1. Introduction to Marketing (MC4050)
Lecture Week 4
The Marketing Environment

2. Learning Outcomes
Define the broad categories of factors that affect the marketing environment
Explain the distinction between the microenvironment and the macro environment
Understand the influences at work within each of these categories and their importance to marketing decisions
Explain how companies respond to environmental change

3. The marketing environment

4. The Marketing Environment
A Definition
The actors and forces outside marketing
that affects management’s ability to develop and maintain successful transactions with its target customers
Successful companies know the vital importance of
constantly watching and adapting to changing environment

5. Marketing environment
Environment continues to change rapidly.
More than any other group in the company, marketers must be the trend trackers and the opportunity seekers.
Marketing research and marketing intelligence to collect information about the marketing environment
Spends more time in the customer and competitor environments
By carefully studying the environment
Marketers can adapt their strategies to meet new market place challenges and opportunities

6. Marketing environment-Micro
Actors close to the company that affects its ability to serve its customers
The company
Suppliers
Marketing intermediaries
Customers markets
Competitors and
Publics
All these actors combine to make up company’s value delivery network

7. Marketing environment- Macro
Consists of the larger societal forces that affect the microenvironment
Political/legal
Economic
Sociocultural
Technological
Environmental

8. The Macro-Environment (PESTEL)
Political/Legal
*The EU
*National gov’t
*Local gov’t
*Regulatory bodies
*Trade associations
Economic
*Market structures
*Gov’t policy
*Trading blocks
*Taxation
*Interest rates
Sociocultural
*Demographics
*Culture
*Attitudes
*Current issues
*Ethical issues
Technological
*Products
*Materials
*Distribution
*Marketing/admin
Environmental
*Climate change
*Sustainable sourcing
*Product disposal
*Natural resources

9. How to monitor changes in the external environment
Environmental scanning –
the process of monitoring and analysing the marketing environment of a company.
Environment scanning is done by:
The use of SWOT (Strengths, Weaknesses,Opportunities, Threats) analysis
Anticipating change, spotting emerging opportunities
Spotting potential problems early enough to remedy them before they cause damage
Different organisations adopt different approaches and commit different resources to monitoring and evaluating changes in the environment.

10. Microenvironment- Company
In designing marketing plans, marketing management takes other company groups into account
Top management, finance, R&D, operations, accounting
All 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
Marketing manager must work closely with other company departments.

11. Microenvironment- Company
The Company - key questions:
Do all of the departments operate a culture that is focused on ‘think customer’?
Do they all work together to provide superior customer value and satisfaction?
Could they be structured better in order to achieve these objectives?

12. Microenvironment- Suppliers
An examination of the firms and individuals
that provide the resources needed by the company and its competitors
to produce goods and services
Suppliers are a vital link in the overall
‘value delivery system’
Must keep an eye on
supply availability, supply shortages or delays, labour strikes.
This will affect sales on short run and damage customer satisfaction in long run.
Eg wall mart. It helps them to test new products in its stores. Its supplier development department publishes a supplier proposal guide and maintains a supplier website. This will help suppliers to navigate the complex wall mart buying process.

13. Microenvironment- Suppliers
Marketing managers also monitor the price trend of their key inputs
Rising supply cost may force price increases
Can harm the company’s sales volume
Treat suppliers as a partners in creating and delivering customer value
E.g. Wall Mart.
It helps them to test new products in its stores.
Its supplier development department publishes a supplier proposal guide and maintains a supplier website.
This will help suppliers to navigate the complex wall mart buying process.

14. Microenvironment: Intermediaries
Organisations that help the company to
promote, sell and distribute its goods and services to final buyers
They include
re-sellers,
physical distributors,
marketing-services agencies and
financial intermediaries
Must partner with marketing intermediaries to improve the performance of entire system.

15. Intermediaries- Resellers
They are distribution channel firms that help the company find customers or make sales to them
E.g. wholesalers, retailers
Large and growing resellers compared to old days.
Such as Wall Mart, Tesco.
These kind of re-seller have high bargaining power with manufacturing firm.

16. Intermediaries: physical distribution firms
Help the company to
stock and move good from their point of origin to their destination.
E.g. warehouse and transportation firms.
Working together with them to balance the factors such as
cost, safety and speed.

17. Intermediaries: marketing services agencies
Marketing services agencies are
marketing research firms,
advertising agencies,
media firms and
marketing consulting firms
They help the company target and promote product to the right markets

18. Intermediaries: financial
Financial intermediaries helps
financial transaction or
insure against the risks associated with the buying and selling of goods.
For e.g.
bank,
credit companies,
insurance companies etc.

