CHAPTER

2
MARKETING ENVIRONMENT

Subtopics:-
2.1 Organization’s Micro Environment
2.2 Organization’s Macro Environment
2.3 Responding to the Marketing Environment
DEFINITION OF MARKETING ENVIRONMENT

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

The marketing environment is made up of a micro-environment and a

macro-environment.

Marketing
Environment

Micro-environment Macro-environment
forces
forces
 Company  demographic
 Suppliers  economic
 Marketing  natural
intermediaries  technological
 Customer  political
 Competitors  cultural
 publics

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2.1 ORGANIZATION’S MICROENVIRONMENT

The micro-environment consists of the forces close to the company that

affect its ability to serve its customers. The forces are as follow.

The Company

 In creating marketing plans, marketers need to work with other

company groups such as top management, finance, research and
development (R&D), purchasing, operations and accounting.
o Top management sets the company’s mission, objectives, broad
strategies, and policies. Marketing managers make decisions
within the strategies and plans made by top management.
o Finance is concerned with finding and using funds to carry out
the marketing plan.
o The R&D department focuses on designing safe and attractive
products.
o Purchasing worries about getting supplies and materials
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 o Operation is responsible for producing and distributing the
desired quality and quantity of products.
o Accounting has to measure revenues and costs to help
marketing know how well it is achieving its objectives.
 They should work harmoniously to provide customer value and
satisfaction.

Suppliers

 Suppliers are firms and individuals that provide the resources needed
by the company to produce its goods and services.
 The role of marketers is to make sure that suppliers provide the raw
materials according to schedule.
 Supply shortage or delays can affect sales in the short run and
damage customer goodwill in the long run.

Marketing intermediaries
 Marketing intermediaries are firms that help the company to promote,
sell, and distribute its goods to final buyers.
 They include middlemen, physical distribution firms, marketing services
agencies, and financial intermediaries.

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 No. Marketing Intermediaries
Resellers

1.

These are distribution channel firms that

help the company to find the customers or
make sales to them. These include
wholesalers, and retailers who buy and
resell goods.
Physical distribution firms

2.

The firms that help the company to stock

and move goods from their point of origin
to their destinations. A company must
determine the best way to store
(warehouse) and ship (air, rail) goods,
which include the cost, delivery, speed,
and safety.

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 Marketing services
agencies

3.

These are the marketing research firms,

advertising agencies or media firms. A
marketing consulting firm helps the
company to target and promote its
product to the right markets. These firms will
vary in creating, quality, service, and price.
Financial intermediaries

4.

These include banks, credit companies

that help finance transaction or insure
against risk which is connected to buying
and selling goods.

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Customers

 The customer markets can be divided into five types.

No. Five Types of Consumer Markets

Consumer markets This consists of individuals and
1. households that buy goods and
services for personal consumption.
Business markets Buyers that buy goods and
2. services for further processing or
for use in their production process
Reseller markets Buyers that buy goods and
3.
services to resell at a profit.
Government markets Government agencies that buy
4. goods and services for distribution
to the relevant bodies.
International markets Buyers from other countries
5. including consumers, producers,
resellers, and governments

Competitors
 To succeed, a company must satisfy the needs and wants of
consumers better than its competitors do. Thus, marketers must do
more than simply adapt to the needs of target consumers.

The entertainment and technology industry is a huge industry

made up of many companies that are all trying to stand out from
each other by delivering the best customer value and
satisfaction than its fellow competitors.

Sony stays ahead of its competition by constantly setting the

trends by continuously coming up with new and innovative
products, which sets them apart from the competition in the eyes
of their customers.

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 Over the last few years,
Sony has introduced
the first plug-and-play
Plasma WEGA TVs, the
first flat-screen 30-inch
XBR LCD WEGA TV, and
the first desktop
videoconferencing
system.

Sony has gained a

strategic advantage
over its competitors by
being able to predict
the future trends in
there industry and
continuously go above
and beyond the
customers
expectations.

Public

 A public is any group that has an actual or potential interest in or

impact on an organisation’s ability to achieve its objectives.
 Seven types of publics:

No. Seven Types of publics

Financial publics

1.

They influence the company’s ability

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 to obtain funds such as banks,
investment houses, and stockholders.
Media publics

2.

They are those who carry news

features and editorial opinion such as
newspapers, magazines, and radio
and television stations.
Government publics

3.

Management must take government

developments into account.
Marketers must often consult the
company’s lawyers on issues of
product safety, truth in advertising,
and other matters.
Citizen-action publics

4.

The public relations department can

help the organization to keep in
touch with the consumer and citizen
groups because the company’s
marketing decision may be

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 questioned by consumer
organizations – Federation of
Malaysian Consumers Associations
(FOMCA), environmental group,
Persatuan Pengguna Islam Malaysia
(PPIM), Consumers' Association of
Penang (CAP), and environmental
groups.
Local publics

5.

These are neighbourhood residents

and community organizations such as
Rukun Tetangga whereby large
organizations appoint a community
relations officer to deal with the
community.
General publics

6.

