cultural forces.
II. The Company's Microenvironment
A. The Company
1. Marketing must make decisions within the constraints set by
top management.
2. Marketing's plans and actions are also influenced by
other departments in the organisation--finance,
purchasing, accounting, and so on.
B. Suppliers
1. Suppliers provide the resources to produce goods and
services.
2. Trends in the price or availability of supplies can
seriously affect marketing.
c. Marketing Intermediaries--firms that help promote, sell,
and distribute goods to final buyers.
1. Middlemen--wholesalers and retailers--help the company
find customers or make sales to them.

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2. Physical distribution firms--warehouses and

transportation firms--aid in stocking and moving goods.
3. Marketing services agencies--research firms,
advertising agencies, and so on--help the company
target the right markets and promote its products to
them.
4. Financial intermediaries--banks, insurance companies,
etc.--help finance transactions and insure risk
associated with buying and selling.
D. CUstomers--the company can operate in one or more customer
markets: the consumer, industrial, reseller, government,
and international markets.
E. Competitors-firms must consider their size and industry
position relative to competitors, and their competitors•
marketing strategies, in developing their own strategies.
F. Publics--groups that have an actual or potential interest
in or impact on an organisation's ability to achieve its
oHjectives.
III. The company's Macroenvironment
A. Demographic environment--demography, the study of human
populations, is important to marketers because.markets are
made up of people.
1, Changing age structure--the U.S. population is growing,
the birthrate is declining, life expectancies are
rising, and the population is growing older as the baby
boom generation ages.
2. Changing American family--people are marrying later and
having fewer children, there are more working mothers,
and there are more nonfamily households.
3. Geographic shifts--about 17 percent of the population
moves each year. Three major trends are occurning:
movement to the sunbelt states, movement from rural to
urban areas, and movement from the city to the suburbs.
4. The population is becoming better educated, and the
workforce is becoming more white-collar.
B. Economic Environment--consists of factors that affect
consumer purchasing power and movement from the city to the
suburbs.
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l. Changes in income--spending is affected by income

levels, which are expected to increase through the
mid-1990s. Income distribution is skewed, which means
some consUlllers can buy luxuries, whereas others can
barely afford necessities.
2. Changing spending patterns--Engel's "laws" state that
as income rises, the percentage spent on housing
remains constant, and the percentage saved or spent on
other categories increases.
c. Natural Environment--involves natural resources used by
markets or affected by marking activities.
l. Raw material shortages mean that marketers must use
their natural resources wisely.
2. Increased energy costs may hamper economic growth, and
have led to searches for alternatives to oil.
3. Increased pollution levels create marketing
opportunities for pollution-control products and
methods of producing and packaging goods"that do not
cause environmental damage.
4. Government agencies seek to protect the environment and
may impose controls on business practices.
D. Technological Environment--new technologies replace older
technologies and create new markets and opportunities.
1. Technology changes quickly and makes some products
obsolete.
2. Unlimited technological opportunities create marketing
challenges as well.
3. The u.s. leads the world in research & development
spending. companies are adding marketing people to R&D
teams to obtain a stronger marketing orientation.
4. Minor improvements are more common than major
innovations.
5. Marketers must be alert to aspects of new technologies
that would lead to government intervention or public
opposition.
E. Political Environment--laws, government agencies, and
pressure groups that constrain organisations.
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1. Legislation and regulations are designed to protect

companies from each other, to protect consumers from
unfair business practices, and to protect the interests
of society.
2. Government-agency activity varies over time. In the
1980s, the trend was toward deregulation.
3. The number and power of public interest groups have
increased during the past three decades.
F. Cultural Environment--factors that affect society's basic
values and behaviours.
1. Core beliefs are passed on from parents to children and
are difficult to change; secondary beliefs are not as
hard to influence.
2. Societies contain subcultures that may be chosen as
target markets.
3. Cultural shifts do take place.
a. People's relation to themselves--people may achieve
self-expression through experiences or things.
b. People's relation to others--society appears to be
becoming more other-oriented, less self-oriented.
c. People's relation to institutions--people generally
accept the major social institutions, but some
people are highly critical of certain institutions
and there has been an overall decline in
institutional loyalty.
d. People's relation to society--marketing efforts
have reflected a trend toward increased patriotism.
e. People's relation to nature--some people are wary
of nature, some are in harmony with it, and others
want to master it.
f. People's relation to the universe--most Americans
practice religion, but religious convictions have
been declining, and religious institutions are
turning to marketing to help them compete with
worldly attractions.
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v. Responding to the Marketing Environment

A. Many companies view the marketing environment as
uncontrollable.
B. Other companies take an environmental management
perspective and attempt to influence their environment
through lobbying, advertising, and legal actions •