Analyzing the Marketing

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

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 3

Developments in Markets
1. Demographic shifts (aging, in UK 25 % of children lives
with one parent, 31 % of the pop lives alone)
2. Shifts in political power in the world
3. Megabrands attacked by low-priced competitors
4. Increased power of distributors
5. No special marketing staff departments
6. Demanding consumers
7. Growth of social networking
8. Growth of a 24 hour economy
9. Growth of the Internet. Fragmentation of the media
10. People Planet Profit becomes more important
 4

This all leads to marketing managers having to face the

following principal challenges:
• Increased and increasing levels of competition, price
competition, customer service, product quality
• Increasing emphasis on product innovation
• Less predictable customer needs
• Emergence of new market segments
• Growing power of distribution channels
• Growing environmental (‘green’) concerns
• Increases in governmental regulation
• European integration
• Increasing advertising and promotional costs.
 5

Market and
Environmental Analysis
The changing business environment (or the
emergence of a new marketing reality)
• All businesses in the world face a faster pace of
environmental change and therefore
• a greater degree of environmental uncertainty
 6

Analysing the environment

• Marketing strategy must develop out of a detailed
understanding of the environment.
• This is recommended to be done in a stepwise manner. The
process includes four principal stages:
1. The initial audit of the environment (how does it look like
basically; in what sense will it change over the next few
years?)
2. An assessment of the organization’s position within the
environment and its ability to cope with environmental
pressures (how to do this in detail will be discussed in
chapter seven)
3. Identification of emerging opportunities and threats and an
assessment of the organization’s strengths to manage these
effectively.
4. The preliminary identification of the marketing strategy.
Marketing Environment
• System of Resources
▫ Demographic environment
▫ Natural environment
• System of Meaning
▫ Sociocultural environment
▫ Technological Environment
▫ Political-Legal Environment
• System of Behavior
▫ Economic environment
System of Resources
• Population
▫ Size
▫ Birth rate, death rate
▫ Age composition
▫ Urban versus rural
▫ Geographical density
• Land
▫ Area
▫ Principal crops
▫ Natural barriers
• Infrastructure
▫ Communication
▫ Transportation
System of Meaning
• Political
▫ Stability and continuity of government
▫ Political structure
▫ Degree of government participation
• Cultural
▫ Habits
▫ Ethnic background and religion
• Sociological
▫ Social class and mobility
▫ Ideological stratification
• Legal
▫ Code versus common law
▫ Rules of competition, copyrights, patents, packaging
• Technology and science
System of Behavior
• Structure, development of economy
▫ Degree of industrialization
▫ Agriculture, industrial and service specialization
▫ Degree of self-sufficiency
▫ Level of economic growth and development
▫ Competitive and market structure of the economy
The Macro environment

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 14

Analysing the environment

The first step (the initial audit of the environment) can be
done with
1. an PEST (Political, Economic, Social and Technological)
analysis
2. followed by an assessment of the nature of
environment. This is concerned with answering three
questions: 1. how uncertain is the environment? 2.
what are the sources of this uncertainty?; and 3. how
should this uncertainty be dealt with?
3. The answers to these questions are dependent on the
nature of the environment in terms of whether it is
simple, dynamic and complex
 15

Environmental position (step 1)

• The company’s environmental position depends on:
1. the environment (simple, dynamic, complex) and
on
2. the organization itself (a. interactions with the
environment are routine and standardised or not;
b. receptivity of management to negative
environmental pressures and c. company’s
freedom of manoeuvre).
• With increasing complexity and decreasing
stability, uncertainty will increase
 16

The nature of the marketing

environment
• The marketing environment consists of forces that
lie outside the organization while they influence the
company’s marketing management.
• The environment has two distinct components:
the micro-environment and the macro-environment.
• The micro-environment is closest to the company
and has direct influence on its ability to deal with its
markets (company itself, suppliers, distribution
network, customers, competitors).

