ANALYZING THE MARKETING

ENVIRONMENT

Chapter
03
 LEARNING GOALS
1. Understand environmental forces
2. Learn how demographic and economic factors affect marketing
3. Identify trends in the firm’s natural and technological environments
4. Explore key changes in political and cultural environments
5. Realize how companies react to the marketing environment
 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

What should companies do in the constantly changing environment?

 Companies constantly watch and adapt to the changing environment
 Marketers should track the environment & be opportunity seekers.
 Marketers have disciplined methods for collecting information about
the marketing environments – marketing research
 CONT.…….
The marketing environment is made up of :
1. Microenvironment:
Includes the actors close to the company including the company,
suppliers, marketing intermediaries, customer markets, competitors,
& publics, that effect its ability to serve its customers
 These actors can be controlled by the company with its own action,
called controllable factors
2. Macro environment
Involves larger societal forces that affect the microenviroment –
demographic, economic, natural, technological, political, & cultural
forces
 Uncontrollable factors
 COMPANY’S MICROENVIRONMENT

Actors in the microenvironment

1. The company
2. Suppliers
3. Marketing intermediaries
4. Customers
5. Competitors
6. Publics

Marketing success will require building relationships with other

company departments, suppliers, marketing intermediaries,
customers, competitors & various publics, which combine to make
up the company’s value delivery network
 CONT.……

The company
 In designing marketing plans, marketing management takes other
company groups into account such as top management, finance,
research & development, purchasing, operations & accounting
 Top management sets the company’s mission, objectives, strategies
& policies whereas marketing managers make decisions within the
strategies & plans made by top management.
 Under the marketing concept, all of the functions or department
must “think consumer”. They should work in harmony to provide
superior customer value and relationships.
 CONT.……
Suppliers: Who are suppliers?
 They provide resources needed by the company to produce its goods &
services

Problems which can take place

 Supply availability – supply shortage or delays, labor strikes, & other
events can cost sales in the short run and damage customer satisfaction
in the long run.
 Rising the supply costs may force price increases that can harm the
company’s sales volume.
 CONT.….

Marketing Intermediaries:
o Firm that help the company to promote, sell and distributes its products to
final buyers. They include resellers, physical distribution firms, marketing
services agencies, and final intermediaries

1. Resellers:
o Distribution channel firms that help the company find customers or make
sales to them. These includes wholesalers & retailers who buy and resell
merchandise.
 CONT.…
2. Physical distribution firms
Help the company to stock and move goods from their points of
origin to their destinations.

3. Marketing services agencies

oMarketing research firms, advertising agencies, media firms, and
marketing consulting firms that help the company target and promote
its products to the right markets.

4. Financial intermediaries
oIncludes banks, credit companies, insurance companies, & other
businesses that help finance transactions or insure against the risks
associated with the buying and selling of goods
 CONT…
 Today’s marketers recognize the importance of working with their
intermediaries as partners rather than simply as channels through
which they sell their products. For example, Coca Cola sign on as the
exclusive beverage provider for a fast food chain, such as
McDonalds or subway. Provides marketing support to both.
5. Customers
Company needs to study five types of customer markets closely:
 Consumer market consist of individual & households that buy
goods & services for personal consumption.
 Business market buy goods & services for further processing or for
use in their production process
 Reseller market buy goods & services to resell at a profit
 Government markets are made up of government agencies that buy
goods & services to produce public services or transfer goods &
services to others who need them
 International markets consist of buyers in other countries including
consumers, producers, resellers & governments
 CONT…
6. Competitors
 To be successful, company must provide greater customer
satisfaction & value than its competitors do.
 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.

7. Publics
o Any group that has an actual or potential interest in or impact on an
organization’s ability to achieve its objectives”
There are 7 types of publics:
a. Financial publics influences the company’s ability to obtain funds,
including banks, investment houses
b. Media publics carry news, features, editorial opinions including
newspapers, magazines and radio and television stations
 CONT…
c. Government publics: Marketers must often consult the
company’s lawyers on issues of product safety, truth in
advertising, and other matters
d. General public: A company needs to be concerned about the
general public’s attitude towards its products and activities. The
publics image of the company affects its buying
e. Internal publics includes workers, managers, volunteers & the
board of directors. Large companies use newsletters and other
means to inform & motivate their internal publics.
f. Local publics includes neighborhood residents & community
organizations . Large companies usually appoint a community
relations officer to deal with the community, answer questions, &
contribute to causes
g. Citizen-action publics: A company’s marketing decisions may be
questioned by consumer organizations, environmental groups etc.
Its public relations department can help it stay in touch with
citizen group & consumers
 THE MACRO ENVIRONMENT
The macroenvironemental forces are as follows:
1.Demographic

