Chapter Three

Analyzing the Marketing

Environment
ANALYZING

Chapter 3- slide 1
AAST - AADAWY
 Analyzing the Marketing
Environment
Topic Outline

• The Company’s Microenvironment

• The Company’s Macroenvironemnt
• Responding to the Marketing Environment

Chapter 3- slide 2
 Learning Objectives

• Provide a framework to help managers, entrepreneurs and

investors comprehensively assess the environment in
which they operate or propose to operate, in order to
assess market attractiveness and enhance their likelihood
of achieving success.
• Addresses three important questions for marketing
strategists:
1. Does it really matter whether we swim upstream or downstream?
2. How can we be sure we’ve identified and understood the key trends?
3. And finally, how does macro trend analysis play out in assessing markets
and in making marketing decisions?

Chapter 3- slide 3
 The Marketing Environment

The marketing environment includes

the actors and forces outside marketing
that affect marketing management’s
ability to build and maintain successful
relationships with target customers

Chapter 3- slide 4
 The Marketing Environment
• Microenvironment: The forces close to the
company that affect its ability to serve its
customers – the company, market channel firms,
customer markets, competitors and publics,
which combine to make up the firm’s value
delivery system.
• Macroenvironment: The larger societal forces
that affect the whole microenvironment –
demographic, economic, natural, technological,
political and cultural forces.

Chapter 3- slide 5
The Microenvironment

Chapter 3- slide 6
 The Company’s Internal
Microenvironment
The Company
• Top management
• Finance
• R&D
• Purchasing
• Operations/Manufacturing
• Accounting

Chapter 3- slide 7
 The Company’s External
Microenvironment
Suppliers
• Firms and individuals that provide the
resources needed by the company and its
competitors to produce goods and services
• Treated as partners to provide customer
value

Chapter 3- slide 8
 The Company’s
Microenvironment
Marketing Intermediaries

Help the company to promote, sell and distribute its products to final buyers

Physical
Resellers distribution
firms

Marketing
Financial
services
intermediaries
agencies
Chapter 3- slide 9
 Types of Marketing Intermediaries
• Resellers—The individuals and organizations that buy
goods and services to resell at a profit.
• Physical distribution firms— Warehouse, transportation
and other firms that help a company to stock and move
goods from their points of origin to their destinations.
• Marketing services agencies—Marketing research firms,
advertising agencies, media firms, marketing consulting
firms and other service providers that help a company to
target and promote its products to the right markets.
• Financial intermediaries— Banks, credit companies,
insurance companies and other businesses that help
finance transactions or insure against the risks associated
with the buying and selling of goods.
Chapter 3- slide 10
 The Company’s
Microenvironment
Competitors
• The marketing concept states that, to be successful,
a company must provide greater customer value and
satisfaction than its competitors do.
• Thus, marketers must do more than simply adapt to
the needs of target consumers. They must also gain
strategic advantage by positioning their offerings
strongly against competitors’ offerings in the minds of
consumers.

Chapter 3- slide 11
 The Company’s
Microenvironment
Publics
• Any group that has an actual or potential
interest in or impact on an organization’s
ability to achieve its objectives
– Financial publics
– Media publics
– Government publics
– Citizen-action publics
– Local publics
– General public
– Internal publics

Chapter 3- slide 12
 The Company’s
Macroenvironment

Chapter 3- slide 13
 The Company’s
Macroenvironment
Demographic Environment
Demography is the study of human populations
in terms of size, density, location, age, gender,
race, occupation, and other statistics
• Demographic environment is important
because it involves people, and people make
up markets
• Demographic trends include age, family
structure, geographic population shifts,
educational characteristics, and population
diversity
Chapter 3- slide 14
 The Company’s
Macroenvironment
Implications of Demographic Trends for Market
Attractiveness
• Rapid economic development and a growing middle class
in Asia have been a boon for capital goods manufacturers
in the United States and Europe, as they export capital
equipment to the Asian factories seeking to satisfy Asia’s
growing demand for manufactured goods for local as well
as export markets.
• Youth populations in developed countries have created
growing demand for a products of many types and services
to enable young persons.
• Demographic trends also have led marketers to develop
products and special marketing programs targeted at kids
and other demographic groups whose numbers are
growing. Chapter 3- slide 15
Implications of technological Trends for Market Demographic
Attractiveness

