Chapter.2 Marketing Environment

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Chapter 2MARKETING ENVIRONMENT

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OBJECTIVES

Main objectives:

1. Describe the environmental factors that affect the company’s ability to serve its customers

2. Discuss how companies react to the marketing environment.

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OVERVIEW

In this chapter, we’ll look deeper into the first step of the marketing process – understanding the marketplace and customer needs and wants.

We’ll discover that marketing operates in a complex and changing environment.

The actors in this environment – suppliers, intermediaries, customers, competitors, publics & others – may work with or against the company.Major environmental forces – demographic, economic, natural. Technological, political and cultural – shape marketing opportunities, pose threats and affect the company’s ability to build customer relationships.

To develop effective marketing strategies, we must first understand the environment in which marketing operates.

Marketing environment is made up of microenvironment and macroenvironment.

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MARKETING ENVIRONMENT

Definition:The actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers.

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THE COMPANY’S MICROENVIRONMENT

Microenvironment can be defined as “ the actors close to the company that affect its ability to serve its customers – the company, suppliers, marketing intermediaries, customer markets, competitors and publics.

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Microenvironment

Company

Suppliers

Intermediaries

Competitors

Publics

Customers

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The SIX (6) elements of a company’s microenvironment:

1. The Company- In designing marketing plans, marketing management takes other

company group into account.- They are top management, finance, R&D, purchasing, operation and

accounting.- All of these interrelated groups from the internal environment.- Top management sets the company’s mission, objectives, broad

strategies and policies for the company. - Then, marketing managers make decisions within the strategies and

plans made by top management.- Marketing managers must work closely with other company’s

departments.- All the department must works together in order to achieve the

company objective – to provide superior customer value & relationships.


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2. Suppliers - Suppliers provide the resources needed in producing

goods and services. - Marketing managers must watch supply availability and

costs. - Supply shortages or delays, will seriously affect marketing.- Most marketers nowadays treat their suppliers as partners

in creating & delivering customer value.


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3. Marketing Intermediaries

- Intermediaries are firms that help the company to promote, sell and distribute its goods to final buyers.

- They include:

a) Resellers - They are distribution channel firms that help the

company find customers & make sales to them.- These include wholesalers and retailers who buy and

resell merchandise.


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b) Physical Distribution Firms- Help the company to stock and move goods from

their points of origin to their destinations.- E.g. warehouses.

c) Marketing Services Agencies- Marketing research firms, advertising agencies, media

firms & marketing consulting firms that help the company target & promote its products to the right markets.

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d) Financial Intermediaries- Financial intermediaries are institutions such as bank,

credit companies and insurance companies. - These institutions helps finance transactions or insure

against the risks associated with the buying and selling of goods.


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4. Competitors

- Competitors are companies with similar offerings in the same marketplace.

- To be successful, a company must provide greater customer value and satisfaction than its competitors do.

- Company must gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers.


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5. Publics - Public is any group that has an actual or potential interest in

or impact in an organization’s ability to achieve its objectives.

- There are seven types of publics:

a) Financial public- Influence the company’s ability to obtain fund.- E.g. banks, investment houses.

b) Government public- Affect the company by passing legislations and laws that put

restriction on the company’s actions.- Public municipality, FINAS, and other government bodies.


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c) Media public- This group carries news, feature and editorial opinion that may

influence customers’ opinion towards the business. - E.g. Newspapers, magazines and television station

d) Citizen-action public- Include environmental group and minority group that can

questioned the actions of the company and put them in the public spotlight.

- E.g. Consumer organizations.

e) Local public- neighborhood and community organizations that will question

a company impact on the local area and the level of responsibility of their action.


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f) General public- Can greatly affect the company as any changes in their attitude

will affect the company. - Its consists population at large

g) Internal public- Consists of those who employed within the organization and

deal with the organization and construction of the company’s product.

- When employees feel good about their company, this positive attitude spills over to external public.


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6. Customers - Customers are the most important factor in the

microenvironment because they made up markets.- There are FIVE (5) types of customer market:

a) Consumer markets - Consist of individuals and households that buy goods and

services for personal consumption- e.g. End user

b) Business markets- Buy goods and services for further processing to produce

their own product- Restaurants, tailors, etc.


