Understanding Marketing

Environment

Prof. Kaleem Mohammed Khan

Department of Business Administration

Faculty of Management Studies & Research
Aligarh Muslim University, Aligarh

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Chapter Objectives
 Concept of Marketing Environment
 Types of Marketing Environment
 The Company’s Microenvironment
 The Company’s Internal Environment
 Suppliers
 Marketing Intermediaries
 Customer Markets
 Competitors
 Publics
 The Company’s Macro-Environment
 Demographic Environment
 Economic Environment
 Natural Environment
 Technological Environment
 Political Environment
 Cultural Environment

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Concept of Marketing Environment
 Companies do not operate in isolation. They operate under the
influence and impact of various forces and actors.

 A company’s marketing environment consist of the actors and

forces outside marketing that affect marketing management’s
ability to develop and maintain successful relationships with its
target customers.

 The marketing environment offers both opportunities and

threats.

 The environment continues to change at a rapid pace.

 Companies have two important tools to know about their

environment—Marketing Intelligence and Marketing Research
—for collecting information about the marketing environment.

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Types of Marketing Environment
 The marketing environment is made up of a
microenvironment and a macro environment.
 The microenvironment consists of the forces close
to the company that affect its ability to serve e fits
customers-the company, suppliers, marketing
channel firms, customer markets, competitors, and
publics.
 The macroenvironment consists of the larger
societal forces that affect the microenvironment-
demographic, economic, natural, technological,
political, and cultural forces.
 We look first at the company’s microenvironment

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The Marketing
Environment
Demographic

Company
Cultural Economic

Publics Suppliers
Company
Competitors
Customers
Political Natural

Intermediaries

Technological

Tuesday, December 4, 2012 Prof. KMKhan 5

The Company’s Microenvironment
 Marketing management’s’ job is to attract and retain
customers by creating customer value and satisfaction.

 However, marketing managers cannot accomplish this

task alone. Their success will depend on other actors in
the company’s microenvironment

 These are: Other company departments, suppliers,

marketing intermediaries, customers, competitors, and
various publics, which combine to make up the
company’s Microenvironment.

 These are shown in the next slide.

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Actors in the Microenvironment

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The Company’s Internal
Environment
 In designing marketing plans, marketing management takes
other company groups into
 Top management sets the company’s mission, objectives,
broad strategies, and policies.
 MM make decisions on plans approved by top management.
 MM must also work closely with Finance which is concerned
with finding and using funds to carry out the marketing plan.
 The R&D focuses on designing safe and attractive products.
 Purchasing deals with materials, manufacturing is responsible
for producing the desired quality and quantity of products.
 Together, these departments have an impact on the marketing
department’s plans and actions and they should work in
harmony to provide superior customer value and satisfaction.

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Suppliers
 Suppliers are an important link in the company’s overall
customer value delivery system.

 They provide the resources needed by the company to

produce its goods and services.

 Supplier problems can seriously affect marketing.

 Marketing managers must watch supply availability-

supply ;shortages or delays, labor strikes, and other
events can cost sales in the short run and damage
customer satisfaction in the long run.

 Marketing managers also monitor the price trends of their

key inputs. Rising supply costs may force price increases
that can harm the company’s sales volume.

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Marketing Intermediaries
 Marketing intermediaries help the company to promote, sell,
and distribute its goods to final buyers.

 They include resellers, physical distribution firms, marketing

services agencies, and financial intermediaries.

 Resellers: Are firms that help the company find customers or

make sales to them. These include wholesalers and retailers,
who buy and resell merchandise. Selecting and working with
resellers is not easy. Because of emergence of corporate (big)
retailing. These organizations have enough power to dictate
terms.

 Physical distribution firms: Help the company to stock and

move goods from their points of origin to their destinations. A
company must determine the best ways to store and ship
goods, balancing factors such as cost, delivery, speed, and
safety.

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Marketing Intermediaries (Cont)
 Marketing services agencies: Marketing research firms,
advertising agencies, and marketing consulting firms that help
the company target and promote its products to the right
markets. It must choose carefully because these firms vary in
creativity, quality, service and price.
 Financial intermediaries: They include the banks, insurance
companies, and other businesses that help finance
transactions or insure against the risks associated with the
buying and selling of goods.
 Marketing intermediaries form an important component of the
company’s microenvironment. It must partner effectively with
marketing intermediaries to optimize the performance of the
entire system.
 Thus, today’s marketers recognize the importance of working
with their intermediaries as partners rather than simply as
channels through which they sell their products.