• What makes this generation different . . . is not just its

demographic muscle, but it is the first to grow up
surrounded by digital media.
• Computers and other digital technologies, such as smart
phones, are commonplace to N-Gen members. They work
with them at home, in school, and they use them for
entertainment. Increasingly these technologies are
connected to the Internet. . . . Constantly surrounded by
technology, today’s kids are accustomed to its strong
presence in their lives.
• These kids are learning, playing, communicating, working
and creating communities very differently than did their
parents. They are a force for social transformation.
Chapter 3- slide 16
 The Company’s
Macroenvironment
Demographic Environment
More people are:
• Divorcing or separating
• Choosing not to marry
• Choosing to marrying later
• Marrying without intending to have children
• Increased number of working women
• Stay-at-home dads

Chapter 3- slide 17
 The Company’s
Macroenvironment
Demographic Environment
• Growth in Egypt North and South and
decline in Northwest and Northeast
• Moving from rural to metropolitan areas
• Changes in where people work
– Telecommuting
– Home office
– Divorcing or separating

Chapter 3- slide 18
 The Company’s
Macroenvironment
Demographic Environment

• Changes in the workforce

– More educated
– More white collar
– Less Blue collar

Chapter 3- slide 19
 The Company’s
Macroenvironment
Demographic Environment
Increased Diversity
Markets are becoming more diverse
– International
– National
• Includes:
– Ethnicity
– Spirituals & Seculars
– Disabled

Chapter 3- slide 20
 The Company’s
Macroenvironment
Economic Environment

Economic environment consists of

factors that affect consumer purchasing
power and spending patterns
• Industrial economies are richer markets
• Survival economies consume most of
their own agriculture and industrial
output

Chapter 3- slide 21
 The Company’s
Macroenvironment
Economic Environment

• Changes in income
• Value marketing involves ways to offer
financially cautious buyers greater
value—the right combination of quality
and service at a fair price

Chapter 3- slide 22
 The Company’s
Macroenvironment
Economic Environment
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

Chapter 3- slide 23
 The Company’s Macroenvironment
Natural Environment
Natural environment involves the natural resources that are needed as
inputs by marketers or that are affected by marketing activities.
• Trends
– Shortages of raw materials
– Firms making products that require scarce natural resources such as water & certain minerals
face large cost increases, even if the materials do remain available.
– Increasing cost of energy
• Many companies are searching for practical ways to harness solar, nuclear, wind and other
forms of energy. Others are directing their research and development efforts to produce
high energy-efficient technologies to meet customers’ needs.
– Increased Pollution
• Increased pollution In consumer markets, niche green segments, where environmentally
sensitive consumers are prepared to pay a premium price for green benefits, have emerged
in categories ranging from cosmetics, toiletries and detergents to passenger cars.
– Increase government intervention
• Whereas some governments vigorously pursue environmental quality, others, especially
many poorer nations, do little about it, largely because they lack the needed funds or
political will.
Chapter 3- slide 24
 The Company’s Macroenvironment
Technological Environment
• Most dramatic force in changing the marketplace
– Technology has released such wonders as penicillin, organ transplants, notebook computers
and the Internet. It has also released such horrors as nuclear missiles, chemical weapons and
assault rifles, and such mixed blessings as cars, televisions and credit cards. Forces that
creating new technologies Creates new products and opportunities.

• Trends
• Fast pace of technological change
– New technologies create new markets and opportunities. Companies that fail to anticipate and
keep up with technological change soon find their products outdated. Technology life cycles are
getting shorter.
• The first-generation modern mechanical typewriter dominated the market for 25 years. Subsequent
generations had shorter lives – 15 years for electromechanical models, seven years for electronic
versions and five years for first-generation microprocessor-based ones. And today, the average life
span of some computer software products, for example, is now well under one year.

