Topic 2: The Marketing Environment

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Topic 2 The Marketing Environment

• By the end of this session you will
• Be able to identify the main agents of change
  (economic, societal and technological forces -
  PESTEL)
• Understand and evaluate their impact on marketing
  activities and processes undertaken by
  organisations

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The Marketing Environment

• Forces outside marketing that affect ability to
  build and maintain successful relationships with
  target customers (Armstrong Kotler, 2005)
• present Opportunities and Threats
• The Micro-environment forces close to the
  company (the company, suppliers, marketing
  intermediaries, customer markets, competitors and
  publics)
• The Macro-environment larger societal forces
  (demographic, economic, natural, technological,
  political and cultural)

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The Marketing Environment
Macroenvironment
Economic
Legal
Microenvironment
Customers
Suppliers
Company
Distributors
Competitors
Physical
Social
Technological
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The Marketing Environment

• Impacts on the ways that marketing is theorised
  and practiced
• Impacts on current and future products and
  services, markets and buying behaviours - the
  companys overall value delivery system

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The Companys MicroenvironmentThe Company

• Marketing management must consider and work
  closely with the other (interrelated) company
  functions - the internal environment
• senior management
• finance and accounting
• research and development
• purchasing
• manufacturing
• human resources

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The Companys MicroenvironmentSuppliers

• Firms / individuals that provide the resources
  needed by the company to produce its goods and
  services
• supply availability issues effect on sales and /
  or customer satisfaction
• treat suppliers as partners in creating and
  delivering customer value

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The Companys MicroenvironmentDistributors /
Marketing intermediaries

• Firms that help the company promote, sell and
  distribute its goods to final buyers
• middle men/resellers (distribution channel firms,
  including wholesalers, retailers who find
  customers or make sales to them)
• physical distribution firms
• marketing services agencies
• financial intermediaries

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The Companys MicroenvironmentCustomers

• Consumer markets personal consumption
• Business markets further processing or use in
  their production process
• Reseller markets resell at a profit
• Institutional markets including schools,
  hospitals, nursing homes
• Government markets government agencies
• International markets
• Each market has special characteristics which
  contribute to Total Market Demand

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The Companys MicroenvironmentCompetitors

• To be successful, a company must provide greater
  customer value and satisfaction than its
  competitors do (Armstrong Kotler, 2005)
• Consider size and industry position compared to
  competitors
• Consider direct and indirect competition

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The Companys MacroenvironmentSocial Forces
Demographics

• World population size and growth trends
• Changing age structure of the population
• Two income households
• The changing family
• Increasing diversity
• location, gender, race, occupation and many
  other statistics ...

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The Companys MacroenvironmentSocial Forces
Cultural Forces

• A combination of traditions, taboos, values,
  perceptions, preferences, behaviours and
  attitudes
• Decision making can be affected by
• Persistence of core cultural values
• Shifts in secondary cultural values (cultural
  swings)
• Peoples views of themselves (purchases will
  match views as a means of self expression)
• Development of sub-cultures
• Increase in social responsibility and marketing
  ethics cause-related marketing

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The Companys MacroenvironmentSocial Forces
Consumer Movement

• Collection of individuals, organisations and
  groups whose objective is to protect the rights
  of consumers
• eg Consumers Association (CA - Which? magazine)
  to promote informed choices between products and
  services
• unbiased testing
• campaigning re product quality and safety
• information accuracy

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The Companys MacroenvironmentEconomic Forces

• Factors that affect consumer purchasing power and
  spending patterns
• economic growth and unemployment
• income distribution and changes in purchasing
  power, from recession (value based marketing) to
  boom periods (personal consumption)
• changing consumer spending patterns - economic
  forecasting to monitor variables such as income,
  cost of living, interest rates and savings and
  borrowing patterns
• Impact of Single European Market

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The Companys MacroenvironmentEcological/Physical
Forces

• Natural resources needed as inputs by marketers
  or that are affected by marketing activities -
  environmental concerns
• Use of environmentally friendly ingredients
• Recyclable and non-wasteful packaging
• Protection of the ozone layer
• Animal testing of new products
• Pollution
• Energy conservation

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The Companys MacroenvironmentTechnological
Forces

• Perhaps the most dramatic force now shaping our
  destiny new technologies may create new markets
  and opportunities. Trends include
• fast pace of technological change
• higher R D budgets
• concentration on minor improvements
• increased regulation
• Attempt to use technology to reduce costs and
  develop new income streams - the internet

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The Companys MacroenvironmentPolitical / Legal
Forces

• Consists of laws, government agencies and
  pressure groups that influence and limit various
  organisations in a given society
• legislation regulating business (Monopolies
  Mergers, Restrictive Practice, Codes of Practice)
• growth of public interest groups
• increased emphasis on ethics and socially
  responsible actions cause-related marketing
• Cultivate close relationships with politicians to
  monitor and/or influence eg New Labour the
  cigarette industry,

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Environmental Scanning and Analysis

• A marketing oriented firm looks outward to the
  environment in which it operates, adapting to
  take advantage of emerging opportunities and to
  minimise potential threats - monitoring and
  analysing
• To be effective
• 1. Define a feasible range of strategic forces
  that require monitoring
• 2. Design a system which provides a fast response
  to events that are only partially predictable and
  grow very rapidly - use of the internet

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Strategic Marketing Fit
Fit
Fit
Fit
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A complete Environmental Scanning System should
(Brownlie, 2002)

• Monitor trends, issues and events and their
  implications
• Develop forecasts, scenarios and issues analysis
  as input to strategic decision making
• Provide a focal point for the interpretation and
  analysis of environmental information identified
  by others
• Establish a library or database for environmental
  information
• Provide a group of internal experts on external
  affairs
• Disseminate information on the business
  environment through newsletters, reports and
  lectures
• Evaluate and revise the scanning system itself by
  applying new tools and procedures

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Benefits of Formal Environmental Scanning

• Better general awareness of and responsiveness to
  environmental changes
• Better decision making/strategic planning
• Greater effectiveness in dealing with the
  government
• Improved industry and market analysis
• Better foreign investment and international
  marketing
• Improved resource allocation and diversification
  decisions
• Superior energy planning

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Poor Responses to Environmental Change

• Change is the only constant (Jobber, 2004)
• Two reasons for poor responses are
• 1. Ignorance
• poor scanning can mean companies remain unaware
  of threats and opportunities that may exist (poor
  and high risk business practice)
• 2. Delay
• bureaucracy may delay action, as could marketing
  or technological myopia or sheer fear of change!
• But, to react too quickly without proper and
  prudent consideration may be just as bad !

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Responses to Environmental Change
Environmental change
Ignorance
Barriers to change
Delay
Retrenchment
Gradual strategic repositioning
Radical strategic repositioning
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Issues and Themes

• Environmental change can be gradual - the ageing
  of the Western populations - or sudden - outbreak
  of war. Thus whilst companies can adapt to some
  changes over time, others may be so sudden that
  rapid action is required
• In either case, companies need to be continuously
  on the alert by continuously scanning their
  environments

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Company Environment -
Marketing in the Old Economy New Economy