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c) Reseller markets- buys goods and services to resell at a profit.- E.g. wholesalers, retailers, etc.

d) Government markets- Consists of government agencies that buy goods to

produce public goods or transfer the goods and services to others who need them

- E.g. hospitals, bus-stops, etc.

e) International market- Buyers in other countries, including consumers,

producers, resellers & governments.


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Macroenvironment is “a larger societal forces that affect the microenvironment – demographic, economic, natural, technological, political and cultural forces.

THE COMPANY’S MACROENVIRONMENT

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Demographic

Economic

Natural

Technological

Political

Cultural


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1. Demographic Environment- The study of human populations in terms of size, density,

location, age, gender, race, occupation and other statistics.- Demographic is one of the most important elements in

marketing macroenviroments because it involves people and people make-up markets.

- Marketers will depend on this factors to produce or improve the products as these factors will influence the buying behaviors


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2. Economic Environment- Factors that affect consumer buying power and spending

patters.- Changing in income poses influences on how consumers

spend their money. - For examples, if consumer’s income increases, they will buy

luxurious goods more, spending on convenience products will decrease at the same time.

- Changing in consumer spending pattern also influences on how consumers spends their money.

- E.g. With the increase awareness on healthy living, consumers tend to spend more on health products and services than other things.


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3. Natural Environment- Natural resources are the elements that are needed as input

by the marketers or the elements that are affected by marketing activities.

- Marketers should be aware of several trends in the natural environment.

- The trends are:

a) Shortages of mineral- Shortages of mineral resources will affect the prices of

the products.- E.g. shortages of oil will increase its price and demand for

motor vehicles may drop as well/


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b) Increased pollution- Government will intervene if the production activities

endangered the environment. - Example, government promotes no plastics bags days

because plastic is known as a non-biodegradable material which can be hardly be disposed.

c) Increased government intervention- Happens in natural resource management.- E.g. Limiting logging activities may reduce timber supply.


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4. Technological Environment

- Forces that create new technologies , creating new product and market opportunities.

- The R&D used in production activities can be considered as one of the technological effort as the process will improvise the product.

- Technology may help a company to increase its productivity, thus company should pay a close attention to the technology as this elements will help them to flourish.

- If a business doesn’t pay a close attention to technology, they may be left behind.


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5. Political & Social Environment

- Includes laws, government agencies & pressure groups that influence and limit various organizations & individuals in a given society.

- Marketers should be aware of the law and legislation imposed by the government, agencies and regulating bodies.

- This element could give good or bad influences to the marketers.

- E.g. Government imposes the usage of helmets. This regularity increased the demand for helmets.


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6. Cultural Environment

- Institutions & other forces that affect society’s basic values, perceptions, preferences, and behaviors.

- Marketers should be aware with the cultural values of their target market.

- Some persistent values like core values cannot be changed while secondary can be changed.

- Core beliefs are passed on from parents to children. E.g. everyone should get married.

- Secondary beliefs are more open to changes. E.g. everyone should get married in early age tend to change nowadays, people are no longer engaged in marriage at younger age.


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COMPANY’S REACTIONS TOWARDS MARKETING ENVIRONMENT

Company/organizations react to marketing environment in two ways:

1) Proactive approach2) Reactive approach

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Proactive approach

- Company takes aggressive actions to affects the publics and forces in their marketing environment.

- Such companies even hire lobbyist to influence legislation affecting their industries & stage media events to gain favorable press coverage.

- Example would be Air Asia operates as low cost carrier even though there s economic downturn.

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Reactive approach

- Companies that view the marketing environment as uncontrollable elements to which they must react and adapt.

- They passively accept the marketing environment and do not try to change it.

- They analyze the forces and design the strategies to avoid the threats and taking the advantages of the opportunities the environment provides.

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Finish oredy.. ^^,v

Chapter.2 Marketing Environment

Business

marketing managers

marketing plans

companys ability

marketing process

marketing environment1

companys microenvironment

company group

companys actions