• High R&D budgets

• Concentration on minor improvements
• Increased Safety regulation
Chapter 3- slide 25
AAST - AADAWY 2016
Chapter 3- slide 26
 The Company’s
Macroenvironment
Political Environment

Political environment consists of laws,

government agencies, and pressure
groups that influence or limit various
organizations and individuals in a given
society

Chapter 3- slide 27
 The Company’s
Macroenvironment
Political Environment

• Legislation regulating business

– Increased legislation
– Changing government agency enforcement
• Increased emphasis on ethics
– Socially responsible behavior
– Cause-related marketing

Chapter 3- slide 28
 The Company’s
Macroenvironment
Cultural Environment

Cultural environment consists of

institutions and other forces that affect a
society’s basic values, perceptions, and
behaviors

Chapter 3- slide 29
 The Company’s
Macroenvironment
Cultural Environment
Persistence of Cultural Values

Core beliefs and values are persistent and are

passed on from parents to children and are
reinforced by schools, churches, businesses,
and government
Secondary beliefs and values are more open
to change and include people’s views of
themselves, others, organizations, society,
nature, and the universe

Chapter 3- slide 30
 The Company’s
Macroenvironment
Cultural Environment
Shifts in Secondary Cultural Values

• People’s view of themselves

– Yankelovich Monitor’s consumer
segments:
• Do-It-Yourselfers—recent movers
• Adventurers
• People’s view of others
– More “cocooning”

Chapter 3- slide 31
 The Company’s
Macroenvironment
Cultural Environment
Shifts in Secondary Cultural Values
• People’s view of organizations
• People’s view of society
– Patriots defend it
– Reformers want to change it
– Complainers want to leave it

Chapter 3- slide 32
 The Company’s
Macroenvironment
Cultural Environment
Shifts in Secondary Cultural Values

• People’s view of nature

– Some feel ruled by it
– Some feel in harmony with it
– Some seek to master it
• People’s view of the universe
– Renewed interest in spirituality

Chapter 3- slide 33
Shifting Values in New Millennium Societies

Developing societies are gradually moving away from traditional values and towards
The emerging values being embraced on an ever-widening scale.

AAST - AADAWY 2016

Chapter 3- slide 34
 Responding to the Marketing
Environment
Views on Responding

Uncontrollable Proactive Reactive

• React and • Aggressive • Watching

adapt to actions to and reacting
forces in the affect forces to forces in
environment in the the
environment environment

Marketing management cannot always affect environmental forces. In many cases, it must settle for
simply watching and reacting to the environment. For example, a company would have little
success in trying to influence geographic population shifts, the economic environment or important
cultural values. But whenever possible, smart marketing managers will take a proactive rather than
reactive approach to the marketing environment.

Chapter 3- slide 35
Environmental Analysis Guides Marketing
Decision Making
Macro trends can have powerful influence on the attractiveness of
markets, as well as on marketing practice. What should managers
charged with strategic responsibilities do to take advantage of or cope
with such trends?

First, they need to prioritize trend categories, so they know what to

watch for.

Second, they need to identify, and then monitor, sources of relevant

information about macro trends.

Third, as key developments are noted, they need to anticipate impacts

and be prepared to change strategies if necessary.

Chapter 3- slide 36
 First - Prioritizing Trend Categories
• Apparel marketers closely watch sociocultural trends so as to
provide garments in tune with today’s changing lifestyles.
• Real estate investors closely monitor economic trends, because
changes in interest rates or income can dramatically impact
demand for both commercial and residential properties.
• High-tech entrepreneurs watch technological trends.
• Food marketers study demographic and sociocultural trends to
provide new food products that fit modern lifestyles and satisfy
rapidly growing demand for ethnic foods.
What’s important is for businesspeople to understand which
macro trend categories are likely to have the most impact on
their fortunes and monitor those categories accordingly.
Similarly, managers need to monitor changes in ethical
standards and expectations, so they do not run afoul of their
customers’ expectations.

