Chapter 2

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The Marketing Environment
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3
Learning Objectives
After studying this chapter, you should be able to:
1. Describe the environmental forces that affect the company’s ability

to serve its customers
2. Explain how changes in the microenvironment affect marketing

decisions
3. Explain the key changes in the macroenvironment and how they

influence the business
4. Discuss how companies can react to the marketing environment
Chapter Structure
1. The marketing environment

2. The marketing macro-environment
3. The marketing micro-environment
4. Responding to the marketing environment
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Marketing Environment
• A company’s marketing environment consists of the
actors and forces outside marketing that affect
marketing management’s ability to build and maintain
successful relationships with target customers.
• Marketing environment includes:

• The micro-environment
• The macro-environment
Macro-
environment
Negative
Company’s
marketing
activities
Positive
Micro-
environment
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3.1 The Company’s Macro-environment
The company and all of the other actors operate in a larger

macroenvironment of forces that shape opportunities and
pose threats to the company.
NATURAL
DEMOGRAPHIC
ENVIRONMENT
ENVIRONMENT
ECONOMIC Macro- POLITICAL/LEGAL

ENVIRONMENT
ENVIRONMENT Environment
TECHNOLOGICAL CULTURAL
ENVIRONMENT ENVIRONMENT
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Demographics
• Demography is the study of

human populations
• Demographic trends include
age, family structure,
geographic population shifts,
educational characteristics,
and population diversity.
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The Demographic Environment
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Generational marketing is
important in segmenting people by
lifestyle of life state instead of age.
Question: Do marketers need to

create separate products and
marketing programs for each
generation?
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Demographics and Business
Chinese regulations limiting

families to one child have
resulted in what’s been known
as the “six-pocket syndrome.”
Chinese children are being
showered with attention and
luxuries, creating
opportunities for marketers.
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Geographic Shifts in Population
• In 2008, the world had, for the first time, more of its
population living in towns and cities than in the rural
areas.
• In Asia, there is a migration from rural to urban cities.
• A major trend emerging from this urban migration is a
growing number of single-person households.
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A Better-Educated, More
White-Collar More
Professional Population
• The world population is

becoming better educated.
• The workforce also is becoming
more white-collar
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Increasing Diversity
• Countries vary in their ethnic and racial makeup.

• At one extreme is Japan, where almost everyone is
Japanese.
• At the other extreme is the U.S., with people from virtually
all nations.
• Marketers are facing increasingly diverse markets, both at
home and abroad, as their operations become more
international in scope.
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Islamic banking
Increasing
diversity – The
growth in Islamic
banking caters to
the Muslim market
where the notion of
interest, earned and
charged, is
considered
incongruent with
their faith.
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Economic Environment
Consists of factors that affect

consumer purchasing power and
spending patterns:
• Changes in consumer spending
• Income distribution
• Income, cost of living, interest
rates, savings and borrowing
patterns
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Changes in Income
• Marketers should pay attention to income distribution AND

average income.
• Upper-class - spending patterns are not affected by
current economic events
• Middle class - somehow careful about spending but can
still afford the good life some of the time.
• Working class - stick close to the basics of food, clothing,
and shelter and must try hard to save.
• Underclass - must count their pennies when making even
the most basic purchases.
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Targeting at Different Income Segments
Different companies appeal to different income segments.
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Natural environment
The natural environment involves
the physical environment and the
natural resources that are
needed as inputs by marketers or
that are affected by marketing
activities.
• Basic level: weather, natural
disasters,…
• Broader level: environmental
sustainable concerns
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Natural environment
Shortage of Raw
Materials
Factors
Anti-Pollution affecting the Increased
Pressure Natural Energy Costs
Environment
Government
Protections
26 © 2012 Principles of Marketing: An Asian Perspective
Natural environment
In response to ecological
concerns, Levi Strauss
and Co. designed the
Levi’s© Eco jeans made
of 100 percent organic
cotton. The product tag
is made of 100 percent
recycled paper.
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Natural environment
Singapore’s Changi Airport

embarks on a green movement
by having recycling points
throughout the airport
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Natural environment
Wal-Mart is committed to
sustainable development by
reducing its use of plastic
bags and donating food that
otherwise would be
discarded.
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Technological Environment
• Most dramatic force in

changing the
marketplace
• Creates new markets
and opportunities
• Challenge to make
practical, affordable
products
• Safety of new product
always a concern
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Technological Environment
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How has the video game industry changed?

