Marketing Environment

Environmental Scanning and

Environmental Management
• Environmental Scanning is the process of
collecting information about the external
marketing environment to identify and
interpret potential trends.
• Environmental Management involves
marketers’ efforts toward achieving
organizational objectives by predicting and
influencing the competitive, political-legal,
economic, technological, and social-cultural
environments.
 THE COMPANY’S
MARKETING ENVIRONMENT
• All Companies operate within a marketing
environment. This environment consists of all
the factors and forces that affect the
company’s ability to transact effectively
with its target market.
• This environment can be divided into :
(A) Micro-environment
(B) Macro-environment
 Marketing Environment
• All the factors and forces influencing the
company’s ability to transact business effectively
with it’s target market.

• Includes:
– Microenvironment - forces close to the company
that affect its ability to serve its customers.
– Macroenvironment - larger societal forces that
affect the whole microenvironment.
The Marketing Environment

Demographic

Company
Cultural Economic

Publics Suppliers
Company
Customers
Competitors Natural
Political
Intermediaries

Technological
The Microenvironment

Company

Publics Forces Affecting a Suppliers

Company’s Ability to
Serve
Customers
Competitors Intermediaries
Customers
 The Company’s
Microenvironment

• Company’s Internal Environment-

Environment functional
areas such as top management, finance, and
manufacturing, etc.
Suppliers - provide the resources needed to
produce goods and services.
Marketing Intermediaries - help the company
to promote, sell, and distribute its goods to
final buyers. They include middlemen, physical
distribution firms, marketing service agencies
and financial intermediaries
 The Microenvironment
• Customers:
– Five types of markets that may purchase
a company’s goods and services.
• Consumer
• Business
• Reseller
• Government
• International
 The Company’s
Microenvironment

Competitors - those who serve a

target market with similar
products and services.
Publics - any group that perceives
itself having an interest in a
company’s ability to achieve its
objectives.
The Macro-environment

Demographic

Cultural Forces that Shape Economic

Opportunities
and Pose Threats
to a Company
Political Natural
Technological
 Socio – cultural factors
• Anything within the context of society
that has the potential to affect an
organization.
• Includes factors such as attitudes,
customs, lifestyles, values etc.
• Any change in the above factors can be an
opportunity or a threat for the firm.
 Demographic factors
• Demography : Study of population.
• A change in the age mix of the population has
many potential consequences for organizations.
• Eg.: US, Japan and many other European countries
are ageing out as a result of the sharp decline in
the birth rate & improvements in health care.
• By 2015, more than 35% population of these
countries will be more than 65 years of age.
• India, Brazil, Mexico are young countries.
 Demographic factors
• 33% of the Indian population below 15yrs
in 2000. In 2020, the average age of an
Indian will be 29yrs in contrast to China
(37 ), US ( 45 ) & Western Europe ( 48 ).
• Companies in the other countries will now
have to change their product offerings to
suite the older market.
 Education Levels
• Rising education has a major impact on
organizations. As education levels increase,
there is a subsequent increase in income,
hence consumption increases. The std. of
living of the society increases.
• The education level also determines the
knowledge consumers have about various
products.
 Technological factors
• Technological advancements mean
“creative destruction”. If companies fail to
embrace new technology, they are planning
to fail in the long run.
• Changing technology has a direct impact on
the demand for a firm’s products and
services, production processes and raw
material.
• Technology can change the lifestyles and
buying patterns of consumers.
• Internet has created huge opportunities
for many Indian firms who have started
exporting on a large scale.
• It also changes the production process.
Shift from manual work to robotics has
increased productivity and also
unemployment.
 Political & Legal factors
• The philosophy of the political
parties influence business practices
and determines the risk of doing
business in a particular region.
• Political stability is a key factor in
determining the attractiveness of a
particular area.
• The legal environment serves to
define what organizations can and
cannot do at a particular point of
time.
• Consumer protection acts and the
protection given to consumers is
becoming stringent day by day.
 Economic factors
• Refer to the nature and health of the
economic system within which the firm
operates. Economic factors include the
state of business cycles, distribution of
wealth in the population, interest rates,
savings, debt and credit availability and
the governments monetary and fiscal
policy.
 Business Cycle
• The business cycle directly
influences the consumer spending.
• Purchases of durable goods
(appliances, furniture, automobiles )
etc can be postponed during period
of recession.
 Rising Incomes
• Trend toward dual-income families
leading contributor.
• Provides more discretionary income.
• This raises the demand of goods and
services.
• Huge opportunity for organizations.
 Inflation
• Inflation causes consumers to do two
things:
– Decrease brand loyalty to search for
lowest prices
– Take advantage of coupons and sales to
stock up on items