Chapter.2 Marketing Environment

Chapter 2
MARKETING ENVIRONMENT

1

OBJECTIVES
Main objectives:
1. Describe the environmental factors that affect the company’s
ability to serve its customers
2. Discuss how companies react to the marketing environment.

2

OVERVIEW
In this chapter, we’ll look deeper into the first step of the marketing process –
understanding the marketplace and customer needs and wants.
We’ll discover that marketing operates in a complex and changing
environment.
The actors in this environment – suppliers, intermediaries, customers,
competitors, publics & others – may work with or against the company.
Major environmental forces – demographic, economic, natural. Technological,
political and cultural – shape marketing opportunities, pose threats and affect
the company’s ability to build customer relationships.
To develop effective marketing strategies, we must first understand the
environment in which marketing operates.
Marketing environment is made up of microenvironment and
macroenvironment.

3

MARKETING ENVIRONMENT
Definition:
The actors and forces outside marketing that affect marketing
management’s ability to build and maintain successful
relationships with target customers.

4

THE COMPANY’S MICROENVIRONMENT
Microenvironment can be defined as “ the actors close to the
company that affect its ability to serve its customers – the
company, suppliers, marketing intermediaries, customer
markets, competitors and publics.

5

Company

Customers

Suppliers

Micro
environment

Publics

Intermediaries

Competitors
6

The SIX (6) elements of a company’s microenvironment:
1. The Company
- In designing marketing plans, marketing management takes
other company group into account.
- They are top management, finance, R&D, purchasing,
operation and accounting.
- All of these interrelated groups from the internal environment.
- Top management sets the company’s mission, objectives,
broad strategies and policies for the company.
- Then, marketing managers make decisions within the
strategies and plans made by top management.
- Marketing managers must work closely with other company’s
departments.
- All the department must works together in order to achieve
the company objective – to provide superior customer value &
relationships.
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2. Suppliers
- Suppliers provide the resources needed in producing
goods and services.
- Marketing managers must watch supply availability and
costs.
- Supply shortages or delays, will seriously affect marketing.
- Most marketers nowadays treat their suppliers as partners
in creating & delivering customer value.

8

3. Marketing Intermediaries
-

Intermediaries are firms that help the company to
promote, sell and distribute its goods to final buyers.
They include:

a) Resellers
- They are distribution channel firms that help the
company find customers & make sales to them.
- These include wholesalers and retailers who buy and
resell merchandise.

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b) Physical Distribution Firms
- Help the company to stock and move goods from
their points of origin to their destinations.
- E.g. warehouses.
c) Marketing Services Agencies
- Marketing research firms, advertising agencies, media
firms & marketing consulting firms that help the
company target & promote its products to the right
markets.

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d) Financial Intermediaries
- Financial intermediaries are institutions such as bank,
credit companies and insurance companies.
- These institutions helps finance transactions or insure
against the risks associated with the buying and
selling of goods.

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4. Competitors

-

-

Competitors are companies with similar offerings in the
same marketplace.
To be successful, a company must provide greater
customer value and satisfaction than its competitors do.
Company must gain strategic advantage by positioning
their offerings strongly against competitors’ offerings in
the minds of consumers.

12

5. Publics
- Public is any group that has an actual or potential interest in or
impact in an organization’s ability to achieve its objectives.
- There are seven types of publics:
a) Financial public
- Influence the company’s ability to obtain fund.
- E.g. banks, investment houses.
b) Government public
- Affect the company by passing legislations and laws that put
restriction on the company’s actions.
- Public municipality, FINAS, and other government bodies.
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c) Media public
- This group carries news, feature and editorial opinion that may
influence customers’ opinion towards the business.
- E.g. Newspapers, magazines and television station
d) Citizen-action public
- Include environmental group and minority group that can
questioned the actions of the company and put them in the
public spotlight.
- E.g. Consumer organizations.
e) Local public
- neighborhood and community organizations that will question
a company impact on the local area and the level of
responsibility of their action.

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f)
-

-

General public
Can greatly affect the company as any changes in their attitude
will affect the company.
Its consists population at large

g) Internal public
- Consists of those who employed within the organization and
deal with the organization and construction of the company’s
product.
- When employees feel good about their company, this positive
attitude spills over to external public.

