CHAPTER 2 The Marketing Environment and Market Analysis

CHAPTER 2
The marketing
environment and
market analysis
LEA RN IN G OBJE CTIVE S
After studying this chapter, you should be able to:

2.1 describe the marketing environment and the purpose of environmental analysis
2.2 explain the factors at work in the organisation’s internal environment
2.3 understand the importance of the different micro‐environmental factors
2.4 outline the different types of macro‐environmental forces
2.5 conduct a preliminary situation analysis.
Copyright © 2017. Wiley. All rights reserved.
Elliott, Greg. Marketing, 4th Edition, Wiley, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/mqu/detail.action?docID=5049568.
Created from mqu on 2018-02-26 20:59:05.
CASE STUDY
Selling convenience: the rise of the meal kit

Suzie is a busy professional living in Auckland who tries
to take care of her health by eating mindfully. However,
during the week she doesn’t have time to cook dinner
from scratch, so instead she has healthy meal kits
delivered to her door. This means she can improve her
culinary skills and repertoire, and eat healthy food made
from scratch, with the value adds of convenience and
assistance. Suzie’s favourite meal kit is Farro Fresh,
which provides seasonally focused, fresh meals while
promoting a no‐fuss approach to cooking.
Today’s time‐poor consumers are seeking ways to
maximise their free time — in other words, there is a
convenience trend occurring.1 There is a growing trend within the food industry where informed eaters
are willing to pay more for healthy packaged food options.2 The meal (or food) kit phenomenon seems
to be leveraging off this trend. Demand for convenience options is growing due to an increase in female
participation in the workplace, time pressure and rising consumer incomes, coupled with a decline in
kitchen knowledge.3 The dichotomy of time pressure and the desire to eat nutritious food is creating a
market opportunity for meal preparation products.
Companies such as Green Chef4 in the USA are providing healthy meal kits made only with fresh,
organic ingredients. They position themselves as a provider of both organic and sustainable ingredients.
These companies are selling convenience, and also assistance. Each Green Chef meal kit comes with
a set of instructions for meal preparation. The meal kit revolution is part of a wider trend for consumers
who want healthy, easy and convenient meal options. Trends from the US often spread internationally,
so we can probably expect to see an increase in the popularity of meal kits in Australia and New Zealand
in the future.
Not all sellers of convenience deliver a meal kit direct to the consumer. Other options include grocery
stores selling their own meal kits, making them more accessible to the everyday consumer. For example,
Australian company Youfoodz provides meal kits that can be ordered online and delivered direct to your
door, but also purchased in various stores, including IGA stores.
It seems that healthy, assistance‐based convenient mealtime solutions are a growing trend. Con-
sumers such as Suzie are creating a demand that means healthy meal kit products will proliferate in the
marketplace.
QUESTIONS
Survey five people. Ask each person if they have ever purchased a meal (or food) kit.
1. For those who have purchased a meal kit, ask the following questions.
(a) Was purchasing a meal kit a one‐off or infrequent event, or do you purchase meal kits on a regular
basis?
(b) For what reason(s) did you or do you purchase meal kits?
2. For those who haven’t purchased the product, ask them whether they would consider purchasing a
meal kit, and why (or why not).
Introduction
In the introduction to marketing chapter we learned that marketing is ‘the activity, set of institutions,
and processes for creating, communicating, delivering and exchanging offerings that have value for cus-
tomers, clients, partners and society at large’.5 Successful marketing must therefore be based on under-
standing the market. Marketers are also faced with internal pressures, which often include the economic
imperative to grow the bottom line. Many marketers are offered incentive schemes that deliver pay
increases and/or bonuses to the marketers who can meet growth targets. Growth can be gained by
CHAPTER 2 The marketing environment and market analysis 43
selling more, increasing prices or reducing product costs. This puts marketers in a situation where they
need to balance the customers’ needs with the companies’ expectations.
In addition to understanding the needs and wants of their customers and clients, and balancing these
against the organisation needs, marketers need to understand the wider environment in which they
operate. They need to understand their products in light of what competitors currently offer and what
they expect to offer in future. Marketers cannot expect to succeed by devising one strategy and sticking
with it; nor will they succeed by simply copying a competitor. In many ways, then, marketing can be
likened to a game of sport. Like a sports team, organisations need to develop and implement a strategy to
win, and they must be prepared to change their strategy to outfox their competition. Again like a sport, if
you are ten points behind at half‐time, there is little point carrying on with the same approach. If you are
ten points ahead, you need to ensure you maintain and increase that margin. To achieve this, marketers
need to understand and be attuned to their customers and society at large. Marketers need to plan and
think of ways to stay one step ahead of the competition. Apple might be a good example of a company
that can do this. Can you think of another?
As one means of staying ahead of the competition, marketers need to keep their fingers on the pulse.
To better meet customer needs — and to devise ways they can convince employees and/or partners to
change if necessary — marketers need to understand both who they are competing with, and what bar-
riers to change currently exist in their own organisation and in partner organisations.
This chapter is about understanding the environment in which organisations exist. In addition to their
own internal environment, organisations operate within a micro environment (comprising the various
players in the industry such as suppliers and competitors) and a macro environment (comprising broader
forces such as social values and laws). Marketers must be able to analyse the environment in which
they operate to obtain a comprehensive understanding of the situation they face. This understanding,
together with management’s objectives, is used by marketers to formulate a strategy to compete in the
marketplace.
2.1 The marketing environment

LEARNING OBJECTIVE 2.1 Describe the marketing environment and the purpose of
environmental analysis.
The marketing environment refers to all of the internal and external forces that affect a marketer’s
ability to create, communicate, deliver and exchange offerings of value. The factors and forces within
the marketing environment can be classified as belonging to the internal environment, the micro environ-
ment, and the macro environment (see figure 2.1). The internal environment refers to the organisation
itself and the factors that are directly controllable by the organisation. The micro environment comprises
the forces and factors at play inside the industry in which the marketer operates. Micro‐environmental
factors affect all parties in the industry, including suppliers, distributors, customers and competitors.
The macro environment comprises the larger‐scale societal forces that influence not only the industry
in which the marketer operates, but all industries. Macro‐environmental factors include political forces,
economic forces, sociocultural forces, technological forces, environmental forces and legal forces. This
macro‐environmental framework has been called the PESTEL (for political, economic, sociocultural,
technological, environmental, legal) framework. Micro‐environmental and macro‐environmental forces

are outside of the organisation and, while they can be influenced, they cannot be directly controlled.
Marketers seek to monitor, understand, respond to and influence their environment. This is a complex
task and encompasses all of marketing. Environmental analysis is an analytical approach that involves
breaking the marketing environment into smaller parts to better understand it. This chapter introduces
key considerations for an environmental analysis in order to provide you with insights into some of the
things that effective marketers need to understand.
44 Marketing
FIGURE 2.1 The marketing environment
nvironment
Macro e
political
environmen
Micro t
the industry
te
l
ch
nta
no
me
log
iron
ica
al environm
ern
env
l
en
Int t
the
organisation
customers
partners
people
processes
ic
soc
om
i oc
on
ult
ec
c o m p e tit o r s
ur
al
legal
In the course of your degree you may study economics, business law, management, logistics, human
resources and other areas. Each subject is relevant to marketing. Studying these subjects will provide
you with a more detailed understanding of each area. This will help you conduct an environmental
analysis, which will in turn help you to build a more comprehensive picture of some of the environ-
mental influences that marketers need to understand. The rest of this chapter provides an overview of the
key considerations in the marketing environment. Successful marketers need a detailed understanding
of each and every factor that we discuss. We will discuss the internal and external environments and
conclude with an explanation of how to conduct a situation analysis of the organisation’s overall
marketing environment. The situation analysis and the organisation’s objectives form the basis of
marketing planning.
SPOTLIGHT
Palm oil: looking for a sustainable solution

