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.
• It 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. 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.
Components of Marketing Environment

Demographic

Cultural Publics Economic

Suppliers

Company
Customers
Competitors
Political Natural
Intermediaries

Technological
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
market services 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.

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 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
ChangingAge
AgeStructure
Structure
Population
Populationis
isgetting
gettingolder
older

Changing
ChangingFamily
FamilyStructure
Structure
Marrying
Marryinglater,
later,fewer
fewerchildren,
children,
working
working women, and nonfamilyhouseholds
women, and nonfamily households

Geographic
GeographicShifts
Shifts
Moving
Movingto
tothe
theSunbelt
Sunbeltand
andsuburbans
suburbans

Increased
IncreasedEducation
Education
Increased
Increasedcollege
collegeattendance
attendance
and
andwhite-collar
white-collarworkers
workers
Growing
GrowingEthnic
Ethnicand
andRacial
RacialDiversity
Diversity
73%
73%Caucasian,
Caucasian,12%
12%African-American,
African-American,
10%
10%Hispanic
Hispanic&&3.4%
3.4%Asian
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.
 Economic Environment

Economic
Economic Changes
Changes
Development
Development in
in Income
Income
Key
Key
Economic
Economic
Concerns
Concerns for
for
Marketers
Marketers

Changes
Changes
in
in Consumer
Consumer
Spending
Spending
Patterns
Patterns
 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
– Underclass
• In between are developing
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.
 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
Rapid Pace
Pace of
of High
High R
R&&DD
Change
Change Budgets
Budgets

Issues
Issues in
in the
the Technological
Technological
Environment
Environment

Focus
Focus on
on Minor
Minor Increased
Increased
Improvements
Improvements Regulation
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
 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.
• Cause-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.
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 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
• 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
 STRATEGIC MARKETING
INTRODUCTION
 In its strategic role, marketing focuses on a
business’s intentions in a market and the means and
timing of realizing those intentions.

 The strategic role of marketing is quite different from

marketing management.

 Marketing in its new role, a new term—strategic

marketing

3-58
Cont’d
 Within a given environment, marketing strategy
deals essentially with the interplay of three forces
known as the strategic three Cs: the customer, the
competition, and the corporation.

 A good marketing strategy should be characterized

by (a) a clear market definition; (b) a good match
between corporate strengths and the needs of the
market; and (c) superior performance, relative to the
competition is the key success factors of the business.

3-59
 STRATEGIC MARKETING PLANNING
 A strategic market plan gives direction to a firm's
efforts and better enables it to understand the
dimensions of marketing research, consumer
analysis, and product, distribution, promotion,
and price planning.
• Strategic marketing process including the
development
 SWOT Analysis
 Mission Statement
 Organizational Goals
 Corporate Strategy
 Marketing strategy 3-60
 Cont’d
 The strategic market plan is not a marketing plan; it
is a plan of all aspects of an organizations strategy in
the market place.
 A marketing plan deals primarily with implementing
the market strategy as it relates to target market(s)
and the marketing mix.

 A Strategic marketing plan is an outline of the

methods and resources required to achieve
organizational goals within a specific target
market(s).
 All functional areas must include marketing and must
be coordinated to reach organizational goals.
3-61
 Cont’d
Brief description of contents of the marketing
plan
1. Executive Summary and Table of Contents
The marketing plan begins with a brief synopsis of the
key points and major recommendations. The Table of
Contents follows the executive summary.

2. Environmental Analysis (also known as

Situation Analysis)
It provides information about the firm's current
situation with regard to the current marketing
environment. 
3-62
3. SWOT Analysis
Cont’d
 A company has to understand its internal Strengths
and Weaknesses and also be cognizant of external
opportunities and threats.

 To do a SWOT analysis correctly, you must know

about your competition and the industry.

After the SWOT analysis is complete, a company has

to build on the strengths that it has, do everything
possible to eliminate or correct weaknesses, take
advantage of opportunities, and do what it takes to
minimize or avoid threats.
3-63
4. Marketing ObjectivesCont’d
Based on the SWOT analysis, the organization's major
objectives are stated. 

This makes it clear to all what the organization is

trying to accomplish through its marketing plan.

Objectives are in terms of such factors as market

share, profitability, and/or sales volume. Other factors
to be considered include innovation (introduce five
new products), image, distribution, etc.

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5. Marketing StrategiesCont’d
A marketing strategy has two key components:  a
target market and a marketing mix to satisfy the
target market. 
A good marketing strategy enables a firm to achieve
its objectives. 

A firm will succeed if it can use its strategy to achieve

an advantage over the competition. 
A successful product offers either a quality advantage
and/or price advantage over competing brands.
How the product or service will be positioned is also
an important strategy. 3-65
 Cont’d
6. Marketing Implementation/Action Program
 This section describes the actual marketing
programs that will be undertaken in order to
implement the marketing strategy. 

Some issues that must be discussed include

what specific actions must be taken?  Who will
do it?  When is it going to be done?  How much
will it cost? 

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7. Evaluation and Control Cont’d
 The organization can determine whether the
marketing plan is actually working. 
 Can be done on a monthly or quarterly basis.

 Provide benchmarks to assess how well the plan

accomplished its goals.
 Measurement of programs to evaluate progress
toward organizational goals. 
 If the marketing plan is not working, it is very
important for the organization to be able to pinpoint
the cause as soon as possible and have a contingency
plan.    3-67
Winning markets through market oriented
strategies
 It is more important to do what is
strategically right than what is immediately
profitable.

 Given that a particular company wants to pursue a

particular market or market segment, it needs to
develop a differentiating and positioning strategy for
that target market.

 It will need to define how it differ from it’s significant

competitors and how it wants to come across to its
buyers.
3-68
 Once the company decides on it’s product
positioning, it now has to undertake the
difficult work of new-product development,
testing and launching.

 Marketing Strategy comprise the broad

principles by which marketing management
expects to achieve its business and marketing
objectives in a target market.

 It consists of basic decisions on marketing

expenditures and marketing mix elements.
3-69
 THANK YOU
FOR YOUR
ATTENTION!!!