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Political/Legal Environment
Political environment
laws, government
agencies, and pressure
groups that influence or
limit various
organizations and
individuals in a given
society
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Political/ Legal Environment
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Political/ Legal Environment

v Increase in business regulation
• protect companies from each other.
• protect consumers from unfair business practices
• protect the interests of society against unrestrained
business behavior
v Increased emphasis on ethics and social responsible
actions
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Counterfeit Products
The popularity of counterfeit

brands in Asia has proven to
be a growing problem for
companies. Purses and bags
like these are easily
available in markets in Asia.
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Socially Responsible Behavior
•Enlightened companies encourage their managers to

look beyond what the regulatory system allows and
simply “do the right thing.”
•These socially responsible firms actively seek out ways
to protect the long-run interests of their consumers and
the environment.
Cultural Environment
•Cultural environment consists of institutions and other
forces that affect a society’s basic values, perceptions, and
behaviors
•People grow up in a particular society that shapes their basic
beliefs and values.
•They absorb a world view that defines their relationships
with others
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Cultural Environment
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Persistence of Cultural Values
• Core beliefs and values persist because they 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.
• Marketers want to predict cultural shifts in order to spot
new opportunities or threats.
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Shifts in Secondary Core Values
Previously a communist country,

Christmas is celebrated commercially in
many Asian countries even though
Christianity is not one of the country’s
main religions.
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Example - Cultural reflections

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3.2 The Company’s Micro-environment
Actors in the Microenvironment
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The Company
• Top management
All the interrelated
• Finance groups form the
internal
• R&D
environment. All
• Purchasing groups should work
• Operations
in harmony to
provide superior
• Accounting customer value and
relationships
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Suppliers
Suppliers provide the resources

needed by the company to produce its
goods and services.
Things to consider:
- Supply availability—supply
shortages or delays, labor strikes,
and other events may harm
thecompany.
- Price trends of their key inputs.
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Marketing Intermediaries
Marketing intermediaries
help the company to
promote, sell, and distribute
its products to final buyers.
Functions:
• Transportation
• Storage
• Sales
• Advertising
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Types of Marketing Intermediaries
• find customers or make sales to them

Resellers (Wholesalers, Retailers)
Physical • stock and move goods from their points of origin

distribution firms to their destinations
Marketing • research firms, advertising agencies, media

services agencies firms, and marketing consulting firms
Financial • banks, credit companies, insurance companies,

and other businesses that help finance
intermediaries transactions
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Lotte Mart opened outlets in HCMC and

Hanoi. It is big reseller in Vietnam.
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Partnering with marketing

intermediaries – Coca-Cola
provides Subway with much more
than just soft drinks. It also
pledges powerful marketing
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support.
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Think - Pair - Share
Name some marketing intermediaries in Vietnam.

What do they do?
Customers
• Customers are the most important

actors in the company’s
microenvironment
• The aim of the entire value delivery
network is to serve target customers
and create strong relationships with
them.
• The company might target any or all
five types of customer markets
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Five types of customer markets:
• Consumer markets: 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: made up of government agencies that
buy goods and services to produce public services.
• International markets: buyers in other countries, including
consumers, producers, resellers, and governments.

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Competitors
• Marketers must gain strategic advantage by positioning

their offerings strongly against competitors’ offerings in
the minds of consumers.
• No single competitive marketing strategy is best for all
companies.
Types of competitors
2 main sources:
• Brand (from manufacturers of
similar products)
• Substitute products (dissimilar
products that satisfy the same
need)
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Competitors
• Who are our competitors?