Palm oil is extracted from the fruit of oil palms, and can
be found in approximately half of the products we buy
(e.g. ice cream, instant noodles, shampoo).6 Forests
are being depopulated in order to make way for more
palm oil plants. This means the natural habitats of
orangutans are being decimated. The single greatest
threat to the declining population of orangutans is palm
oil manufacturing. As a result, the Sumatran orangutan
is now critically endangered.7,8 Unless manufacturers
avoid the use of palm oil (or at the very least, source
sustainable palm oil) and consumers demand to know
if products contain unsustainable palm oil, these
valuable ecosystems will be destroyed.
Certainly, palm oil is becoming a hot topic within the sustainability space, and some companies
are making a commitment to sustainable sourcing. In 2014 Starbucks announced that it would pur-
chase all palm oil from suppliers who are certified sustainable (though the certification process has also
come under fire). L’Oreal, the parent company of personal care brands such as Kiehl’s and The Body
Shop, states that it is committed to buying traceable deforestation‐free palm oil.9 However, there are
some serious questions around the notion of sustainable palm oil.
An alternative to palm oil, a substitute based on a yeast used in wine production, is being tested at the
University of Bath, England.10 There are also some companies who, where possible, simply choose not to
use palm oil. For example, Only Good, a brand of skin care products, does not use palm oil at all.11
There are websites, such as Borneo Orangutan Survival Australia (www.orangutans.com.au), which
are dedicated to providing consumers with information about how to buy responsibly. These websites
provide lists of products that are made using sustainable palm oil or no palm oil at all.
Although palm oil plantations are threatening orangutan populations, the palm oil industry has also
raised many people out of poverty. It is therefore important to find sustainable options that maintain
valuable ecosystems while still providing employment.
QUESTIONS
1. List three examples of products that you currently use that contain palm oil.
2. What is the current rate of deforestation?
3. How are technology and consumer trends affecting industries where palm oil is used?
CONCEPTS AND APPLICATIONS CHECK
1. Describe the factors in the marketing environment.

2. Which environmental factors can an organisation control or influence?
3. Name the six key forces in the PESTEL model of the macro environment.
4. What is an environmental analysis and why is it important to marketing?
2.2 Internal environment

LEARNING OBJECTIVE 2.2 Explain the factors at work in the organisation’s internal environment.
The internal environment refers to the parts of the organisation, the people and the processes used
to create, communicate, deliver and exchange offerings that have value. The internal environment is
directly controllable by the organisation. A thorough understanding of the internal environment ensures
that marketers understand the organisation’s strengths and weaknesses. Strengths and weaknesses are
internal factors that positively and negatively affect the organisation’s ability to compete in the market-
place. Typically marketers seek to minimise weaknesses and maximise strengths.
46 Marketing
As discussed in the introduction to marketing chapter, the most successful organisations are those with
a market orientation. This means that all parts of the organisation are focused on creating and delivering
value for the market. While this may seem simple, it is often very difficult in practice. Organisations consist
of people, groups, departments and complex interrelationships. At times these can work against each other,
rather than with each other. In reality, the internal environment of any organisation is affected by the personal
and political natures of the people who make it up. It is important to be aware that as organisational com-
plexity increases, so does the potential for conflict. Marketers need to understand the parts of the organisation
and the processes that are in place. The main parts of a typical organisation include the following.
•• Senior management is responsible for making decisions about the overall objectives and strategy of
the organisation.
•• Middle management is typically responsible for a department or a geographic region. Middle manage-
ment makes decisions about the overall objectives and strategy of the department or geographic region
for which they have responsibility. Their aim is to make sure the objectives for their department or
region are aligned with the objectives of the organisation as a whole.
•• Functional departments, where organisations are structured around specific functions and/or regions.
If you are a business student you will study many of these functions during your degree. Functional
departments may include:
–– marketing
–– sales
–– research and development
–– customer service
–– distribution/logistics
–– manufacturing
–– finance
–– human resources
–– administration.
Functional department managers make decisions about the overall objectives and strategy of their
department. Their aim is to make sure the objectives for their department are aligned with the broader
objectives of the organisation and to manage their departments to ensure the departmental objectives
are achieved.
•• Employees are responsible for carrying out the work required to meet departmental objectives. Most
corporations talk about their people being ‘their most important asset’. Employees are also the ‘face’
of the organisation and marketers need to understand and manage the attitudes and behaviours of
employees who come into contact with customers and clients.
•• External vendors (outsourcing), where organisations often outsource functions and roles if they can be
done more efficiently by specialist external providers. This represents a shift of the function from the
internal environment to the micro environment and thus reduces the level of control. The organisation
doing the outsourcing must, however, manage the service relationship with the external provider, and
so outsourced functions still very much affect the organisation’s internal environment. An organisation
needs to ensure that the outsourced services remain consistent with its own objectives and do not
adversely affect its market perception. This does not always occur, however, as Telstra discovered
when one of its offshore information technology vendors, Satyam, was engulfed in a corporate fraud
scandal. The India‐based company overstated its cash reserves by $1 billion. The scandal, along with
performance issues, led to the cancellation of Telstra’s $32 million contract with the company.12
The structure of any organisation can be summarised in an ‘organisation chart’. Most large organ-
isations have a formal chart that illustrates the relationships between different parts of the organisation
and the management hierarchy, but even the smallest businesses can be charted. Figure 2.2 is an
extract of a typical example. An organisation chart can be a very useful tool to help analyse the
internal environment. It gives an indication of the focus of the organisation’s operations, how different
areas relate to each other and where the power rests in the organisation.
FIGURE 2.2 An example of an organisation chart (extract)
CEO
Manager, Manager, Manager, Manager,

Manager, Manager,
Sales, Human Accounting Information
Operations Marketing
Asia–Pacific Resources & Finance Technology
Product Product
National Sales National Sales National Sales
Advertising Brand Manager Manager
Manager, Manager, Manager,
Manager Manager (products (products
Australia New Zealand Malaysia
A, B & C) D, E & F)
Sales Sales Sales Sales Sales