G&W - Ch. 5 -TW

 17

The macro-environment
• The macro-environment is a broader set of forces
that have a bearing upon the company (including
economic, demographic, technological, political,
legal, social and cultural factors).
• The environmental forces are largely non-
controllable, but often large companies can take
action to influence external factors and actors (for
instance by lobbying; market power).
• Authors have given recognition to the volatility and
potential malevolence of environmental factors.
 18

Strategic windows
• The term strategic window is used to describe the fact
that there are often only limited periods when the ‘fit’
between the ‘key requirements’ of market and the
particular competences of a firm competing in that
market is at an optimum.
• Investment in a product line or market area has to be
timed to coincide with periods in which a strategic
window is open, i.e. where a close fit exists.
Disinvestment should be considered if the company
appears not to be able to cope.
• The consequences of failing to identify strategic
windows can, of course, be significant and are typically
manifested in terms of a loss of opportunity, market
share or competitive advantage.
 19

G&W - Ch. 5 -TW

The political, economic, social and

technological environments
(PEST) The political (and legal) environment
• The political and legal environment is composed of laws,
pressure groups and government agencies, all of which exert
some influence on companies and individuals in society.
• The legislative framework has led to an increasing amount of
legislation to protect companies from each other (such as
anti-trust laws), protect consumers and protect society from
irresponsible business behaviour.
• The marketing planner should be aware of current laws and
the possible direction of new legislation (also following public
interest groups in the area of sustainability issues).
• It is also important to be aware of country differences in this
respect. In general, it is about political risk.
The Macroenvironment
Political and Social Environment
Legislation regulating business is intended to protect
– companies from each other
– consumers from unfair business practices
– the interests of society against unrestrained business behavior

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The Macroenvironment
Political and Social Environment
▫ Increased emphasis on ethics
▫ Socially responsible behavior
▫ Cause-related marketing

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 The Macroenvironment
Cultural Environment
The cultural environment consists of institutions and other
forces that affect a society’s basic values, perceptions, and behaviors.

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 The Macroenvironment
Cultural Environment
Core beliefs and values are persistent and are passed on from parents to
children and are reinforced by schools, churches, businesses, and
government.
Secondary beliefs and values are more open to change and include
people’s views of themselves, others, organizations, society, nature, and the
universe.

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 24

The economic and physical

environments
• We see some changes which cannot be ignored:
• Changing economic and political power (going
to China and India etc.)
• A higher degree of economic inter-connection
• Rising debt levels (and political movement to
address this)
• High levels of Third World debts
• Rapidly fluctuating commodity prices
• Very different patterns of consumer expenditure.
The Macroenvironment
The Natural Environment
Trends in the Natural Environment
▫ Growing shortages of raw materials
▫ Increased pollution
▫ Increased government intervention
▫ Developing strategies that support environmental
sustainability

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The Macroenvironment
Natural Environment
Environmental sustainability
involves developing strategies and
practices that create a world economy
that the planet can support
indefinitely.

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 27

The social, cultural and demographic

environments
• Demographic development is exerting the greatest
influence on demand.
• There is a strong relationship between population
and economic growth, while the absolute size of the
population acts as the boundary condition
determining potential or primary demand.
• A detailed understanding of the size, structure,
composition and trends of the population is
therefore of fundamental importance to the
marketing planner.
• Fortunately, there is plenty of statistical information
on demographic developments.
 28

Worldwide demographic developments

1. A growing the world’s population,
2. A slowdown in birth rates in many developed countries,
3. An aging population, as advances in medical care allow
people to live longer (also growing amount of empty-
nesters),
4. Changing family structures (later marriages, fewer
children, increased divorce rates, more working wives,
more career women),
5. Higher levels of education,
6. Geographical shifts (esp. growing urbanization),
7. A growth in the number of people willing to commute
long distances to work.
The Macroenvironment
Demographic Environment
• Demography is the study of human populations—size, density, location,
age, gender, race, occupation, and other statistics.
• Demographic environment involves people, and people make up
markets.
• Demographic trends include changing age and family structures,
geographic population shifts, educational characteristics, and population
diversity.

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The Macroenvironment
Demographic Environment

• Baby Boomers – born 1946 to 1964

• Generation X – born between 1965 and 1976
• Millennials – born between 1977 and 2000
• Generation Z – born after 2000

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 The Macroenvironment
Demographic Environment
Generational marketing is important in
segmenting people by lifestyle or life stage instead of
age.

