The Marketing Environment: The Marketing Environment Internal and External Factors which Influence Marketing Strategies and Activities Objectives: after reading this section you should be able to:: Objectives: after reading this section you should be able to: Describe the environmental forces that affect the company’s ability to serve its customers.
Explain how changes in the demographic and economic environments affect marketing decisions.
Identify the main trends in the firm’s natural and technological environments.
Explain the key changes that occur in the political and cultural environments.
Discuss how companies can react to the marketing environment. Marketing Environment: Marketing Environment The actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful transactions and relationships with its target customers. The Company’s Microenvironment: The Company’s Microenvironment The forces close to the company that affect its ability to serve its customers - the company, market channel firms, customer markets, competitors and publics, which combine to make up the firm’s value delivery system. The Company: The Company In designing marketing plans, marketing management must take other company groups, such as top management, finance, research and development (R&D), purchasing, manufacturing and accounting, into consideration. Suppliers: Suppliers Firms and individuals that provide the resources needed by the company and its competitors to produce goods and services. Marketing Intermediaries: Marketing Intermediaries Firms that help the company to promote, sell and distribute its goods to final buyer; they include physical distribution firms, marketing-service agencies and financial intermediaries. Slide8: Resellers: the individuals and organizations that buy goods and services to resell at a profit.
Physical distribution firms: warehouse, transportation and other firms that help a company to stock and move goods from their point of origin to their destinations.
Marketing-service agencies: marketing research firms, advertising agencies, marketing consulting firms and other service providers that help a company to target and promote its products to the right markets. Slide9: Financial intermediaries: banks, credit companies and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods. Customers: Customers The company must study its customer markets closely and keep up to date with changing customer requirements.
The company must communicate with its customers, and must listen to them closely. Competitors: Competitors The marketing concept states that, to be successful, a company must provide greater customer value and satisfaction than its competitors. Thus, marketers must do more than simply adapt to the needs of target consumers.
They must also gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers. They must strive to anticipate competitor activity and strategy. Publics: Publics Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. Slide13: Financial publics influence the company’s ability to obtain funds. Banks, investment houses and stockholders are the principal financial publics.
Media publics are those that carry news, features and editorial opinion. They include newspapers, magazines and radio and television stations.
Government publics Management must take government developments into account. Marketers must often consult the company’s lawyers on issues of product safety, truth in advertising and other matters. Slide14: Citizen action publics A company’s marketing decisions may be questioned by consumer organizations, environmental groups, minority groups and other pressure groups.
Local publics Every company has local publics, such as neighbourhood residents and community organizations.
General public A company needs to be concerned about the general public’s attitude towards its products and activities. The public image of the company affects its buying.
Internal publics A company’s internal publics include its workers, managers, volunteers and the board of directors. The Company’s Macroenvironment: The Company’s Macroenvironment The larger societal forces that affect the whole microenvironment - demographic, economic, natural, technological, political and cultural forces. PEST (STEP) analysis: PEST (STEP) analysis POLITICAL
TECHNOLOGICAL SLEPT analysis: SLEPT analysis SOCIAL/CULTURAL
TECHNOLOGICAL BPEST analysis: BPEST analysis BUSINESS
TECHNOLOGICAL PESTLE analysis: PESTLE analysis POLITICAL
ENVIRONMENTAL/ECOLOGICAL Political and Legal Environment: Political and Legal Environment Laws, government agencies and pressure groups that influence and limit various organizations and individuals in a given society. Legal Forces: Legal Forces Procompetitive legislation: Laws enacted to preserve competition and to end various practices deemed unacceptable by society.
Office of Fair Trading: UK government office set up to oversee reading practices of organizations and individuals in the UK.
Competition Commission: An independent body in the UK that investigates monopolies to determine whether they operate against the public interest. Slide22: Consumer Protection Legislation: In the UK
Fair Trading Act (1973)
Sale of Goods Act (1979),etc
Growth of public interest groups
Consumer Association: A private organization, funded by members subscriptions, that works to further consumer interests.
Increased emphasis on ethics and socially responsible actions. Regulatory Forces: Regulatory Forces Government (UK, EU)
Non-governmental Regulatory Forces
Deregulatioj Demographic Environment: Demographic Environment The study of human population in terms of size, density, location, age, sex, race, occupation and other statistics. Slide25: Population size and growth trends
Changing age structure of a population
The changing family
Rising number of educated people
Increasing diversity - racial integration across EU Economic and Competitive Environment: Economic and Competitive Environment Factors, including the effects of general economic conditions, buying power, willingness to spend, spending patterns,types of competitive structure, competitive tools and competitive behaviour, that influence both marketers’ and consumers’ decisions and activities.