Representative, Representative, Representative, Representative, Representative,
NSW QLD VIC & TAS SA & NT WA
Marketers need to understand the objectives for each part of the organisation and how the objec-
tives are being met. They need to understand whether the objectives align between the various parts
of the organisation and whether the objectives are consistent with the overall marketing goals of the
organisation. Employees are individuals and may perceive objectives differently. Consider the following
case.13 Senior management in two Australian financial institutions each decided to shift the emphasis
of financial service staff from a service focus to a sales focus. Under this new strategy employees were
given new titles. According to management, employees who previously had a service role were now
called ‘sales consultants’ or ‘sales officers’. Employees resisted the management initiative, however, and
continued to refer to themselves as ‘customer service officers’. One employee commented:
Basically I still think of myself as a customer service officer because I would rather service customers
than sell them products. I think it is a much nicer title.
For many of the employees, their identification as caring service people had developed early in their
careers, and they were unwilling to make a transition from service to sales. Resistance to management’s
objectives from the employees would have reduced the ability of the organisation to meet its objectives.
To be successful, all of the parts of the internal environment should work together towards one
common goal. This is most likely to occur when each person and department understands their contribu-
tion and the contribution of other departments.
Internal marketing
Internal marketing is a cultural framework and a process to achieve strategic alignment between
front‐line employees and marketing. More specifically, internal marketing is a collection of activities,
processes, policies and procedures that treat employees as members of an internal market who need to
be informed, educated, developed and motivated in order to serve clients more effectively. Companies
that provide and practise internal marketing are more likely to satisfy their employees. In turn, satisfied
48 Marketing
employees are more likely to deliver to a customer’s satisfaction and be more productive. Research
suggests that if carried out effectively, internal marketing would be expected to positively influence
employee attitudes and behaviours.
Internal marketing is practised in three main ways. First, the primary role of internal marketers is
to manage internal communications to ensure that employees’ actions are aligned with company goals
(internal communications). Second, internal marketing managers use market research to understand
employees’ needs and demands (internal market research). Then, they provide the training needed by
employees to reach the company’s goals. The three activities assist marketers to ensure that all members
understand their role in creating, communicating, delivering and ultimately exchanging offers that have
value for the target audience.
The marketing department is best positioned to understand what customers value. It is the marketing
department’s role to collaborate with the human resources department to ensure that all members within
an organisation understand their role in creating, communicating, delivering and exchanging offerings
that have value. It is then up to the other departments to use their own expertise to deliver that value.
With the increasing focus on a market orientation in many organisations, marketers have generally
gained more influence and have been allocated more resources for their activities in recent decades.
With this, however, has come an increasing expectation of results and an increasing need for marketers
to be able to demonstrate and quantify their achievements. Marketing, like all other parts, processes and
people in an organisation, must work to achieve the overall organisational objectives and must always
demonstrate how it does so. This is discussed further in the chapter on marketing planning, implemen-
tation and evaluation.
In many organisations, the severe squeeze on profits brought about by the global financial crisis
resulted in tighter marketing budgets (particularly in the areas of new product development and adver-
tising) and even more pressure for marketers to justify their organisation’s investment in marketing. In
general, during economic downturns, organisations tend to make drastic cuts to marketing budgets.14
Marketing is viewed by many organisations largely as a cost, rather than as an investment. However,
companies choosing to grow their marketing investment in economic downturns fare much better when
economic recovery commences. Some companies were too swift to let staff go in the recent downturn in
Australia, making it subsequently difficult to attract good staff when the economy recovered. Whatever
the economic conditions, marketing can help influence consumer behaviour, set prices effectively, create
value for marketing expenditure and take advantage of emerging opportunities.
It should be clear from the previous discussion that the internal environment is not an isolated entity.
Much of what happens in an organisation’s internal environment is affected by what happens in the less
controllable external environment.
The external environment is concerned with things that are outside of the organisation. The external
environment encompasses the people and processes that the organisation cannot directly control. Mar-
keters can only seek to influence the external environment. For example, movie studios cannot prevent
people from copying or file‐sharing movies and TV shows with their friends. They do, however, lobby
governments to introduce legal penalties for doing so, and they include warnings about piracy on DVD
and Blu‐ray packaging, and on the films themselves. Hence, they cannot control the factors in their
external environment, but they do seek to influence them. The process of outsourcing (transferring an
internal function to an external provider) has gone through waves of popularity over the past few dec-
ades. It represents a blurring of the line between the internal and external environment.
A thorough understanding of the external environment ensures that marketers understand the oppor-
tunities and threats that may arise. Opportunities and threats are external factors that positively and
negatively affect the organisation’s current and future ability to successfully serve the market. Typically
marketers seek to make the most of the opportunities identified and minimise the threats arising in the
external environment. The external environment includes the micro environment and the macro environ-
ment. We will look at each in turn to provide you with an understanding of the types of external factors
that marketers need to understand.
SPOTLIGHT
Please hold
Call centre customers get frustrated at the long waiting
times, hang-ups, automated responses and lack of
information. How many times have you been left on
hold for more than 20 minutes by leading service pro-
viders? While, as consumers, it is easy to criticise call
centres (given that we all have a horror story or two to
share), it is a different case when you are a marketer
for a call centre. As marketers, we need to not only
understand the customer’s experience — we also
need to experience working in a call centre to under-
stand the technical support and training required for
the teams operating in that environment.
Picture a call centre. The employees are under pressure to answer calls within the shortest number
of rings; answer each call in the correct way (‘Good morning, my name is . . . how can I help? Can
I have your account number?’); ask the right questions; listen; provide the right answers or advice
(sometimes within a tight timeframe); log the conversation; be polite; and close the call. This list is an
over‐simplified view of the call centre process that employees are required to adhere to hundreds of
times each day.
Now, think about the environment in which call centre employees are working. Typically, call centre
employees work in a small, open space with noise all around them. Their calls are monitored for
training and quality assurance purposes. There might even be a screen installed by management
on the wall to constantly display call volume and response time data. All these aspects of working
in a call centre make it hard to concentrate, and the big screens remind employees there are more
customers waiting. How can you motivate employees to deliver a quality service experience in
this environment?
QUESTION
Ray White Real Estate offers a concierge service (see www.raywhiteconcierge.com.au), which has been
designed to take the hassle out of moving house. With just one phone call, they take care of everything —
including arranging all connections and disconnections, insurance and even home loans for people
selling or buying their home through Ray White. Imagine you are the marketing manager for Ray White
Concierge’s call centre. Name one thing you could do to improve the service experience for a consumer.
1. How can a marketing manager motivate an employee to deliver improved customer service?
2. Find your bank’s annual report to shareholders (usually available in the investor section of its
corporate website), and locate the bank’s objectives for the next financial year. Were the behaviours
of the staff who provided you with service consistent with management’s objectives? If so, how
were they consistent? If not, what improvements are needed for management’s objectives to
be reached?
3. Find an organisational chart for a business. Identify the areas of possible conflict that may arise from
the structural organisation of the business. You should consider the number of different levels of
management, the number of different departments and the number of employees in the organisation.
How can marketers ensure that all employees understand their contribution and the contribution of
other departments to providing value to customers and clients?
4. Outsourcing leads to improved service delivery — true or false? Search the internet and find an
example from Qantas airlines to defend your point of view.
50 Marketing
2.3 Micro environment
LEARNING OBJECTIVE 2.3 Understand the importance of the different micro‐environmental factors.
The micro environment consists of customers, clients, partners and competitors. Unlike the internal environ-
ment, the micro environment is not directly controllable by the organisation. The organisation can, however,
exert some influence on the customers, clients, partners, competitors and other parties that make up its
industry. For example, a recent survey by CHOICE found that 60 per cent of Jetstar customers were satisfied
with the airline. Jetstar’s customer relationship management has been overhauled and call centre practices
have been changed, allowing the airline to cut complaint resolutions from 90 to 10 days; also, instead of
having to make a formal complaint in writing, customers can now do it over the phone. While Jetstar can’t
directly control a customer, it can influence satisfaction by improving its complaint handling procedures.15
In one way or another, all of the factors in the micro environment affect the marketer. In analysing the micro
environment, marketers need to consider customers and clients; partners, including suppliers; and competitors.
We will discuss each of these in turn next, and will look at how to conduct such an analysis later in the chapter.
Customers and clients