2.Economic

3.Technological

4.Political

5.Natural

6.cultural
 DEMOGRAPHIC ENVIRONMENT

“The study of human populations in terms of size, density, location,

age, gender, race, occupation & other statistics”
•It is a major interest to marketers because it involves people & people
make up the market
•Changes in the world demographic environment have major
implications for business
•For example: Chinese government passed regulations limiting
families to one child each as a result parents now spend about 40% of
their income on their child
•Thistrend has created a huge market opportunities for children’s
educational products
 CONT…
• This has created opportunities for companies peddling educational
offerings aimed at kids. Example: Disney, is moving full speed into
educational products
• Another major demographic development in one child policy is that
close to 75% of all Chinese household will be childless. The result is
aging society, which will cause a large growth in service market
such as senior education, nursing homes etc.
• In Pakistan, 14 years or younger comprise close to 40% of the
population, out of which almost 14% are four years old or younger.
looking at this situation, proctor and gamble launched its world
famous disposable diapers brand, pampers, in Pakistan in August
2000.
• Therefore marketers keep close track of demographic trends &
developments in their markets, both at home and abroad.
 CONT…
Most important demographic trends in the subcontinent are as follows:
1. Increasing population
• One of the main characteristic of the Asian population is the rapid
growth in its urban population.
2. A growing middle class
• Indian population has been divided into 5 economic classes on the
basis of their real annual disposable income:

 Deprived households – These households have an annual

disposable income of less than Rs. 90,000. They are the poorest
economic class in the economy. They are mostly unskilled
workers working on daily wage basis
 CONT…
 Aspirers-This category has an annual disposable incomes in the range
of Rs.90,000 to Rs.200,000. They spend almost half of their incomes
on basic necessities. Includes small time retailers, small farmers, and
low skilled industrial workers
 Seekers- This category has an annual disposable income between Rs.
200,000 and Rs. 500,000. Includes white collar employees, mid-level
government officials, newly employed young post graduates etc
 Strivers- They have an income ranging from Rs. 500,000 to Rs.
1,000,000 per annum. Includes established professionals like
lawyers, MBAs, senior government officials, medium scale
industrialists etc. people in this category are considered as well
established & successful in the Indian society
 Global Indians- this category has an annual disposable income in
excess of Rs. 1,000,000. Includes senior corporate executives, large
business owners, top most professionals, politicians, film actors, and
big farmers.
 CONT…
3. Growth in the rural population
•Today main constraints for marketers in rural markets is not
purchasing power alone, but a variety of other factors like lack of
proper infrastructure such as road and telecommunication connectivity
and reliable supply of electricity , which affect distribution
infrastructure (such as cold storages)

4. A changing family system

•Shift from joint family system to working family, which includes
husband and wife, who focus more on their career rather than family
value.
•Since both partners work, family income increases, leading to
increased consumption and demand.
 CONT.…
5. The changing role of women
• Shift of women’s educational and working preferences
• The entry of women in the corporate world has changed the
economy in many ways. Their earning have increased the
disposable income of the family
• They have become an active member of the family & have an
equal say in family decisions, right from which house to buy to
where the family goes for an outing
6. A better educated, white collared, more professional population
• Indian population becoming more educated since government is
spending on educational sector
• The rising number of educated people will increase the demand
for quality products Work force is also becoming more white
collar
• Job growth is now strongest for professional workers and weakest
for manufacturing workers
 CONT.…

7. Increasing Diversity
• Mix of many nations and culture, which makes marketers serve
various groups rather than a single group
 TECHNOLOGICAL ENVIRONMENT
“Forces that create new technologies, creating new product & market
opportunities”
•New technology replaces an older technology & industries who
ignored new technology faced failure in their business, therefore
marketers should watch the technological environment closely, if not
they will soon find their products outdated & miss new product &
market opportunities.
•The challenge is not only technical but also commercial – to make
practical & affordable version
•Alsoas products & technology becomes complex, public needs to
know that these are safe due to which government agencies investigate
& ban unsafe products
 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:
•Shortages of raw materials
•Increased pollution
•Increased government intervention

