Marketing Environment

Marketing Management
MARKETING ENVIRONMENT
Market and Environmental Analysis

Lecture Outcomes
 The components of marketing environment
 The key elements of the environment
 How firms go about analyzing the environment
 How the environmental factors changing markets
 Factors involved on internal environments
 Key tracking and identifying opportunities in the
microenvironment
 Dynamic and complex marketing environments
 Example of each environment.
p. 02

The marketing environment consists of external factors and
forces that directly and/or indirectly impact the organization
to develop and maintain successful relationships with its
target customers.
There are two perspectives (sometimes three) namely:
1. the macro-environment,
2. the micro-environment,
3. the internal environment.
Introduction
The external environment, which includes all the
external factors—competitive, economic, political,
legal/regulatory, technological, and sociocultural—that
can exert considerable direct and indirect pressures on
both domestic and international marketing activities.p. 03

consists of the forces close to the company that
affect its ability to serve its customers, e.g.,
 the company,
 suppliers,
 marketing channel firms,
 customer markets,
 competitors and publics.
Introduction: Marketing Environment
Micro-
environment
consists of the large societal forces that affect
the micro-environment:
 Demographic environment,
 Economic environment,
 Natural environment,
 Technological environment,
 Political environment, and
 Cultural forces.
Macro-
environment
p. 04

The
Organization
Competitors
Customers
Suppliers
Distributors
Supply chain
Demography
Economic
factor
Natural
force
Technological
change
Political issue
Cultural &
Social
p. 05
Company’s Internal Environment
Marketing Environment
Fig: Marketing Environment including micro, macro and internal environment

All factors that are internal to the organization
are known as the 'internal environment'.
They are generally audited by applying the 'Five
Ms' which are Men, Money, Machinery, Materials
and Markets.
The internal environment is as important for
managing change as the external.
The internal environment can be audited using
other approaches such as
 SWOT Analysis,
 Michael Porter's Five Forces Analysis or
PEST Analysis.
Internal
environment
Introduction: Marketing Environment
p. 06

With regard to the question of how the organization monitors
the environment, there are two types of environments are:
1. Dynamic environment
2. Complex environment
p. 07
Marketing Environment
In a dynamic environment, organization is typically faced with
major change in the areas of technology and markets, with
the result that decisions can no longer be based upon the
assumption, rather than that of scientific basis.
The focus needs to be upon the future with a far greater
degree of inspirational interpretation. Idea of alternative
futures can then be used to identify the likely impact upon
consumers, suppliers, competitors, government, the financial
institutions, their probable responses.
For organizations faced with a complex environment, many of
the issues and problems to which reference has been made
are exacerbated.

Marketing analysis is based upon the answers to six questions:
1. How complex is the environment? (Complexity is a measurement of the
number of different environmental forces which have an impact, or potential impact)
2. How routine and standardized are orgn interactions with
elements of the environment?
3. How interconnected and how remote, initially, are the
significant environmental variables?
4. How dynamic and how unpredictable are the changes
taking place around the organization?
5. How receptive is mgt to the ways in which environmental
pressures adversely affect input and output processes?
6. How is flexibility of choice and to what extent is the orgn
constrained from moving into new areas?
p. 08
Questions in Environment Based Marketing

Micro Environment
Marketing management’s job is to attract and build
relationships with customers by creating value and satisfaction.
The micro-environment is made up of those elements that
are closest to the company and that exert the greatest and
most direct influence over its ability to deal with its markets.
The micro-environment includes:
 the organization itself,
 other company departments,
 suppliers,
 marketing intermediates,
 customers,
 competitors, and
 various publics, which make up the company’s market.
p. 09

Micro Environment: The Company
In designing marketing plans, marketing management takes
other company groups into account – groups such as:
 Top management,
 Finance,
 Research and development (R&D),
 Purchasing,
 Manufacturing, and
 Accounting.
All those interrelated groups form the internal environment.
 Top management,
 Finance,
 Research and development,
 Purchasing,
 Manufacturing, and
 Accounting.
p. 10