Marketers must understand the current and future needs and wants of their target market. They must:
•• understand what their customers value now
•• be able to identify any changes in customer preferences
•• be willing and able to respond to changes
•• anticipate how needs and wants might change in the future
•• be able to influence customer preferences.
Consider, for example, how downsizing products (a macro‐environmental factor) discussed at the start
of the chapter has affected customers and clients (in the micro environment). Marketers that can respond
to these trends in order to satisfy changing consumer preferences will view this as an opportunity and
tailor their marketing mix accordingly. Consumer behaviour is explained in detail later in the text.
In the business‐to‐business market (i.e. where businesses market their products to other businesses),
marketers need to be similarly aware of the current and future needs of their target market. For example,
changes in economic conditions (another macro‐environmental factor), such as movements in interest
rates, will likely have an impact on business investment and spending patterns. Astute marketers keep
abreast of such developments, assess their likely impact and implement marketing strategies accordingly.
Business‐to‐business marketing is explained in detail in the chapter on business buying behaviour.
Partners
Marketers need to understand their partners, how each partner’s processes work and how their
partnerships benefit each party. Partners include the following.
•• Logistics firms. Logistics is the term used to describe all the processes involved in distributing
products; it includes storage and transport.
•• Financiers. Financiers provide financial services such as banking, loans and insurance, and the financial
system’s infrastructure facilitates electronic payment transactions with partners and customers.
•• Advertising agencies. Small businesses tend to devise their own advertisements, often with the help
of the publication, radio station or other medium they are advertising with. Larger businesses can
hire the services of advertising agencies. When they do so, they put an enormous amount of faith in
the agency to attract the attention of potential customers and encourage them to actually engage in a
marketing exchange with the organisation.
•• Retailers. Retailers are the businesses from which customers purchase goods and services. Many
retailers, such as corner shops and supermarkets, sell mainly products made by others. Other busi-
nesses make and retail their products, particularly small boutique businesses, service businesses and
businesses with an online shop.
•• Wholesalers. Wholesalers are an intermediary acting between the producer and the retailers to provide
storage and distribution efficiencies to both.
•• Suppliers. Suppliers provide the resources that the organisation needs to make its products. Suppliers
are a crucial business partner and they must be monitored for continuity of supply and price.
While the word ‘partner’ suggests a mutually beneficial relationship, there are also many risks
involved in working with partners and often the balance of power between partners can be skewed
towards one at the expense of the other. For example, Woolworths and Coles often sell Coca‐Cola at a
loss during price promotions. They do this because Coca‐Cola specials draw customers to the store and
these customers often then purchase other products as well. The Coca‐Cola Company does not need to
discount Coca‐Cola in order to sell it and so does not offer a rebate to the supermarkets when they put it
on special. This is rare in the food retailing business. Marketers need to know the missions and strategies
of their partners. Ideally their strategies should be aligned and complementary. Marketers need to under-
stand their partners’ cost structure to enable them to price their offerings appropriately. Marketers need
to understand how partners promote their offerings, if at all.
Suppliers
Marketers need to know their existing and potential suppliers’ costs, availability, time frames and
planned innovations to determine how they can best create value. They also need to know and manage
the risks involved in their dependency on their suppliers. Organisations need to be aware of and pre‐empt
any problems (e.g. labour strikes and stock shortages) with the supply of the resources they need to
ensure they can fulfil demand. In summary, marketers must identify, assess, monitor and manage risks to
supplies and risks to the price of supplies.
Competitors
As stated in the introduction to marketing chapter, the most successful businesses throughout history
have been those built around and focused on making their customers happy — and doing it better than
their competitors can. To succeed, marketers must ensure their offerings provide their target market
with greater value than their competitors’ offerings. Marketers seek to understand their competitors’
marketing mix, sales volumes, sales trends, market share, staffing, sales per employee and employment
trends. They do this through casual and formal analysis, as we will describe later in the chapter.
Marketers exist in competitive markets and there are many different types of market competition.
Table 2.1 summarises the types of competitive market and gives an example of each.
When thinking about competition, marketers need to think broadly. There are many different levels of
competition that marketers face. Table 2.2 summarises the different levels of competition and provides
an example of each. While marketers often think in terms of brand competition, a broader definition of
competition can place marketers in a better position to create, communicate, deliver and exchange offer-
ings that have value.
TABLE 2.1 Types of competition
Competitive Description Example

structure
Pure competition Numerous competitors offer Markets for agricultural goods such as sugar and for
undifferentiated products. financial securities such as shares are the closest real‐
No buyer or seller can exercise world approximations to pure competition. In reality,
market power. pure competition does not exist.
Monopolistic Numerous competitors offer The market for laptop computers exhibits monopolistic
competition products that are similar, competition. Acer, DELL, Lenovo, Apple, Toshiba and
prompting the competitors many others all sell versions of essentially similar products,
to strive to differentiate their though the products are differentiated by colour packaging,
product offering from others. price, memory, processing speed and so on.
52 Marketing
Competitive Description Example
structure
Oligopoly A small number of competitors The US mass media and news industry is an example;
offer similar, but somewhat i.e. 90 per cent of this industry is owned by six
differentiated, products. There corporations: Comcast, The Walt Disney Company,
are significant barriers to new 21st Century Fox, Time Warner, CBS Corporation and
competitors entering the market. Viacom.
Monopoly There is only one supplier and Many government services are essentially monopoly
there are substantial, potentially industries, such as the provision of roads and rail.
insurmountable, barriers to new These are maintained as monopolies when it is
entrants. considered inefficient or somehow undesirable to have
competition. This position can change, however, with
some governments choosing to open up some of their
monopoly markets to private competition (e.g. electricity
supply in Queensland).
Monopsony The market situation where Until the start of the twenty‐first century, De Beers had
there is only one buyer. almost total control over the diamond trade. Their power
over this industry meant that the company was not only
a monopoly as a seller of processed diamonds, but was
also somewhat of a monopsony as the main purchaser
of rough diamonds.
TABLE 2.2 Levels of competition
Level of Description Example

