MU-CBE-Marketing Management

CHAPTER TWO

2.1. The Marketing Environment

Marketing environment the actors and forces outside marketing that affect marketing
management’s ability to build and maintain successful relationships with target customers.

More than any other group in the company, marketers must be environmental trend trackers and
opportunity seekers. Although every manager in an organization should watch the outside
environment, marketers have two special aptitudes. They have disciplined methods marketing
research and marketing intelligence for collecting information about the marketing
environment. They also spend more time in collecting data about customer and competitor
environments. By carefully studying the environment, marketers can adapt their strategies to
meet new marketplace challenges and opportunities.

Marketing Intelligence is the systematic collection and analysis of publicly available information
about consumers, competitors, and developments in the marketing environment. The goal of
competitive marketing intelligence is to improve strategic decision making by understanding the
consumer environment, assessing and tracking competitors’ actions, and providing early
warnings of opportunities and threats. Similarly

The marketing environment consists of a microenvironment and a macro environment. The

micro environment consists of the actors close to the company that affect its ability to serve its
customers. Such microenvironment includes the company, suppliers, marketing intermediaries,
customer markets, competitors, and publics. The macro environment consists of the larger
societal forces that affect the microenvironment. Demographic, economic, natural, technological,
political, and cultural forces are some of the macro environments. We look first at the company’s
microenvironment.

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Micro Environment

2.1.1. Micro Environment

a. 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,
operations, and accounting. All of these interrelated groups form the internal environment.

b. Suppliers

Suppliers form an important link in the company’s overall customer value delivery network.
They provide the resources needed by the company to produce its goods and services. Supplier
problems can seriously affect marketing. Marketing managers must watch supply availability and
costs.

c. Marketing Intermediaries

Marketing intermediaries help the company promote, sell, and distribute its products to final
buyers. They include resellers, physical distribution firms, marketing services agencies, and
financial intermediaries.

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- Resellers are distribution channel firms that help the company find customers or make
sales to them. These include wholesalers and retailers who buy and resell merchandise.
Selecting and partnering with resellers is not easy.
- Physical distribution firms: are firms that help the company to 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 that help the company target and promote its
products to the right markets.
- 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.

Like suppliers, marketing intermediaries form an important component of the company’s overall
value delivery network. In its quest to create satisfying customer relationships, the company
must do more than just optimize its own performance. It must partner effectively with marketing
intermediaries to optimize the performance of the entire system.

d. Competitors

The marketing concept states that, to be successful, a company must provide greater customer
value and satisfaction than its competitors do. Thus, marketers must do more than simply adapt
to the needs of target consumers. They also must gain strategic advantage by positioning their
offerings strongly against competitors’ offerings in the minds of consumers. No single
competitive marketing strategy is best for all companies. Each firm should consider its own size
and industry position compared to those of its competitors.

e. Publics

The company’s marketing environment also includes various publics. A public is any group that
has an actual or potential interest in or impact on an organization’s ability to achieve its
objectives.

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f. Customers

Customers are the most important actors in the company’s microenvironment. The aim of the
entire value delivery network is to serve target customers and create strong relationships with
them. The company might target any or all five types of customer markets: Consumer markets,
Business market, reseller markets, Government markets and international markets.

2.1.2. Macro Environment

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. The six major forces in the company’s
macro environment:

a) The Demographic Environment

Demography is the study of human populations in terms of size, density, location, age, gender,
race, occupation, religion, nationality education and other statistics. Marketers have to analyze
the marketing variables so that we can develop and distribute products depending on their need
and wants. A change in the world demographic environment has major implications for business.
Let’s look the most common demographic trends.

 The Changing Age Structure of the Population

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Thus, marketers need to form more precise age-specific segments within each group. More
important, defining people by their birth date may be less effective than segmenting them by
their lifestyle, life stage, or the common values they seek in the products they buy.

 The Changing Family

The traditional household consists of a husband, wife, and children (and sometimes
grandparents). Yet, the once American ideal of the two-child, two-car suburban family has lately
been losing some of its luster. For example if a hotel has a family entertainment room, it has to
consider the average family size.

 Geographic Shifts in Population

This is a period of great migratory movements between and within countries. Product
distribution is affected by the geographic location of the populations.

b) The Economic Environment

People alone do not make market. They must have money to spend and willingness to spend it.
Total purchasing power is a function of current income, prices, savings and credit availability.
Markets require purchasing power of the people. The economic environment consists of
economic factors that affect consumers’ purchasing power and spending patterns. Marketers
must pay close attention to major trends and consumer spending patterns both across and within
their world markets.

 Changes in Consumer Spending

Economic factors can have a dramatic effect on consumer spending and buying
behavior.

 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.

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 Inflation and Deflation: and increase or decrease in the general price result in
inflation or deflation. The marketer should consider the inflation of deflation in
his/her marketing activities.
c) The Natural Environment

The natural environment involves the natural resources that are needed as inputs by marketers
or that are affected by marketing activities.

Marketers should be aware of several trends in the natural environment like the following.

