Marketing Management
Marketing Environment

Marketing Environment
• The marketing environment consists of actors and forces outside the organization that affect management’s ability to build and maintain relationships with target customers • It consists of internal and external forces that directly or indirectly influence an organization’s marketing activities



Marketing Environment
• Environment offers both opportunities and threats. • Marketing intelligence and research used to collect information about the environment.

Why External Analysis?
External analysis allows firms to:
• discover threats and opportunities • see if above normal profits are likely in an industry • better understand the nature of competition in an industry • make more informed strategic choices



Marketing Environment
• Includes:
– Micro environment: actors close to the company that affect its ability to serve its customers. – Macro environment: larger societal forces that affect the microenvironment.
• Considered to be beyond the control of the organization.

The Company’s Microenvironment
• Company’s Internal Environment: – Areas inside a company. – Affects the marketing department’s planning strategies. – All departments must “think consumer” and work together to provide superior customer value and satisfaction.



Actors in the Microenvironment

The Company’s Microenvironment
• Suppliers:
– Provide resources needed to produce goods and services. – Important link in the “value delivery system.” – Most marketers treat suppliers like partners.



The Company’s Microenvironment
• Marketing Intermediaries:
– Help the company to promote, sell, and distribute its goods to final buyers
• • • • Resellers Physical distribution firms Marketing services agencies Financial intermediaries

• Resellers are distribution channel firms that help the company find customers or make sales to them. • wholesalers and retailers who buy and resell merchandise. • Resellers often perform important functions more cheaply than the company can perform itself. • However, seeking and working with resellers is not easy because of the power that some demand and use.



Physical Distribution Firms
• Physical distribution firms help the company to stock and move goods from their points of origin to their destinations. Examples would be warehouses (that store and protect goods before they move to the next destination).

Marketing Services Agencies
• Marketing services agencies (such as marketing research firms, advertising agencies, media firms, etc.) help the company target and promote its products to the right markets.



Financial Intermediaries
• Financial intermediaries (such as banks, credit companies, insurance companies, etc.) help finance transactions and insure against risks associated with buying and selling goods.

• Customers:
– Several types of markets that purchase a company’s goods and services – Customer vs consumer



• Competitors:
– Those who serve a target market with products and services that are viewed by consumers as being reasonable substitutes – Company must gain strategic advantage against these organizations

• Publics:
– Group that has an interest in or impact on an organization's ability to achieve its objectives

The Purpose of Five-Forces Analysis
• The five forces are environmental forces that impact on a company’s ability to compete in a given market. • The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.



Porter's Five Forces Model
Potential entrants
Threat of new entrants Bargaining power of suppliers

Industry competitors

Bargaining power of buyers

Rivalry among existing firms


Threat of substitutes

Substitute products

Threat of New Entrants
Economies of Scale Product Differentiation Capital Requirements Switching Costs Access to Distribution Channels Government Policy

Barriers to Entry



Bargaining Power of Suppliers
Suppliers are likely to be powerful if:
Suppliers exert power in the industry by: * Threatening to raise prices or to reduce quality Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases

Supplier industry is dominated by a few firms

Suppliers’ products have few substitutes Buyer is not an important customer to supplier Suppliers’ product is an important input to buyers’ product Suppliers’ products are differentiated Suppliers’ products have high switching costs

Bargaining Power of Buyers
Buyer groups are likely to be powerful if:
Buyers are concentrated or purchases are large relative to seller’s sales Purchase accounts for a significant fraction of supplier’s sales Products are undifferentiated Buyers face few switching costs Buyer has full information Buyer presents a credible threat of backward integration

Buyers compete with the supplying industry by:

* Bargaining down prices * Forcing higher quality
* Playing firms off of

each other



Threat of Substitute Products
Keys to evaluate substitute products:
Products with similar function limit the prices firms can charge

Products with improving price/performance tradeoffs relative to present industry products

Rivalry Among Existing Competitors
Intense rivalry often plays out in the following ways:
Competing for strategic position Using price competition Staging advertising battles Increasing consumer warranties or service Making new product introductions

Occurs when a firm is pressured or sees an opportunity
Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors



The Macroenvironment
• The company and all of the other actors operate in a larger macroenvironment of forces that shape opportunities and pose threats to the company.

The Company’s Macroenvironment



The Company’s Macroenvironment
• Demographic:
– The study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. – Marketers track changing age and family structures, geographic population shifts, educational characteristics, and population diversity.

Economic Environment
Consists of factors that affect consumer purchasing power and spending patterns.
• Changes in Income
– 1980’s - 1990’s – 2000’s – ………………………………….

• Income Distribution
– – – – Upper class Middle class Working class Underclass



Income Distribution

Walt Disney markets two distinct Pooh bears to match its two-tiered market.

Natural Environment
• Involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities.



Factors Impacting the Natural Environment
Shortages of Raw Materials Increased Pollution Increased Government Intervention Environmentally Sustainable Strategies

Technological Environment
• Most dramatic force now shaping our destiny.



Technological Environment
• Changes rapidly. • Creates new markets and opportunities. • Challenge is to make practical, affordable products. • Safety regulations result in higher research costs and longer time between conceptualization and introduction of product.

Political Environment
Includes Laws, Government Agencies, and Pressure Groups that Influence or Limit Various Organizations and Individuals In a Given Society.

Increasing Legislation

Changing Government Agency Enforcement

Increased Emphasis on Ethics & Socially Responsible Actions



Cultural Environment
• The institutions and other forces that affect a society’s basic values, perceptions, preference, and behaviors.

Cultural Environment
• Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government. • Secondary beliefs and values are more open to change.



Cultural Environment
Themselves Others Organizations Society Nature The Universe
Society’s Major Cultural Views Are Expressed in People’s Views of:

References : Marketing Management – Philip Kotler Principles of Marketing – Philip Kotler, Gray Armstrong


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