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CH 3: Analyzing the Mark. Environment

The marketing environment includes the actors and forces outside marketing
that affect marketing management’s ability to build and maintain successful
relationships with customers.

The Company’s Microenvironment

The Company
➢ The Internal environment of a company, its functional areas and departments
➢ Marketing Managers must work closely with other company department
➢ They should work in harmony to provide superior customer value & relationships

Suppliers
➢ They form an important link in the company’s overall customer value delivery system
➢ Supply shortages or delays, labor strikes, and other events can cost sales in the short run
and damage customer satisfaction in the long run
➢ Most marketers today treat their suppliers as partners in creating and delivering
customer value

Marketing Intermediaries
➢ They help the company to promote, sell and distribute the products to final buyers
➢ They include:
o Resellers: distribution channel firms that help the company find customers or
make sales to them (wholesalers & retailers)
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o Physical distribution firms: help the company to stock and move goods from
their points of origin to their destination
o Distributors & Agents: organizations based in the markets that generally have a
contractual relationship with the principal company to buy their products & to
distribute them in local markets
o Marketing services agencies: they are the marketing research firms, advertising
agencies, media firms and marketing consultancy firms that help the company
target & promote its products to the right markets
o Financial intermediaries: include banks, credit companies, insurance companies,
and other businesses that help finance transactions or insure against the risk
associated with the buying & selling of goods

Competitors
➢ A company must provide greater customer value & satisfaction than its competitors do
➢ Firms must gain strategic advantage by positioning their offering strongly against
competitors’ offerings in the minds of consumers

Publics
➢ A public is any group that has an actual or potential interest in or impact on an org’s
ability to achieve its objectives
➢ There are 7 types of publics
o Financial publics: This group influence the company’s ability to obtain funds
(Banks, investment houses & stockholders)
o Media publics: This group carries news, features, and editorial opinion.
(newspapers, magazines, radio & TV stations)
o Government publics: Management must take government development into
account
o Citizen-action publics: Marketing decisions may be questioned by consumer org,
environmental groups & minority groups
o Local publics: Includes neighborhood residents & community org
o General Public: The public’s image of the company affects its buying
o Internal Publics: Includes workers, managers, volunteers & the board of
directors. When employees feel good about their company , this positive
attitude spills over to external publics
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Customers
➢ Customers are the most important actors in the company’s microenvironment
➢ The company might target any or all 5 types of customer markets:
o Consumer Markets: individuals & households that buy goods & services for
personal consumption
o Business Markets: buy goods & services for further processing or for use in their
production process
o Resellers: Buys goods & services to resell at a profit
o Government Markets: made up of government agencies that buy goods &
services to produce public services or transfer the goods & service to others who
need them
o International Markets: consist of buyers in other countries, including consumer,
producer, reseller, distributors, agents & government

The Company’s Macroenvironment

Demographic Environment

➢ Demography: It is the study of human populations in term of size, density, location, age,
gender, race, occupation, and other statistics
➢ China’s one child rule
➢ Marketers keep close track of demographic trends & developments in their markets,
both at home & abroad
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➢ They track changing age and family structure, geographic population shifts, educational
characteristics, and population diversity

Changing Age Structure of the Population:

➢ Baby Boomers:
o Baby boomers include people born between 1946 and 1964
o This generation accounts for about 30% of the Arab population
o Baby boomers “think young” no matter how old they are
o Baby boomers are retiring later and working more after retirement
o Financial services industry is targeting the baby boomers since they will receive
their retirement funds & inherit large amounts of money from their parents
➢ Generation X
o Generation X includes people born between 1965 and 1976.
o This generation tends to display the following traits:
▪ Skepticism
▪ Cautious economic outlook (born in times of recession)
▪ Less materialistic (prize experience)
▪ Family comes first (because of the high level of divorce)
▪ Research products before considering a purchase
➢ Generation Y (Millennials-Echo Boomers)
o Include those born between 1977 and 2000
o Outnumber the baby boomers
o They are comfortable with technology
o Includes:
▪ Tweens (ages 8–12)
▪ Teens (13–19)
▪ Young adults (20’s)

➢ Marketers need to form more precise age-specific segments within each group
➢ Generational Marketing: It is important in segmenting people by lifestyle, life stage and
common values, rather than by age.

The Changing Arab Family

➢ Arab world undergoing major changes related to the Family such as the women working
and involved in the decision making
➢ A deep awareness of cultural trends and the composition of typical families &
households is vital for Marketers
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➢ This can be challenging for companies expanding into new countries & cultures which
differ significantly from the cultures in the countries in which they have previously
operated

Geographic Shifts in Population

➢ Expatriates are coming to the Arab world lured by high income and a high standard of
living.
➢ The nationals of most Gulf countries are now a minority population within their own
countries.

