Chapter two

Marketing
Environment
 Marketing Environment Analysis

• Marketing management rests squarely on the

knowledge of the marketing environment.
• Marketing environment analysis is the process of
gathering, filtering and analyzing information
relating to the marketing environment.
• The firm has to know where the environment is
heading, what trends are emerging therein and what
should be its response to the environmental changes.
• Strategic Response to Environment is Possible only
with Proper Environment Analysis.
 Purpose of Marketing Environment Analysis

• To discriminate which events and trends are favorable

and unfavorable to figure out the opportunities and
threats hidden in the environmental events and trends
• To project how the will be handled at a future point of
time
• To help secure the right fit between the environment
and the business unit
• To help the business unit respond with matching
product, market strategies
• To facilitate formulation of a marketing strategy in the
right way
 Cont’d
• The marketing environment can be divided into
two parts:
The Macro-environment
The Micro-environment
 The Macro-environment
• Broad societal forces that shape the activities of every
business and nonprofit marketer.
• The physical environment, socio-cultural forces,
demographic factors, economic factors, scientific and
technical knowledge, and political and legal factors
are components of the macro-environment.
1. Physical environment: Natural resources and other
aspect of the natural world that influence marketing
activities.
• The analysis of the mega environment must also cover
aspects like extent of endowment of natural resources
in the country, ecology, climate, etc.
 Cont’d
• The availability of natural resources may have a direct
and far-reaching impact on marketing activities in a
geographic region.
• Climate is another aspect of the natural environment
that is of interest to a business firm.
• The other concern of physical environment is ecology,
especially about issues like environmental pollution,
protection of wild life and ocean wealth.
• Currently there is a concern of ecologically marketing
safe products and promoting activities beneficial to the
physical environment which is called Green Marketing.
 Cont’d
2. Socio-cultural Forces:
• Culture: The institutions, values, beliefs, and behaviors of a society, everything
people learn, as opposed to the basic drives with which people are born.
• Culture includes everything people learn as members of a society, but does not
include the basic drives with which people are born.
• Culture is shaped by mankind and learned rather than innate. Culture may be
composed of value, Belief and social class
• Social values reflect abstract ideas about what is good, right, and desirable (and
bad, wrong, and undesirable).
• A belief is a conviction concerning the existence or the characteristics of physical
and social phenomena which may be correct or not.
• Social class a difference of society which is determined by income, occupation
location of residence, etc., of its members Each class has its own standards with
respect to lifestyle, behavior, etc.; they are known as the class values or class
norms.
 Cont’d
3. Demographic factors
• The study of the size, composition, and distribution of the
human population in relation to social factors such as
geographic boundaries.
• The size, composition and distribution of the population in
any geographic market will clearly influence marketing.
• Migration has always been an overwhelmingly important
demographic factor
• Urbanization : the expansion of some metropolitan areas
has brought neighboring cities and their suburbs so close
together that they have, for all practical purposes, merged.
• Age, marriage and Household income are also included
under demographic factors.
 Cont’d
4. Science and Technology
• Science: The accumulation of knowledge about humans and the
environment.
• Technology: The application of science for practical purposes.
• The invention of the steam engine, railroads and the mass
production of automobiles changed the way people thought about
distance ‘the words near and far took on new meaning.
• Television changed the way people think about news and
entertainment.
• Digital technology, especially the Internet, is having such a
profound impact on marketing and society that it deserves special
attention.
 Cont’d
5. Economic Systems
• The system whereby a society allocates its scarce
resources.
• Traditionally, capitalism, socialism, and communism have
been considered the world’s major economic systems.
• Under such systems, competition, both foreign and
domestic, influences the interaction of supply and
demand.
• Pure competition exists when there are no barriers to
competition in which market consists of many small,
competing firms and many buyers.
 Cont’d
• Monopolistic competition is a market structure
characterized by a large number of sellers
offering slightly differentiated products and
exerting some control over their own prices.
• Oligopoly is a market structure characterized by a
small number of sellers who control the market.
• Monopoly is a market structure characterized by
a single seller in a market in which there are no
suitable substitute products.
 cont’d
• Economic conditions around the world are obviously of interest to
marketers.
• Economic condition of one nation is reflected in business cycle which
is fluctuations in general economy.
• Recession. the downward phase, in which consumer spending,
business output, and employment are decreasing.
• Depression. the low phase, in which unemployment is highest,
consumer spending is low, and business output has declined
drastically.
• Recovery. the upward phase, when employment, consumer spending,
and business output are rising.
• Prosperity. the phase in which the economy is operating at or near full
employment and both consumer spending and business output are
high.
 cont’d
6. Political Environment
• Concern of the practices and policies of governments.
• Political environment has several aspects.
• Form of government adopted by the country is the first.
• Political stability as such is another, for, whatever be the
form of government adopted, stability of government is an
essential requisite of economic growth.
• Elements like social and religious organizations, media
and pressure groups, and lobbies of various kinds are also
part of the political environment.
 The Micro-environment
• The factors or elements in a firm's marketing immediate
environment which affect its performance and decision-
making.
• Mostly, in the marketing environment, micro factors do not
affect all the businesses in the industry in the same manner.
• The reason is that every business is different in size,
capacity, financial resources, human resources and overall
strategies.
• "Micro" doesn't mean they're insignificant
• The micro environmental participants perform essential
business activities and composed of 4 C’s company,
customers, competitors, and collaborators.
 cont’d
1. COMPANY
• Company is a business or organization that offers
products and services to consumers which
represents itself.
• Every marketer must work with people in the
organization who perform non-marketing tasks.
• Owners and managers in today’s companies must
strive to be flexible to keep up with dynamically
changing business environments.
• In doing so, they often take an entrepreneurial
