Topic 2

ANALYSING THE MARKETING

ENVIRONMENT

Presented By :
Ms Seema Agarwal
 Chapter Objectives
1. Identify the five components of the marketing environment.
2. Explain the types of competition marketers face and the steps
necessary for developing a competitive strategy.
3. Describe how government and other groups regulate marketing
activities and how marketers can influence the political –legal
environment.
4. Outline the economic factors that affect marketing decisions and
consumer buying power.
5. Discuss the impact of the technological environment on a firm’s
marketing activities.
6. Explain how the social-cultural environment influences marketing.
7. Describe the role of marketing in society and identify the two major
social issues in marketing.
8. Identify the four levels of the social responsibility pyramid.

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 “To assure victory, always
carefully survey the field
before battle.”
- Sun Tzu (Chinese military strategist )

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Marketing Environment

“ A company’s marketing
environment consists of the actors
and forces that affect the company’s
ability to develop and maintain
successful transactions and
relationships with customers”
- Philip Kotler

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Responding To The Marketing
Environment
 There are three kinds of companies:
1. those who make things happen,
2. those who watch things happen, and
3. those who wonder what’s happened.
 Successful companies recognize and respond profitably
to unmet needs and trends.
 Companies could make fortune if they could solve any
of these problems:
 A cure for cancer;
 Desalinization of seawater;
 Nonfattening tasty and nutritious food.
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Examples:

 Enterprising individuals and companies

manage to create new solutions to unmet
needs.
 For Example:
 FedEx was created to meet the need for next-day
mail delivery.
 Amazon was created to offer more choice and
information for books and other products.

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Types of environment
 Companies interact with two types of environment:
 the ‘microenvironment’ and
 the ‘macroenvironment’.
 The microenvironment comprises the company’s:
 suppliers, customers, marketing intermediaries
and competitors.
 The macroenvironment is made up of wider forces
that affect demand for a company’s goods.
 These forces include demographics, economics,
nature, technology, politics and culture.

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SWOT Analysis

Identifying
internal strengths (S)
and weaknesses (W)
and also examining
external opportunities (O) and
threats (T)

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The purpose of SWOT Analysis
 It is an easy-to-use tool for developing an
overview of a company’s strategic situation
 It forms a basis for matching your company’s
strategy to its situation

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 SWOT Analysis

n al
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Things the
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company does
does well.
well.

t er
In
W Things
Things the
the company
company does
does not
not do
do well.
well.

na l O Conditions
Conditions in
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in the
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the external
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orfavor
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College Publishing

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 SWOT is the starting point
 It provides an overview of the strategic
situation.
 It provides the “raw material” to do more
extensive internal and external analysis.

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 Opportunities
 An OPPORTUNITY is a chance for firm
growth or progress due to a favorable
juncture of circumstances in the business
environment.
 Possible Opportunities:
 Emerging customer needs
 Quality Improvements
 Expanding global markets
 Vertical Integration

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Exhibit Framework for Market Opportunity

Identify the Unmet and/or Underserved Customer Need

Identify the Specific Customers a Company Will Pursue

Assess Advantage Relative to Competition

Assess the Company’s Resources to Deliver the Offering

Assess Market Readiness of Technology

Specify Opportunity in Concrete Terms

Assess Opportunity Attractiveness

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 Threats
 A THREAT is a factor in your company’s
external environment that poses a danger
to its well-being.
 Possible Threats:
 New entry by competitors
 Changing demographics/shifting demand
 Emergence of cheaper technologies
 Regulatory requirements

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Opportunities and Threats form a basis
for EXTERNAL analysis
 By examining opportunities, you can discover
 untapped markets, and
 new products or technologies, or
 identify potential avenues for diversification.
 By examining threats, you can identify
 unfavorable market shifts or
 changes in technology, and
 create a defensive posture aimed at preserving your
competitive position.

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External Analysis.

A continuous process which includes


Scanning: Identifying early signals of environmental
changes and trends

Monitoring: Detecting meaning through ongoing observations
of environmental changes and trends

Forecasting: Developing projections of anticipated outcomes
based on monitored changes and trends

Assessing: Determining the timing and importance of
environmental changes and trends for firms’ strategies and
their management

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 The microenvironment
 The microenvironment can be separated into:
 The internal environment and
 The external environment.

 The internal environment consists of the:

 firm’s own management structure,
 the organisation’s strategies and objectives, and
 the departments within the company.