 Top management sets the company’s mission, objectives,
broad strategies and policies. Marketing plans must be
approved by top management before be implemented.
 Finance is concerned with finding and using funds to
carry out the marketing plan.
 Research and development (R&D) department focuses on
designing safe and attractive products;
 Purchasing worries about getting suppliers and materials,
 Manufacturing is responsible for producing the desired
quality and quantity of products.
 Account measures revenues and costs to help marketing.
Micro Environment: The Company
The responsibilities of all departments:
p. 11

Micro Environment: Suppliers
 Suppliers provide the resources needed by the
company to provide its goods and services,
therefore, they are linked in the company’s overall
customer value delivery system.
 Suppliers sometimes are treated as partners to
provide customer value
 Marketing managers must watch supply availability,
supply shortage or delays, labor strikes, and other
events
 Marketers must watch supply availability and pricing
 Effective partnership relationship management with
suppliers is essential
p. 12

Micro Environment: Marketing Intermediates
Marketing intermediates help the company to:
 promote,
 sell, and
 distribute its goods to final buyers.
They include:
 resellers,
 physical distribution firms,
 marketing services agencies, and
 financial intermediates.
Resellers are distribution channel firms that help company
find consumers or make sales to them. These include:
 wholesalers, and
 retailers.
Physical distribution firms help the company to stock and
move goods from their profits of origin to their destinations.
p. 13

Micro Environment: Customers
Consumer markets consist of individuals and households
that buy goods and services for personal consumption;
Business markets buy goods and services for further
processing or for use in their production process;
Reseller markets buy goods and services to resell at a profit;
Reseller
Market
Consumer
Market
Business
Market
Government
Market
International
Market
Govt. markets are made up of
govt agencies that buy goods
& services to produce public
services or transfer the
goods and services to other;
International markets consist
of buyers in other countries,
plus consumers, producers,
resellers and governments.Fig. Different types of consumers
p. 14

Micro Environment: Competitors
A company must provide greater customer value and
satisfaction than competitors do.
Marketers must:
 do more than simply adapt to the needs of target
consumers,
 also must gain strategic advantage by positioning
their offerings strongly against competitor’s
offerings in the minds of consumers.
 provide better customer satisfaction than
competitors do.
 consider its own size and industry position
compared to those of its competitors.
No single marketing strategy is best for all companies.
p. 15

 Brand Competitors - Market similar products to same
customers at similar prices, e.g., pharmaceutical products
 Category Competitors - Market different products that solve
same problem or satisfy same basic customer need, e.g.,
stationary products, software service etc
 Total Budget Competitors - Other competitors for the
disposable income of the customer
Micro Environment: Competitors
Three types of competitors are:
Benefit Provided:
Brand
Competitors
Category
Competitors
Generic
Competitors
Self Study
p. 16

Micro Environment: Publics
 Financial publics influence
the company’s ability to
obtain funds. Banks,
investment houses, and
stockholders are the major
financial publics.
 Media publics carry news,
features, and editorial
option. Newspapers, magazines,
and radio-television stations are
included in this group.
A public is any group that has an actual or potential interest
in or impact on an organization’s ability to achieve its
objectives.
There are seven types of publics:
Government
public
Media
public
Internal
public
Financial
public
General
public
Local
public
Citizen action
public
Fig: Different types of publics
p. 17

Micro Environment: Publics
 Government publics take government developments into
account. Marketers often consult company’s lawyers on
issues of product safety, advertising truth & other matters.
 Citizen action public - company’s marketing decisions may
be questioned by consumer organizations, environmental
groups, minority groups and others.
 Local publics, include neighborhood residents and
community organizations. Large company usually appoints
a community relations officer to deal with the community,
attend meetings and contribute to worthwhile causes.
 General public - company needs to be concerned about the
general public’s attitude toward its products and activities.
 Internal public, includes workers, managers, volunteers,
and board of directors. When employees feel good about their
company, this positive attitude spills over to external publics.
p. 18