• What do they want?
• What are their strategies?
• What make them differentiated
• What will they do?
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Competitors
• Number of competitors?
• Direct/ indirect/ potential/ … competitors?
• Target market
• Market share
• Their strengths, weaknesses
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Publics
Financial publics General public
Media publics Internal publics
Government publics
Citizen-action publics
Local publics
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Publics - any group that has an actual or potential interest in or

impact on an organization’s ability to achieve its objectives.
• Financial publics influence the company’s ability to obtain funds.

• Media publics carry news, features, and editorial opinions.
• Government publics. Management must take government developments into

account.
• Local publics include neighborhood residents and community organizations.

• Citizen-action publics include consumer organizations, environment groups,
and minority groups
• General public. The general public’s image of the company affects its buying.
• Internal publics include workers, managers, volunteers, and the board of

directors.

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Think - Pair - Share
How many publics can you name for UFM?
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3.3 Responding to the Marketing Environment
Many companies think the marketing environment is an

uncontrollable element to which they have to adapt.
Other companies take an environmental management

perspective to affect the publics and forces in their
environment.
Marketing managers should take a proactive rather than

reactive approach to the marketing environment.
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SWOT
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3.4 Practice Questions
Your advertising agency is currently researching the

gender, education, location, age, and occupations of
your target market. What is this environment called?
a. demographic
b. psychographic
c. geographic
d. product-use
3-67
You are directed to study the factors that are larger

societal forces that affect your company (demographic,
economic, natural, technological, political, and cultural).
What are you studying?
a. the macroenvironment
b. the microenvironment
c. the marketing environment
d. the marketing mix
e. the global environment
3-68
In what way(s) might Vinamilk rely on marketing

intermediaries?
a. to provide speed in delivery to consumers

b. to package the milk
c. to assist with promotional efforts
d. to create a TV advertising campaign
e. all of the above
3-69

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2/21/21

The Marketing Environment

After studying this chapter, you should be able to:

1. Describe the environmental forces that affect the company’s ability

2. Explain how changes in the microenvironment affect marketing

3. Explain the key changes in the macroenvironment and how they

4. Discuss how companies can react to the marketing environment

The Marketing Environment

1. The marketing environment

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The Marketing Environment

• Marketing environment includes:

The Marketing Environment

3.1 The Company’s Macro-environment

The company and all of the other actors operate in a larger

ECONOMIC Macro- POLITICAL/LEGAL

3.1 The Company’s Macro-environment

• Demography is the study of

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3.1 The Company’s Macro-environment

The Demographic Environment

3.1 The Company’s Macro-environment

Question: Do marketers need to

3.1 The Company’s Macro-environment

The Demographic Environment

3.1 The Company’s Macro-environment

Chinese regulations limiting

3.1 The Company’s Macro-environment

The Demographic Environment

3.1 The Company’s Macro-environment

Geographic Shifts in Population

3.1 The Company’s Macro-environment

• The world population is

3.1 The Company’s Macro-environment

• Countries vary in their ethnic and racial makeup.

3.1 The Company’s Macro-environment

3.1 The Company’s Macro-environment

The Demographic Environment

3.1 The Company’s Macro-environment

Consists of factors that affect

3.1 The Company’s Macro-environment

• Marketers should pay attention to income distribution AND

3.1 The Company’s Macro-environment

Targeting at Different Income Segments

Different companies appeal to different income segments.

3.1 The Company’s Macro-environment

3.1 The Company’s Macro-environment

3.1 The Company’s Macro-environment

3.1 The Company’s Macro-environment

Singapore’s Changi Airport

3.1 The Company’s Macro-environment

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3.1 The Company’s Macro-environment

• Most dramatic force in

3.1 The Company’s Macro-environment

3.1 The Company’s Macro-environment

How has the video game industry changed?

3.1 The Company’s Macro-environment

3.1 The Company’s Macro-environment

Political/ Legal Environment

3.1 The Company’s Macro-environment

Political/ Legal Environment

3.1 The Company’s Macro-environment

The popularity of counterfeit