Education & Employment

➢ Due to the high unemployment rates (global recession), a government reassessment of

education policies and training schemes has taken place
➢ Government should provide small-scale investment opportunities for the unemployed
and for new graduates & should encourage private education institutions to implement
training schemes for these groups

Increasing Diversity

➢ Marketers now face increasingly diverse markets, both at home and abroad, as their
operations become more international in scope
➢ Due to the increase in number of expatriates, the population in getting more diverse
➢ Companies in the Arab world are targeting ethnic groups with specific products,
services, and promotions
➢ As population in different countries grow more diverse, successful marketers will
continue to diversify their marketing programs to take advantage of opportunities in
fast-growing segments (Indians in UAE)

Economic Environment

➢ It consists of factors that affect consumer purchasing power & spending patterns
➢ Marketers must pay attention to major trends & consumer spending patterns
➢ Nations vary greatly in their levels & distribution of income:
o Industrial Economies: constitutes rich markets for many different kinds of goods
o Subsistence Economies: They consume most of their own agricultural &
industrial output and offer few market opportunities
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o Developing Economies: Can offer outstanding marketing opportunities for the

right kinds of products.

Changes in Income

➢ Value Marketing:
o Has become the watchword for many marketers
o Instead of offering high quality at high price, or lesser quality at low prices;
marketers are looking for ways to offer today’s more financially cautious buyers
greater value—Just the right combination of product quality & good service at a
fair price

Changing Consumer Spending Patterns

➢ Food, housing & transportation use up the most household income

➢ Consumers at different income level have different spending patterns
➢ Engel’s Law→ As income rises:
o the percentage spent on food declines
o the percentage spent on housing remains constant
o the percentage spent on savings increases

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:
o Shortages of raw materials: (Renewable & Non-Renewable)→ Higher costs
o Increased Pollution: Industry will almost always damage the quality if the
natural environment
o Increased Government Intervention: It intervenes in natural resource
management—They promote a clean environment by creating laws
o Environmentally Sustainable Strategies: An effort to create a world economy
that the planet can support indefinitely (companies are undergoing green
movement)
➢ Some countries do little about pollution, largely because they lack the needed funds or
political will
➢ The general hope is that companies will accept more social responsibility & that less
expensive devices can be found to control & reduce pollution
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Technological Environment
➢ The most dramatic force that is now shaping our destiny
➢ New Technologies create new markets & opportunities
➢ However, every new technology replaces an older technology
➢ Companies that do not keep up will soon find their products outdated and they will miss
new product & market opportunities
➢ Safety of the new product is a main concerns→ government agencies investigate & ban
potentially unsafe products

Political Environment
➢ The political environment consists of laws, government agencies, and pressure groups
that influence or limit various organizations and individuals in a given society.
➢ Legislation Regulating Business:
o Well-conceived regulations can encourage competition and ensure fair markets
for goods & services
o Increase Legislation:
▪ Legislation affecting business around the world has increased steadily
over the years
▪ Has 3 purposes:
• Protect companies from each other (Laws are passed to define &
prevent unfair competition)
• Protect consumers from unfair business practices (low quality,
invasion of privacy, lies and deceiving customers)
• Protect the interest of society: against unrestrained business
behavior (firms take responsibility or the social costs of their
production or products)
o Changing Government Agency Enforcement:
▪ Government agencies have some discretion in enforcing the laws, they
can have a major impact on a company’s marketing performance
➢ Increased Emphasis on Ethics and Socially Responsible Actions
o Business is also governed by social codes& rules of professional ethics
o Socially Responsible Behavior:
▪ Enlightened companies, who seek to protect the long-run interest of their
consumers, encourage their managers to look beyond what the
regulatory system allows & simply ‘do the right thing’.
▪ Privacy issues rise with the boom in the internet marketing (but policy
makers are taking action to protect consumer privacy)
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▪ By tracking the customers clicks, some companies might use this digital
data to take unfair advantage of consumers
➢ Cause-Related Marketing
o Has become a primary form of corporate giving
o It lets companies “do well by doing good” by linking purchases of the company’s
products or services with fundraising for worthwhile causes or charitable
organizations
o Critics worry it has become a strategy for selling rather than a strategy for giving

Cultural Environment
➢ Persistence of Cultural Values
o Core beliefs and values are persistent and are passed on from parents to
children and are reinforced by schools, mosques, businesses, and governments.
o Secondary beliefs and values are more open to change and include people’s
views of themselves, others, organizations, society, nature, and the universe
➢ Shifts in Secondary Cultural Values
o People’s View of themselves:
▪ Serving themselves vs. others
▪ Do it yourselfers: view the experience as a form of expression
▪ Adventurers: view themselves doing things others wouldn’t dare to do
o People’s View of Others
▪ People’s attitude is shifting→ Cocooning : going out less & staying home
more
▪ Leads to less demands for theater-going and more demand for home
entertainment products
o People’s View of Organization
▪ People are willing to work for major org and expect them, in turn, to
carry out society’s work
▪ There has been a decline in the org loyalty because of the scandals such
as Enron and WorldCom
▪ Many people today see work not as a source of satisfaction but as a
requires chore to earn money to enjoy their nonworking hours
o People’s View of Society
▪ Patriots defend it
▪ Reformers want to change it
▪ Malcontents want to leave it
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o People’s View of the Nature

▪ People vary in their attitudes toward the natural world:
• Some feel ruled by it
• Others feel in harmony with it
• Others seek to master it
▪ People had been growing mastery over nature through technology and
the belief that nature is bountiful; but the realized that nature is finite
and fragile, and it can be destroyed and spoiled by human activities
o People’s View of the Universe
▪ People vary in their beliefs about the origin of the universe and their
place in it
▪ Religion’s influences is visible

Responding to the Marketing Environment