THE MARKETING ENVIRONMENT

Marketing environment

Forces that directly influence an organization’s capability to undertake its business The trading forces operating in a market place over which the business has no direct control but which shape the manner in which the business functions & is able to satisfy its customers

Is it not just the external environment?

The environment external to the firm which constitutes a large part of the marketing environment but is not the whole of the environment Included in the marketing environment is the Internal environment i.e. factors internal to the firm which affect its marketing operations

Components of the marketing environment
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External environment:Consists of: Macroenvironment: Broad forces which shape up the opportunities & threats Microenvironment: Forces in the immediate environment

Internal environment:Forces inside the firm that affect its operations Composed of stakeholders and other functional areas inside a business organization

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Controllability
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A firm has: No control over its macroenvironment. It can only respond to the changes taking place Some control over its microenvironment

Why is it important?

An understanding of macro and micro environment forces:
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Essential for planning Helps a business to compete effectively Assists in the identification of opportunities and threats Enable an organization to take advantage of emerging strategic opportunities

Environmental scanning
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Monitor: trends, issues and events Identify: trends, issues, events that are significant to the organization Evaluate: the impact of trends, issues and events upon the organization in the current market Forecast: where are the trends heading? Examine the threats & opportunities they are likely to bring in future Evaluate: Impact of threats and opportunities on the firm’s long term strategy

Forecasts

Forecasts are integral to:
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Marketing planning Analysis of market attractiveness Monitoring of marketing performance Resource allocation Product & stock management

Internal or Organizational environment

These include:
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Human resource department Operations department Finance department R & D department

Internal environment

Marketing is affected by:
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Internal processes and procedures Allocation of responsibilities within the organization Resource availability Culture of the organization Attitude of internal stakeholder

Micro environment

Refers to the environment more closely linked to the organization It comprises of all those organizations & individuals who directly affect the activities of a company

Elements of a micro environment
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Customers Intermediaries Suppliers Competitors Local community Local government

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Employees Trade unions Co-operators (Partner firms in alliance) Regulators

Regulatory environment
Legal environment: - Consumer law - Planning laws - Environmental law Codes of practice: - Advertising Standards Authority - Market research - Direct selling - Trade associations

Competitive environment
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Starting point is to identify and categorize the competitors: Direct competitors: Firms that produce a similar product which is a direct rival e.g. Coke & Pepsi Close competitors: Firms producing similar products e..g. Pharmaceutical products having the same basic salt Substitutes: Products that are different but can be considered for buying as an alternative e.g. Brownie instead of Black forest cake, Banaspati Ghee instead of Oil Indirect competitors: Firms that produce the same products that fill the same needs as your own product. E.g. book & e-book

Market environment

Refers to the type of market the firm is operating in The main types are: - Consumer or B2C markets
- Business or B2B markets - Government markets - Reseller markets: Buyer is an intermediary

Macroenvironment

Factors outside the area of marketing which impact on but which cannot be influenced by the marketing effort including – demographics, macroeconomic factors, changes in lifestyles etc.

Elements of macroenvironment
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Macroeconomic environment Political environment Social & cultural environment Demographic environment Technical environment Legal & regulatory environment

Macroeconomic environment
Economic growth. Cyclical fluctuations Inflation Unemployment Interest rates Creates marketing opportunities. A major factor in the marketing growth. Fluctuations in the level of sales Direct impact on costs & prices charged. Indirect impact on customer demand Major impact on customer demand via willingness & ability to buy Direct impact on investment by business. Indirect impact on consumer demand in terms of the amount of discretionary spending Fall in the exchange rate boosts exports, makes imports more expensive & causes cost push inflation

Exchange rate

Political environment

Marketing is affected by:
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Government & local policies Tax regime – the level & nature of taxes The extent to which the government is “business friendly” Trade policies Actions of special interest & pressure groups

Social environment

Consumer demand is affected by changes in:
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Population size and growth Demographic profile or the country (age distribution, family size, income level etc.) Culture, beliefs and values of the community Lifestyle

Technological environment
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Invention of new goods & services Development of CAD – reduction in new product development time Use of data bases in market research & direct marketing e.g. Credit cards New technology facilitates mass customization More responsive operations – shorter lead times Development of e-commerce

SWOT & PEST
Positive Internal factors – the internal environment StrengthsOrganizational strengths Negative WeaknessesOrganizational weaknesses ThreatsResulting from political, economic, social, technological environment

External factors – Opportunitiesthe PEST factors Resulting from changes in political, economic, social, technological environment