19. Microenvironment: Customers
A vital factor that clearly has to be examined in great detail - there are up to five types of customer markets:
Consumer
individuals and households that buys for personal consumption
Business
buys goods and services for further processing or for use in production
Reseller
buys to resell at profit
GOVERNMENT MARKETS ARE MADE UP OF GOVERNMENT AGENCIES THAT BUYS GOOD AND SERVICES TO PRODUCE PUBLIC SERVICES OR TRANSFER THE GOODS AND SERVISES TO OTHERS WHO NEED THEM.

20. Microenvironment: Customers
Government
government agencies that buys goods and services to produce public services or transfer the goods and services who need them
International
buyers in other countries, including all of the above
GOVERNMENT MARKETS ARE MADE UP OF GOVERNMENT AGENCIES THAT BUYS GOOD AND SERVICES TO PRODUCE PUBLIC SERVICES OR TRANSFER THE GOODS AND SERVISES TO OTHERS WHO NEED THEM.

21. Microenvironment: Competitors
To be successful
Company must provide greater customer value and satisfaction than competitors do
They have to gain competitive advantage by
positioning their offer against those of the competition
You need to draw a competitive map of all your organisation’s competitors and then decide which of them are worthy of an in-depth analysis

22. Microenvironment: Publics
Any group that has
an actual or potential interest in or impact on an organisation’s ability to achieve its objectives
Seven types of publics:
Financial
media
government
citizen action publics
Local publics
general public/local groups
internal
CITIZEN ACTION- CONSUMER ORGANIZATION, ENVIRONMENTAL GROUPS, minority groups AND OTHERS.

23. Types of publics Financial: Media publics: Government publics:
Influence the company’s ability to obtain funds
Banks, investment houses, and stockholders
Media publics:
Carry news, features and editorial opinions
They include newspapers, magazines, radio and television stations
Government publics:
Management must take government developments into account
Such as product safety, truth in advertising etc.

24. Types of publics Citizen action publics: Local publics:
Company’s marketing decision may be questioned by
Consumer organisations, environmental groups, minority groups and others
Local publics:
Includes neighbourhood resident and community organisation
Large companies appoint community relation officer to deal with
Community, attend meetings, answer questions and contribute to worthwhile causes

25. Types of publics General public: Internal publics:
Need to be concerned about the general public attitude towards its products and activities
Internal publics:
Include workers, managers, volunteers and the board of directors
Newsletters and other means to inform and motivate internal publics

26. The Macro-Environment (PESTEL)
These are external forces
which may not immediately affect the relationship that a company has with its customers, suppliers & intermediaries.
But macro-environmental changes will alter the nature of these relationships.

27. Political/Legal
Changes in the political environment National/ EU/ Globally affect business
Political stability crucial for market stability
Government legislation is a major influence on economic environment & businesses
Local/National/European/International law & bylaws all influence business
Regulation & deregulation of business sectors
Trade associations

28. Macro environment Political
Consists of Laws, government agencies and pressure groups that influence and limit various organisations and individuals in a given society
legislation regulating business
ethical and social responsibility

29. Legislation regulating business
The system work best with at least some regulation.
Well prepared regulation can
encourage competition and ensure fair markets for goods and services.
Thus government develop public policy
to guide commerce that limits business for the good of society as a whole.
Business law protect unfair competition.

30. Legislation regulating business
For e.g. no permission to advertise alcohol and cigarettes in TV in Nepal.
Thailand requires food processors selling national brands to
also market low price brands so that
low income consumers can find economy brands on the shelves.
US has many laws covering issues such as
Competition, fair trade practices, environmental protection, product safety, truth in advertising, consumer privacy, packaging, pricing etc.

31. Increased emphasis on ethics and socially responsible actions
Beyond written laws and regulations,
business is also governed by social codes and rules of professional ethics.
Encourages managers to
simply ‘do the right things’
These socially responsible firms
actively seek out to protect the long run interests of their consumers and the environment.

32. Economic Markets require buying power as well as people
The economic environment consist of factors that affect
consumer purchasing power and spending patterns.
Nations vary greatly in their levels and distribution of income.

33. Macro environment- economic
Subsistence economy
Country consume most of their own agricultural and industrial output.
These countries offer few market opportunities
Industrial economies
Constitute rich market for many different kind of goods.
Marketers must pay close attention to major trends and consumer spending patterns
Both across and within their world markets

34. Economic trends Change in income:
Different level of income at different times such as
more in boom and less in recession
Value marketing:
ways to offer financially cautious buyer greater value
Right combination of product quality and good service at fair price
The distribution of income has created tiered market targeting customers at different level.
Upper class, middle class, working class, under class

35. Economic trends Changing consumer spending patterns:
Consumer at different income level have different spending patterns.
Changes in economic variables such as income, cost of living, interest rates and savings and borrowing patterns have a large impact in the market place.