A company needs to be concerned

about the general public’s attitude
toward its products and activities. In

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 order to build a good image, a
company should organize charity
shows.
Internal publics

7.

These include workers, managers,

and board of directors. Large
companies use newsletters and other
means to inform and motivate their
internal publics. When employees
feel good about their company, this
positive attitude spills over to external
publics.

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2.2 ORGANIZATION’S MACROENVIRONMENT

There are six forces in the organization’s macro-environment. They are:

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Demographic forces
 Demography is the art of studying the population based on age,
location, race, and gender.
 Demographic characteristics are important because they strongly
related to consumer buyer behavior in the marketplace.
 Examples of demography are as follows:
o Age structure: the changing age structure results in different
growth rates for different age groups.
 The baby Boomers:
 Persons born between 1946 and 1964.
 They become the largest demographic segment in
the population today
 The boomers have presented a moving target,
creating new markets as they grew from infancy to
their preadolescent, teenage, young adult, and
now middle-age to mature years.
 The youngest boomers are now in their mid forties;
the oldest are in their early sixties.
 The mature boomers are reaching their peak
earning and spending years.

 Generation X
 Persons born between 1965 and 1978.
 First generation of latchkey children – products of
dual-career households or of divorced or separated
parents
 Since Gen Xers have been grown up during the
recession, they have developed a more cautious
economic outlook.

 Generation Y:
 Persons were born between 1979 and 1994
 Most Gen Yers are the children of baby boomers
and hence are also referred to as “echo boomers”.
 Some of the Gen Yers have already started their
careers and are making major purchasing decisions
such as cars and homes, computers, MP3 players,
cell phones, DVDs, and sneakers.
 Gen Yers are also the most sophisticated generation
ever when it comes to media. They create their own
Websites, or make their own CDs and DVDs.
 Gen Yers tend to prefer word of mouth promotion to
traditional advertising.

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 o Changing family: the changing family means that the number of
working mothers has increased tremendously. Marketers of
automobiles, travel, financial services, and food companies are
increasingly directing their advertising to working women.

Economic

 Economic environment consists of factors that affect consumer

purchasing power and spending patterns.
 Every country varies greatly in their levels and distribution of income.
 The changes in income will suggest that real income will continue to
rise or fall.
 If the income rises, consumers will continue to demand quality products
and better services as they will be able to pay for it.
 Consumer will shift their spending patterns as their income increases.

Natural
 Natural environment involves the natural resources, which are used as
inputs in the marketing activities.
 Shortages of natural resources such as water and forests usually occur
and these resources have to be used wisely to prevent wastage.
Increase in pollution such as disposal of chemical waste can create a
large market for pollution control.
 Solutions such as recycling centres lead to a search for new ways to
produce and package goods that do not cause environmental
damage.
 The governmental intervention is essential because government
agencies play an active role in environment protection.

Technological
 Forces that create new technologies can create new markets and
opportunities for the marketers.
 There is fast pace of technological change and scientists are working
on a wide range of newer technologies that challenge not only
technically but also commercially in order to make practical and
affordable products.
 Many companies are concentrating themselves on minor improvement
rather than gambling on major improvements due to the high cost of
developing a new product.

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Political
 The government develops public policy to guide business for the good
of society as a whole.
 The legislation exists for a number of reasons such as to protect
companies from each other, to protect consumers from unfair business
practices and to protect the interest of society against immoral
business behaviour.

Cultural
 Cultural environment is made up of institution and it affects the
society’s basic values, perceptions, and behaviour.
 People grow up in a society that shapes their basic belief.
 The cultural characteristics can affect marketing decision making.

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2.3 RESPONDING TO THE MARKETING ENVIRONMENT

It has often been said that there are three types of people: those
who make things happen, those who watch what happened and
those who wonder what happened. The same is true of a
company.

Let us find out for details.

Many companies view the marketing environment as an uncontrollable

element to which they must react and adapt. They accept the marketing
environment passively and do not try to change it. They analyze the
environmental forces and design strategies that will help company avoid the
threats and take advantage of the opportunities the environment provides.

Other companies take a proactive stance toward the marketing

environment. These firms take aggressive actions to affect the publics and
forces in their marketing environment. Such companies hire lobbyist to
influence legislation affecting their industries and stage media events to gain
favourable press coverage. They run advertorial to shape public opinion.
They press lawsuits and file complaints with regulators to keep competitors in
line, and they form contractual agreements to better control their distribution
channels.

Marketing management cannot always control environmental forces. In

many cases, it must settle for simply watching and reacting to the
environment. For example, a company would have little success trying to
influence geographic population shifts, the economic environment, or major
cultural values.

REFERENCES

Abu, N., & Kamarulzaman, Y. (2009). Principles of Marketing. Kuala

Lumpur: Oxford University Press.

Kotler, P., & Armstrong, G. (2010). Principles of Marketing. New

Jersey: Pearson Prentice Hall.

McDaniel C, L. C., & JF, H. (2008). Introduction to Marketing. Ohio:

Thomson South-Western.

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