 The characteristics of the firm’s internal environment affect its ability to serve its
customers.

 The external environment comprises

 suppliers,
 marketing intermediaries,
 customers,
 competitors and
 publics.
 As well as obvious groups such as shareholders, publics can also include local
interest groups who may have concerns about the marketer’s impact on the
environment or on local employment.

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The macroenvironment
 Macro- Environment
Ever-Changing
External Environment is Marketplace
not controllable Social
Social
Change
Change
Demographics
Demographics

Economic
Economic
Product
Product Conditions
Distribution Conditions
Distribution
Promotion
Promotion
Price
Price
Competition
Competition
Target
Market Political
Political&&
Legal
LegalFactors
Factors
Technology
Technology
Environmental
Scanning

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 Demographic Environment

Worldwide
WorldwidePopulation
PopulationGrowth
Growth
Population
PopulationAge
AgeMix
Mix
Ethnic
EthnicMarkets
Markets
Educational
EducationalGroups
Groups
Household
HouseholdPatterns
Patterns
Geographical
GeographicalShifts
Shiftsin
inPopulation
Population
Shift
Shiftfrom
fromMass
MassMarket
Marketto
toMicromarket
Micromarket
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 Demographic Factors

Demographics
Demographics

Age
Age Ethnicity
Ethnicity

Location
Location

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Demographic Environment
Age
Age Key Generations

 Baby Boomers- Born between 1946 and 1964.

 Generation X - Born between 1965 and 1976
 Generation Y - Born between 1977 and 1994

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 Demographic Factors
The demographic environment itself is
affected by changes in the mix of age
Age groups in the population.
Age If the population becomes older, this
will lead to rising demand for products
and services consumed by older people
and a similar fall in demand for
products consumed by younger
 Generation Y: Born to Shop people.
 Age 16 and under
 Immense marketing impact
 Affected by change in
families,
workforce, and technology
 Generation X: Savvy and Cynical
 Between age 17--29
 Materialistic, but critical
 Marketing challenge

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 Demographic Factors

Age
Age

Baby Boomers: America’s Mass Market

 Born between 1946 and 1964
 Cherish youth, convenience, individualism
 Led to a personalized economy
with products/services that are:
 Custom-designed
 Convenient and immediate
 Value-added through features or price
 Focus on family, health, convenience, finances, and reading

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 Demographic Factors
Age
Age

Older Consumers: Not Just Grandparents

 Age “50 plus”
 Healthier, wealthier, and better
educated
 Considerable purchasing power
for cars, home remodeling, and travel
 Market potential not fully
tapped due to misconceptions
about “mature adults”

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 Demographic Factors

Location
Location

Indians on the Move

 Implications for real estate, retail

location decisions,
communications, and Internet

 Immigrants add substantial

amount of income yearly to
economy

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 Demographic Factors
Ethnicity
Ethnicity
Growing Ethnic Markets
 U.S. population is shifting to
society characterized by
three ethnic minorities:
 African-Americans
 U.S. Hispanics
 Asian-Americans
 Trend in U.S. is toward
greater multiculturalism
 Similar trend is prevalent in
India also.
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•The development of ethnic
markets can also be relevant.
•In a number of countries, the
ethnic mix of consumers is
changing due to immigration
and other factors.
•This will be reflected in
changing demands for various
goods, not only from the
specific ethnic group but from
other consumers whose tastes
have been affected by them.
•Furthermore, as ethnic
groups emigrate to other
countries, their own tastes
can affect those of consumers
in the host nation (e.g. Asian
foods are now sold in UK
supermarkets).
Ms Seema Agarwal 27
 Demographic Factors
Ethnicity
Ethnicity
Niche
Niche
Marketing
Marketing
(one
(onesegment)
segment)
Marketing
Marketing
Strategies
Strategies
for
for Adapting
Adapting
Promotion
Promotion
Multicultur
Multicultur (one
(onemessage)
message)
al
al
Markets
Markets
Stitching
Stitching
Niches
Niches
(combine
(combinemarkets)
markets)
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Demographics….
 The demographic environment is also affected by the level of
education in a country, since changes in education have an
impact on the wealth of a nation and the tastes of its people.
 The lifestyles of a population also have an impact on the
macroenvironment facing marketers.
 In Western countries there has been a growth in households
made up of single people; and a large proportion of
women now go out to work. This has resulted in an
increase in the sales of convenience foods.
 There is also a greater proportion of couples whose children
have grown up and left home. Such couples have more
disposable income to spend on luxuries, holidays and home
improvements.

