Developed by:

Asst. Prof. Nor Khalidah Abu

July2019 Semester
UNIRAZAK

BMKT1113/BRB1013: PRINCIPLES OF MARKETING

Topic 3: Marketing Environment

(Textbook: Chapter 4)

Learning Outcomes:
 Define marketing environment, microenvironment, and macroenvironment terms
 Identify the microenvironment factors that affects a firm’s ability to serve its
market.
 Identify the macroenvironment factors that affects a firm’s ability to serve its
market.
 Describe how companies react to the marketing environment.

Marketing Environment
Definition: The actors and forces that affect a firm’s ability to build and maintain successful
relationships with customers.

The Marketing Microenvironment

Definition: Actors close to company affecting a firm’s ability to serve customers

Micro Environment Factors

Competitors

Suppliers Publics

Company

Intermediaries Customers

Figure 3.1 Micro Environment Factors

The Company Itself

These are the people and units within a company that fulfill customer needs and wants.
They may include marketing personnel and non-marketing personnel. For example, in
developing new product, the marketing people may require assistance of accounting
personnel in order to set the right price for the product. Any capabilities within the

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 Developed by:
Asst. Prof. Nor Khalidah Abu
July2019 Semester
UNIRAZAK

organization are the strengths for the company. On the other hand, any handicap in any
part of the company in fulfilling customer’s needs are a weakness to the company.

Suppliers
These are people and organizations who provide what a company need in order to
produce what the company make, resupply, or rent to others. Among the supplies are raw
materials, parts, finished goods and services.

Marketing Intermediaries

These are people and organizations that are part of the delivery system of goods and
services to the end users. They may include retailers, wholesalers, agents, lorries,
warehouses, shelf space, and inventories.

Customers

These are purchasers of a product.

Consumer - individuals and households that buy goods and

services for their own personal consumption. They are the final
users of the product. More on consumers in Topic 5 on Consumer
Buyer Behaviour

Business - also known as Industrial markets or B2B markets, they

buy goods and services for further processing or for use in their own
production process. More on business buyers in Topic 6 on
Business Buyer Behaviour.

Reseller - buy goods and services for selling or reselling at a profit.

More details on reseller in Topic 11on Place.

Government – These are organizations who buy goods and

services to produce public services for the population. In Malaysia,
we have the federal government, state government, and local
(municipal) government who provide services to the general public.

International – These are buyers located in other countries. You

will learn more in Topic 13 Global Marketing.

Competitors are other organizations that are competing with the company for the same
consumers with the intention of fulfilling the same needs and wants. The competitive
environment includes all organizations that could possibly satisfy the needs and desires
of the organizations target market. Marketers need to be aware of the type of competitive
environment in which they are operating. This will greatly influence the number and types
of competitors they must be concerned with.

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 Developed by:
Asst. Prof. Nor Khalidah Abu
July2019 Semester
UNIRAZAK

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

organization’s ability to achieve its objectives. A company may need to prepare marketing
plan for these publics as well. It supports businesses. There are seven types of publics:
 Financial public e.g., Banks, investment houses, and stockholders are the major
financial publics.
 Media public e.g. Newspapers, magazines, and radio and television stations.
 Government public e.g. Federal government, State government and Local
government etc.
 Citizen action public e.g. like consumer association and other non-government
organization that represent various citizen concern
 Local publics e.g. Neighborhood residents and community organizations.
 General publics are population at large.
 Internal publics e.g. Workers, mangers, volunteers and the board of directors.

MACROENVIRONMENT

Economic

Culture Political/Legal

Tchnology Natural

Demographic

Figure 3.2 Macroenvironment Factors

Macroenvironment consists of the larger societal forces that affect the whole
microenvironment.

It is an uncontrollable environment where marketers have no or little influence A

macroenvironment covers overall business opportunities. It explores surrounding
environment, which includes marketing for domestic and international economies. As a
result, it needs one change either a new invention or no change at all. This is an
uncontrollable environment. Below are several elements of the macro environment:

1. Natural Resources

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 Developed by:
Asst. Prof. Nor Khalidah Abu
July2019 Semester
UNIRAZAK

Natural environment refers to the physical environment and the natural resources that are
needed as inputs by marketers or that are affected by marketing activities. They include
raw materials used as inputs by marketers or influenced by marketing activities. These
materials consist of mineral extracts, and infrastructure, which is an essential element in
the production process. Depletion of natural resources will distort the firms' production and
marketing process in the future. More consumers are concern about the natural
environment and marketing impact on it.

