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Chapter 4 Armstrong/ Kotler Marketing: An Introduction
The Marketing Environment
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I. The Marketing Microenvironment
The environments in which you will have to market your new product are a major factor in determining your strategy. In a real-life Marketing Plan you would spend a solid amount of time researching these environments. For the purpose of your Marketing Plan, do enough informal and secondary research to have a good idea of what will affect your product launch.
Marketing Plan Hint - When writing the SWOT analysis for your
Marketing Plan, the INTERNAL environments are where you get the information for your STRENGTHS AND WEAKNESSES. The external environments are where you find your Opportunities and Threats
Company Suppliers The Company
The Marketing Concept tells us that in an ideal world, the whole company will work together to profitably meet the needs of the consumer. As the Marketing Manager for a new product, you have to deal with things over which you have some direct control - the product itself, its price, its promotion, and where it is sold (distribution/place). It also means that you cannot just work within the walls of the Marketing Department; you have to get out and talk to the rest of the company, break down the artificial barriers that keep a company from working as a team. This will include all other functional areas of the company that touch on any issues of analysis, planning, implementation and control, and this means pretty much everyone. Some of the questions you are asked below to think about will not end up directly in your
or retail store. What are you going to do when you talk to Manufacturing and they tell you they can only produce the product using three thingamajigs instead of the two you had planned on? And how about the people in Accounting? Have you had coffee with them recently and talked to them about how costs are going to be allocated? It may make a difference in your strategic planning. and report back . GM's home town. they say. and when GM has problems.
What does Top Management have to say about all this? Are they on-side.
Which other parts of the company do you expect will have the most effect on your Marketing Plan? Who can help you? Who might possibly sandbag your efforts? How will you deal with them?
Organizations and people who provide what you need to produce what you make
When General Motors shuts down a plant. but thinking about them and talking about them on the Discussion Group will help you get a better idea of what your company and your product are all about. they have problems. or any organization that buys supplies from someone else.Marketing Plan. There are thousands of companies that supply GM. more people lose their jobs than just the workers at GM. "What's good for General Motors is good for the nation."
Visit a manufacturing company. USA. This is why in Detroit. Michigan. do you have a champion? What happens when you have a new product all ready to go and the Finance department says they can't get you the funding? Did you talk to Research and Development before you started down the road to producing something that's never been made before? Will Purchasing be able to handle the volume of orders you are expecting in your first two months? Nothing kills sales faster than a company that can't fill orders.What is the single biggest problem they have with suppliers?
. Ask them.
slotting fees and shelf space. we may forget that we hate the ad but we
. in-house sales forces and outside agents. or will you be one of the few customers your supplier has? It makes a difference in your expected relationship with that supplier.50 to park in Parking Structure II when you already pay a hefty fee for a yearly parking pass. Arrow relented and now you can buy an Arrow shirt on sale. a group of retailers in western Canada banded together and told Arrow that if they couldn't mark the shirts down then no one in the area would carry the shirts. but in another area of campus) We've all bought something that wasn't quite right but we had to have it and so we took what was there (your new car has everything you want but not automatic windows and you decide to get it anyway) The sad thing here is that advertising research shows that often we remember products BETTER when we hate their ads. but Place (channels of distribution) is perhaps most crucial.When thinking about your suppliers in your
Marketing Plan. Will you have to purchase materials that are in great demand by other companies as well. Traditionally the balance of power in the channels relationship between Arrow shirts and the retailers who sold them lay with Arrow. but we wanted it and so we bought it (paying $8.Marketing Plan Hint .Channels of Distribution)
This is the area where I did my doctoral research. fed up with Arrow's restrictions on selling their shirts on sale. and all the fascinating issues of power and control. We always say that all four of Marketing's P's are equally important. If you are short of money and/or credit rating right now. what can you promise a supplier later on in the future if they help you out now?
