Fad – Hula Hoop; Trend – Diet/exercise; Megatrend – Electric automobilesFAD: Unpredictable, short-lived, and without social, economic, and political significance. Fads are measured in months, rather than years.Wham-0 sold 25 million Hula Hoops in its first 4 months. Pet rocks were launched in the mid-1970’s and sold 1 million units in a matter of months. Five month’s later sales were almost non-existent.TRENDS: Offer a view of the future due to their momentum and durability. The fitness/diet trend is an example, although there have been many fads within this trend, the overall movement toward healthier living has remained.MEGATRENDS: Changes that are slow to form but once established last for 7 – 10 years (or more). Megatrends influence all factors of life that impact business, culture, economics, society, and personal lives.
Where the microenvironment refers to those elements closest to the company, customers, competitors, suppliers, etc., the macroenvrionment refers to those elements that can impact a company, but cannot be controlled. These include things such as the economy, culture, demographics, politics, technology, and the natural environment.
Worldwide population growth6.8 billion in 2010; will grow to 9 billion in 2040Population age mixMexico young population; Italy oldBy 2011 in the US, those 65 and older will grow faster than the entire US population.Ethnic and other markets25 million people in the US were born in another countryHispanic’s accounted for 11 percent of the US population in the 2000 census. By 2020 Hispanics are expected to account for 18.9 percent of the population.Educational GroupsHousehold patterns - 20% of households “Married with Children”; 27% single live-alones; Single-parent families (8%); living with nonrelatives only (5%); and other family structures (8%)
Purchasing power: is the amount of goods/services one unit of currency will purchase. Purchasing power is determined by income, prices, savings, credit availability, and debt. The financial crisis in 2008-09 may have permanently changed consumer buying habits.The income distribution of a country can influence the decision to enter a specific market.
Sociocultural: The influence that both society and culture have on the views of individuals.A subculture is a group that shares a distinct culture different from the larger culture that they belong. Examples of subcultures include: Gothic, Metalhead, punk, Trekkies, biker, etc.
Opportunities can arise due to changes in the political-legal environment. But so too can threats.
Companies must be cognizant of the effects of their business on the environment and how regulations can influence its competitive position. Changes in regulations can also provide opportunities for companies, but these opportunities may only be recognized if the company includes this aspect into their strategic planning.
Basics of Marketing – MBA I
Why a product like radio declined
and now once again emerging as an
What Were the Drivers of This Change ?
Government policy ?
Other media substitutes ?
Why Market Leaders Suffered?
HLL vs. Nirma
Bajaj vs. Honda
Dot.com boom, then bust and now resurgence
HMT vs. Titan
Market leadership today cannot be taken for granted.
New and more efficient companies are able to
upstage leaders in a much shorter period.
The marketing environment consists of
actors and forces outside the organization
that affect management’s ability to build and
maintain relationships with target customers.
Environment offers both opportunities and
Marketing intelligence and research used to
collect information about the environment.
Microenvironment: actors close to the
company that affect its ability to serve its
Macro environment: larger societal forces
that affect the microenvironment.
○ Considered to be beyond the control of the
Analyzing the Macroenvironment
Needs and Trends
○ Fads – “unpredictable, short-lived, and without social, economic
and political significance”
○ Trend – “direction or sequence of events that has some
momentum & durability”
○ Megatrends – “ large social, economic, political and
technological changes that are slow to form and once in place,
they influence us for some time between 7-10 years or longer”
Identifying Major Forces
○ Suppliers, intermediaries, customers, competitors, and public –
Is their behaviour controllable?
○ A steep decline of stock market affects savings, investment,
retirement funds etc, increasing unemployment, corporate
scandals, rise of terrorism.
○ Six major forces – Demographic, economic, social-cultural,
natural, technological, political & legal.
Founded in 1998 by two Stanford
university PhD students.
Corporate mission – To organize the
world’s information and make it
universally accessible and useful.