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 Markets
The company needs to study its customer markets closely. There
are five possible types of customer markets.

International Consumer
Markets Markets

Company
Company
Government Business
Markets Markets

Reseller
Markets

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 Markets
 Consumer markets: Consists of individuals and households
that buy goods and services for personal consumption.
 Business markets: Buy goods and services for further
processing or for use in their production process.
 Reseller markets: Buy goods and services to resell at a
profit.
 Government markets: Are made up of government agencies
that buy goods and services to produce public services or
transfer the goods and services to others who need them.
 International markets: Consist of these buyers in other
countries, including consumers, producers, resellers, and
governments.
 Each market type has special characteristics that call for
careful study by the seller.

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 Markets

International Consumer
Markets Markets

Company
Company
Government Business
Markets Markets

Reseller
Markets

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 Competitors
 The marketing concept states that to be successful, a
companies provide better offers than its competitors do.
 Thus, marketers must do more than simply adapt to the
needs of target consumers.
 They also must gain advantage by positioning their
offerings strongly against competitors’ offerings in the
minds of consumers.
 No single competitive marketing strategy is best for all
companies.
 Each firm should consider its own size and industry
position compared to those of its competitors. Large
firms with dominant positions in an industry can use
certain strategies that smaller firms cannot afford.

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Competitive Forces

Types of Competition
Competition Other organizations that market products that
are similar to or can be substituted for a
marketer’s products in same geographic area
Brand competitors Firms that market products with similar
features and benefits to the same customers
at similar prices
Generic competitors Firms that provide very different products that
solve the same problem or satisfy the same
basic customer need

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Publics
 A public is any group that has an actual or potential interest in
or impact on an organization’s ability to achieve its objectives.

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 Complete Microenvironment

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The Company’s Macro-
Environment
 The company and all actors in the microenvironment operate in
larger macro-environmental forces.
 These macro-environmental forces present both opportunities
as well as threats to the company.
 These forces are largely uncontrollable i.e., they can not be
changed by an individual company.
 Therefore companies are required to track or find the changes
in the macro-environmental forces by scanning them on a
regular basis to take advantages of opportunities and to ward
of the threats.
 We may define environmental scanning as “Gathering
information regarding macro-environment, analyzing it and
forecasting the trends to perform effective marketing.
 These forces are shown in the figure given in the next slide.

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 The Company’s Macro-
environment

Demographic
Demographic

Cultural
Cultural Forces
Forcesthat
thatShape
Shape Economic
Economic
Opportunities
Opportunities
and
andPose
PoseThreats
Threats
to
toaaCompany
Company
Political
Political Natural
Natural

Technological
Technological

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Demographic Environment
 Demography is the study of human populations in terms of
size, density, location, age, gender, race, occupation, and other
statistics.

 The demographic environment is of major interest to marketers

because it involves people, and people make up markets.

 The world population is growing at an explosive rate. A

growing population means growing human needs to satisfy.
Depending on purchasing power, it may also mean growing
market opportunities.

 The world’s large and highly diverse population poses both

opportunities and challenges. Thus, marketers keep close track
of demographic trends and developments in their markets

 We discuss the most important demographic trends.

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Major Trends in Demographic
Environment
 Worldwide Population growth: 6.1 billion in 2000—7.9 b in
2025.
 Two major concerns:
1. Certain natural resources are limited and non-
replaceable.
2. Population growth is highest in poor countries
 Population Age Mix: Marketers are required to know the
proportion of various age groups in the population.
 Household Patterns: Traditional family is replaced by nuclear
family. From single earning family to dual earning family.
 Geographical Shifts in Population: people are migrating from
rural areas (villages, towns) to urban areas (cities)
 Marketers in their respective product categories are required
to know the changing trends in the population in order to
take advantage of opportunities.

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Demographic Environment in
India
 Increasing population
Rapid growth in urban population in Asia
 In India, urban population to rise to 523 million by 2025
 Change in Family Structure
 Changing Role of Women
 A growing middle class
 One study MGI India divided the Indian population into 5 economic

classes
 Division based on real annual disposable income

 1.. Deprived households have an annual disposable income of less than Rs

90,000
 The poorest economic class, Mostly unskilled or semi-skilled workers

on daily wages

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Demographic Environment in
India
 2. Aspirers have an annual disposable income in the range of Rs 90,000 to
Rs 200,000
– Spend most of their income on basic necessities, Small-time retailers,
small farmers, etc.
 3. Seekers have an annual disposable income between Rs 200,000 and Rs
500,000. Mostly white-collar employees, mid-level government officials,
newly employed postgraduates, medium-scale traders
 4. Strivers have an annual income ranging from Rs 500,000 to Rs
1,000,000
 Have a stable income source and access to amenities

