Fundamentals of Marketing Strategy

University of London

Lesson 1: What is the marketing environment audit?

Model answer – Defining the market environment audit

The marketing environment audit is the comprehensive and periodic analysis of an organisation’s
marketing environment, objectives, strategies and activities, undertaken to establish problem areas and
opportunities.

Marketing environment terminology

Design a poster to explain the following related terms, including any similarities and differences
between them:

situational analysis
environmental scanning
environmental audit.

Activity – Reflection: the marketing environment

What do you find most interesting about the marketing environment in which businesses operate? You
may focus on a particular organisation, including, if you wish, the one you currently work for or one you
have worked for in the past. Note down your reflections in your study journal.

Micro and Macro environment factors to be analyzed for companies

There are lot of factors that needs to be considered for carrying out any business. Organizations never
exist or operate in "Vacuum". It operates in an environmental which is basically divided into two broad
categories. The fist being the micro-environment and the second being the macro-environment. Let us
understand both of them as detailed below:

Micro Environmental factors

Micro environment refers to the environment which is in direct contact with company and affects the
routine activities of business straight away. It is a collection of forces or factors that are close to the
organization and can influence the performance as well as the day to day activities of the firm. Six
components of micro environment are: Company, Suppliers, Marketing Intermediaries, Competitors,
General Public and the Customers.
The Company

Various groups in an organization like the top management, finance, operations, human resourcing,
research and development (R&D), accounting etc needs to be taken into account by the marketing
management for designing the marketing plans. Marketing managers needs to work closely with them
as that will help them to make decisions with broader strategies and plans. With marketing team taking
the lead, other departments like manufacturing, finance, legal and human resources teams takes the
responsibility for understanding the customer needs as well as creating customer value.

Suppliers

The suppliers are an important part of an organization’s overall customer value delivery network. They
are the ones who provide inputs to business like raw materials, parts, cutting tools, equipments etc. The
quality and reliability of vendors are very essential for smooth functioning of business of any
organization. Marketing managers must have a control on the suppliers availability and costs. Any
shortage or delays of supplies, in terms of natural disasters or other events can cause damage to sales
in short run and lead to customer dissatisfaction in the long run.

Marketing Intermediaries

The marketing intermediaries are also an important component for company’s overall value delivery
network. They include those individuals or firms who help the company in promotion, sales and
distribution of its goods to the final buyers. Examples includes middlemen (agents or merchants) who
help the company find customers, physical distribution firms such as warehouses or transportation firms
that help the company in stocking and moving goods from their origin to the destination and marketing
service agencies such as market research and advertising firms.

Competitors

Competitors are rivals who compete with the organization in market and resources as well. According to
the marketing concept, a company needs to provide greater customer value and satisfaction that its
competitors, in order to be successful. The marketers must not only try to simply adapt to the needs and
demands of target customers, but also try to attain strategic advantage against the competitors by
positioning their products strongly in the market.

General Public

The public refers to the group of people who have an actual or potential interest in company’s product
or who can have an impact on the organizations ability to achieve its objective. There are seven types of
publics identified in a company’s marketing environment which includes financial publics, media publics,
government publics, citizen-action publics, internal publics, local publics and general public.

Customers

The most important actors in the company’s microenvironment are its customers. The whole of value
delivery network aims to engage the target customers and create strong relationships with them. There
are five types of customer markets that companies might try to target. These include consumer markets,
business markets, government markets, reseller markets, and the international markets.

Macro Environmental factors

Macro environment refers to the major external and uncontrollable factors that influence the decision
making of an organization. A company does not operate alone in its business environment, but operates
in a larger context. It comprises of forces that provide opportunities, but at the same time also pose
threats to company. Six components of macro environment are Demographic, Economic, Natural,
Technological, Political and Cultural environments.
Demographic environment

Demography can be defined as the study of human population in context of size, density, age, location,
gender, race, occupation and other statistics. The marketers have special interest in the demographic
environment because it consists of people and people are the driving force for development of markets.
The large and diverse demographics offer both opportunities as well as challenges for businesses.

Economic environment

The economic environment consists of factors that can affect consumer purchasing power as well as the
spending patterns. As an example, it is not advisable for a company to start exporting its goods to a
country before having examined the citizens spending patterns. Important economic criteria includes
GDP, GNI, Import duty rate, unemployment, inflation, spending patterns as well as the disposable
personal income.

Natural environment

It refers to the natural resources or physical environment that are required as inputs by marketers or
which is affected by the marketing activities. The ecological conditions have become a crucial factor to
consider as the environmental concerns have grown strongly in the recent years. Example, air and water
pollution, floods, droughts, etc.

Technological environment
Technology has a crucial influence in the macro environment. An organization needs to perform a
thorough research on the spread and use of technology, before investing in any of marketing activities.
The company needs to have an understanding of the technology penetration as well as user interface
technology in the region and make plans accordingly for their communication and campaigns.

Political environment

The developments in the political environment strongly affect the marketing decisions. This involves
laws, government agencies, as well as the pressure groups that can influence or give constrains to
various individuals or organizations in a given society.

Cultural environment

The cultural environment links to factors which affects the basic values, preference, perceptions and
behavior of the society. Organizations needs to understand the cultural beliefs and practices prevalent
in society for marketing decision making. Failure of companies in understanding foreign cultures can
lead to many cultural blunders. For example, a symbol having a positive meaning in one culture can
have a negative meaning in some other culture.

In conclusion, success of any marketing campaigns is highly dependent on the micro and macro
environmental factors. Any strategic marketer should have an in-depth consideration of these factors for
any decision making. Considering these factors can boost the success rates of marketing campaigns for
any organization as well as increase the reputation of brand in long term.