AdWords, Analytics, Maps, Finance,
Local, Gmail, Google+, Youtube,
Then GOOGOL now
The Marketing Environment
Worldwide population growth
Population age mix
Ethnic and other markets
The World as a Village
If the world were a village of 100 people:
61 – Asian (20 Chinese, 17 Indian)
18 – Unable to read (33 have cell phones)
18 – Under 10 years of age (11 over 60
18 – Cars in the village
63 – Inadequate sanitation
67 – Non-Christian
30 – Unemployed or underemployed
53 – Live on less than $2 a day
26 – Smoke
14 – Obese
01 – Have AIDS
Source: David J. Smith and Shelagh Armstrong, If the World Were a
Village: A Book About the World’s People, 2nd ed. (Tonawanda, NY: Kids
Can Press, 2002)
Age group Total
The study of human population in terms of size, density, location,
age, gender, race, occupation, and other statistics.
The World’s large & highly diverse population pose both
opportunities & threats.
E.g. China’s policy to control population growth.
Keeping track of changing age, family structures, geographic
population shifts, educational characteristics, & population density.
World wide population estimation 8.1 billion by 2030.
Less developed regions account for 76% of population.
More developed countries growing at 0.6%
Death rate is falling
India 16.7% of world population.
Population size & growth rate.
Population Age Mix
Literacy Levels of Population
15% 34% 24% 13% 14%
66% in India
Mexico – young population & rapid population growth.
Japan – world’s oldest population.
So milk, diapers, school supplies & toys will be more imp in Mexico
than in Japan
Median age India – 23.8, Pakistan – 22.2, Sri lanka – 29.5 etc.
More population in urban areas, 29 to 37 % in 2025.
A growing middle class
Deprived households – Annual household income less than Rs.
90000, poorest economic class, unskilled or semi-skilled daily wage
Aspirers - Rs. 90000 to Rs. 200000., small farmers, small retailers,
low skilled industrial workers.
Seekers – Rs. 200000 to Rs. 500000, white collar employees, mid
level govt. officials, newly employed young postgraduates, and
medium scale traders & businesspeople.
Strivers - Rs. 500000 to Rs. 1000000, established professionals
like lawyers, doctors, CAs, MBAs, senior govt. officials, medium
scale industrialists, rich farmers.
Global Indians – In excess of Rs. 1000000, Senior corporate
executives, large business owners, topmost professionals,
politicians, film actors, big farmers, graduates from leading
Seekers & strivers
7 million households
87 million by 2025
Nandan Nilekani on Demography India – China (2009)
Growth in rural population
By 2015 rural population will increase by 906 million.
Some problems like, purchasing power, lack of proper infrastructure,
reliable supply of electricity etc.
A Changing Family System
Joint family system – able bodied men will be bread earners, women
looks after kitchen, elderly look for cultural norms & preach value to kids.
Dual income single kid (DISK)
The changing role of women
Education, more ambitious, earning more, more active member of family.
A better educated, more white-collared, more professional
More educated people will demand more quality product, books,
magazines, travel, personal computers, & internet services.
Inner state diversities are increasing
Factors that affect consumer purchasing power & spending patterns.
Industrial economy, Developing economy, Subsistence economy,
The Global Financial Crisis
Changing Income distribution & Consumer spending pattern
Ernst Engel law – As family income rises, % spent on food declines, % spent on housing remains constant, % spent on
other categories increases, % spent on savings also increases.
Growing urban middle class.
Purchase of consumer items increasing.
Current income, prices, savings, debt & credit availability.
India GDP – 4.4 % FQ 2013
Per capita income (Rs. 5,729 per month for FY 2012-13), healthy foreign exchange reserves (US$
275 billion), Inflation (CPI / WPI-9.64%)
Income Distribution –
Subprime housing loans issued in US, most stock markets in world crashed, severe lending crunch, inflation, less
exports, less FDI, less GDP growth.
In India demand for housing, construction, consumer durables & IT sector were affected most.
Lower income households declining continuously.
Destitute – annual income of Rs. 16000
Aspirants – 16000 – 22000
Climbers – 22000 – 45000
Consuming class – 45000 – 215000
Rich – more than 1000000 lakhs annual income
Demand is likely to increase, additional opportunities for new products & services, Business expansion etc.
Walt Disney markets two distinct Pooh bears to match its two-tiered
Environment & norms that largely define consumer
Society shapes the beliefs, values,
tastes & preferences.
Ethnic Diversity – one fifth of the world
Major religions – Hinduism, Islam, Sikhism, Christianity, Buddhism & Jainism
Different languages & thousands of dialects.
Customs, social systems, Values, habits, Religions & Caste Systems.