Marketing Intermediaries (Place . We've all bought something that was more than we wanted to pay for it. and when we go to the store. But some years ago. a huge manufacturer on whom a retailer was dependent for a popular product. consider what will be the balance of power. It involves trucks and warehouses.
buy goods and services to produce public services or transfer them to needy constituents. The number-one user of advertising in Canada is the government International . but basically the whole text and course emphasizes global marketing
. they buy goods and services for further processing or for use in their own production process. More on these in the Learning Unit on Business Buyer Behaviour Reseller . we're not talking here about ordering something that has run out of stock. Students tend to overlook it or to do it wrong.read this section in Distribution carefully in
the Marketing Plan instructions.remember the product enough to buy it But no one has ever bought something that wasn't there to buy. More on these in the Learning Unit on Consumer Buyer Behaviour Business .
Consumer .also known as Industrial markets or B2B markets. We will look at these in more detail in the Learning Unit on Place Government .individuals and households that buy goods and services for their own personal consumption. There is a chapter in the
text on International Marketing.buy goods and services for repackaging and selling at a profit. or buying on the Internet where you don't see a physical product. but rather of a situation where the good simply wasn't available to be bought
Who holds the power in your Marketing Plan product's channels of distribution? With whom will you need to establish relationships?
Marketing Plan Hint . You must at the early stages of your Plan do some investigation into how other companies currently distribute products similar to the one you are proposing to market.buyers in other countries.
or he might just pour it all down a rat hole
. Instead of buying a new suit.000 range Your Target Market: Well-to-do gentlemen
Your Product: Men's Suits Your Brand: YourLuxury Your Price: $2. Ultimately everything in the world is a competitor for the dollar that a customer might spend at your store. etc.000 on a fast night at the gaming tables. He might donate the money to charity. Services. He might put the $2.000. He might fritter away every cent of the $2. you will be choosing only one
Companies offering your target market similar goods and services. he might blow the whole $2.Exercise:
Which one of these five types will you choose as your customer? To make the project easier.000 on small items like ice cream cones. He might buy one of the first five items for around $2. Experiences. Imagine you are the owner of a men's suit manufacturing company called YourLuxury suits. Investments.000 in the bank to start saving for a red sports car. your gentleman might spend his money on YourLuxury suit Rolex watch Fixing living room windows Week in Hawaii Repairing family sedan Donating to charity New sports car Ice cream cones (many of them) Gambling at Casino Royale Pouring money down a rat hole Anything is a possible alternative to his spending his money in your store.
000. but you rejected this level when you chose
. Generic Competition . You need not include these wilder fringe categories of competition in your list of competitors. all expenditures are "competition" for you.000 won't get spent in your store if he does something else with it. either physically or conceptually and your category gets narrower. the sports car are all luxury goods. but you need recognize that in a sense. Product Competition .Here the products are more similar. it still means that that $2. You can have Distant Product Competitors such as: YourLuxury suit Moore's Suits Hudson's Bay Menswear Value Village but let's face it. Generic competitors offer substitute goods which may be very different physically and conceptually from yours but which meet a common need. It is a level of competition.(which my father used to contend he would have just as much fun doing as gambling). Whatever your guy does with his $2. you don't have any real competition from any of these other places.The Generic market is narrower. YourLuxury suit
Rolex watch Weekend in Hawaii Saving for a sports car The Rolex watch. at $2. At some level they meet the same need that a luxury suit does. the weekend in Hawaii.000 for your suit.
. You know something about men's suits. In one class.your target market. for which you can find no direct competition. Note that there are "latent" competitors as well as current one. You know how to compete. seeing you come out with your product. these are current competitors. You can NEVER say that you have NO competition.000 anymore) Here your competition is very narrow -.
*The reason I say "almost always" is that there are some new emerging theories of business which maintain that for some companies.yours or someone else's? This is your direct competition.only expensive men's suits. an upgraded stereo system. assume that there will always be competition. What about companies that may start up business because. there is ALWAYS a competitor for your potential customer's money. your potential customer has decided what product he wants.these are "latent" competitors. There are other companies out there who already produce what you are planning to. In a product market. they sense there is a market there . They thought they had no competition until they realized that a car buyer would have to choose between their expensive product and say.