General Economic Conditions: General Economic Conditions Business cycle: fluctuations in the economy that follow the general pattern of prosperity, recession, depression and recovery.
Prosperity: A period during which unemployment is low and total income is relatively high.
Recession: A period during which unemployment rises and total buying powr declines. Slide28: Depression: A period during which unemployment is extremely high, wages are very low, total disposable income is at a minimum and consumers lack confidence in the economy.
Recovery: The stage of the business cycle in which the economy moves from depression or recession to prosperity. Consumer Demand and Spending Behaviour: Consumer Demand and Spending Behaviour Buying power: Resources such as goods, services and financial holdings that can be traded in an exchange situation.
Income: The amount of money received through wages, rents, investments, pensions and subsidy payments for a given period.
Disposable income: After-tax income, which is used for spending or saving. Slide30: Discretionary income: Disposable income that is available for spending and saving after an individual has purchased the basic necessities of food, clothing and shelter.
Wealth: The accumulation of past income, natural resources and financial resources.
Willingness to spend: A disposition towards using buying power, influenced by the ability to buy, expected satisfaction from a product and numerous psychological and social forces. Slide31: Consumer spending patterns: Information indicating the relative proportions of annual family expenditures or the actual amount of money spent on certain goods and services.
Comprehensive spending patterns: The percentages of family income allocated to annual expenditures for general classes of goods and services.
Product-specific spending patterns: The annual monetary amounts families spend for specific products from within a general product class. Assessment of Competitive Forces: Assessment of Competitive Forces Competition: Those companies marketing products that are similar to, or can be substituted for, a given business’s products in the same geographic area. Types of Competitive Structure : Types of Competitive Structure Monopoly: A market structure that exists when a company turns out a product that has no close substitutes.
Oligopoly: A market structure that exists when a few sellers control the supply of a large proportion of a product. Slide34: Monopolistic competition: A market structure that exists when a business with many potential competitors attempts to develop a differential marketing strategy to establish its own market share.
Perfect competition: A market structure that entails a large number of sellers, not one of which could significantly influence price or supply. Slide35: Competitive tools: The set of tools which a business uses to deal with competitive forces. These include price, differentiation of market segments, product offering, service,promotion, distribution or enterprise.
Monitoring competition: The process by which a company studies the actions of its major competitors in order to determine what specific strategies they are following and how those strategies affect its own. Social/Cultural/Green Forces: Social/Cultural/Green Forces Cultural Environment: Institutions and other forces that affect society’s basic values,perceptions, preferences and behaviours.
Societal/Green Forces: Individuals and groups and the issues engaging them that pressure marketers to provide high living standards and enjoyable lifestyles through socially responsible decisions and activities. Cultural Environment: Cultural Environment Persistence of cultural values: core and secondary beliefs
Shifts in secondary cultural values
people’s view of themselves
people’s views of others
people’s views of organizations
people’s views of society
people’s views of nature
people’s views of the universe Social Environment: Social Environment Living standards and quality of life
Green movement: the trend arising from society’s concern about pollution, water disposal, manufacturing processes and the greenhouse effect
Consumer movement: a diverse collection of independent individuals, groups and organizations seeking to protect the rights of consumers. Technological Environment: Technological Environment Technology: the knowledge of how to accomplish tasks and goals.
Forces that create new technologies, creating new product and market opportunities.
Fast pace of technological change
High R&D budgets
Concentration on minor improvements
Effect of technology on society
Effect of technology on marketing
Technology assessment Natural Environment: Natural Environment Natural resources that are needed as inputs by marketers or that are affected by marketing activities.
Shortage of raw materials
Increased cost of energy
Government intervention in natural resource management Examining and Responding to the Marketing Environment: Examining and Responding to the Marketing Environment Environmental scanning: the process of collecting information about the forces on the marketing environment.
Environmental analysis: the process of assessing and interpreting gathered through environmental scanning.
Environmental management perspective: the firm takes aggressive actions to affect the publics and forces rather than simply watching it and reacting to it. The marketing Environment and Strategic Opportunities: The marketing Environment and Strategic Opportunities Strategic windows: major developments or opportunities triggered by changes in the marketing environment.
new distribution channels
new legislation and regulation
financial and political shocks Additional Reading: Additional Reading Dibb, Simkin,Pride & Ferrell, Marketing Concepts & Strategies, 4th Euro ed,, Houghton Mifflin, 2001, chapter 2
Kotler, Armstrong,Saunders & Wong, Marketing Principles, 3rd Euro ed, FT Prentice Hall, 2001, chapter 4