Marketing Environment Notes

The Marketing Environment

Definition

  • A company's marketing environment consists of actors and forces outside marketing that affect marketing management's ability to build and maintain relationships with target customers.

Importance of Tracking Trends

  • Marketers must track trends and seek opportunities.
    • They operate the marketing research function.
    • They spend more time in customer and competitor environments.

Components

  • Micro-environment: Factors close to the company.
  • Macro-environment: Larger societal forces.

Micro-environment

  • Factors close to the company that affect its ability to serve customers.
    • The Company
    • Suppliers
    • Marketing Intermediaries
    • Customer Markets
    • Competitors
    • Publics

The Company

  • Management sets mission, objectives, and strategies.
  • Marketing managers make decisions within these plans and work with other departments (finance, purchasing).

Suppliers

  • Important link in the customer value delivery system.
  • Problems can affect marketing (supply shortages, industrial action, price increases).

Marketing Intermediaries

  • Help promote, sell, and distribute goods.
    • Resellers (wholesalers, retailers)
    • Physical distribution firms
    • Marketing services agencies
    • Financial intermediaries
  • Important component of the value delivery system; requires effective partnership to optimize performance.

Customers

  • Five types of customer markets:
    • Consumer Markets: Individuals and households for personal consumption.
    • Business Markets: For further processing or production.
    • Reseller Markets: To resell at a profit.
    • Government Markets: For public services.
    • International Markets: Buyers in other countries.
  • Each market type has unique characteristics.

Competitors

  • Companies must provide greater customer value and satisfaction than competitors.
  • Gain strategic advantage by positioning offerings strongly against competitors.

Publics

  • Any group with an actual or potential interest in or impact on an organization's ability to achieve its objectives.

  • Seven types of publics:

    • Financial publics: Influence ability to obtain funds (banks, stockholders).
    • Media Publics: Newspapers, magazines, radio, and television stations.
    • Government publics: Government developments must be taken into account.
    • Citizen-action publics: Consumer organizations, environmental groups.
    • Local publics: Neighbourhood residents and community organizations.
    • General public: Public's attitude toward products and activities.
    • Internal publics: Workers, managers, volunteers, and board of directors.

Macro-environment

  • Larger societal forces that affect the micro-environment.
    • Demographic
    • Economic
    • Natural
    • Technological
    • Political
    • Cultural

Demographic Environment

  • Demography: Study of human populations (size, density, location, age, gender, race, occupation).
  • Major interest because it involves people, who make up markets.
  • World population growth: Expected to double by the end of the century, mostly outside industrialized countries.
  • Changing population structure: Youthful populations in India and Africa vs. aging populations in EU, USA, and China.
  • Generational differences: Baby Boomers, Generation X, Generation Y (Millennials), Generation Z. Segment by lifestyle and life stage.
  • Changing family structure: New household formats, more divorces, later marriages.
  • Working women: Increase creates new business opportunities.
  • Youth market: Youths remaining at home longer but declining in size due to economic conditions.
  • Older workers: People working beyond retirement age.
  • Geographic shifts: Migration impacts market demand and product/service needs.
  • Ethnic diversity: Increasing diversity in markets.
  • Other aspects of diversity: Targeting LGBTIQ communities and people with disabilities.
  • Urbanisation: Shift from rural to urban areas, and suburban living with home-based work.

Economic Environment

  • Factors affecting consumer purchasing power and spending patterns.
  • Nations vary in income levels:
    • Industrial economies
    • Developing economies
    • Subsistence economies
  • Shifting world order: Emerging markets like India and China.
  • Changes in income: Economic downturns force careful spending.
  • Income distribution: Upper, Middle, Working, and Underclass.
  • Changing consumer spending patterns: Engel's Law (percentage spent on food decreases as income rises while spending on housing remains constant and other categories increase).
  • Economic variables: Income, cost of living, exchange rates, interest rates, savings.

Natural Environment

  • Natural resources needed as inputs or affected by marketing activities.
  • Environmental concerns have grown.
  • Trends:
    • Shortages of raw materials
    • Increased pollution
    • Increased government intervention
  • Socially responsible companies develop sustainable strategies.

Technological Environment

  • Creates new technologies, product, and market opportunities.
  • Replaces older technologies.
  • Marketers should watch it closely to avoid products becoming outdated.

Political and Social Environment

  • Laws, government agencies, and pressure groups that influence or limit organizations and individuals.
  • Increasing legislation regulating competition, fair trade, environmental protection, product safety, etc.
  • Emphasis on ethics and socially responsible behaviour: protecting long-run interests of consumers and the environment.

Cultural Environment

  • Institutions and forces affecting society's values, perceptions, preferences, and behaviours.
  • Core beliefs and values: Passed on and reinforced by social institutions.
  • Secondary beliefs and values: More open to change.
  • Marketers want to predict cultural shifts.
  • Shifts in people's view of themselves, others, organizations, society, nature, and the universe.

SWOT Analysis

  • Tool for auditing an organization and its environment.

  • First stage of planning.

  • Focuses on key issues.

  • Stands for:

    • Strengths
    • Weaknesses
    • Opportunities
    • Threats
      ### SWOT Analysis

  • Goal is to:

    • Match the company's strengths to attractive opportunities in the environment.
    • Eliminate the weaknesses and minimize the threats.

    Strength

  • Is an internal capability which may help a company achieve its objectives
    ### A strength could be

    • a new, innovative product or service
    • location of the business
    • quality processes and procedures
      ### Weakness
    • an internal limitation which may hinder a company from reaching its objectives.
      ### A weakness could be
    • undifferentiated products and services (i.e.
    • location of the business
    • poor quality goods or services
    • damaged reputation
    • poor connections with other businesses
    • limited financial resources
      ### Opportunity

  • is a favourable trend in the external environment which the firm may exploit to its advantage.
    ### An opportunity could be

    • a developing market such as the Internet.
    • a new technology is available
    • a new international market
      ### Threat

  • is an unfavourable external factor that may pose challenges to a company's performance.
    ### A threat could be

    • a new competitor
    • scarce raw materials
    • a change in consumer tastes away from the company's product or service
    • an economic downturn
    • taxation is introduced on products or services.