. competition is not relevant but this is beyond the scope of this introductory course. It's an easier market to compete in. Laurent suit Lou Miles suit Georgio Armani jacket (I don't think you can get a whole suit for only $2... You may not know how to compete with a Hawaiian vacation.a computer assisted map device to tell you where you are). What you choose to consider your direct competition makes all the difference in what your marketing strategy will be. And finally you have Close Product Competitors such as: YourLuxury suit Yves St. particularly luxury suits. tinted windows. a group came up with an idea for a device for a car that did not exist at the time (it now does . and now he's choosing between brands . THERE IS ALMOST* ALWAYS COMPETITION If you are producing something that has never been made before. For this course. leather bucket seats. then your competition is just at a broader level.
and think back on your answers in the unit on Marketing and Publics in Unhip Society. The internal environments are where you find your strengths and weaknesses
. not you. for example in a situation where competitors can easily enter the market (see Penetration Pricing). do NOT just list "competition.When listing "Threats" in the Marketing
Plan. The Marketing Macroenvironment
Demographic Economic Natural Technological Political Cultural
The macroenvironments are for the most part uncontrollable by the company." it is always a threat for just about any company. list that particular specific threat. If competition is a particularly major threat for your company. the EXTERNAL environments are where you get the information for your OPPORTUNITIES AND THREATS.Exercise:
Who are your competitors? your latent competitors? your generic competitors? your direct competitors?
Marketing Plan Hint . Things happen and the company must be prepared to react.
Marketing Plan Hint .
Publics Financial Media Government Citizen Action Local General Internal
Note that a public is any group that has an interest in what your organization does and note that THEY decide if they are publics. How would your answer differ if you were Fries a member of one of these Publics?
II. see UnHip Fries Look again at the Unhip Fries case. For a case dealing with these various publics. but leave the majority of discussion of competition for the Competition section.When writing the SWOT analysis for your
Marketing Plan. It's such a serious threat that you cover competition in a section all on its own.
But keep it in mind. The python is the consuming public.how many. Even the North American market is made up of very different consumer experiences. In an Introductory course we must generalize sometimes or we'd never get through all the material.
Changing Age Structure In 1996. square rather than narrow pointed toe -.
When the Baby Boomers were young. David Cork and Susan Lightstone wrote a book called The Pig and the Python: How to Prosper From the Aging Baby Boom (Toronto: Stoddart Books). danced (even vacuumed if you believe the ads) in shoes like this red high heel
Now these are the popular women's shoes: low sturdy heel. occupation. women worked. the pig (lump in python) is the clump of Baby Boomers as they move through the age demographics and affect thousands of product markets.
Chunky shoes didn't used to be in style. ever. then think about one reason why the style of shoes has changed recently. Remember throughout the course but particularly in this Unit that we refer mostly to the North American market. race. age. go ask your grandmother
. What effect have the baby-boomers had on shoe fashion? If you can't figure this one out and if your mother is younger than 40. sex. where they live and how densely populated.Demographic Environment
Demography is the study of human beings . Changes in demographics have a major impact on marketing. shopped. These environmental factors particularly will be vastly different in different countries and cultures.think about the size of a target market that includes the Baby Boomers.
The middle class keeps trying to have "the good life" and can generally keep up if they are careful about spending. I ate cod tongues for lunch. With the increased popularity of American fast food. you can now buy at your local grocery store burritos hot enough to singe your tongue. People in different geographical areas often eat distinctly different foods.value marketing
Paradox of the New Economy .Changing Canadian Households The traditional suburban family of dad.
What demographic factors specifically affect your Marketing Plan product?
Many things affect consumer purchasing power and spending patterns."squeezed consumer" 2000's . where you once had to bring canned chiles up from the Mexican-influenced southwest of the United States because everything gastronomic in Toronto was basically related to grey roast beef and mashed potatoes. mom. The lower middle class has a great deal of difficulty keeping up with the consumer choices presented to them by Marketing. the
percentage spent on food declines. While in Newfoundland on a strike support visit. Many companies are capitalizing on increased multiculturalism to promote their goods and services.
