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MARKETING ENVIRONMENT
In order to correctly identify opportunities and monitor threats, the company must begin with a thorough understanding of the marketing environment in which the firm operates. The marketing environment consists of all the actors and forces outside marketing that affect the marketing managements ability to develop and maintain successful relationships with its target customers. Though these factors and forces may vary depending on the specific company and industrial group, they can generally be divided into broad micro environmental and macro environmental components. For most companies, the micro environmental components are: the company, suppliers, marketing channel firms (intermediaries , customer markets, competitors, and publics which combine to make up the companys value delivery system. The macro environmental components are thought to be: demographic, economic, natural, technological, political, and cultural forces. The wise marketing manager knows that he or she cannot always affect environmental forces. !owever, smart managers can take a proactive, rather than reactive, approach to the marketing environment. "s marketing management collects and processes data on these environments, they must be ever vigilant in their efforts to apply what they learn to developing opportunities and dealing with threats. #tudies have shown that e$cellent companies not only have a keen sense of customer but an appreciation of the environmental forces swirling around them. %y constantly looking at the dynamic changes that are occurring in the aforementioned environments, companies are better prepared to adapt to change, prepare long&range strategy, meet the needs of todays and tomorrows customers, and compete with the intense competition present in the global marketplace. "ll firms are encouraged to adopt an environmental management perspective in the new millennium. " companys marketing environment consists of the actors and forces outside marketing that affect marketing managements ability to develop and maintain successful relationships with its target customers. ' . %eing successful means being able to adapt the marketing mi$ to trends and changes this environment. ( . )hanges in the marketing environment are often *uick and unpredictable. + . The marketing environment offers both opportunities and threats. , . The company must use its marketing research and marketing intelligence systems to monitor the changing environment. - . #ystematic environmental scanning helps marketers to revise and adapt marketing strategies to meet new challenges and opportunities in the marketplace. The marketing environment is made up of a:

1. Micro environmental 2. Macro-environment.

1. Micro Environmental
The microenvironment consists of five components. The first is the organi.ations internal environment/its several departments and management levels/as it affects marketing management0s decision making. The second component includes the marketing channel firms that cooperate to create value: the suppliers and marketing intermediaries (middlemen, physical distribution firms, marketing&service agencies, financial intermediaries . The third component consists of the five types of markets in which the organi.ation can sell: the consumer, producer, reseller, government, and international markets. The fourth component consists of the competitors facing the organi.ation. The fifth component consists of all the publics that have an actual or potential interest in or impact on the organi.ations ability to achieve its ob1ectives: financial, media, government, citi.en action, and local, general, and internal publics. #o the microenvironment consists of si$ forces close to the company that affect its ability to serve its customers: a. The company itself (including departments . b. #uppliers. c. 2arketing channel firms (intermediaries . d. )ustomer markets. e. )ompetitors. f. 3ublics.

1. The Company ! Microenvironment

"s discussed earlier the companys microenvironment consists of si$ forces that affect its ability to serve its customers. 4ets discuss these forces in detail:

a. The Company
The first force is the company itself and the role it plays in the microenvironment. This could be deemed the internal environment. ' . Top management is responsible for setting the companys mission, ob1ectives, broad strategies, and policies. ( . 2arketing managers must make decisions within the parameters established by top management. + . 2arketing managers must also work closely with other company departments. "reas such as finance, 5 6 7, purchasing, manufacturing, and accounting all produce better results when aligned by common ob1ectives and goals. , . "ll departments must 8think consumer9 if the firm is to be successful. The goal is to provide superior customer value and satisfaction.

". #$pplier!

#uppliers are firms and individuals that provide the resources needed by the company and its competitors to produce goods and services. They are an important link in the companys overall customer 8value delivery system.9 ' . :ne consideration is to watch supply availability (such as supply shortages . ( . "nother point of concern is the monitoring of price trends of key inputs. 5ising supply costs must be carefully monitored.

c. Mar%etin& Interme'iarie!
2arketing intermediaries are firms that help the company to promote, sell, and distribute its goods to final buyers. ' . Re!eller! 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. + . 5esellers often perform important functions more cheaply than the company can perform itself. !owever, seeking and working with resellers is not easy because of the power that some demand and use. (hy!ical 'i!tri"$tion )irm! help the company to stock and move goods from their points of origin to their destinations. ;$amples would be warehouses (that store and protect goods before they move to the ne$t destination . Mar%etin& !ervice a&encie! (such as marketing research firms, advertising agencies, media firms, etc. help the company target and promote its products. *inancial interme'iarie! (such as banks, credit companies, insurance companies, etc. help finance transactions and insure against risks.