E.g. Dress codes, food habits, local advertising, regional biases for brand
Progression from traditionalism & self sacrifice to westernization &
Increased Emphasis on Ethics & Socially Responsible Actions
Socially responsible behaviour – business scandals, environment issues, online privacy
issues, transfer of digital data etc.
Cause-related marketing – linking to a worthwhile cause, selling strategy than giving
strategy. But may give company good image.
E.g. CRY greeting cards.
Made up of institutions & other forces that affect
society’s basic values, perceptions, preferences, &
Persistence of Cultural Values
Most Asians believe in working, getting married & giving
to charity and have strong faith in religion.
Core beliefs & values passed on from parents to children
& are reinforced by schools, religious institutions,
business, & government.
Secondary beliefs are more open to change. E.g. Getting
married is core belief but getting married early in life is
Shifts in Secondary Cultural Values
British left India but leaved imprints on a variety of areas like dress codes, leisure activities, & job
People’s views of themselves
People’s views of others
Patriotism theme used for promoting ideas & products on Independence day.
People’s views of Nature
Changing Attitudes towards corporations, government agencies, trade unions, universities & other
People’s views of Society
People like to stay at home to enjoy the comforts of home & connect with others through advanced
Less demand for theater going & more demand for home improvement, home office, & home
People’s views of Organizations
Some seek personal pleasure, wanting fun, change etc.
Others seek self realization through religion, recreation, or pursuit of career or other life goals.
Selects products those match their views of themselves.
Nature is finite & fragile that can be destroyed or spoiled by human activities.
Organic food products
People’s views of Universe
Moving away from materialism to spirituality.
Heightened sensitivity presents unique marketing opportunity.
E.g. Aastha TV channel, Ayurvedic treatment.
Includes Laws, Government Agencies, and Pressure Groups that
Influence or Limit Various Organizations and Individuals In a Given
Changes in tariff & quota regimes may have direct impact on the
profitability, survival of business.
Legislation Regulating Business – to encourage competition and
ensure fair market for goods & services. A good public policy is needed.
○ India – laws covering competition, fair trade practices, environmental protection,
product safety, advertising, consumer privacy packaging & labeling, pricing & other
○ To protect companies from each other, MRTP in India, to protect consumers, to
protect interest of society.
Changing Government Agency Enforcement
○ US – Federal Trade Commission, Food & Drug Administration, Federal Energy
Regulatory Commission, Environment Protection Agency etc.
○ Companies should understand laws at local, state, national & international level.
New Forms of Nontariff Barriers in Trade
○ WTO want to reduce tariff & nontariff barriers in international trade but pressures from
civil society groups created various social compliance regulations.
○ Use of child labour is not allowed for export companies.
Accelerated pace of change
Environment surgery, birth control pills
Best - Penicillin, open heart
Dangerous - Hydrogen Bomb, nerve gas, machine guns
Mixed blessings – automobiles, television, credit cards, Cell
phones, & video games.
New technology affects the economy’s growth, creates new
markets & opportunities & replace old technology.
Transistors hurt vacuum-tube industry, CDs hurt cassettes etc.
Accelerating pace of change
Unlimited Opportunities for innovation
Varying R & D budgets
Increased regulation of technological change.
Special Interest Groups
Laws, government agencies, & pressure groups.
Increase in Business Legislation
To protect companies & consumers from unfair
competition, to protect society from unfair activities, to
charge business with social costs.
Legal review procedures & guide business according to
The growth of special interest groups
Consumer protection act – Safety, Information, Choice,
Representation, Redressal & consumer education.
Involves the natural resources that are needed inputs by marketers or that are
affected by marketing activities.
Concentration of industries in one area threatening to natural environment.
Deterioration of natural environment – shortage of raw materials.
Increased pollution – disposal of chemical & nuclear waste, dangerous mercury
levels in sea, quantity of chemicals in soil & food, plastic & other packaging
Conserving natural resources
Shortage of drinking water
Increased Govt. Interventions - New regulations, environment protection agency,
Environment Sustainability – an effort to create a world economy that planet can
Companies are developing recyclable & biodegradable packaging, recycled
materials & components, better pollution controls, & more energy efficient
Political:- Governmental and legal issues
affecting how the company operates.
Regulation – Tax implication
Banning of phone use in certain circumstances
Economic:- Factors influencing the purchasing
power of customers and the company's cost of
Cost of 3G licenses (Spectrum auction process)
Cost of calls being driven down
Third world countries
Social:- Demographic and cultural aspects
of the environment which influence
customer needs and market size.