Macro Environment
p. 19
The company and all of the other actors operate in a
larger macro-environment of forces that shape
opportunities and pose threats to the company.
Six major forces in the company’s macro-environment are:
1. Demographic environmental,
2. Economic forces,
3. Natural issues,
4. Technological issue,
5. Political forces, and
6. Cultural forces.
DE
EF
NI
TI
PF
CF
Macro
Environment

p. 20
 Demography is the study of human populations in terms
of size, density, location, age, gender, race, occupation
and other statistics.
 Demographic environment is of major interest to
marketers because it involves people, and people make
up markets.
 The world population is growing at an explosive rate. It
now totals more than 6 billion and will exceed 7.9 billion
by the year 2025. A growing population means growing
human needs to satisfy.
 Exam: People in SSWD (single, separated, widowed, divorced) group
need smaller apartments, & food packed in smaller size.
Macro Environment: Demography

p. 21
People are frequently migrating from less
developed region (less comfortable) to
comparatively much developed (comfortable)
region.
In Bangladesh, most poor people tend to shift in
Dhaka city for a work.
The garments industry offers work for women and
children. Men are engaged in different works, at least
they pull rickshaw, pull non-powered cars etc.
Migration:
Two main factors involved are:
1. Migration, and
2. Diversity
Exam:
Reason:

p. 22
Americans are a mobile people with about 12 million US
households (more than one out of every ten) moving each year.
Such population are of interest to marketers because people
in different regions buy differently.
Please see two countries. Japan, where almost
everyone is Japanese.
The united States, with people from virtually all
nations.
USA has often been called a ‘melting pot’ in which
diverse groups from any nations and cultures
have melted into a single, more homogeneous
whole, seems to become a Salad Bowl.
Diversity:

p. 23
Exam: The US population is:
72 percent White,
13 percent African Americans
11 percent Hispanic
3 percent Asian
1 percent native (Eskimos and Aleuts)
The US-Asian population also has grown rapidly in
recent years and now totals about 3 percent of the
population.
During the next half century, the proportions of
both Hispanic and Asians will more than double.
Such population shifts interest marketers because people
in different regions buy differently. Also Americans have
been moving from rural to metropolitan areas continuously.

Therefore, more people are:
• Divorcing or separating
• Choosing not to marry
• Choosing to marry later
• Marrying without intending to have children
• Increased number of working women
• Stay-at-home dads
Bangladesh Issue:
• Living in: Rural 72%, Urban 21%, Semi-urban 7%
• People: about 57% of population is below 25 years of age
• Birth rate: High population growth rate- 1.57%
• Religion: mostly Muslim, with about 10% from other religions
• Literacy: 47.9%, 15+ year old literacy rate increased 12% in 10 yrs.
• Family: Trend of nuclear families in urban areas.
• Population density: highest population density in the world
• Facilities: most public facilities are in urban area, i.e., internet.
p. 24

People make up the market, the basis for any market:
 Pre- and early adolescents, age upto 12
 View TV ads as “just advertising”
Baby &
Tweens
Teens  Spend approximately 72 hours per week tuned in
electronically
 View shopping as a social sport
 Adapting online shopping
 Born between 1979 and later
 Surpassed population of baby boomers in 2010
 Two Stages: 1) Just passed teenage,
2) On careers and started families.
 Gen Y found to be: inquisitive, quick shoppers, opinionated,
diverse, multi-taskers, good time managers, environmentally aware.
Generation
Y
 Born between 1965 and 1978
 Independent, tough, adaptable, cautious, and
skeptical
 Max buying capability, home owner, ought to goal
 Avid buyers of the latest technology and recreation
Generation
X
p. 25

p. 26
 Economic environment consists of factors that affect
consumer purchasing power and spending patterns.
 Marketers need to consider the state of a trading
economy in the short and long-terms.
 Some countries have subsistence economics – they
consume most of their agricultural and industrial output
e.g. India. These countries offer few market
opportunities.
 Marketers must pay close attention to major trends and
consumer spending patterns both across & their markets.
Macro Environment: Economic
 Industrial economies are richer markets