'. C$!tomer!
The company must study its customer markets closely since each market has its own special characteristics. These markets normally include: ' . Con!$mer mar%et! (individuals and households that buy goods and services for personal consumption . ( . +$!ine!! mar%et! (buy goods and services for further processing or for use in their production process . + . Re!eller mar%et! (buy goods and services in order to resell them at a profit . , . Government mar%et! (agencies that buy goods and services in order to produce public services or transfer them to those that need them . - . International mar%et! (buyers of all types in foreign countries .

e. Competitor!

;very company faces a wide range of competitors. " company must secure a strategic advantage over competitors by positioning their offerings to be successful in the marketplace. <o single competitive strategy is best for all companies.

). ($"lic!
" public is any group that has an actual or potential interest in or impact on an organi.ations ability to achieve its ob1ectives. " company should prepare a marketing plan for all of their ma1or publics as well as their customer markets. =enerally, publics can be identified as being: ' . Financial publics&&influence the companys ability to obtain funds. ( . 2edia publics&&carry news, features, and editorial opinion. + . =overnment publics&&take developments into account. , . )iti.en&action publics&&a companys decisions are often *uestioned by consumer organi.ations. - . 4ocal publics&&includes neighborhood residents and community organi.ations. > . =eneral publics&&a company must be concerned about the general publics attitude toward its products and services. ? . Internal publics&&workers, managers, volunteers, and the board of directors.

2. 2")5: ;<@I5:<2;<T
The )ompanys 2acro 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. There are si$ ma1or forces (outlined below in the companys macro environment. There are si$ ma1or forces (outlined below in the companys macro environment. a. 7emographic. b. ;conomic. c. <atural. d. Technological. e. 3olitical. f. )ultural.

a. 7emographic ;nvironment
Demography is the study of human populations in terms of si.e, density, location, age, se$, race, occupation, and other statistics. It is of ma1or interest to marketers because it involves people and people make up markets. 7emographic trends are constantly changing. #ome more interesting ones are. ' . The worlds population (though not all countries rate is growing at an e$plosive rate that will soon e$ceed food supply and ability to ade*uately service the population. The greatest danger is in the poorest countries where poverty contributes to the difficulties. ;merging markets such as )hina are receiving increased attention from global marketers. ( . The most important trend is the changing age structure of the population. The population is aging because of a slowdown in the birth rate (in this country and life e$pectancy is increasing. The baby boomers following Aorld Aar II have produced a huge 8bulge9 in our populations age distribution. The new prime market is the middle age group (in the future it will be the senior citi.en group . There are many subdivisions of this group. a . =eneration B&&this group lies in the shadow of the boomers and lack obvious distinguishing characteristics. They are a very cynical group because of all the difficulties that have surrounded and impacted their group. b . Echo boomers (baby boomlets are the large growing kid and teen market. This group is used to affluence on the part of their parents (as different from the =en Bers . :ne distinguishing characteristic is their utter fluency and comfort with computer, digital, and Internet technology (sometimes called <et&=ens . c . =enerational marketing is possible, however, caution must be used to avoid generational alienation. 2any in the modern family now 8telecommute9&&work at home or in a remote office and conduct their business using fa$, cell phones, modem, or the Internet In general, the population is becoming better educated. The work force is be&coming more white&collar. 3roducts such as books and education services appeal to groups following this trend. Technical skills (such as in computers will be a must in the future. The final demographic trend is the increasing ethnic and racial diversity of the population. 7iversity is a force that must be recogni.ed in the ne$t decade. !owever, companies must recogni.e that diversity goes beyond

ethnic heritage. :ne the important markets of the future are that disabled people (a market larger any of our ethnic minority groups .

b. ;conomic ;nvironment
The economic environment includes those factors that affect consumer purchasing power and spending patterns. 2a1or economic trends in the Cnited #tates include: ' . 3ersonal consumption (along with personal debt has gone up ('DEFs and the early 'DDFs brought recession that has caused ad1ustments both personally and corporately in this country. Today, consumers are more careful shoppers. ( . Val$e mar%etin& (trying to offer the consumer greater value for their dollar is a very serious strategy in the 'DDFs. 5eal income is on the rise again but is being carefully guarded by a value& conscious consumer. + . Income 'i!tri"$tion is still very skewed in the C. #. and all classes have not shared in prosperity. In addition, spending patterns show that food, housing, and transportation still account for the ma1ority of consumer dollars. It is also of note that distribution of income has created a 8two&tiered market9 where there are those that are affluent and less affluent. 2arketers must carefully monitor economic changes so they will be able to prosper with the trend, not suffer from it.

c. <atural ;nvironment
The natural environment involves natural resources that are needed as inputs by marketers or that are affected by marketing activities. 7uring the past two decades environmental concerns have steadily grown. #ome trend analysts labeled the specific areas of concern were:

1,. #hortages of raw materials.