competition
Total budget Consumers have limited financial A university student would like to attend a concert and
competition resources and therefore must make the tickets are $120. The concert is competing with all
choices about which products other possible uses of the student’s $120 — refuelling
to consume and which to forgo. the car, weekly rent, food and other bills, leaving it in the
In this sense, organisations are bank, and so on.
competing against all alternative
ways the consumer can engage in
an exchange of value.
Generic Consumers often have alternative Sydney Buses competes with CityRail and Black and
competition ways to meet their product needs. White Taxis for the business of consumers needing
The same want or need can be to get from A to B. Bus, train and taxi rides are quite
satisfied by quite different products. different, but meet the same need.
This is known as substitutability.
Product Some products are broadly similar, Soft drinks, water, alcohol, coffee and juice are all
competition but have different benefits, features beverages that people could purchase to drink.
and prices that distinguish them
from competing products.
Brand Some products are very similar, Westpac, ANZ, the Commonwealth Bank and the
competition offering the same benefits, features National Australia Bank all offer savings accounts
and price to the same target with similar minimum balances, interest rates, internet
market. banking facilities, distribution of ATMs, fees and so
on. There is not a lot to intrinsically distinguish these
products from each other. This is in contrast to other
options for investing savings, such as buying shares,
debentures, real estate or artworks.
SPOTLIGHT
Can a corpulent Woolies discard its history and fight off Aldi?
JOHN RICE, UNIVERSITY OF NEW ENGLAND AND
NIGEL MARTIN, AUSTRALIAN NATIONAL UNIVERSITY
Woolworths’ shareholders have endured a bumpy ride
these last few years. From its peak close to $40 in
mid‐2014, the share price has been flirting with $20
most of this year before yesterday’s rather uncon-
vincing spike.
Woolworths’ travails of recent years have been well
documented. Most notable has been the disastrous
Masters foray. This slow motion train wreck got most of
the attention, but in hindsight it was a sideshow. The real
issue has been the assiduous ascendance of Aldi — a
serious and focused competitor that has quietly, patiently
but very deliberately moved into Woolworths’ heartland
and destroyed its fundamental value.
Australian shoppers, once sceptical of Aldi’s rather idiosyncratic own‐brand products, have
embraced the German upstart with gusto in recent years. Aldi has been able to position itself as
the underdog, when in reality it is one of the world’s most capable and deep‐pocketed retailers. Its
‘piling it high, selling it cheap’ approach has been welcomed by Australian shoppers who for far too
long knew they were being taken for a ride by a grocery duopoly with some of the highest margins
in the world.
Woolworths’ new chief executive, Brad Banducci, has the unenviable task of turning all this around
and yesterday he fired the one shot he probably has in the locker. In an absolute sense the announce-
ment yesterday was underwhelming — 500 staff to go and another 1000 moving closer to the retail
frontline. Together with the mooted store closures, these add to more than $4 billion of write‐downs and
charges this year. Banducci has taken the charge on the capital account to embellish the profit and loss
by clearing the decks of baggage.
However, the real problem is none of this does anything where it matters, in the stores where the
customers are and in the relationships with suppliers. In both areas Woolworths has fundamental and
structural problems and yesterday’s announcement does little to address these.
A major problem for Woolworths is its history. Woolworths became corpulent on its own suc-
cess, shoehorning more and more products into its increasingly large format stores. A large-format
Woolworths has 15 horizontal metres of yoghurt — Aldi has about 50 cm of horizontal space in its
refrigerated section devoted to this product. It’s a case in point of how we humans can have too much
of a good thing.
Aldi has its own version of most of the products it sells while Woolworths stocks a variety of supplier
versions and quite a few of its own. Its growth in the range of what it sells, undertaken while it was
riding high on a wave of oligopolistic profitability is virtually impossible to reverse.
The focus of Aldi has so many benefits — lower wastage, more reliable and economical supply
arrangements and more efficient in‐store logistics. These are the fundamental drivers of profitability that
Woolworths simply cannot replicate.
The other major problem facing Woolworths is its relationships — with employees, customers and
suppliers. While it was riding high it took the opportunity to strong‐arm suppliers into supply arrange-
ments that accrued massive profits to Woolworths, but left suppliers struggling. Woolworths’ employees
too must shake their head in disbelief at the payout for outgoing CEO Grant O’Brien, who was most
closely associated with the Masters debacle. Customers are also deserting in droves.
Some may hope that the future can only look better, but this hope may be forlorn. Exiting unprofitable
store locations creates a vacuum for Aldi or, worse still, its fellow German retailer, Lidl. The willingness of
Australians to switch allegiance has delivered Aldi better growth in Australia than any of its other inter-
national expansions. This has not gone unnoticed in the boardrooms of other global retailers. Australia
is still seen as one of the most cosseted and hence promising grocery markets anywhere.
54 Marketing
So, taken together while the times are tough for Woolworths, they may well be about to become
tougher still. Buying Woolworths shares at their current level may well be a great idea — or we may yet
see its shares plummet again as the realities of its huge fixed costs and shrinking margins combine to
see more long-term pain for the company.
Source: Originally published on The Conversation.
QUESTIONS
1. Imagine you are the marketing manager for ALDI. From a marketing perspective, how would you
attempt to beat larger competitors like Coles and Woolworths?
2. Look back to table 2.1. What type of competition occurs in Australian grocery retailing?
1. What aspects of competitors’ operations must an organisation understand as part of its micro‐
environmental analysis?
2. What risks are involved in entering an oligopoly market?
3. An organisation cannot directly control its micro environment. It can, however, exert influence. Look
at the 2012 Master Grocers Australia report (Let’s have fair competition). Describe one way that
independent retailers were trying to influence their environment in 2012.
4. Review the different levels of competition outlined in table 2.2. Imagine that you are the marketing
manager for movie theatres. Outline two examples of competition that your movie theatre faces for
each level of competition outlined in table 2.2.
5. Imagine you are the marketing manager of an independently owned grocery retail outlet. Outline all
of the micro‐environmental factors that you should analyse when making marketing decisions for the
business.
2.4 The macro environment

LEARNING OBJECTIVE 2.4 Outline the different types of macro‐environmental forces.
The organisation itself and all of the forces within the micro environment operate within a larger
environment known as the macro environment. The macro environment encompasses the factors out-
side of the industry that influence the survival of the organisation. In practice, the macro environment
can be at any geographic level including local, state, country or regional (e.g. the Asia–Pacific or the
European Union).
In some cases it is possible for marketers to influence macro‐environmental factors. However, these
factors will always remain beyond a marketer’s control. For example, a company can lobby government
to reduce the tax on wine, but they cannot directly control the rate set by the government.
Failure to plan based on emerging trends can lead to business closure. Effective marketers continually
monitor the environment, adapting and changing offers where necessary in response to changes in the
macro environment.
News services, business and investment media, libraries, the internet and industry associations are
all avenues to inform marketers of developments in the macro environment. Key environmental factors
that marketers need to consider when analysing the marketing environment include political, economic,
sociocultural, technological, environmental and legal forces. (This view of the macro environment is
commonly abbreviated to ‘PESTEL’.) The key considerations are summarised in figure 2.3 and each
factor is discussed in the following sections.
FIGURE 2.3 The macro environment
The political arena has a huge influence upon businesses and the spending
power of consumers. Marketers must consider:
Political 1. the stability of the political environment
2. the influence of government policy, laws and regulation
3. government trade agreements such as ASEAN
4. taxation and government rebate policies.
Marketers need to understand the economy in the short and long terms.
Marketers must consider:
1. interest rates, economic growth (gross domestic product) and consumer
Economic confidence
2. income levels, savings, credit and spending levels
3. the level of inflation, employment and unemployment
4. exchange rates and balance of trade.
Social and cultural influences have a large influence on businesses.