Also on:
 Changes in income
 Value marketing, involves
ways to offer financially
careful buyers greater value
- right combination of quality
and service at a fair price
The marketers should have to look at:
•Interest rates,
•The level of inflation employment level per capita,
•Long-term prospects for the economy GDP per capita.
p. 27

Ernst Engel: ‘Engel’s law’
As income rises:
• The percentage spent on food declines
• The percentage spent on housing remains constant
• The percentage spent on savings increases
Economic situation changes in consumer spending patterns
 GDP 6.7%
 Inflation ~10%
 Exchange Rate BDT 82 per USD
 Steady economic performance despite global slowdown.
Bangladesh Issue:
p. 28

p. 29
Natural environment involves the natural resources that
are needed as inputs by marketers or that are affected
by marketing activities.
Macro Environment: Natural
Marketing trends:
 Shortages of raw materials
 Increased pollution
 Increase government intervention
 Environmentally sustainable strategies
1. First issue involves growing shortage of raw materials. Air
and water seem to be infinite resources, but some non-
renewable resources, such as oil, coal etc. are limited.
Marketing Issues:

p. 30
3. A third issue is increased governmental intervention in
natural resource management. The governments of
different countries vary in their concern and efforts to
promote a clean environment. Example: In Germany,
government vigorously pursue environmental quality.
Otherwise, many poor nations, like Bangladesh, do little
about pollution.
4. Environmentally sustainable strategies
2. The second issue is increasing pollution. Industry will
almost always damage the quality of the natural
environment. Consider the disposal of chemical and
nuclear wastes, the dangerous mercury level in the
ocean, etc.

 Arong, a famous show-piece and ready-made
garment selling division;
 Kumudini, as like as Arong
- eliminated polystyrene and polyethylene
carton and shopping bags and now uses
smaller, recyclable paper wrappings and
napkins.
 Bata, a worldwide shoe manufacturing company
uses such type of cartons in place of
polyethylene bags.
 McDonald’s eliminated polystyrene cartons and
now uses smaller, recyclable, biodegradable
paper wrapping and napkins
Example:
p. 31

Macro Environment: Technology
Technological environment is perhaps the most
dramatic forces that create new technologies,
creating new product and market opportunities.
Examples:
 New antibiotics (saving lives),
 Organ transplants (Enhancing lives),
 Notebook computers (making easy life),
 Cell phone & Internet (easy communication).
Marketing stimulating innovation are:
 Build scenarios
 Enlist the Web
 Talk to early adopters
 Use marketing research
 Create an innovative environment
 Cater to entrepreneurs
p. 32

Macro Environment: Technology
did not know about automobiles, air phones,
radios, or the electric light.
did not know about television, aerosol cans,
automatic dishwashers, room air-
conditioners, antibiotics or computers.
did not know about Xerography, synthetic
detergents, tape recorders, birth control
pills, or earth satellites.
did not know about personal computers, CD
players, VCRs, or the World Wide Web.
every new technology replaces an older
technology; old industries are fighting to
survive, adapting new technologies… .
The technological environment changes rapidly. Example:
Abraham Lincoln
Woodrow Wilson
Franklin D. Roosevelt
John F. Kennedy
Barak Obama ??
p. 33

Macro Environment: Political
Marketing decisions are strongly affected by developments in
the political environments, that consists of laws, government
agencies and pressure groups that influence and limit various
organizations and individuals in a given society.
The political arena has a huge influence upon the regulation
of businesses, and the spending power of consumers and
other businesses. Therefore, considering issues:
 Stability in the political environment;
 Government policy and laws on rules & regulations, tax;
 Government's position on marketing ethics;
 Government's policy on the total economy;
 Government’s view on culture and religion;
 Trading agreements between governments such as EU,
SAFTA, NAFTA, ASEAN, or others?p. 34

