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2 The Marketing Environment
2 The Marketing Environment
Learning Objectives
What are macro and micro environment?
What are the factors in the internal and external
environment?
Understanding on different analysis tool such as PEST,
Introduction
Change is the fact of life, and organization have to adapt to this ever
changing environment.
If they want to survive they need to take into account of, and adapt to,
changing economic and technological conditions and monitor changing needs and wants of their target markets.
By identifying environmental trends in good time, management can
Introduction (cont)
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Companies have been divided into three categories: Companies that make things happens: identify & understand forces and conditions that bring about change. They continually adapt, and stay ahead of the game.
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Companies that watch things happen: fail to adapt early enough to become part of that change. They have little opportunity to influence events, but usually make changes to survive. Such changes are reactive rather than planned.
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Companies that wonder what happen: are impervious to change and fail to realize that circumstances have altered. Even when change is acknowledged management refuses to adapt to an ever changing environment. Such firm are unlikely to survive in the long run.
Marketing Environment
Micro Environment
2. Macro Environment
Micro Environment
The Micro Environment is the internal environment in which an organization operates,
Customers have wants and needs that an organization will try to satisfy with its products and services. A group of customers is the target market to which an organization will make a product/service offering. An organization should be aware that a customers needs and wants may change over time and it is important that an organization's marketing activities change to continue to satisfy customer needs.
Stakeholders are anybody who has an interest or can influence the activities of the organization,
therefore it is important that an organization can identify its stakeholders and any impact they may have, in order that it can decide if it needs to take any action, such as a communications campaign.
Distributors Organizations may use distributors, such as retailers, to get their products to their target markets. Distributors can add value to a product, particularly in relation to the service they provide.
Macro Environment
The Macro Environment is the external environment in which an organization
operates. The external environment has certain forces that will impact on an organization; these external forces are known as PEST, which stands for:
Political factors are influences such as a change of government in a country,
and rates of inflation. Changes in interest rates could affect an organization's net profit margin if it is borrowing money or selling products on credit.
customers that make up an organization's market, such as its demographic profile, lifestyle and attitudes. Recently many organizations have experienced a change in the attitude of consumers towards environmentally-friendly
products.
Technological factors are developments in technology that influence buyer
behavior or decision-making. The most recent example is the large growth in on-line purchasing, resulting in many organizations developing websites to provide consumers with information on their products and allowing them to order on-line.
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understand their own micro environment to enable them to obtain a broad picture of the competitive nature of the market in which they operate. The five forces are as follows:
Bargaining Power of Suppliers This requires the organization to acknowledge the fact
that suppliers can impact on an organization's marketing activity. It requires the organization to understand who its suppliers are and how much the organization is reliant on a particular supplier. The more reliant the organization is on a supplier, the
greater the competitive pressure on the organization and the more important it is to
develop a long term, mutually beneficial relationship with that supplier.
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its needs and wants. It considers how easy it is for customers to switch to competitor products should they become dissatisfied with the organization's products or if competitors take aggressive marketing action, perhaps such as reducing price. The easier it is for customers to switch, the stronger the competitive pressure on the organization.
Threat of New Entrants This is an assessment of how easy it would be for a competitor
to enter the organization's market and the pace at which this is likely to happen. The organization will need to identify barriers to entry and indeed if it can use its marketing activities to try to create barriers to entry. Strong brand image and good customer relationships are strong barriers to entry.
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above). The organization will need to understand the choices available to customers and also be aware of new technological developments that could see an increase in substitute products.
competitors in a market. In some markets competitors compete aggressively, using marketing tactics such as sales promotions, price, etc. However, in some markets competitors do not compete in aggressive ways such as reducing price, because of low profit margins or the risk of long term failure. An understanding of how competitors are likely and able to respond to an organization's marketing activity will help the organization with its marketing planning.
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Economic Environment The music industry is a global industry and music companies export their music world-wide. In many countries the sales/retail price is often pre-set and therefore the music company is very sensitive to changes in exchange rates between countries. A significant change in an exchange rate can mean that the music companys profit margin is reduced by an increase in the cost of exchanging monies.
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products via retail outlets, however, a result of the recent changes is that the music industry has had
to work with different distributors such as Apple/iTunes, mobile networks such as T-Mobile, and online music distributors such as Amazon to make its products available to consumers via the internet.
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(b) Briefly describe Porters Five Forces model and explain how this model can be used to analyse an organisations micro environnement. (10 marks)
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Q&A
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