Marketers must understand:
Sociocultural 1. religion, culture, subcultures, values, attitudes and beliefs
2. population trends including age, household size and composition, marriage
and divorce trends, places lived, ethnicity and health.
Technology is vital for competitive advantage. Marketers must consider:

1. whether offerings can be made more cheaply and to a better standard of
Technological quality using new technologies
2. whether technology can be used to innovate
3. whether distribution or communication can be improved using technology.
Marketers need to understand environmental influences including ecological

Environmental
and environmental aspects such as weather, climate and climate change.
Marketers need to understand legal and regulatory influences such as:

Legal 1. laws including the Competition and Consumer Act, the Privacy Act,
the Spam Act, the Sale of Goods Act and the Prices Surveillance Act
2. regulations from industry bodies such as the Advertising Standards Bureau.
Economic factors are the focus of economics courses and students intending to major in marketing
should seek to take an introductory economics course if it is not a core degree requirement. An under-
standing of the political environment is also encouraged. Students intending to major in marketing
should seek to take one course in politics and law to gain a broad understanding of the political and legal
environments. Students choosing to continue in marketing studies will explore sociocultural factors in
detail in consumer behaviour courses.
56 Marketing
Political forces
Political forces describe the influence of politics on marketing decisions. Politics is directly relevant to
the marketing organisation through:
•• lobbying for favourable treatment at the hands of the government
•• lobbying for a ‘light touch’ approach to regulation
•• the very large market that the government and its bureaucracy comprise
•• the ability of political issues to affect efforts at international marketing.
Many organisations, particularly smaller ones, monitor political issues, but do not actively engage in poli-
tics. Larger organisations, or the bodies created to represent smaller ones, can engage directly in politics by
seeking to influence lawmakers. Every time there is a federal election, the sources of large donations to one
or other of the major political parties become headline stories in the media. Organisations can also campaign
for legal or policy changes that can have a fundamental impact on their operating environment. The exten-
sive changes to Australia’s workplace relations system made by the federal government in recent years are an
example of how political forces can change an organisation’s operating environment.
It is worth noting too that political parties, governments and the public service themselves under-
take a lot of marketing activities. For example, the federal government’s Department of Foreign Affairs
and Trade runs advertising campaigns and maintains its www.smarttraveller.com.au website to inform
Australians travelling overseas about laws, customs, health issues and other matters that might affect
their travel decisions.
Economic forces
Economic forces refer to all of those factors that affect how much money people and organisations can
spend and how they choose to spend it. The obvious components of this are income, prices, the level
of savings, the level of debt and the availability of credit. Many of these factors are discussed in the
chapter on segmentation, targeting and positioning, as they are fundamental defining characteristics of
the market.
Economic forces and conditions can change quickly and dramatically, and marketers can find them-
selves facing a very different economic environment within a short period of time. Currency fluctuations,
for example, affect the prices of exports and imports. A devaluation of the Australian dollar makes exports
cheaper and imports more expensive. The reverse applies when the currency appreciates on international
markets (i.e. exports become more expensive and imports cheaper). Interest rates are another economic
force. Increases or decreases in interest rates can have a significant impact on both consumer and busi-
ness confidence, and subsequent spending and investment patterns. The global financial crisis served to
highlight an important aspect of the macro environment: it is made up of global forces that are beyond
the control of any individual organisation or even government.
Sociocultural forces
Sociocultural forces is a term used to describe the social and cultural factors that affect people’s atti-
tudes, beliefs, behaviours, preferences, customs and lifestyles. They comprehensively and pervasively
influence the value people put on different product offerings. ‘Demographics’ describe statistics about
a population. A population can be characterised by its demographic characteristics: age, gender, race,
ethnicity, educational attainment, marital status, parental status and so on. These characteristics influence
the behaviour of society as a whole and the individuals within it. Changes in demographic characteristics
should be expected to result in changes in the behaviour of individual consumers and society generally.
This topic is explored in detail in the chapter on market segmentation, targeting and positioning.
One of the sociocultural themes to become a key issue for marketing organisations over the past
couple of decades is the natural environment. Society (particularly the younger members of society) has
become more and more concerned about the sustainability of humankind’s lifestyle — the effect our
activities have on the world that supports us. Think about how many issues related to the natural environ-
ment appear in the headlines every day: sustainability, corporate social responsibility, global warming,
pollution, deforestation, salinity and carbon trading. Marketers need to be aware of these issues and
society’s expectations of how businesses and other organisations need to respond. Some marketing
organisations have already capitalised on the growing environmental concern of society; others have
responded to it; others are slow to respond and potentially risk destroying their businesses.
Technological forces
It is important, when considering technological forces, not to fall into the trap of viewing technology
just in terms of iPhones, satnavs and hybrid‐electric cars. Rather, technology is a broad concept based
on finding better ways to do things. That is, the electronic gadgetry of a satnav device is not really the
technology; the technology is that a satnav is a better way (than a map) to navigate to your destination.
Technology is advancing at an unprecedented rate. Our daily lives are touched by technology almost
all of the time. It is similarly common to be touched by technological change. Think about how often
you change to a newer, better, brighter model of mobile phone (or at least how often you would like to).
While email, Web 2.0, mobile phones, mobile internet and e‐commerce are an everyday part of your life,
they all represent major technological changes that your lecturers have had to learn to adapt to (with
varying degrees of success!).
In a wired world, we are connected most of the time, be it to the internet via a PC, laptop, or smart
phone, to our friends via Twitter or Facebook, or to our work via email or Skype. Never before have
marketers been able to interact with the market as often, as intimately, and as extensively as they can
today. For example, it is reasonably common today for a survey to pop up online seeking your feedback
when you first enter a website.
Technology does not just change the expectations and behaviours of customers and clients. Tech-
nological change can have huge effects on how suppliers work. Today manufacturers, suppliers and