approach to running the business.
 Cont’d
• Entrepreneur is a risk-taking individual who sees an opportunity
and is willing to undertake a venture to create a new product or
service.
• Entrepreneurs are typically creative, optimistic, and hardworking
individuals who put their own money on risk to start small
companies to make something happen.
• Entrepreneurial organization is an organization that encourages
individuals to take risks and gives them the autonomy to develop
new products as they see it.
• The top managers of many large organizations try to instill an
entrepreneurial spirit in their employees.
• That is, these companies favors organizational structures that allow
employees to initiate marketing action swiftly rather than forcing
them to follow bureaucratic procedures before taking action.
 Cont’d
2. CUSTOMERS
• Customer is an individual or a group of individual
who buys or use a company's goods or services.
• Customers are the lifeblood of every company.
• A company that does not satisfy its customers’
need will not stay in business over the long run.
• It is difficult to think of a more direct influence on
marketing than the gaining or losing of customers.
• In discussion of customer need satisfaction any
company have to create a utility for customer.
 Cont’d
• Utility means the degree of pleasure or
satisfaction that an individual receives from
getting of specific good or service.
• Historically, consumer needs have been discussed
in terms of economic utility.
• Economic utility is the ability of a good or
service marketed by an organization to satisfy
some aspect of a consumer’s wants or needs.
• There are four specific types of economic utility :
form utility, place utility, time utility and
possession utility.
 Cont’d
• Form utility: An Economic utility created by
marketer in conversion of raw materials into
finished goods/services that meet consumer
needs.
• In converting raw materials into finished goods,
an organization’s production department alters
the materials’ form.
• Marketing helps production system to create form
utility by interpreting consumers’ needs for
products of various configurations and
formulations.
 Cont’d
• Place utility : An Economic utility created by a
marketers in providing goods or services
available where consumers want them.
• Bridging the physical separation between buyers
and sellers is where marketing’s roots lie.
• Products available at the right place that is, where
buyers want them have place utility.
 Cont’d
• Time utility : An Economic utility created by a
marketer in providing goods/services available
when consumers want them.
• Making products or services available when
consumers need them creates time utility.
• A bank may close at 6:00 p.m., but by
maintaining a 24-hour automatic teller machine,
it produces additional time utility for its
customers.
 Cont’d
• Possession utility: An Economic utility created by a
marketers by transferring of physical possession and
ownership of the product/service to the consumer.
• This type of utility is created at the conclusion of a
sale, when the transfer of ownership occurs.
• House owners enjoy greater freedom to alter their
homes, such as the right to paint walls bright orange,
than do house renters; they have possession utility.
• Possession utility satisfies the consumer's need to
own the product and to have control over its use or
consumption.
 Cont’d
3. Competitors
• Competitor include One of two or more rival
companies engaged in the same business.
• Your competitors are interested in selling their
products and services to your company’s
customers and potential customers.
• One of the fundamental marketing tasks is
identifying and understanding the competition.
• The marketer does this by analyzing product
classes, product categories, and brands.
 Cont’d
• Product class: is a broad group of products that differ
somewhat but perform similar functions or provide similar
benefits.
• Product category: is a subset of a product class containing
products of a certain type.
• Brand: is a name or some other identifying feature that
distinguishes one marketer’s product from others.
• However, brands of products compete primarily within product
categories.
• A marketer must of course be aware of the entire class of goods
or services being marketed
• But it is the product category that contains the most
competitors, because the category reflects a specific consumer’s
wants, needs and desires.
 Cont’d
• In marketing there are generally four types of
competition
• Price based competition: Competition based on
payment against consumption of good or service.
• Price competition is associated with possession
utility.
• Economists have spent a great deal of time
investigating price competition, in general, a
price that is lower than competitors’ prices will
attract customers with the concept of ceteris
paribus assumption.
 Cont’d
• Quality based competition is more complex than
price competition because consumers define quality
in many different ways.
• Quality-based competition is associated with form
utility.
• Durability and reliability are traditionally
associated with quality.
• So are design, color, style and many other attributes
that determine the physical nature of products.
• Prompt, polite, and friendly service is also
associated with consumers’ perception of quality.
 Cont’d
• Time-based competition is directly associated with time
utility.
• Time-based competition is very important in many
industries, especially those in which customers view
competing products as virtually identical.
• Moreover, time is becoming more important as a
competitive weapon in a world of ever-faster global
communications.
• A marketing manager in today’s competitive environment
has to think like a fighter pilot
 which means when things move so fast, you can’t always make
the right decision but you have to learn to adjust to which
seems correct more quickly.
 Cont’d
• Location-based competition is the effort to
provide more place utility than competitors do.
• In traditional business situations, bridging the
physical separation between buyers and sellers
meant having a better geographical location
• But today barriers caused by distance are easier
to overcome than they once were by using of
ICT.
 Cont’d
4. Collaborators
• Collaborator: may be a person or company that
works with the other company which help the
company to run its business but are not actually
part of the company.
• Collaborate may include buying materials and
supplies, hiring an advertising agency, or getting
a loan from a bank requires that one company
work with another company.
• Any activity of collaborator is facilitated by
Value chain
 Cont’d
• Value chain is the chain of activities by which a company
brings in materials, creates a good or service, markets it, and
provides service after a sale is made.
• Each part of the system in the chain adds value to the product
customers ultimately buy.
• The collaborators activity may be divided in to primary,
upstream, and downstream activities.
• Before the company engages in its primary operations, such as
production, accounting and pricing, it engages in upstream
activities, such as purchasing equipment and materials from
suppliers,
• Downstream activities, performed after the product has been
produced, require dealing with other collaborators, such as
transportation companies and retailers.
THANKS!