Changes in Income . once traditionally a country with almost no heart disease. and station wagon is fast disappearing. Thai.a dubious achievement. 2 1/3 children. Consumer behaviour models now list "single parent" as a major life-stage variable in marketing (it's about time) and yet many companies continue to use images of the family to promote their goods and services. the percentage spent on housing remains constant. China. and the
.Engel's Law says that as income rises.The fact that for most consumers rising income has only barely kept
pace with inflation means that consumers have become more value conscious. 1980's .changes in technology were supposed to mean we had more leisure time but for most of us we now work more hours and have less leisure time Changing Consumer Spending Patterns .consumption frenzy 1990's . Increasing Diversity In Toronto. or Lebanese dishes. dog. and the ingredients to make authentic Indian. now is catching up with American rates of that disease -. Social class makes a difference. The rich don't worry too much about current economic events. Population and Growth Shifts People are moving all over the world and migration patterns affect the flow of goods and wants.
An example: in a declining economy.When listing Threats in your Marketing
Plan.Engel's Law says that as income rises. and the percentage spent on savings and other categories increases. the percentage spent on housing remains constant.
At whose expense do you produce your products? Name one element in the Natural environment that will affect your Marketing Plan
. Find a specific economic event which specifically affects your company and not others.
Do some calculations: has this been true for you in your life?
Economic Development . the percentage spent on food declines.
What specific economic factors affect your Marketing Plan product?
Marketing Plan Hint .percentage spent on savings and other categories increases. Dollar Stores and other discount stores will often do a brisker business as more people turn to cheaper ways to buy the same things they still need to buy. do NOT just list a poor economy as one of the Threats. A poor economy usually affects most all businesses negatively.
A threat from the Natural environment has to relate specifically to natural resources needed by the company. for many products the Natural Environment will not be a threat and you can safely say "Not Applicable.When listing Threats in your Marketing
Name one element in the Technological environment that will affect your Marketing Plan product. explain why it is classified in that environment
. explain why it is classified in that environment (there may not be a Natural environmental factor)
Marketing Plan Hint . An example: a company making high-quality solid wood furniture would be affected if there were a forest fire in the area that supplied the wood. or things that will be affected by the marketing of your product. Check your textbook for four major trends in the natural environment.
explain why it is classified in that environment
Reviewing the Environments
. marketers find it easier to change secondary values
Name one element in the Cultural environment that will affect your Marketing Plan product.Political Environment
Name one element in the Political/Legal environment that will affect your Marketing Plan product. explain why it is classified in that environment
Core cultural values are hard to change.
technological.think it through: what main things make an environment internal or external?
Here's an exercise to help you understand what kind of thing belongs in each environmental area.
Matching Environments & Ads
Caution: this page of full colour ads will take a while to download
III. social/cultural . family. In your own words. what do you think is the mission statement of the World Trade Organization?
What is the difference between an internal and an external environment? This is not a simplistic question with a like-wise-simple answer .
Click here to go to another matching exercise that involves matching the macro-environment variables . natural.with real-life ads. you have to match one-on-one-and-onlyone. education. That is. economic. There may be more than one correct answer. The Global Marketing Environment
The International Trade System
Quota Embargo Exchange Controls Non-Tariff Trade Barriers
The World Trade Organization
Check out the Web Page for the World Trade Organization
After looking at their website.age. geography. and you can't leave any out. With this one. political/legal. you can't use one environment more than once.
Ph. Toronto © M.Economic Communities Exercise
NAFTA What were the original goals for the North American Free Trade Association? What was Canada supposed to get out of it? Do you think it was a good deal for Canada?
Environmental Management Perspective
For your Marketing Plan product.D.B.0 Introductory Marketing York University.A. M. are there any environments that you feel you ought to aggressively work to control. Responding to the Marketing Environment
Taking an Environmental Management Perspective means the firm will take aggressive steps to affect the environments in which it operates rather than waiting to be affected by those environments. rather than waiting for them to affect you?
Introduction Segmentation Strategy Product Society Price Environments Place Research Promotion Buyers The Marketing Plan
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AK/ADMS 2200 3. Louise Ripley.