distributors are likely to be in constant electronic exchange with marketing organisations, ensuring
stock levels are automatically monitored and maintained, tracking goods in transit down to the nearest
kilometre. Increasingly the customer can see how many goods are in stock or how long they will have to
wait to have an item delivered. Consider the efficiencies brought about by electronic payment systems.
How many more shoes can Mathers sell given a customer can whip out a credit card to purchase a pair
that take their fancy, rather than have to go to a bank, fill out a paper form, stand in line and be handed
some crumpled paper currency to carry back to the shop?
Technology, while enabling many advances, can also pose a threat. Kodak, long‐established as a
leading photography brand, suffered massive downsizing and significant loss of business as a result of
the advent of digital cameras in the 1990s. The mass market for photographic film disappeared in a few
short years.
Environmental forces
Environmental forces is a term used to describe the environmental factors that affect individuals, com-
panies and societies. There is a wide range of environmental factors that companies need to be mindful
of, including ecological and environmental aspects such as weather, climate and climate change. For
example, natural disasters can directly impact companies. Consider the earthquake affecting Kaikoura,
New Zealand in 2016. The earthquake cut off roads and therefore access to this popular tourist destin-
ation. At the time of the earthquake, 30 per cent of people in the town were counted as visitors and many
tourists had to be rescued. With tourism as the lifeblood of the town, this natural disaster has had a dev-
astating effect on operations such as Whale Watch Kaikoura, a firm that facilitates whale watching and
related activities. Damage to the infrastructure in and around Kaikoura and changes to the level of the
seabed post‐quake meant that the business was unable to continue operating. It is estimated that the cost
of the Kaikoura earthquake will be around $3 billion. Environmental factors can have more influence
58 Marketing
in certain industries, and marketers need to be mindful of the factors likely to influence their particular
industry (e.g. tourism, farming and insurance). As discussed in the introduction to marketing chapter,
growing awareness of the potential impacts of climate change is affecting how companies operate and
the products they offer, both creating new markets and diminishing or destroying existing ones.
Legal forces
Laws and regulations are intimately tied to politics. Elected officials and the bureaucracy that works
for them are ultimately responsible for making legislation; that is, for creating and changing laws. Reg-
ulations are made under conditions established by legislation and tend to deal with more minor or more
specific issues than legislation. They are by no means unimportant.
Laws and regulations govern what marketing organisations can and cannot legally do. They spell out
their obligations to consumers, partners, suppliers, government authorities and society as a whole. The
most significant laws and regulations fall into the following categories: privacy, fair trading, consumer
safety, prices, contract terms and intellectual property.
In a bid to forestall legal regulation, many industries have adopted codes of conduct as a self‐
regulatory device. Self‐regulation is usually cheaper, and more attuned to industry needs and actual
practice. For example, Australian advertisers established the Advertising Standards Bureau to establish
and uphold certain standards in advertising. In New Zealand, under the Health Practitioners Competence
Assurance Act 2003, certain regulatory bodies are given the responsibility for registering and overseeing
practitioners in specific health professions.
As mentioned earlier in the chapter when describing the impact of political forces on an organisation’s
macro environment, larger organisations (and industry lobby groups) can attempt to influence govern-
ment lawmakers. An example of this occurred in 2011, when a group of high‐profile Australian retailers
(such as David Jones, Myer, Harvey Norman and Target) banded together in an orchestrated advertising
campaign. This campaign was designed to highlight what Australian retailers perceived as an inequity in
the market, where offshore retailers are not required by the Commonwealth Government to pay import
duty or GST (goods and services tax) on sales to Australia under the value of $1000. The group of
Australian retailers (which employ Australians and are required to pay 10 per cent GST on all purchases)
argue that this inequity places them at a price disadvantage compared to offshore online retailers. The
Commonwealth Government countered by saying it wouldn’t be pressured into making a decision; while
local consumer advocacy group CHOICE argued that the Australian retailers’ campaign was motivated
by self‐interest, and would only result in higher prices for local consumers.16
Macro‐environmental complexity
There are numerous ways to view the macro environment. The PESTEL framework we have outlined
in this section of the chapter is just one. It is intended to help focus on some issues of importance for
marketers, but it must be remembered that none of these factors act in isolation. Rather, they are all
interdependent, and a change in one will almost always have consequences for the others. For example,
the development of internet technology created a need for new laws to regulate online conduct; an entire
online economy developed; the provision of internet infrastructure and the regulation of internet content
has become a major political issue; the nature of relationships and how people spend their days has been
fundamentally changed by the online world.
Let’s consider another example. Over the past two decades, people have become more aware of the
need to minimise the impact of human behaviour on the natural environment. Amid warnings from
scientists of global warming, pollution, the exhaustion of fossil fuels and the extinction of flora and
fauna species, individuals, businesses and governments have begun to give much more weight to the
need for business activities to be responsible and sustainable. Options put forward to encourage such
behaviour include proposals for emissions trading schemes and/or carbon taxes. New Zealand intro-
duced a government‐run emissions trading scheme in 2008, while Australia introduced a carbon tax
on 1 July 2012, with a cost initially set at $23, then increasing to $24.15 before being revoked from
1 July 2014 onwards. The role of carbon taxes continues to be debated across the globe, and many
in the general population hold conflicting views. Emissions trading schemes and carbon tax pro-
posals are designed to encourage market forces to reduce carbon pollution, which is one of the main
contributors to global warming. By 2014, about 40 national and over 20 sub‐national jurisdictions
had implemented or scheduled emissions trading schemes or carbon taxes. According to the Climate
Commission report titled Critical decade: international action on climate change, these schemes
cover around 850 million people, or 30 per cent of the global economy, and around 20 per cent of
global emissions.17
Emissions trading schemes and carbon tax proposals are generally based on the theory that the price of
products that generate more carbon pollution will increase as a result of the scheme/proposal, reducing
demand; whereas carbon‐friendly products will fall to be relatively low in price, increasing demand.
Over time, those producers that are larger greenhouse gas emitters will be less able to compete in the
market with those who can produce in a more carbon‐friendly manner.
SPOTLIGHT
Cyber Monday gives a big boost to mobile commerce

