The Marketing Environment

THE MARKETING ENVIRONMENT
By: Noreen M. Albrando

REPORT OUTLINE
• 1ntroduction
• Analyzing the Organization’s Micro Environment
• Company’s Macro Environment
• Differences between Micro and Macro Environment
• Environmental Scanning
• Techniques of Environment Scanning
LEARNING OBJECTIVES
• To describe the environmental forces that affect the company’s ability to serve
its customers
• To explain how changes in the demographic and economic environments affect
marketing decisions
• Identify the major trends in the firms' natural and technological environments
• To explain the key changes in the political and cultural environments
• To discuss how companies can react to the marketing environment
INTRODUCTION
• No business operates in a vacuum;

• Any organization is surrounded by laws and liabilities, pressure groups
and public bodies, customers and competitors.
• These are part of the marketing environment that the organization works within, and
since marketing is at the interface between the organization and the outside world,
dealing with this environment is a major part of the marketer‘s work.
• This means that the marketing policy of a firm (or any organization) should be
viewed as operating within a complex and rapidly changing
environment. These external factors must be monitored and responded to if
the organization is to meet its goals.
The marketing environment includes the actors and

forces outside marketing that affect marketing
management’s ability to build and maintain
successful relationships with customers.
The micro environment consists of the actors close to the company that
affect its ability to serve its customers, the company, suppliers,
marketing intermediaries, customer markets, competitors, and
publics.
The macroenvironment consists of the larger societal forces that affect

the microenvironment. It is considered to be beyond the control of
the organization.
• Demographic
• Economic
• Natural
• Technological
• Political
• Cultural
THE COMPANY’S MICROENVIRONMENT
• The company
• Suppliers
• Marketing intermediaries
• Customers
• Competitors
• Publics
THE COMPANY
• Company organization consists of Board of Directors and
functional managers.
• Marketing plans are drawn up as per the philosophy of Top
Management.
• Marketing decisions like new products, expansion, etc depend on
the support of top management. It depends upon finance,
managerial skills, organization’s strengths and weaknesses.
THE COMPANY
Internal environment includes:

• Top management
• Finance
• R&D
• Purchasing
• Operations
• Accounting
SUPPLIERS
• Provide the resources to produce
goods and services
• Important link in the “value delivery
system”
• Treated as partners to provide
customer value
• Marketers must watch supply
availability and pricing.
MARKETING INTERMEDIARIES
• Help the company to promote, sell, and distribute its products to
final buyers
• Include:
• Resellers
• Physical distribution firms
• Marketing services agencies
• Financial intermediaries
• Resellers are the distribution channel firms
that help the company find customers or
make sales to them. These include:
• Wholesalers
• Retailers
• Physical distribution firms are the
distribution channel firms that help the
company to stock and move goods from
their points of origin to their final
destination.
• Marketing service agencies are the
marketing research firms, advertising agencies,
media firms, and marketing consulting firms that
help the company target and promote its
products to the right markets.
• Financial intermediaries include 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.
CUSTOMERS
• Customer markets consist of
individuals and households that buy
goods and services for personal
consumption.
• Business markets buy goods and
services for further processing or for
use in their production process.
COMPETITORS
• Firms must gain strategic advantage
by positioning their offerings against
competitors’ offerings.
• Each firm should consider its own
size and industry position
compared to those of its
competitors.
COMPETITORS
• To be successful, a company must satisfy
needs and wants of consumers better
than competitors.
• A company should monitor three
variables when analyzing each of its
competitors
1. Share of market
2. Share of Mind
3. Share of Heart
One must understand competitor’s strengths and must differentiate firm’s

products and offerings from those of competitors.
PUBLICS
• Citizen-action publics include
consumer organizations, environment
groups, and minority groups
• Local publics include neighborhood
residents and community organizations
• General publics influence the company’s
public image
• Internal publics include workers,
managers, volunteers, and directors
THE COMPANY’S MACROENVIRONMENT
• The major and uncontrollable factors that influence an

organization’s decision making, and affect its performance
and strategies. These factors include the economic factors,
demographic, legal, political, and social conditions,
technological changes, and natural forces.
• Specific examples of macro environment influences include
competitors, changes in interest rates, changes in cultural
tastes, disastrous weather, or government regulations.
• Demographic environment
• Economic environment
• Natural environment
• Technological environment
• Political environment
• Cultural environment
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. This is a major interest to
marketers.
• Demographic trends include age, family structure, geographic
population shifts, educational characteristics, and population
diversity.
Changing Age Structure of the