1. Shortages of raw materials:

•Air & water may seem to be infinite resources, but some groups see long
run danger. Air pollution & water shortage are already a big problem in
most parts of the world.
•Renewable resources, such as forests & food, also have to be used wisely
•Non-renewable resources such as oil, coal & various minerals, pose a
serious problem
•Firms making products that require these non-renewable resources face
large cost increase, even if the material do remain available
 CONT.…
2. Increased pollution
•Industry will almost always damage the quality of the natural environment
•Consider the disposal of chemical & nuclear wastes, quantity of chemical
pollutants in the soil & food supply & the littering of the environment with
bottles, plastics & other packaging materials
3. Increased Government Intervention in Nature Resource Management
•Thegovernment of different countries vary in their concern & efforts to
promote a clean environment.
•Poor nations, do little about pollution, because they lack the needed funds &
political accord needed to mount a worldwide environmental effort.
•Now companies are developing environmentally sustainable strategies &
practices in an effort to create a world economy that the planet can support
indefinitely. They are responding to customer demands with more
environmentally responsible products.
 ECONOMIC ENVIRONMENT

“Factors that effect consumer buying power & spending patterns”

•Nationsvary greatly in their levels & distribution of income.
Marketers must pay close attention to major trends and consumer
spending patterns both across and within their world markets.
•Some countries have subsistence economies – they consume most of
their own agricultural & industrial output. These countries offer few
market opportunities.(Nepal)
•Some have industrial economies – rich markets for many different
kinds of goods (Japan, Singapore, China)
•In between are developing economies – which can offer outstanding
marketing opportunities for the right kinds of products (Pakistan,
India)
 CONT.…
Here are some of the major economic events and more stable economic
trends in the subcontinent:
1. Changing income distribution and consumer spending patterns
•Consumer at different income levels have different spending patterns.
These differences were noted by Engel, who studies how people shifted
their spending as their income rose. He found that as family income rises,
the percentage spent on food does not increase a lot, the % spent on
housing remains about constant & both % spent on most other categories
and that devoted to saving increases.
2. The Global Financial Crisis
•The changing economic conditions can have a huge impact on even the
most successful companies including high energy and commodity prices
leading to inflation
•Marketers are trying to address the current lack of interest and the
capacity to pay on the part of household and business consumers by
launching new low-priced versions of their products, providing trade and
consumer discounts, and by using finer segmentation and targeting of
consumers.
 CULTURAL ENVIRONMENT
Made up of institutions and other forces that affect a society’s basic
values, perceptions, preferences and behaviors.
The following cultural characteristics can affect marketing decision
making:
1. Persistence of cultural values
•People in a given society hold many beliefs & values. Their core beliefs
& values have a high degree of persistence. For example most Americans
belief in working, getting married, giving to charity, & being honest.
These beliefs shape more specific attitude & behavior
•Core beliefs & values are passed on from parents to children & are
reinforced by schools, churches, businesses & government
•Secondary beliefs & values are more open to change
• Example: believing in marriage is a core belief whereas believing that
people should get married early in life is a secondary belief
•Marketers have some chance of changing secondary belief but little
chance of changing core values
 CONT.…

2. Shifts in secondary cultural values

•Consider the impact of popular music groups, movie personalities, &
other celebrities on young people’s hair styling & clothing norms.
•Marketers want to predict cultural shift in order to spot new
opportunities & threats