 The growing shortages of raw materials: Air and water may seem to be infinite
resources, but some groups see long-run dangers.
 Increased pollution: Industry will almost always damage the quality of the natural
environment. Consider the disposal of chemical and nuclear wastes; the dangerous
mercury levels in the ocean; the quantity of chemical pollutants in the soil and
food supply; and the littering of the environment with non biodegradable bottles,
plastics, and other packaging materials.
 An increased government intervention in natural resource management: The
governments of different countries vary in their concern and efforts to promote a
clean environment. Some, such as the German government, vigorously pursue
environmental quality. Others, especially many poorer nations, do little about
pollution, largely because they lack the needed funds or political will.
d) The Technological Environment

These are forces that create new technologies, creating new product and market opportunities.
The technological environment is perhaps the most dramatic force now shaping our destiny.
Technology has released such wonders as antibiotics, robotic surgery, miniaturized electronics,
smart phones, and the internet. It also has released such horrors as nuclear missiles, chemical
weapons, and assault rifles. It has released such mixed blessings as the automobile, television,
and credit cards. Our attitude toward technology depends on whether we are more impressed
with its wonders or its blunders. New technologies can offer exciting opportunities for marketers.

New technologies create new markets and opportunities. However, every new technology
replaces an older technology. For example digital photography hurt the film business. When old
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industries fought or ignored new technologies, their businesses declined. Thus, marketers should
watch the technological environment closely. Companies that do not keep up will soon find their
products outdated. And they will miss new product and market opportunities.

e) The Political and Social Environment

The political environment consists of laws, government agencies, and pressure groups that
influence or limit various organizations and individuals in a given society. Marketing decisions
are strongly affected by developments in the political environment. The political environment
consists of laws, government agencies, and pressure groups that influence or limit various
organizations and individuals in a given society.

1) Legislation Regulating Business

Even the most liberal advocates of free-market economies agree that the system works best with
at least some regulation. Well-conceived regulation can encourage competition and ensure fair
markets for goods and services. Thus, governments develop public policy to guide commerce
sets of laws and regulations that limit business for the good of society as a whole. Almost every
marketing activity is subject to a wide range of laws and regulations.

Why is Business Legislation Enacted?

Business legislation has been enacted for a number of reasons.

The first is to protect companies from each other. Although business executives may praise
competition, they sometimes try to neutralize it when it threatens them. So laws are passed to
define and prevent unfair competition.

The second purpose of government regulation is to protect consumers from unfair business
practices. Some firms, if left alone would make shoddy products, invade consumer privacy,
mislead consumers in their advertising, and deceive consumers through their packaging and
pricing. Unfair business practices have been defined and are enforced by various agencies.

The third purpose of government regulation is to protect the interests of society against
unrestrained business behavior. Profitable business activity does not always create a better
quality of life. Regulation arises to ensure that firms take responsibility for the social costs of
their production or products.
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2) Increased Emphasis on Ethics and Socially Responsible Actions

Written regulations cannot possibly cover all potential marketing abuses, and existing laws are
often difficult to enforce. However, beyond written laws and regulations, business is also
governed by social codes and rules of professional ethics.

f) The Cultural Environment:

The cultural environment consists of institutions and other forces that affect a society’s basic
values, perceptions, preferences, and behaviors. People grow up in a particular society that
shapes their basic beliefs and values. They absorb a worldview that defines their relationships
with others. Cultural factors strongly affect how people think and how they consume. So
marketers are keenly interested in the cultural environment. They also should be responsible
citizens. The following cultural characteristics can affect marketing decision making.

• 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. Core beliefs and values are passed on from parents to children and are
reinforced by schools, churches, business, and government. 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. For example, family-planning marketers could
argue more effectively that people should get married later than not getting married at all.

• Shifts in Secondary Cultural Values

Although core values are fairly persistent, cultural swings do take place. Consider the impact of
popular music groups, movie personalities, and other celebrities on young people’s hairstyling
and clothing norms. Marketers want to predict cultural shifts to spot new opportunities or threats.
The major cultural values of a society are expressed in people’s views of themselves and others,
as well as in their views of organizations, society, nature, and the universe.

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Responding to the marketing Environment

There are three kinds of companies regarding their response to the marketing environment: those
who make things happen, those who watch things happen, and those who wonder what’s
happened.

Many companies view the marketing environment as an uncontrollable element to which they
must react and adapt. They passively accept the marketing environment and do not try to change
it. They analyze environmental forces and design strategies that will help the company avoid the
threats and take advantage of the opportunities the environment provides.

Other companies take a proactive stance toward the marketing environment. Instead of letting the
environment define their strategy, craft a strategy that defines your environment. Rather than
assuming that strategic options are bounded by the current environment, these firms develop
strategies to change the environment.

Even more, rather than simply watching and reacting to environmental events, these firms take
aggressive actions to affect the public and forces in their marketing environment. Such
companies hire lobbyists to influence legislation affecting their industries and stage media events
to gain favorable press coverage. They run “advertorials” (ads expressing editorial points of
view) to shape public opinion. They press lawsuits and file complaints with regulators to keep
competitors in line, and they form contractual agreements to better control their distribution
channels. By taking action, companies can often overcome seemingly uncontrollable
environmental events.

Marketing management cannot always control environmental forces. In many cases, it must
settle for simply watching and reacting to the environment. But whenever possible, smart
marketing managers will take a proactive rather than reactive approach to the marketing
environment.

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In other ways the marketing environment can be categorized under internal and external
environment. The components in the company, where by the company can easily affect, are
internal environments and all the rest are external environments.

Something that might facilitate or negatively affect-factor-environment

Marketers should give due attention of marketing environment. This can be achieved when the
required data from customers, competitors… are gathered via marketing research or marketing
intelligence.

Based on their logical proximity to the organization (Macro and Micro)

Based on scope and ease of control (Internal and External)

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