Chapter 3- slide 37
 Second - Information Sources and Outputs
of Macro Trend Analysis
• Almost all sources of information are now readily available on
the Web. Search engines such as Google are a powerful tool
in the quest for information.
• The key outputs of a competent macro trend analysis for any
market should include both quantitative and qualitative data.
• Quantitative data should provide evidence of the market’s
size and growth rate, for the overall market as well as for key
segments.
• Qualitative data should include factors that will likely influence
these figures in the future, whether favorably or unfavorably.

Chapter 3- slide 38
Third - Anticipating and Responding to
Environmental Change
• Critical changes in macroenvironmental conditions often call
for changes in the firm’s strategy. Such changes can be
proactive or reactive, or both.
• To the extent that a firm identifies and effectively deals with
key trends before its competitors do, it is more likely to win
and retain competitive advantage.
• In any case, management needs systems to help identify,
evaluate, and respond to environmental events that may
affect the firm’s longer-term profitability and position.
• One such approach uses an opportunity/threat matrix to
better assess the impact and the timing of an event, followed
by the development of an appropriate response strategy.
This approach is discussed in the next exhibit.
Chapter 3- slide 39
 Impact and Timing of Event
• In any given period, many environmental events that could have an impact on the firm – either positively
or negatively – may be detected.
• Somehow, management must determine the probability of their occurrence and the degree of impact
(profitability and/or market share) of each event.
• One relatively simple way to accomplish these tasks is to use a 2 × 2 dimensional opportunity/threat
matrix such as that shown in Exhibit 4.5.
• This example contains four potential environmental events that the high speed access division of a
telecommunications company might have identified as worthy of concern in the early 2000s.
• The probability of each occurring by the year 2010 was rated as was the impact on the company in terms
of profitability or market share.
• The event likely both to occur by 2010 and to have the greatest impact appears in the upper left-hand box.
• At the very least, such an event should be examined closely, including estimating with as much precision
as possible its impact on profitability and market share.
• The opportunity/threat matrix enables the examination
of a large number of events in such a way that
management can focus on the most important ones.
• Thus, events such as number 4 in the exhibit, with a
high probability of occurring and having a high impact
should be closely monitored.
• Those with a low probability of occurrence and low
impact, such as number 3 in the exhibit, should
probably be dropped, at least for the moment.
• Events with a low probability/high impact (number 1)
should be reexamined less frequently to determine
whether the impact rating remains basically sound.

Chapter 3- slide 40
 Learning Summary
• Macro trends can and often will profoundly influence the
success of any business. Serving attractive markets, where
trends are favorable – swimming with the current – is likely to
yield more success than serving those where trends are
unfavorable – swimming against the current.
• Thus, context, the second of the 4 Ps, matters and is central to
the assessment of any opportunity.
• Taken together, the six macro trend categories constitute a
useful analytical framework to ensure that all bases are covered
when scanning environmental conditions.
• Paying regular and systematic attention to the highest priority
macro trend categories permits timely decision making, perhaps
ahead of competitors.

End of Presentation
Chapter 3- slide 41
 Applying the concepts
Changes in the marketing environment mean that marketers must meet
new consumer needs that may be quite different – even directly opposite –
from those in the past. You can track changes in the marketing
environment by looking at how companies modify their products. Where
appropriate, you could visit selected companies’ websites to gain details
about their products.
• Make a list of the products you encounter in one day that claim to be
‘low’ or ‘high’ in some ingredient, such as fruit juices without added
preservatives, low-fat yogurts or high-fibre cereal.
• Write down similar products that seem to offer the opposite
characteristics.
• In each case, which product do you think came first? Do you think that
this is an effective response to a changing marketing environment?
Why? Why not?

Chapter 3- slide 42