Population
• Generational marketing is important
in segmenting people by lifestyle of life
state instead of age.
Changing Age Structure of the Population

• Baby Boomers include people born between 1946 and
1960.
• Include most affluent Asians

• Generation X includes people born between 1961 and 1980.
They tend to:
• Have high divorce rates
• Are concerned about the environment
• Respond to socially responsible companies
• Are less materialistic
• Emphasize quality of life
• Consumer organizations, environment groups, and minority groups

• Generation Y includes people born between
1981 and 1995.
• The Internet generation
The Changing Asian Family

More people are:
• Divorcing or separating
• Choosing not to marry
• Choosing to marry later
• Marrying without intending to have children
• Higher divorce rates
• Increased number of working women
• More stay-at-home dads
Geographic Shifts in Population
Trends include:
• Migratory movements between and within countries
• Moving from rural to metropolitan areas
• Changes in where people work
• Telecommuting
• Home office
• Divorce or separation
Changes in the Workforce

Trends include:
•More educated
•More white collar
•More professional
Increasing Diversity
• Markets are becoming more diverse:
• International
• National
• Trends include
• Ethnicity
• LGBTQ+
• Disabled
ECONOMIC ENVIRONMENT
• Economic environment consists of

factors that affect consumer purchasing
power and spending patterns both across
and within world markets.
• Subsistence economies consume most of
their own agriculture and industrial output.
• Industrial economies are richer markets.
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.
• Income distribution
• Upper-class consumers
• Middle-class consumes
• Working-class consumers
• Underclass consumers
Changing consumer spending

pattern
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
• Increased pollution
• Increased government intervention
• Environmentally sustainable strategies
• Green marketing
TECHNOLOGICAL ENVIRONMENT
• Most dramatic force in changing the marketplace with many positive and negative
effects
• Rapid change
• Provides new markets and new opportunities
• Internet
• Medicine
• Miniaturization
• Weapons
• Credit cards
• Communication
TECHNOLOGICAL ENVIRONMENT
• Forces that create new technologies, create new product
and market opportunities.
• Technological innovation
• Role of research and development
POLITICAL ENVIRONMENT
Political environment consists

of laws, government agencies, and
pressure groups that influence or
limit various organizations and
individuals in a given society.
• Legislation regulating business

• Public policy to guide commerce—sets of laws and regulations that
limit business for the good of society at large
• Increasing legislation to:
• Protect companies
• Protect consumers
• Protect the interests of society
Increased Emphasis on Ethics and Socially Responsible Actions

• Socially responsible behavior occurs when firms actively seek out
ways to protect the long-term interests of their consumers and the
environment
• Cause-related marketing
CULTURAL ENVIRONMENT
The cultural environment

consists of institutions and other
forces that affect a society’s basic
values, perceptions, and behaviors.
It determines the value system of

the society which in turn affects
the functioning of the business.
Persistence of Cultural Values

• Core beliefs and values have a high degree of persistence, 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.
Shifts in Secondary Cultural Values

• Major cultural values of a society are expressed in people’s view of:
• Themselves
• Others
• Organization
• Society
• Nature and the universe

• People’s view of themselves
• Yankelovich Monitor’s consumer segments:
• Do-It-Yourselfers—recent movers
• Adventurers
• People’s view of others

• People’s view of organizations
• People’s view of society
• Patriots defend it
• Reformers want to change it
• Malcontents want to leave it

• 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
DIFFERENCES BETWEEN MICRO AND
MACRO ENVIRONMENT
BASIS FOR MICRO MACRO