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6. Customers
- Customers are the most important factor in the
microenvironment because they made up markets.
- There are FIVE (5) types of customer market:
a) Consumer markets
- Consist of individuals and households that buy goods and
services for personal consumption
- e.g. End user
b) Business markets
- Buy goods and services for further processing to produce their
own product
- Restaurants, tailors, etc.
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c) Reseller markets
- buys goods and services to resell at a profit.
- E.g. wholesalers, retailers, etc.
d) Government markets
- Consists of government agencies that buy goods to
produce public goods or transfer the goods and services
to others who need them
- E.g. hospitals, bus-stops, etc.
e) International market
- Buyers in other countries, including consumers,
producers, resellers & governments.
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THE COMPANY’S MACROENVIRONMENT

Macroenvironment is “a larger societal forces that affect the
microenvironment – demographic, economic, natural,
technological, political and cultural forces.

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Demographic

Cultural

Economic

Political

Natural

Technological
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1. Demographic Environment
- The study of human populations in terms of size, density,
location, age, gender, race, occupation and other statistics.
- Demographic is one of the most important elements in
marketing macroenviroments because it involves people and
people make-up markets.
- Marketers will depend on this factors to produce or improve
the products as these factors will influence the buying
behaviors

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2. Economic Environment
- Factors that affect consumer buying power and spending
patters.
- Changing in income poses influences on how consumers
spend their money.
- For examples, if consumer’s income increases, they will buy
luxurious goods more, spending on convenience products
will decrease at the same time.
- Changing in consumer spending pattern also influences on
how consumers spends their money.
- E.g. With the increase awareness on healthy living,
consumers tend to spend more on health products and
services than other things.
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3. Natural Environment
- Natural resources are the elements that are needed as input
by the marketers or the elements that are affected by
marketing activities.
- Marketers should be aware of several trends in the natural
environment.
- The trends are:
a) Shortages of mineral
- Shortages of mineral resources will affect the prices of
the products.
- E.g. shortages of oil will increase its price and demand for
motor vehicles may drop as well/
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b) Increased pollution
- Government will intervene if the production activities
endangered the environment.
- Example, government promotes no plastics bags days
because plastic is known as a non-biodegradable material
which can be hardly be disposed.
c) Increased government intervention
- Happens in natural resource management.
- E.g. Limiting logging activities may reduce timber supply.

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4. Technological Environment
-

-

-

Forces that create new technologies , creating new product
and market opportunities.
The R&D used in production activities can be considered as
one of the technological effort as the process will improvise
the product.
Technology may help a company to increase its productivity,
thus company should pay a close attention to the technology
as this elements will help them to flourish.
If a business doesn’t pay a close attention to technology, they
may be left behind.
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5. Political & Social Environment
-

-

Includes laws, government agencies & pressure groups that
influence and limit various organizations & individuals in a
given society.
Marketers should be aware of the law and legislation
imposed by the government, agencies and regulating bodies.
This element could give good or bad influences to the
marketers.
E.g. Government imposes the usage of helmets. This
regularity increased the demand for helmets.

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6. Cultural Environment
-

-

Institutions & other forces that affect society’s basic values,
perceptions, preferences, and behaviors.
Marketers should be aware with the cultural values of their
target market.
Some persistent values like core values cannot be changed
while secondary can be changed.
Core beliefs are passed on from parents to children. E.g.
everyone should get married.
Secondary beliefs are more open to changes. E.g. everyone
should get married in early age tend to change nowadays,
people are no longer engaged in marriage at younger age.
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COMPANY’S REACTIONS TOWARDS MARKETING
ENVIRONMENT
Company/organizations react to marketing environment in two
ways:
1) Proactive approach
2) Reactive approach

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ENVIRONMENT
Proactive approach
-

-

Company takes aggressive actions to affects the publics and
forces in their marketing environment.
Such companies even hire lobbyist to influence legislation
affecting their industries & stage media events to gain
favorable press coverage.
Example would be Air Asia operates as low cost carrier even
though there s economic downturn.

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ENVIRONMENT
Reactive approach
-

Companies that view the marketing environment as
uncontrollable elements to which they must react and adapt.
They passively accept the marketing environment and do not
try to change it.
They analyze the forces and design the strategies to avoid
the threats and taking the advantages of the opportunities
the environment provides.

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Chapter.2 Marketing Environment

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