The major cultural values of a society are expressed in people’s

views of themselves & others, as well as their views of
organizations, society, nature & the universe
 CONT.…
1. Peoples views of themselves
•People vary in their emphasis of serving themselves versus serving
others
•Some people seek personal pleasure, wanting fun, change & escape
•Some seek self realization through religion, recreation, career & other
life goals.
•Peopleuse product, brand & services as a mean of self expression &
they buy product and services that match their views of themselves
•Marketers can target their product & services based on such self views.
Example,MasterCards target adventurers who might want to use their
credit cards to quickly set up experience of a lifetime
 CONT.…
2. Peoples views of others
• In the past decades observer have noted several shifts in people’s
attitude towards others
• Some trend trackers have seen a new wave in which people are
going out less with others & staying home more to enjoy creature
comforts of home & hearth
• This trend suggests a great demand for home improvement &
entertainment products
3. People’s views of society
• People vary in their attitude towards the society
• People’s orientation to their society influences their consumption
patterns & attitudes toward the marketplace
 CONT.…
4. People’s views of nature
• People vary in their attitude towards the natural world
• The renewed love of things natural has created a 63-million-
person “lifestyles of health and sustainability” market, consumers
who seek out everything from natural, organic & nutritional
products to fuel efficient cars & alternative medicine
• Business has responded by offering more products & services
catering to such interests. For example: food producers have found
fast growing markets for natural & organic foods. Consider
earthworm farm, company that grows and sells organic produce.
Founder of the company wanted to do the right thing by farming
the land organically & producing food they’d feel good about
serving to their family, friends & neighbors.
 CONT.…
5. People’s views of organizations
• People vary in their attitude toward corporations, government
agencies, trade unions, universities & other organizations
• People are now willing to work for major organizations and expect
them, in turn, to carry out society’s work
• Many people don’t see work as a source of satisfaction but as a
source to earn money to enjoy their nonwork hours
• This trend suggests that organizations need to find new ways to
win consumer & employee confidence
 CONT.….
6. people’s views of the universe
• People vary in their beliefs about the origin of the universe & their
place in it.
• People have been moving away from materialism to seek more
permanent values – Family, community, earth, faith
• American are on spiritual journey, concerned with the meaning of
life and issues of the soul & spirit. People say they are
increasingly looking to religion. This new spiritualism affects
consumers in everything from the TV show they watch & the
books they read to the products and services they buy
 POLITICAL AND SOCIAL ENVIRONMENT
• Laws, government agencies, and pressure groups that influence and
limit various organizations & individuals in a given society”
• Marketers must keenly follow the changing sociopolitical
environment of the world in order to seek out opportunities and to
address potential threats
Legislation regulating business
• Governments develop public policy to guide commerce – sets of
laws & regulations that limit business for the good of society as a
whole. Almost every marketing activity is subject to a wide range of
laws & regulations
 CONT.…
Increasing legislation
• Legislation affecting business around the world has increased
steadily over the years. Countries in the subcontinent, has many
laws covering issues such as competition, fair trade practices,
environmental protection, product safety, truth in advertising,
consumer privacy, packaging and labeling, pricing and other
important areas
Business legislation has been enacted for a number of reasons.
 Firstly, to protect companies from each other to avoid unfair
competition
 Second, to protect consumer from unfair business practices
 Lastly, to protect the interest of society.
 CONT.…
Increased emphasis on ethics and socially responsible actions
• Besides the written laws and regulations, business is also governed
by social codes & rules of professional ethics.

Socially responsible behavior

• The boom of internet marketing has created a new set of social
and ethical issues. Critics worry most about online privacy issues.
There has been an explosion in the amount of personal digital data
available.
• Much of the information is systematically developed by
businesses seeking to learn more about their customers, often
without consumer realizing that they are being observed
 CONT.…
• Example, every time you swipe your credit or debit card, you allow
a lot of personal information to pass on to the card agency, which
may sell this information to other marketers who want to know their
customers’ buying patterns and preferences. As a result, consumer
advocates and policymakers are taking action to protect consumer
privacy.
 CONT.….
Cause related marketing
• To exercise social responsibility and build more positive images,
many companies are now linking themselves to worthwhile
causes.
• Today, every product seems to be tied to some cause. For example,
pay for your purchases with the right charge card and you can help
to fight heart disease
• Cause related marketing lets companies “do well by doing good”
by linking purchases of the company’s products or services with
fund raising for worthwhile causes or charitable organizations.
• It can greatly benefit both the company and the cause. The
company gains an effective marketing tool while building a more
positive public image whereas the charity firm or cause gains
greater visibility
 RESPONDING TO THE MARKETING
ENVIRONMENT

Companies can passively accept the marketing environment as an

uncontrollable element to which they must adapt, avoiding threats and
taking advantage of opportunities as they arise. Or they can take a
proactive stance – working to change the environment rather than simply
reacting to it.. Whenever possible, companies should try to be proactive
rather than reactive.
THE END