COMPARISON ENVIRONMENT ENVIRONMENT
Meaning Micro environment is Macro environment
defined as the nearby refers to the general
environment, under environment, that can
which the firm operates. affect the working of all
business enterprises.
Elements Competitors, Population &
Organization itself, Demographic, Economic,
Suppliers, Market, Socio-Cultural,
Intermediaries and Technological, Legal &
Customers. Political and
Environmental.
MACRO ENVIRONMENT
BASIS FOR MICRO MACRO

COMPARISON ENVIRONMENT ENVIRONMENT
Nature of elements Specific General
Are these factors Yes No
controllable?
Influence Directly and Regularly Indirectly and Distantly
MACRO ENVIRONMENT
Conclusion
Microenvironment and macro environment, both
cover the overall environment of business. So, they
are more complementary rather than contradictory.
The study of these environments will help to know
the strength, weakness, opportunity and threat of
business.
ENVIRONMENTAL SCANNING
Environmental scanning is a process of obtaining

information from the environment. It helps
prepare an organization to exploit the business
opportunity by developing a sound resource
base. Further, it also assists in preparing
scenarios and to adjust with changes.
SCANNING THE BUSINESS
ENVIRONMENT
IDENTIFYING THE FORCES DRIVING
CHANGE
• The goal of any environmental scanning process is to successfully identify the

key forces driving change within the contextual environment of the
organization.
• To achieve that goal, managers must set up personal and organizational
scanning systems to be sure that the widest perceptional view of the
environment is achieved. This scanning system should;
• Identify each force, the variables, and their interdependencies with other variables.
• Suggest cause-and-effect relationships.
• Determine the history and timing associated with the development of the forces.
• Assist the manager estimating the impact of forces driving change on the firm.
TYPES OF ENVIRONMENTAL SCANNING
Environmental scanning may be done in two ways as mentioned below:

• Centralized Scanning
– Some specific environment components are only analyzed;
– The important components which are likely to exert considerable impact to
the business are only analyzed.
• Comprehensive Scanning
– All the components of environment are analyzed in a detailed and micro way
PROCESS OF ENVIRONMENTAL
SCANNING
1. Study the forces and Nature of the Environment

2. Determine the sources of Information
3. Determine the Approach of Environmental scanning
4. Scan and Assess the Trend
SCANNING
1. Study the forces and Nature of the Environment

The forces of the environment that have got significant bearing in the growth and
development of the business should be identified.
– They may be political, economic, sociology-cultural, technological, legal, physical
environment and global components.
After this, the nature of the environmental components is studied.
– The nature of environment may be simple or complex. It may also be stable or
volatile. The nature of the environment affects a firm's ability to predict the future.
Some business may be operating in simple environment and others in complex.
When there is a high level of uncertainty and complexity in the environment,
environmental scanning becomes more critical.
SCANNING
2. Determine the sources of Information

There are different sources through which information on business environment may be
collected. They are as follows:
1. Secondary sources: Newspapers, book, research articles, industrial and trade
publications, government publication, and annual report of the competitors.
2. Mass Media: Radio, TV and internet.
3. Internal sources: Internal reports, management information system, data
network, and employee.
4. External Agencies: Consumers, marketing intermediaries and suppliers.
5. Formal studies: Formal research and study by employee, research agencies, and
educational institutions. Spying and surveillance of the competitors.
SCANNING
3. Determine the approach of environmental scanning.

There are mainly three approaches to environmental scanning. They are:
1. Systematic Approach
– The information regarding market and customer, government
policy, economic and social aspects are continuously collected. In
other words, the environment is monitored in a regular way. The
timeliness and relevance of such information enhances the
decision-making capacity of the management.
SCANNING
3. Determine the approach of environmental scanning.