 Mostly professionals such as lawyers, CAs, senior government officials,

rich farmers
 5. Global Indians have an annual disposable income in excess of Rs
1,000,000
 Creamy layer in society, Globe-trotters with a high standard of living

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Prof. KMKhan
Economic Environment
 Factors that affect consumer purchasing power and spending patterns.
Marketers should keep track of the following:
 Income Distribution: Marketers should pay attention to income
distribution as well as average income. Average income is increasing in
every country. Purchasing power increased. Many companies are
aggressively targeting the affluent
 Changing Consumer Spending Patterns: Percentage spent on food
declined, the percentage spent on housing remains more or less same
and the percentage spent on most other categories increased
 Savings: Purchasing power not only comes from current income but
also from savings people have.
 Credit Availability: Another factor is availability of loan facilities.
Banks and other financial institutions are providing loans for
purchasing various products.
 Marketers can take advantage of changes in the economic
environment.

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Economic Environment
 The global financial crisis of 2007–2009 has affected the
consumption and production of many products
 Value marketing involves ways to offer financially cautious buyers
greater value—the right combination of quality and service at a fair
price
 Changes in Consumer Spending Patterns
 Ernst Engel—Engel’s Law
 As income rises:
 The percentage spent on food declines
 The percentage spent on housing remains constant
 The percentage spent on savings increases

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Natural Environment
 The natural environment involves the natural resources that
are needed as inputs by marketers or that are affected by
marketing activities.
 Marketers should be aware of several trends in the natural
environment.
 The first involves growing shortages of raw materials.
Nonrenewable resources, such as oil, coal, and various
minerals, pose a serious problem.
 A second environmental trend is increased pollution.
Governments of many countries coming out with anti-pollution
laws.
 A third trend is increased government intervention in natural
resource management.
 A fourth environmental trend is increased energy costs. Prices
of oil, electricity and coal increased tremendously. Alternative
sources of energy are being explored.

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Natural Environment

Changing
ChangingRole
Role
of Government
of Government

Factors
Higher
HigherPollution affecting Shortage
Pollution Shortageof
of
Levels
Levels the natural Raw Materials
Raw Materials
environment

Increased
IncreasedCosts
Costs
of Energy
of Energy

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Technological Environment
 The technological environment is perhaps the most dramatic
force shaping our destiny.
 Accelerating pace of change: The technological environment
changes rapidly. Think of all of today’s common products that
were not available 100 years ago, or even 30 years ago.
 New technologies create new markets and opportunities.
Thus, marketers should watch the technological environment
closely. Companies that do not keep up with technological
change soon will find their products outdated. They will miss
new product and market opportunities.
 More R & D Budgets: Big companies and governments are
spending more on H & D activities.
 Increased regulations of technological change: As products
and technology become more complex, government agencies
come with more regulations to safeguard consumers.
Marketers should be aware of these regulations when applying
new technologies and developing new products.

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 Technological
Environment
Rapid
RapidPace
Paceof
of High
HighRR&&DD
Change
Change Budgets
Budgets

Issues
Issuesin
inthe
theTechnological
Technological
Environment
Environment

Focus
FocusononMinor
Minor Increased
Increased
Improvements
Improvements Regulation
Regulation

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 Political Environment

Includes
Includes laws,
laws, government
government agencies,
agencies, andand pressure
pressure
groups
groups that
that influence
influence or
or limit
limit …
… in
in aa given
given society
society

Emphasis
Emphasis on
on
Increasing
Increasing ethics
ethics &
& social
social
legislation
legislation Government
Government responsibility
responsibility
•• Protect
Protect companies
companies agency
agency
from
from each
each other
other enforcement
enforcement •• Societal
Societal marketing
marketing
•• Protect
Protect consumers
consumers concept
concept
•• Protect
Protect society
society (self-regulation)
(self-regulation)

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Cultural Environment
 The cultural environment is made up of institutions and other
forces that affect a society’s basic values, perceptions,
preferences, and behaviors. People grow up in a particular
society that shapes their basic beliefs and values.

 Core beliefs and values are persistent and are passed on from
parents to children and are reinforced by schools, religious
institutions, businesses, and government

 Secondary beliefs and values are more open to change and

include people’s views of themselves, others, organization, society,
nature, and the universe

 Existence of subcultures

 Subcultures

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Responding to the
Marketing
Environment
Views on Responding