#taples such as air, water, and wood products have been seriously damaged and non&renewable such as oil, coal, and various minerals have been seriously depleted during industrial e$pansion.

2,. Increased pollution

is a worldwide problem. Industrial damage to the environment is very serious. Far&sighted companies are becoming 8environmentally friendly9 and are producing environmentally safe and recyclable or biodegradable goods. The public response to these companies is encouraging. !owever, lack of ade*uate funding, especially in third world countries, is a ma1or barrier.

-,. =overnment intervention

in natural resource management has caused environmental concerns to be more practical and necessary in business and industry. 4eadership, not punishment, seems to be the best policy for long&term results. Instead of opposing regulation, marketers should help develop solutions to the material and energy problems facing the world.

.,. ;nvironmentally sustainable strategies.

The so&called green movement has encouraged or even demanded that firms produce strategies that are not only environmentally friendly but are also environmentally proactive. Firms are beginning to recogni.e the link between a healthy economy and a healthy environment.

d. Technological ;nvironment
The technological environment includes forces that create new technologies, creating new product and market opportunities. ' . Technology is perhaps the most dramatic force shaping our destiny. ( . <ew technologies create new markets and opportunities. + . The following trends are worth watching: a . Faster pace of technological change. 3roducts are being technologically outdated at a rapid pace. b . There seems to be almost unlimited opportunities being developed daily. )onsider the e$panding fields of health care, the space shuttle, robotics, and biogenetic industries. c . The challenge is not only technical but also commercial&&to make practical, affordable versions of products. d . Increased regulation. 2arketers should be aware of the regulations concerning product safety, individual privacy, and other areas that affect technological changes. They must also be alert to any possible negative aspects of an innovation that might harm users or arouse opposition.

e. 3olitical ;nvironment
The political environment includes laws, government agencies, and pressure groups that influence and limit various organi.ations and individuals in a given society. @arious forms of legislation regulate business. ' . =overnments develop p$"lic policy to guide commerce&&sets of laws and regulations limiting business for the good of society as a whole. ( . "lmost every marketing activity is sub1ect to a wide range of laws and regulations. #ome trends in the political environment include:

1,. Increa!in& le&i!lation to/ a,. 3rotect companies )rom each other. ",. 3rotecting consumers )rom $n)air "$!ine!! practice!. c,. 3rotecting interests of society a&ain!t $nre!traine' "$!ine!! "ehavior.
( . )hanging government agency enforcement. <ew laws and their enforcement will continue or increase. + . Increased emphasis on ethics and socially responsible actions. #ocially responsible firms actively seek out ways to protect the long&run interests of their consumers and the environment. a . ;nlightened companies encourage their managers to look beyond regulation and 8do the right thing.9 b . 5ecent scandals have increased concern about ethics and social responsibility. c . The boom in e&commerce and Internet marketing has created a new set of social and ethical issues. )oncerns are 3rivacy, #ecurity, "ccess by vulnerable or unauthori.ed groups.

f. )ultural ;nvironment
The cultural environment is made up of institutions and other forces that affect societys basic values, perceptions, preferences, and behaviors. )ertain cultural characteristics can affect marketing decision&making. "mong the most dynamic cultural characteristics are: ' . 3ersistence of cultural values. 3eoples 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. #econ'ary beliefs and values are more open to change. ( . #hifts in secondary cultural values. #ince secondary cultural values and beliefs are open to change, marketers want to spot them and be able to capitali.e on the change potential. #ocietys ma1or cultural views are e$pressed in: a . (eople ! vie0! o) them!elve!. 3eople vary in their emphasis on serving themselves versus serving others. In the 'DEFs, personal ambition and materialism increased dramatically, with significant implications for marketing. The leisure industry was a chief beneficiary. b . (eople ! vie0! o) other!. :bservers have noted a shift from a 8me&society9 to a 8we& society.9 )onsumers are spending more on products and services that will improve their lives rather than their image. c . (eople ! vie0! o) or&ani1ation!. 3eople are willing to work for large organi.ations but e$pect them to become increasingly socially responsible. 2any companies are linking themselves to worthwhile causes. !onesty in appeals is a must. d . (eople ! vie0! o) !ociety. This orientation influences consumption patterns. 8%uy "merican9 versus buying abroad is an issue that will continue into the ne$t decade. e . (eople ! vie0 o) nat$re. There is a growing trend toward peoples feeling of mastery over nature through technology and the belief that nature is bountiful. !owever, nature is finite. 4ove of nature and sports associated with nature are e$pected to be significant trends in the ne$t several years. f . (eople ! vie0! o) the $niver!e. #tudies of the origin of man, religion, and thought&provoking ad campaigns are on the rise. )urrently, "mericans are on a spiritual 1ourney. This will probably take the form of 8spiritual individualism.9
Reference: Principles of Marketing, Philip Kotler, 12th Edition.