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 Economic Factors
Factors that influence consumer buying power and marketing strategies,

Key
Key Economic
Economic
Factors
Factors of
of Interest
Interest
to
to Marketers
Marketers
Distribution
Distributionof
of
Consumer
Consumer Recession
Recession
Income
Income

Inflation
Inflation

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 Economic Factors
Distribution
Distribution of
of The economic environment is
Consumer
Consumer important to marketers because it
Income
Income affects the amount of money
people have to spend on
products and services.
Rising Incomes

 Most of the households earn

“middle-class” income
 Dual -income families
are rising
 More discretionary income for high-quality,
high-priced goods and services

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 Economic Factors
Inflation
Inflation
The
Thedevaluation
devaluationof
ofmoney
moneyby byreducing
reducingwhat
whatititcan
can
buy through persistent price increases
buy through persistent price increases

 Prices rise with no wage increase,

purchasing power decreases

 Increase profit margins by

increasing efficiency

 Consumers reaction:
 Search for lowest prices
 Rely on coupons and sales

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 Economic Factors

Recession
Recession Unemployment
The proportion of
people in the economy
who do not have jobs
 Income, production and employment fall and are actively looking
for work.
 Reduced demand for goods and services

 Marketing strategies:
 Improve existing products
 Introduce new products
 Maintain customer services
 Emphasize top-of -the line products

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Economics

 Economies around the world not only vary in their

absolute or total level of wealth but also in how
their wealth is spread within the population.
 For example, poor countries may be classified either
as:
 those which have a highly unequal spread of wealth or
 those where it is more evenly shared.
 The former group of countries may be markets for luxury
goods, despite the level of poverty.
 In contrast, the second type of country may be more attractive
to marketers of inexpensive goods for the mass market.

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 The International Economic Environment

 Marketers must consider the economic

environment of other nations
 Changes in foreign currency rates may affect
marketing decisions
 Recessions in one part of the world may be offset
by prosperity in another

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Natural Environment

Shortage of
raw materials

Increased
energy costs

Anti-pollution
pressures

Governmental
protections
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Nature
 Shortage of Raw materials:
 This is important to marketers insofar as it is the source of many raw materials and
fluctuation in supply can affect the prices paid for purchases.
 Increasing Costs
 Furthermore, the increasing cost of some raw materials has meant that recycling of some
materials, such as aluminium, has become economic.
 The increased cost of energy is also having an effect on the types of products that appeal to
consumers.
 For example, in some countries there is a trend towards small cars and products
that save energy.

 Anti-Pollution Pressures:
 There is increasing pressure from public opinion as to where raw materials are sourced from,
and their effect on the natural environment.
 Paper manufacturers have had to pay attention to sourcing pulp from renewable forests,
where trees are replanted to make up for those which have been felled.
 There is also pressure on them not to use chemicals and bleaches in their processing of paper.
 Changing Role Of Government –
 Governments vary in their concern and efforts to promote a clean environment.
 Finally, due to developments in technology, it is possible for manufacturers and consumers to
cause less damage to the environment.
 Various European countries encourage the use of catalytic converters in cars to reduce the
levels of poisonous gases that are emitted into the atmosphere.

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 Technological and Resource Factors
Technology
Technology

 The technological environment

represents the application of
knowledge in science, inventions,
and innovations to marketing.
 New technology helps firm cope
with other environmental factors
 Rapidly changing force which
creates many new marketing
opportunities but also turns many
existing products extinct

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Technology
 Although firms can offer customers a wider array of advanced products, changes
in technology also mean that there may be more than one technical solution to a
customer’s needs.
 Today there is a struggle between suppliers of different types of hi-fi equipment.
 Technological developments affect how people work and do business.
 For example, the falling cost of telecommunications coupled

with their increased sophistication has meant that it is

possible for individuals to work away from the office.
 In the future this could lead to lower usage of transportation

systems.
 Furthermore, the falling cost of technology has meant that many more
small firms can function in areas such as publishing and film production,
which used to be the domain of large organisations.

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Technology….
 Marketers have to consider how their product may need to be
developed over time, if it is to remain competitive.
 For example, Apple Computer gained an advantage over IBM and

IBM compatibles through the use of its Graphic User Interface

(GUI), which meant that the users can manipulate pictures on the
computer screen rather than use complex commands.
 This made it much easier to use than IBM personal computers.