Picture phones, Smartphone
3G, 4G, 5G etc.
SMS / MMS
The Company’s Microenvironment
Company’s Internal Environment:
Areas inside a company.
Affects the marketing department’s
All departments must “think consumer” and
work together to provide superior customer
value and satisfaction.
The Company – top management, finance, R & D, purchasing,
operations, & accounting.
Provide resources needed to produce goods and services.
Important link in the “value delivery system.”
Most marketers treat suppliers like partners
Help the company to promote, sell, and distribute its goods to final buyers
○ Resellers – wholesalers, retailers
○ Physical distribution firms – to stock & move goods from their point of origin to
○ Marketing services agencies – marketing research firms, advertising agencies,
media firms, & marketing consultancy firms.
○ Financial intermediaries – banks, credit companies, insurance companies.
○ E.g. Coca cola signs on as exclusive beverage provider for fast food chains.
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
Group that has an interest in or impact on an organization's ability to achieve its
Five types of consumers – consumer markets, business markets, reseller markets,
government markets, international markets
Responding to the Marketing
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:
Running “advertorials” (ads expressing editorial point of
Forming agreements to control channels
Marketing & Other business
Finance & Marketing
Financial Dimensions – Cost & Profit history of
business, financial statements, budgets, ROI,
ROE, ROS etc.,
Marketing decisions as investment decisions.
Financial tools & criteria to evaluate investment.
Capital allocation based on expected returns.
Evaluation of M&A – both marketing & financial
Accounting & Marketing
Firms' cost allocation procedure
Use fully allocated costs rather than
variable costs depicts distorted picture
of product profitability.
Evaluation of marketing performance –
selling or advertising costs as a % of
Production & Marketing
Production capabilities determine no &
types of products which can be
Marketing – accurate sales forecast.
Change in production capacities.
Size of new plants depends on market
research based estimation of demand.
Customer Service & Marketing
Customer complaints – solved or not.
No of complaints
Type of complaints
Regular line of communication between
customer service & marketing
Procurement & Marketing
Many firms modifying products to
substitute scarce raw material with more
available, cheaper or legally available
Shortage of coffee – increase in price of
coffee beans – changes in the brand’s
R & D - Marketing
R & D – New product Development
Product design – market research
Marketing research may provide
important insights into customer’s
unsolved problem & needs.
R&D may decide the future of new
HRM & Marketing
HRM – hiring, training & management
Develop job description, screen
candidates, design training programs &
Value of human capital
Legal & Marketing
Legal function of firm, brand name
requires legal clearance, new product
approvals, pricing policies etc.
Legal dept – risk avoidance
Marketing – Risk taking
Top Management & Marketing
Provide guidance, inspiration,
encouragement & control of firms
marketing & non marketing efforts.
Consists of the set of consumers who profess a
sufficient level of interest in a market offer.
Total amount of possible sales in the market.
Total Market potential – The maximum amount
of sales that might be available to all the firms
in an industry during given period, under a
given level of industry marketing effort &
Total Market potential = potential no of buyers *
Average quantity purchased by buyer * The
Well defined geographic area
Entry / Exit decisions
Resource Allocation decisions.
Estimation of market
Estimation by analogy
Comparing data from similar countries
Problems: geography, culture, tradition and Historical
Income elasticity of demand
Market’s level of development
Demand for any product = f(income, price, competition,
provides a summary of the structure of an economy by
showing the impact of changes in the demand for one
industry’s product on other industries product
Relationship between economic sectors
Published by UN CTAD/GATT/WTO
Difference between total market potential and total
The difference could be due to
Product usage gap - increase promotion, advertising,
Product line gap - lack of product variation; latent
Distribution gap - lack of appropriate coverage
Market share is the percentage of
total sales that a company can
expect to get from the total
Eg. there are 100 gadgets sold in
a country and company A sells 43
of them, then company A has a
43% market share
you sold Gadgets for a total cost
of $860 and the people in the
country spend a total of $2,000 on
the same widgets, then the
market share is $860/$2,000 or
To calculate market share divide your
sales forecast by the total market
Increasing market share is the main
objective of the business.
Unit market share = 100*unit sales/Total
Measurement – No of buyers, % of