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The Macroenvironment
Demographic Environment

Markets are becoming more diverse.

▫ International
▫ National
▫ Ethnicity
▫ Gay and lesbian
▫ Disabled

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The Macroenvironment
Technological Environment
• Most dramatic force in changing the
marketplace
• New products, opportunities
• Concern for the safety of new products

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 34

The technological environment

Technological advance is a force for ‘creative destruction’ (new products have
knock-out effects for existing products). For industry this means: change or die.
Technology influences not only companies but also the entire society.
In this area the marketing planner should pay attention to:
1. The accelerating pace of technological change
2. Unlimited innovational opportunities
3. Higher research and development budgets
4. Some industries focus on minor product improvements that are essentially
defensive (rather than focusing on major product advances)
5. A greater emphasis upon the regulation of technological change to
minimize adverse effects on society (such as safety and health in the
workplace, healthy food, cleaner energy, pollution ceilings).
Careful technological monitoring is necessary to ensure that emerging
opportunities are not ignored or missed. This requires more market-oriented
rather than product-oriented research.
A Company’s Marketing Environment
Microenvironment consists of the actors close to the company that affect its
ability to serve its customers—the company, suppliers, marketing
intermediaries, customer markets, competitors, and publics.

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The Microenvironment

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The Microenvironment
Suppliers
• Provide the resources to produce goods and services
• Treat as partners to provide customer value

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The Microenvironment
Marketing Intermediaries

Marketing intermediaries are firms

that help the company to promote, sell,
and distribute its goods to final buyers.

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The Microenvironment
Marketing Intermediaries

Physical
Resellers distribution
firms

Marketing
Financial
services
intermediaries
agencies

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 The Microenvironment
Competitors

Firms must gain strategic advantage by positioning their

offerings strongly against competitors’ offerings in the minds
of consumers.

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The Microenvironment
Publics
Any group that has an actual or potential interest in or impact on an
organization’s ability to achieve its objectives:
▫ Financial publics
▫ Media publics
▫ Government publics
▫ Citizen-action publics
▫ Local publics
▫ General public
▫ Internal publics

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The Microenvironment
Customers
• Consumer markets
• Business markets
• Reseller markets
• Government markets
• International markets

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Marketing Process

HBR (2000), Note on Marketing Strategy

Marketing in the European
Union: The European
Consumer Fact or Fiction?
Three Reasons for the EU
• Prevent a future war between France and Germany
• Protect Europe against the Soviet Union
• Rebuild the European Economy
 The European Union: Some Facts

! 447 Million Consumers in 27 countries

! Austria: 8,9 million consumers
! Belgium: 11,5 million consumers
! Denmark: 5,8 million consumers

! Finland: 5,5 million consumers

! France: 67,0 million consumers
! Germany: 83,0 million consumers

! Greece: 10,7 million consumers

eece: 10,4 million consumers
 The European Union: Some Facts

! Ireland: 4,9 million consumers

! Italy: 60,3 million consumers
! Luxembourg: 0,6 million consumers
! Netherlands: 17,3 million consumers
! Portugal: 10,3 million consumers
! Spain: 46,9 million consumers
! Sweden: 10,2 million consumers
Expansion of the European Union 2004
Czech Lithuania
Cyprus Malta
Estonia Poland
Hungary Slovakia
Latvia Slovenia

75 million additional consumers

Expansion of the European Union
2007 and 2013

In 2007
• Romania
• Bulgaria
26,4 million additional consumers
•29 million
additional
In 2013
consumers
• Croatia
4 million additional consumers
Brexit – UK Leaves EU
• Referendum June 23, 2016
• Article 50 signed March 2017
• 31 January 2020 UK leaves the EU
• 65 million consumers

• Brexit deal included

elements of the divorce
• Transition period ends
December 31, 2020
Future expansion EU

• Countries on the Balkan?