 However, the introduction by Microsoft of Windows meant that

IBM users could also have a pictorial display on their screens,

and this reduced Apple’s advantage.
 To regain the advantage Apple has recently introduced a new

computer chip (PowerPC) which is supposed to be faster than the

Pentium chip used by IBM.

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 Political and Legal Factors
Political
Political//Legal
LegalFactors
Factors

Government Laws and Regulations

Protect

Businesses Society

Consumers New
Technology

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 Political and Legal Factors
 Marketing decisions are greatly influenced by developments in the
political environment.
 This environment is composed of:
 Laws
 Government agencies and
 Pressure groups that influence and control various organizations
and individuals in society.
 Laws define and protect the fundamental rights of individuals.
 Business needs legal support to:
 Protect firms by defining and preventing unfair competition
 Protect consumers from unfair business practices and
 Protect the interest of the society
 Marketing managers must have an up-to-date and complete knowledge
about the laws governing marketing and distribution of goods.

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Politics

This has implications for their obligations to customers and the

wider public.
 Customers are increasingly able to seek redress for faulty
products, and those who live near manufacturing plants are able
to claim compensation for pollution.
 The political environment around the world has recently
favoured the privatisation of public companies.
 Such companies have also been able to compete more freely in
the private sector.
 Political changes in Eastern Europe have also meant that these
markets are now open to marketers from around the world.

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 Political and Legal Factors
Regulatory Acts for Marketing Affairs

MRTP
MRTPACT,
ACT,1969
1969
FERA
FERAACT,
ACT,1973
1973
Prevention
Preventionof
ofFood
FoodAdulteration
AdulterationAct,
Act,1954
1954
Essential
EssentialCommodities
CommoditiesAct,
Act,1955
1955
Drug
Drugand
andCosmetics
CosmeticsAct,
Act,1940
1940
Trade
Tradeand
andMerchandise
MerchandiseAct,1958
Act,1958
Weights
Weightsand
andMeasures
MeasuresAct,
Act,1958
1958
The
TheConsumer
ConsumerProtection
ProtectionAct,
Act,1986
1986

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 SOCIAL ENVIRONMENT

 Burgeoning middle class

 Major changes in life style
 Increased urbanization
 More & more consumption orientation
 Double income & nuclear family on rise
 Living on credit become trend
 Boom in leisure activities
 Upwardly mobile social class on the rise

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 Social Factors

Social
Social Factors
Factors

Values
Values Lifestyle
Lifestyle

Attitudes
Attitudes

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 Social Factors
Social
Social Factors
Factors
Influence
Influence ...
...
 Products that people buy

 Prices paid for products

 Effectiveness of specific promotions

 How, where, and when people expect to purchase

products

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Culture
 People’s opinions and tastes are shaped by the
society in which they live.
 It should be noted that societies are not made up of
homogeneous populations.
 They contain sub-cultures, which are beliefs and
values shared by smaller groups of people.
 Such groups may arise out of a common race,
religion, social activity or hobby.
 Sub-cultures are important to marketers
insofar as they may have different
consumption habits from the rest of the
population.

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Culture….
 The following are some aspects of culture that
influence people’s consumption:
 the ‘core’ culture is that set of values handed down from
generation to generation and which is reinforced by social
institutions such as schools and places of worship.
 Core values are likely to be strongly held and it may be
difficult for marketers to promote a message that runs
counter to them.
 More susceptible to change are secondary values.
 People’s opinions are influenced by the media, role
models and changing tastes.

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Activity
 Choose an industry about which you can get
information from either newspapers or books.
 Describe any political, economic, social and
technological changes taking place that will affect
the demand for the products/services produced by
that industry.
 Then explain what impact this is having on the
marketing activities of the firms in that industry.
 Where possible, collect relevant statistics and details
of the source of the information.
 The examples you use and the sources of
information can be either local or international.

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An example -It is based on an extract
from a UK national newspaper.
‘Within the UK a social change which is taking place is
the rise in the sales of ethnic foods. Last year £366
million was spent on such foods, an increase of 87
per cent in four years. Of this figure Indian food is
the most popular, accounting for £171 million.
Furthermore 37 per cent of people questioned had
tried cooking Indian meals at home. Industry
experts say that the recession and the ease of ethnic
cooking is encouraging people to cook at home.’
 The marketing impact of this information would be
on producers of ethnic cooking ingredients, whose
forecasts of sales could take into account the news of
a healthy and growing market.

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