2. Ad-hoc Approach
– Specific environmental components are only analyzed through survey
and study. Ad-hoc approach is useful for collecting information for
specific project, evaluating the strategic alternative or formulating new
strategies. It is not a continuous process.
3. Processed form approach
– The information collected from internal and external sources are used
after processing them. Normally, the information obtained from
secondary sources are processed and used as per the requirements of
the business.
SCANNING
4. Scan and assess the trend

This is the final step of environmental scanning process.
It involves a detailed and micro study of the environment to identify the
early signals of potential changes in the environment.
It also detects changes that are already under way and shows the trend of
the environment. The trend should be assessed in terms of opportunities
and threats.
TECHNIQUES/ METHOD OF
Environmental scanning is a technique of detail

study of the environment. It is done to assess the
trend of the environment and prepare the
organization accordingly.
There are different techniques/methods of environmental scanning.

1. Executive opinion method:
It is also called executive judgement method. Under this environment is
forecasted on the basis of opinion and views of top executives. A panel is
formed consisting of these executives.
2. Expert opinion method:
Under this environment forecasting is based on opinion of outside experts or
specialist. The experts have better knowledge about market conditions and
customer taste and preferences. This method is similar to executive opinion
method. However, it uses external experts.

3. Dephi method:
This method is extension of expert opinion method. It involves forming a panel
of experts and questioning each member of the panel about the future
environmental trend. Later, the responses and summarized and returned to the
members for assessment. This process continues till the acceptable consensus is
achieved.
4. Extrapolating method:
The past information is used to predict the future. Different methods used to
extrapolate the future are time series, trend analysis and regression analysis.

5. Historical analogy:
The environmental trends are analyzed with the help of other trends which are
parallel to historical trend.
6. Intuitive reasoning:
Rational and unbiased intuition is used for environmental scanning. Environmental
dynamics are guessed individual judgement. Reliability of this method is questionable.

7. Scenario building:
Scenarios are the pictures of possible future. They are built on the basis of time
ordered sequence of events that have logical cause and effect relationship with
each other. Scenarios are built to address future contingencies.
8. Cross-impact matrix:
Environmental forecasts through various methods are combined to form and
integrated and consistent description of future. Cross impact matrix is used to assess
the internal consistency of the forecasts.
IMPORTANCE OF ENVIRONMENTAL
SCANNING
• Signals threats: It provides an early signal of threats, which can be defused or minimized if
recognized well in advance.
• Customer needs: It signals an organization to the changing needs and requirements of the
customers.
• Capitalize opportunities: It helps an organization capitalize opportunities earlier than the
competitors.
• Qualitative information: It provides a base of objective qualitative information about the
environment that can be utilized for strategic management.
• Intellectual simulation: It provides intellectual stimulation to managers in their decision
making.
• Image: It improves the image of the organization as being sensitive and responsive to its
environment.
THANK YOU! 

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THE MARKETING ENVIRONMENT

By: Noreen M. Albrando

• No business operates in a vacuum;

The marketing environment includes the actors and

The macroenvironment consists of the larger societal forces that affect

Internal environment includes:

One must understand competitor’s strengths and must differentiate firm’s

• The major and uncontrollable factors that influence an

Changing Age Structure of the

Changing Age Structure of the Population

Changing Age Structure of the Population

Changing Age Structure of the Population

The Changing Asian Family

Changes in the Workforce

• Economic environment consists of

Changing consumer spending

• Natural environment involves the natural resources that are needed as

Political environment consists

• Legislation regulating business

Increased Emphasis on Ethics and Socially Responsible Actions

The cultural environment

It determines the value system of

Persistence of Cultural Values

Shifts in Secondary Cultural Values

Shifts in Secondary Cultural Values

Shifts in Secondary Cultural Values

Shifts in Secondary Cultural Values

BASIS FOR MICRO MACRO

BASIS FOR MICRO MACRO

Environmental scanning is a process of obtaining

• The goal of any environmental scanning process is to successfully identify the

Environmental scanning may be done in two ways as mentioned below:

1. Study the forces and Nature of the Environment

1. Study the forces and Nature of the Environment

2. Determine the sources of Information

3. Determine the approach of environmental scanning.

3. Determine the approach of environmental scanning.

4. Scan and assess the trend

Environmental scanning is a technique of detail

There are different techniques/methods of environmental scanning.

There are different techniques/methods of environmental scanning.

There are different techniques/methods of environmental scanning.

There are different techniques/methods of environmental scanning.

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