Marketing Environment

Marketing – The Marketing Environment


The marketing environment

• The forces that directly and indirectly influence an organization’s capability to undertake its business.

• The trading forces operating in a marketplace over which a business has no direct control, but which shape the manner in which the business functions and is able to satisfy its customers.


Is it not just the external environment?

• The environment external to the firm constitutes a large part of the marketing environment but it is not the whole of the environment.

• Included in the marketing environment is the internal environment - that is, factors internal to the firm which affect the marketing operation.


Macro-environment-broad and general Environmental forces

Micro-environmentForces acting directly on the firm

Internal environmentInside the firm.


Components of the marketing environment

• The external environment consists of :

• Macro-environment• -broad forces which shape

the character of opportunities and threats

• Micro-environment.• -the actors in the

immediate environment

• Internal environment.• Forces and actors inside

the firm that affect the marketing operation.

• Composed of internal stakeholders and the other functional areas with the business organisation.


Controllability

• The organisation has no control over the macro environment. It can only respond to changes taking place

• The organisation has some degree of influence over the micro environment but by no means complete control

• The organisation controls its own internal environment although this does not mean the marketing department or marketing manager has control


Why is it important?

• An understanding of macro and micro marketing environment forces

• Is essential for planning.• Helps a business to compete more effectively

against its rivals.• Assists in the identification of opportunities and

threats.• Enables an organization to take advantage of

emerging strategic opportunities.


Environmental scanning

• Monitor - trends, issues, events• Identify - trends, issues, events that are significant

to the organisation.• Evaluate - the impact of trends ,issues and events

upon the organisation’s in current markets.• Forecast - where the trends are heading. Examine

the threats and opportunities they are likely to bring in the future.

• Evaluate - the impact of threats and opportunities on the firm’s long term strategy.


Forecasts

• Forecasts are integral to:• Marketing planning• Analysis of market attractiveness• The monitoring of marketing performance• Resource allocation• Product and stock management• Marketing opportunity analysis is at the

heart of marketing and this requires accurate sales forecasts


The internal or organisational environment

• This refers to the other internal functions that impinge on the marketing function.

• The internal or organisational environment includes– The human resource department– The operations department– The accounting and finance department– The research and development department


The internal environment

• Marketing is affected by• Internal processes and procedures• Allocation of responsibilities within the organisation• Resource availability• The extent to which the major functional areas

work together supporting the marketing function to be customer orientated

• The culture of the organisation• The attitude of internal stakeholder


The micro-environment

• This refers to the environment mostly closely linked to the organization

• It comprises all those organizations and individuals who directly affect the activities of a company

• All factors which impact directly on a firm and its activities in relation to a particular market

• The actors in the immediate environment that affect the firm’s capability to operate effectively in its chosen market


Elements of the micro-environment

• Customers• Intermediaries• Suppliers• Competitors • Local community• Local government

• Employees• Trade unions• Intermediaries• Co-operators (partner

firms in an alliance) • Regulators


Regulatory environment

• Legal environment• Contract law• Consumer law• Product safety• Trade descriptions• Data protection • Planning laws• Environmental law

• Codes of practice• Advertising Standards

Authority • Market Research • Direct selling • Trade associations• Codes of practice

might not be legally binding but organisations are expected to comply.


The competitive environment

• The starting point is to identify who are the competitors. Four categories can be identified.

• Direct competitors - firms that produce a similar product which is a direct rival e.g. Coca Cola is a direct competitor of Pepsi Cola.

• Close competitors - firms producing similar products e.g. Tango is a close competitor of Pepsi.

• Substitutes -products that are different but might be bought instead. A packet of crisp rather than a bar of chocolate.

• Indirect competition - all other firms are indirect competitors in that they compete for consumers’ money.


Market structures

• Economists analyse markets in terms of the degree of competition

• Perfect competition - many firms selling homogeneous goods to customers who buy on price alone

• Monopolistic competition - many firms each selling a differentiated good over which they have a monopoly

• Oligopoly - competition between a small number of firms

• Monopoly - a single supplier


Porter’s five forces

• Porter’s five forces analysis helps firms to analyse the strength of competitive threats. The five forces are:

• The intensity of existing competition• Barrier (or lack of) to the entry of new competitors - how

easy is it for newcomers to enter the market.• The threat of substitute products.• The bargaining power of customers - dominant

customers will drive down price.• The bargaining power of suppliers - dominant suppliers

will force up prices.• Profitability and the achievement of objectives will be

affected by the combination of five forces.


The market environment

• This refers to the type of market in which the firm operates.

• The market type impacts upon the marketing function.

• The main types are:– Consumer or B2C markets– Business or B2B markets– Export markets– Government markets - where the government is a large

buyer– Reseller markets - where the buyer is an intermediary

who sells on to someone else


The macro-environment

• Comprises general forces and trends rather than specific organizations -the big issues that affect all businesses active in the market

• The macro-environment refers to the general environmental factors that influence the organization

• Factors outside the area of marketing which impact on but which cannot be influenced by the marketing effort- including demographics, macro-economic factors, natural environment state, changes in lifestyle


Elements of the macro-environment

• Macro-economic environment

• Political environment

• Social and cultural environment

• Demographic environment

• Technical environment

• Legal and regulatory environment.


The macro-economic environment

Economic growth Creates marketing opportunities. A major factor in market growth.

Cyclical fluctuations Fluctuations in the level of sales.

Inflation Direct impact on costs and prices charged. Indirect impact on customer demand.

Unemployment Major impact on customer demand via willingness and ability to buy.

Interest rates Direct impact on investment by business. Indirect impact on consumer demand in terms of the amount of discretionary spending.

Exchange rate Fall in the exchange rate boosts exports, makes imports more expensive and causes cost push inflation.


The political environment

• Marketing is affected by: • Government and local government policies.• The tax regime - the level and nature of tax. • The extent to which the government is

“business friendly”.• Government attitude to regulation.• Trade polices• The actions of special interest and pressure

groups.


The social environment

• Impact on consumer demand of changes in:

• Population size and growth

• The demographic profile of the country (age distribution, family size, regional distribution of the population)

• The culture, beliefs and valves of the community

• Lifestyle


The technological environment

• Some ways in which technology affects marketing:• Invention of new goods and services.• CAD has reduced the lead time on new product

development.• The pace of technological change has reduced the

product life cycle.• The use of databases in market research and

direct marketing.• The development of e-commerce.• More responsive manufacturing operations means

shorter customer lead times.• New technology facilitates mass customisation


The alphabet soup of environmental analysis

PEST

Political

Economic

Social

Technological

SLEPT

Social

Legal

Economic

Political

Technological

SPECTACLES

Social

Political

Economic

Cultural

Technological

Legal

Environmental

Social

PRESTCOM

Political Regulatory

Economic

Social

Technological

Competitive Organisational

Market

PESTEL

Political

Economic

Social

Technological

Aesthetic

Customers

Legal

Environmental

Sectoral


SWOT and PEST

Positive Negative

Internal factors-the internal environment

Strengths

Organisational strengths.

Weaknesses

Organisational weakness.

External factors

-the PEST factors

Opportunities resulting from changes in the political, economic, social and technological environment.

Threats from the political, economic, social and technological environment.


A further acronym: PRESTCOM

Political Government policy, taxes etc.

Regulatory Law and voluntary codes of practices

Economic Macro-economic variables

Social Demographics, culture, lifestyle

Technological Processes and products

Competitive Nature of the competition

Organisational Internal environment

Market Type of market.

Marketing Environment

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