• Turkey?
 Treaty of Rome
Freedom of Movement for:

!People
!Goods

!Services

!Capital
 The 1992 White Paper (1985)

! The white paper of the Commission of the

European Union of June 1985 proposed
the complete elimination of non-tariff
barriers by 1992
 The 1992 White Paper (1985)

! The white paper of the Commission of

the European Union of June 1985
proposed the complete elimination of
non-tariff barriers by 1992
! These non-tariff barriers can be divided

into three types:

 The 1992 White Paper (1985)

! The white paper of the Commission of the

European Union of June 1985 proposed
the complete elimination of non-tariff
barriers by 1992
! These non-tariff barriers can be divided

into three types:

– Physical barriers
 The 1992 White Paper (1985)

! The white paper of the Commission of

the European Union of June 1985
proposed the complete elimination of
non-tariff barriers by 1992
! These non-tariff barriers can be divided

into three types:

– Physical barriers
– Technical barriers
 The 1992 White Paper (1985)

! The white paper of the Commission of

the European Union of June 1985
proposed the complete elimination of
non-tariff barriers by 1992
! These non-tariff barriers can be divided

into three types:

– Physical barriers
– Technical barriers
– Fiscal barriers
 The Single European Act
! The completion of the Internal Market by
12/31/1992
! Recognition of the various legal systems
of the member states (jam example)
! Decision-making through qualified
majority vote instead of unanimity
 The Single European Act

! The completion of the Internal Market by

12/31/1992
! Recognition of the various legal systems of

the member states

! Decision-making through qualified

majority vote instead of unanimity

 Treaty of Maastricht

!Political Union
!Monetary Union
 European Monetary Union

! Two criteria for the EMU are:

– Total Government Debt should be less than
60% of GNP
– Budget Deficit should be less than 3% of
GNP
! Only two countries comply with EMU
terms as of June 1995:
– Germany
– Luxembourg
 European Monetary Union

! Three other criteria for the EMU are:

– currency stability
– price stability (inflation not higher than
1.5% over the 3 EU countries with the
lowest inflation rates)
– interest rates
The European Union:
The Supply Side
European Marketing Mix
• Supply side perspective on
▫ distribution
▫ promotion
▫ product/services
▫ pricing
European Advertising
• There are at least 50 different laws restricting
advertising to children
• Some examples:
▫ in the Netherlands: confectionery ads can not be
aimed at children, after 8 p.m., toothbrush symbol
▫ war toys can not advertised in Spain and Germany
▫ France prohibits children from being presenters of
products or to appear without adults
European Product Standards
• Any product that is approved in one country can be
sold in other European countries
• European Product Liability Laws - Importer is
responsible
Differences in price of gasoline
• Based on differences in taxation
• Production costs are similar
• Small differences in transportation costs
The European Union:
The Demand Side
The Household Production Function

Input Output

Labor market time Income

Income Market
+ Shopping Time Goods

Market Good +
Production &
Maintenance Time Commodities

Commodities +
Consumption Time Satisfaction
Population Demographics
Differences
in GNP
Per capita
in the EU
Number of
Cars per
1000 inhabitants
in the EU
Availability of
Mobile phones
and
Internet
Demand side
• Income (level, distribution and disposition)
• Consumption patterns
• Shopping Behavior (stores, opening hours)
• Time (shopping, maintenance, production,
comsumption/leisure, labor market time)
• Education (level, literacy rate)
• Capital goods (Microwave, housing, telephone,
washer, dryer, etc…)
EU Population Density
Persons/Square KM
Belgium 323
Denmark 119
Germany 245
Ireland 51
Netherlands 354
Portugal 110
UK 232

USA 30
European Housing
• Different infrastructure:
▫ Size of housing
– 2 out of 15 EU countries 3 rooms highest percentage
– 4 out of 15 EU countries 4 rooms highest percentage
– 9 out of 15 EU countries 5 rooms highest percentage
Convergence of European Consumer?
• In a study over a 10 year period it was found that
consumption patterns of European Consumers
didn’t change in a direction indicating convergence.
• The study included 14 different product categories:
Clothing, Food, Beverages (Alcoholic and Non-
Alcoholic), Tobacco, Housing, Energy, Household,
Health, Leisure and Education, Personal Transport,
Hotels and Catering, Personal Care and Others!!
 Convergence of European
Consumers

•Expenditure •Country A
s by •Country C
category
•Country B

•time
What does this all
mean???