2. Economy

The economic environment for marketing comprises the overall economy, including
business cycles, consumer income and spending patterns. A business cycle is the pattern
of the level of business activity. Business activity can move from prosperity to recession
to recovery. Marketers must always aware of the present and future economic
development. This is to ensure that the marketing plan can be done. Economic
environment factors that effect consumer buying and spending, and the wealth of an area.
It includes income distribution, inflation, recession and spending patterns.

Consumer income refers to the amount of individual or household income. Consumer

income can be measured in terms of gross income, disposable income, and discretionary
income. During times of prosperity consumers have more income available to spend.
However, during a recession many consumers have less income to purchase goods and
services because of high rates of unemployment and interest.

Spending patterns are influenced not only by the stages of a business cycle, but also by
the availability of resources. When the demand exceeds the supply of certain resources,
consumers are unable to spend their income on these products.

3. Demographic

Demography is the study of human populations in terms of size, density, location, age,
gender, race, origin, occupation and others. The demographic environment is of major
interest to marketers because it involves people, and people make up markets. Marketers
will depend on the demographic factors in order to improve the products market whereby
these factors will influence buying behavior.

Marketers must keep close track of demographic trends and developments in their
markets, both at home and abroad. They must track changing age and family structures,
geographic population shifts, educational characteristics, and population diversity.

4. Technology

Marketers use technology to improve the quality of products and services provided by
organizations today. Technological developments provide important information and
opportunities that meet customers’ needs. Scientific knowledge, research, inventions, and
innovations all result in new or improved goods and services. Advances in manufacturing

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 Developed by:
Asst. Prof. Nor Khalidah Abu
July2019 Semester
UNIRAZAK

technology, distribution, pricing techniques, and marketing research help organizations

better serve their customers.

Technological change is known to introduce new inventions and create opportunity in the
market. Currently, changes in technology happen so abruptly and rapidly. Therefore,
companies must always monitor the technological development today to ensure that they
are not left behind from their competitors.

5. Political and Legal

The political and legal environment includes the laws, regulations, and social pressure-
affecting marketers. Laws and regulations cover many areas relevant to marketers,
including packaging, pricing, advertising, and sales to minors.

There are many marketing decisions that depend on the political development in a nation's
environment. This scenario affects domestic market as well as the international market.
The reason for such rules is to protect the competition among companies (exploitation of
large against small companies) as well as defending customers from unruly business
activities.

While related, the legal environment is distinguishable from the political environment.
Marketing managers need to know the relevant laws affecting business but also need to
be aware of the policies toward enforcement of those laws. There are laws designed to
prevent industry power from being concentrated among a handful of giant firm, laws that
limit pricing strategy, laws that limit channel strategy used by marketers.

6. Culture

Cultural values affect marketing in several different ways. For example, different cultures
place varying degrees of emphasis on the importance of the family and a male head-of-
household. Different cultures and ethnic groups have strong ties and preferences for
certain types of food. Certain ethnic groups place great value on religious and cultural
ceremonies that have been transported from countries in Europe, Asia, and elsewhere.
Cultural environment are institutions and other forces that affect society's basic values,
perceptions and preferences and behaviors.

SWOT Analysis

Internal factors controllable by the organization

(S) Strengths: Favourable factors within a company. Examples include highly experience
staff.
(W) Weaknesses: Negative factors within a company. Example include lack of marketing
expertise in a new industry.

External environment and uncontrollable by the firm

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 Developed by:
Asst. Prof. Nor Khalidah Abu
July2019 Semester
UNIRAZAK

(O) Opportunities: Favorable situations in external environment outside firm with high
potential. Example include market segment ignored by other competitors.
(T) Threats: Unfavorable situations that the firm should beware o as it could lead to failure.
Example include competitor’s counter strategies.

The understanding of SWOT and the findings from other analysis presented in Topic 2
sets the direction for the marketing plan goals and the marketing strategies that are to be
developed for the selected customer that the organization wishes to serve.

SUMMARY

Companies can passively accept the marketing environment as an uncontrollable element

to which they must adapt, avoiding threats and taking advantage of opportunities as they
arise. Or they can take an environmental management perspective, proactively working
to change the environment rather than simply reacting to it. Whenever possible,
companies should try to be proactive rather than reactive.

Review Questions

1. If you were a marketer with a travel agency that focused on international adventure
travel, what demographic trends would you research before introducing new trips or
tours?
2. In what ways economic factors can affect marketing environment?
3. Why is cultural environment important to the domestic marketers as well as
international marketers? Surf the internet and look for cultural blunders marketers
make in their practice.