Macro Environment: Political
Political and legal environment of marketing:
Laws and regulations on technology
 New technology
 Society
 Businesses
 Consumers
 Legislation affects marketing varies state by state
Oregon: limits utility advertising to 0.5 percent of net income.
California: bans fats in restaurants and bakeries.
State or regional laws
Regulatory agencies
 Consumer product safety commission
 Federal trade commission
 Food & Drug administration
p. 35

Macro Environment: Culture
The cultural environment is made up of institutions and other
forces that affect a society’s basic values, perceptions,
preferences and behaviors.
The major cultural values of a society are expressed:
 people’s view of themselves and others,
 views of organizations,
 society,
 nature, and
 the universe.
Some people seek personal pleasure, wanting fun, change,
and escape.
Other seek self-realization through religion, recreation, or the
avoid pursuit of careers of other life goals.
Example: International Lux soap has four colorful and natural contaminations
p. 36

SWOT analysis is a tool for auditing an organization and its
environment. It is the first stage of planning and helps
marketers to focus on key issues.
SWOT stands for strengths, weaknesses, opportunities, and
threats. Strengths and weaknesses are internal factors.
Once key issues have been identified, they feed into
marketing objectives.
It can be used in conjunction with other tools for audit and
analysis, such as PEST analysis and Porter's Five-Forces
analysis.
It is a very popular tool with marketing students because it
is quick and easy to learn.
Evaluation of Environmental Analysis
SWOT analysis:
p. 37

SWOT analysis:
A strength could be:
 Your specialist marketing expertise,
 A new, innovative product or service,
 Location of business,
 Quality processes and procedures,
 Any other aspect of business that adds value to
product or service.
A weakness could be:
 Lack of marketing expertise,
 Undifferentiated products or services (i.e. in
relation to competitors),
 Location of business,
 Poor quality goods or services,
 Damaged reputation.
Environmental Analysis: SWOT
p. 38

A threat could be:
 A new competitor in home market,
 Price wars with competitors,
 Competitor has a new, innovative product or service,
 Competitors have superior access to channels of
distribution,
 Taxation is introduced on product or service.
Opportunities and threats are external factors.
An opportunity could be:
 A developing market such as the internet,
 Mergers, joint ventures or strategic alliances,
 Moving into new market segments that offer
improved profits,
 A new international market,
 A market vacated by an ineffective competitor.
SWOT analysis:
p. 39
Environmental Analysis: SWOT

p. 40
Org's marketing environment is made up from:
1. The internal environment e.g. staff (or internal
customers), office technology, wages and finance, etc.
2. The micro-environment e.g. our external customers,
agents and distributors, suppliers, our competitors, etc.
3. The macro-environment e.g. Political (and legal) forces,
Economic forces, Socio-cultural forces, and Technological forces.
These are known as PEST factors.
PEST analysis:
Political
Economic
Socio-cultural
Technological
The economic factor holds the followings-
 Interest rates,
 The level of inflation employment level per capita,
 Long-term prospects for the economy Gross Domestic
Product (GDP) per capita, and so on.
Recapping
slide 27
Environmental Analysis: PEST

p. 41
The political environment answers the following questions-
 How stable is the political environment?
 Will government policy influence laws that regulate
or tax on business?
 What is the government's position on marketing
ethics?
 What is the government's policy on the economy?
 Does the government have a view on culture and
religion?
 Is the government involved in trading agreements
such as EU, NAFTA, ASEAN, or others?
Political Environment:

p. 42
Social and cultural env. influences on business vary from
country to country. Factors include:
 What is the dominant religion?
 What are attitudes to foreign products and services?
 Does language impact upon the diffusion of products
onto markets?
 How much time do consumers have for leisure?
 What are the roles of men and women within society?
 How long are the population living?
 Are the older generations wealthy?
 Does the population have a strong/weak opinion on
green issues?
Socio-Cultural Environment:

p. 43
Technology is vital for competitive advantage, and is a major
driver of globalization. Consider the following points:
 Does technology allow for products and services to be
made more cheaply and to a better standard of
quality?
 Do technologies offer consumers and businesses more
innovative products and services such as internet
banking, new generation mobile telephones, etc.?
 How is distribution changed by new technologies e.g.
books via the Internet, flight tickets, auctions, etc?
 Does technology offer companies a new way to
communicate with consumers e.g. banners, customer
relationship management (CRM), etc.?
Technological Environment:

p. 44
Michael Porter's Five Forces Analysis
Five forces analysis, is similar to other tools for environmental
audit, such as PEST analysis, but tends to focus on the single,
stand alone, business or SBU (Strategic Business Unit) rather
than a single product or range of products.
Five forces looks at five key
areas namely the
1. Threat of entry,
2. The power of buyers,
3. The power of suppliers,
4. The threat of substitutes,
5. Competitive rivalry.
Threat of
entry
Threat of
substitutes
Power of
buyers
Power of
suppliers
Competitive
rivalry

p. 45
Benefits associated with bulk purchasing in economies scale.
 High or low cost of entry e.g. how much will it cost for latest technology?
 Ease of access to distribution channels e.g. do competitors have
the distribution channels hemmed up?
 Cost advantages e.g. personal contacts or knowledge that larger companies
do - will competitors retaliate?
 Government action e.g. will new laws are introduced that will weaken our
competitive position? How important is differentiation e.g. champagne brands.
Environmental Analysis: Five Forces
The threat of entry.
 There is a few, large players in a market e.g. large grocery chains.
 There are a large number of undifferentiated, small
suppliers e.g. small farming businesses supplying the large grocery chains.
 The cost of switching between suppliers is low e.g. from one
fleet supplier of trucks to another.
The power of buyers

p. 46
Environmental Analysis: Five Forces
This is to be high where entry is likely, there is a threat of substitute
products, suppliers & buyers in the market attempt to control.
The power of suppliers
Threat of substitutes
Power of suppliers tends to be a reversal of power of buyers.
 Where the switching costs are high e.g. switching from one
software supplier to another.
 Power is high where brand is powerful e.g. Microsoft, Pizza Hut.
 Possibility of supplier integrating forward.
 Customers are fragmented (not in clusters) so that they
have little bargaining power e.g. Gas/Petrol stations in remote places.
Where there is product-for-product substitution e.g. email for fax,
where there is substitution, better toothpaste reduces the need for dentists.
 Where there is generic substitution, e.g., CD, DVD and flash drive.
 Could always do without e.g. cigarettes.
Competitive Rivalry

p. 47
Diffenbach has identified three distinct stages in the evolution
of corporate environmental analysis:
3. Application stage, very real attempts are made to monitor
the environment, assess the implications for change and
incorporate staff evaluations into strategy and plans.
2. Analysis stage, involves finding reliable sources of data,
compiling and examining data, develop and discuss trends,
developments and key relationships.
1. Appreciation stage, starts from emergence of books and
articles that argue the looking beyond the short term and
for considering wider implications of economic, social and
political, technological factors that make up business envt.

p. 48
Three approaches to scanning (with these being characterized by an
increasing degree of structure, systemization, sophistication and resource intensity):
Continuous models, represent a further development and
involve focusing upon business envt generally and upon the
long term as opposed to short-term and specific issues.
Periodic models, represent a general development of the
irregular system and are more systematic, resource
intensive and sophisticated. The environment is reviewed
regularly and a longer-term perspective is developed.
Irregular systems, predominate with a poorly developed
planning culture and focusing upon responding to
environmentally generated crises. The net effect is that is
simply placed finding solutions to short-term problems, with
little attention paid to identifying and assessing the impact.

p. 49
➡ Poorly structured ➡ Qualitative in nature
➡ Opinion based ➡ Poorly quantified
➡ Ambiguous in its definitions ➡ Likely to change.
➡ Available only on an irregular basis
➡ Often provided by unofficial sources
➡ Based on an insecure methodology
Continuous env. analysis is based on 3 basic premises:
1. The determinants of success are dictated by the
business environment;
2. The firm’s response to environmental change therefore
represents a fundamental strategic choice;
3. A knowledge of the business environment must precede
the acquisition of any degree of control over it.
The barriers associated with continuous env analysis are:

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