36. Other Economic Factors
Economic growth and unemployment
The state of the economy and business cycle
Interest rates
Personal disposable income
Currency fluctuations
The BRICS, and other growth economies

37. Sociocultural
Consumer attitudes & changes in taste and fashion for products and services over time
Role of women & balance between population of women and men and age distribution
Race, subcultures and occupation
The importance of leisure time
The role of the family
Changes in the structure of population globally
Geographical distribution of populations

38. Macro environment: sociocultural
The study of human populations in terms of
size, density, location, age, sex, race, occupation and other statistics
It is of particular importance because
it involves people and people make up markets
Population is growing at an explosive rate
8.1 billion by the year 2030

39. Macro environment: sociocultural
The worlds large and highly diverse population poses both opportunities and challenges.
for example in china
regulation to control the population by allowing only one child has created huge market opportunities for children’s product.
Chinese children’s known as ‘little emperors and empresses’
Similarly at the other end of this is the opportunity of senior citizens business.

40. Macro environment: sociocultural
Marketers need to keep close track of demographic trends and developments in their markets both at home and abroad.
They track
Changing age and family structures,
Geographic population shifts,
Educational characteristics, and
Population diversity.

41. Changing age and family structures
Changing age structure of the population
Several generational groups
The baby boomers
Born between 1946 and 1964, 27.5% of the population
Spend about $2.1 trillion annually
Generation X
Born between 1965 and 1976 with population of 49 million
Grown up during recession and corporate downsizing, therefore more cautious economic outlook
$1.4 trillion purchasing power
Generation Y
Born between 1977 and 1994
76 million population
Marge teen and young adult market
Requires creative marketing approaches

42. The changing family Traditional family in US US today:
Husband, wife and children, and may be grand parents
US today:
Married couple with children make up only 23%
Married couple without children: 28%
Single parents 16%
No family households: 32%
More women at work
Rise in child day care business

43. Geographic shift in population
Great migration movements between and within countries
Movement from rural to metropolitan areas
Such population shifts interests marketers as people from different region buy differently

44. Educational characteristics
Population of
Better educated
More white collar
More professional
Rising number of educated people will increase demand for
Quality products
Books, magazines
Travel
PC and internet services

45. Increasing diversity Countries vary in their ethnic and racial makeup
Japan: mostly Japanese
US: diverse groups of many nations
International market: more diverse
Proper segmentation and target market required by business to meet their needs

46. Macro environment: sociocultural
Institutions and other forces that affect society’s basic values, perceptions, preferences and behaviours
Peoples basic beliefs and values are shaped by the society where they grow.

47. Cultural characteristics
Following cultural characteristics affects marketing decision making.
persistence of cultural values
Core belief and values have high degree of persistence
For e.g. American believe in working, getting married, giving to charity and being honest
Core belief passed on from parents to children
Reinforced by schools, churches, businesses and governments
shifts in secondary cultural values
Secondary beliefs and values are more open to change
For e.g. impact of popular personalities on young people hair style and clothing norm

48. Technological Allows new goods and services to be offered to consumers
New technology can allow existing products to be made more cheaply, thereby lowering an organisations costs and widening their markets
Technological development allows for new methods of distributing goods and services (e.g. online marketing and selling)
New opportunities for companies to communicate with their target customers

49. Macro environment: Technological
Forces that create new technologies, creating new product and market opportunities
fast pace of change
high R&D budgets
concentration on minor improvements
increased regulation

50. Environmental Consumer concerns have led to demand for:
products not tested on animals
more natural ingredients in products
ingredients from renewable resources and/or processed with minimal environmental impact
organic/non-factory farmed produce, particularly in light of the recent debate on genetically modified foods
health orientated foods and drinks with minimal artificial additives
Recyclable/refillable packaging/minimal packaging
Less energy consumption

51. Trends in natural environment
shortage of raw materials
Firms using such scarce resources face large cost increases
increased pollution
Industry will almost always damage the quality of natural environment
Increased government actions

52. Macro environment- environmental
Environmentally friendly companies are developing environmentally sustainable strategies and practices.
More environmentally responsible products
E.g. recyclable or biodegradable packaging, energy efficient operations
Company are learning that environmentally responsible actions can also be good business.

53. Responding to marketing environment
Three kind of companies
Who makes thing happen
Who watch things happen
Who wonder what’s happened.
Proactive approach vs reactive approach to respond to the marketing environment

54. Responding to changes in the environment
Organisations who ignore or fail to read the marketing environment may not survive in the competitive market
Successful organisations anticipate change and spot emerging opportunities
Successful organisations spot potential problems early enough to remedy them before they cause damage
Organisations must be aware of:
Information overload
Problems associated with handling & sorting information
Failure to appreciate the significance of information