A. ANT OZOK, UNIVERSITY OF MARYLAND
Here is an accurate prediction for a change: no
matter how Black Friday and Cyber Monday sales
turn out, one big winner of the Thanksgiving shop-
ping extravaganza will be mobile commerce. Mobile
users accounted for half of all product browsing
last Cyber Monday. Almost one out of three prod-
ucts was purchased on a mobile phone or tablet last
Cyber Monday. Moreover, mobile sales grew almost
53 per cent from 2014 to 2015 on Cyber Monday,
earning US$514 million of the $3.07 billion total
revenue for the day.
Cyber Monday was an instant hit when it was created in 2005 by the National Retail Federation
(a major retail trade association), and is today by far the largest online shopping day of the year in the
US. As an e‐commerce researcher, I know that Cyber Monday will likely become the biggest shop-
ping day of the year, online or otherwise, sometime in the next decade. Key to that growth will be
Americans’ increasing familiarity with using mobile devices to buy on the go. The e‐commerce industry’s
next marketing innovations could bring location‐ and search‐specific promotional deals, or even shop-
ping for physical items using augmented or virtual reality.
A touch of history
When it began, Cyber Monday was an online shopping counterpart to the in‐person retail frenzy of
Black Friday, the Friday after Thanksgiving that traditionally opens the Christmas gift‐shopping season.
Retailers wanted to take advantage of the fact that office workers were back in their offices after a few
days off — so perhaps they could be enticed by a few special deals.
At the time, it also served as a promotion for the then‐new possibility of shopping online at Amazon
and the websites of big‐box retailers like Target and Best Buy. Early marketing aimed not just at office
workers, but also customers who didn’t enjoy elbowing their way through thronged big‐box stores.
A side benefit appeared for real shop‐til‐you‐droppers: if they missed out on a Black Friday deal, they
could buy it online.
There was a different, less festive attitude: If Black Friday meant shopping for fun, Cyber Monday was
the day to shop for function. In the early days, products promoted on Cyber Monday were typically elec-
tronics, like computers and televisions. The name implies a focus on technology as both what would be
bought and how it would be purchased. For the past five years or so, more than half the US workforce
comes to work on Cyber Monday intending to shop online while at work.
60 Marketing
As a result, it is no longer a day where shoppers look for electronics only or deals they missed during
Black Friday. Now Cyber Monday is a broad shopping experience spanning every product category
imaginable.
Mobile consumption
It would be difficult to imagine Cyber Monday getting this big if not for the increased availability of
mobile technologies. Until only a few years ago, the year‐to‐year growth of mobile commerce was just
incremental. Early researchers did not view mobile commerce as a replacement of computer‐based
e‐commerce, but rather as a convenience tool for on‐the‐go purchases like concert tickets, and to carry
electronic coupon codes rather than printing them for use at bricks‐and‐mortar stores.
Many researchers (including yours truly) argued that it was difficult to think of a mobile as a major
shopping platform because a phone was designed not as a screen to look at but rather a device to span
the distance between a person’s ear and mouth. Some even predicted that mobile commerce would
gain traction once cellphones came with integrated bar code readers.
We were proved wrong when the smartphone brought together a fully functional computer and a
high‐resolution camera, along with touch‐screen controls allowing zooming in on images. Smartphones
rapidly became most Americans’ primary web surfing device. Today, most large online shopping sites
have a mobile version for easier viewing on smaller screens, and mobile shopping as a platform is still
rapidly growing, with large retailers now reporting more sales via mobile devices than via desktop and
laptop computers combined.
Expanding Cyber Monday
The future development of Cyber Monday will include both competition and expansion. Big retailers
spend huge amounts on advertising their Cyber Monday deals, which can put smaller companies at
a disadvantage. So far, the event is a big retailers’ game; smaller players need to work hard with their
small budgets to bump sales on Cyber Monday. (They also have their own Small Business Saturday
event, largely a brick‐and‐mortar affair.)
Retailers are pushing the start date of their deals earlier to beat the competition, and creating even
more dates for good deals (Nov. 11, ‘Singles Day’, is a successful global example). But Cyber Monday
will no doubt keep growing in the mobile arena for years to come.
E‐commerce marketing strategies are constantly changing, and it is conceivable that we will soon see
more Cyber Monday deals beyond retail, such as travel deals, even targeted products and services for
businesses. Retailers will also take advantage of the emerging augmented reality technologies on the
mobile platform to market their products and special deals. Maybe every day is not yet Cyber Monday,
but with the rapid growth of mobile commerce, every day is a Cyber Funday to shop online.
QUESTIONS
1. Identify as many macro‐environmental forces as possible that would impact the online sales of
Cyber Monday.
2. What does the growth of online marketing mean for bricks-and-mortar retailers? Is this a positive
change? Why or why not?

1. Identify six macro‐economic factors and explain their relevance to marketers.

2. You are a marketer for Salt, a resort at Kingscliff in New South Wales. Identify two environmental and
two political trends that will affect your business in the next financial year.
3. You are marketing new houses and understand that the trends towards environmentalism and smaller
families are beginning to reduce demand for large homes. How would you respond to these changes?
4. Identify two major consumer laws in your country. Explain their relevance to marketers.
5. The Australian Competition and Consumer Commission and the Commerce Commission are key
regulatory bodies in Australia and New Zealand respectively. Choose one and locate a recent
decision made. How did this decision impact a company?
2.5 Situation analysis and marketing planning
LEARNING OBJECTIVE 2.5 Conduct a preliminary situation analysis.
Before marketers can create an offering for exchange they must understand their current position or
situation. Situation analysis involves assessing the current situation in order to clearly state where the
company is now. Together with organisational objectives, situation analysis is used as the platform for
marketing planning, as illustrated in figure 2.4.
FIGURE 2.4 Marketing planning
Situation Organisational Marketing

analysis objectives planning
Where we are now. + Where senior management How we plan to get

thinks we should be. to where management
wants us to be.
Consider the following example. A marketer is informed by top management that their objective for
the next financial year is to achieve the number two position in terms of market share for a product
that was launched 12 months ago (it is currently at number four out of six products in the market).
Since the launch the product has achieved 17 per cent market share. To gain the number two position,
the marketer needs to increase market share by a further 10 per cent, to achieve a total of 27 per cent
market share. If successful, the marketer will receive bonuses. In practice, where competition exists, this
is a difficult — but not impossible — objective to achieve. The marketer needs to gain a comprehen-
sive understanding of the current situation, viewed through the eyes of customers, clients, partners and
society at large, in order to develop a marketing plan to reach the target.
Marketers need to be able to analyse their current situation, understanding not only their own busi-
ness, but also their competitors’ businesses and the marketing environment. As stated earlier, situation
analysis leads to an assessment of where we are now. In addition to giving consideration to trends in
the internal and external marketing environment, marketers must understand their past performance.
Figure 2.518 outlines key factors that should be evaluated in a thorough situation analysis.
As illustrated in figure 2.4, the situation analysis, together with the organisation’s objectives, should
form the basis for developing the marketing plan. Essentially, a marketing plan communicates how mar-
keters plan to get from the current situation to where top management thinks their company should be.
Marketing plans are detailed documents, as can be seen by the example included as an appendix at the
back of this text. Although the format and structure of marketing plans vary, the major components
and types of information contained in a typical marketing plan are outlined in figure 2.6. At the end of
each chapter in this text is an activity that allows you to gather information on a product for each of the
major components of the marketing plan listed in figure 2.6. This will enable you to build a detailed
marketing plan as you work through this text.
62 Marketing
FIGURE 2.5 The situation analysis
Company analysis Market analysis
● The firm’s goals and objectives ● Size

● Market share ● Growth
● Service quality ● Customer segments
● Positioning ● Customer needs
● Operations and resources ● Buyer behaviour
● Marketing mix strategies ● Intermediates
● HR policies and procedures
● Financial status
Situation analysis
Environmental analysis Competitive analysis
● Political ● Major competitors

● Economic ● Their goals and objectives
● Social ● Marketplace behaviour
● Technological ● Market share
● Legal/regulatory ● Growth
● Service quality
● Positioning
● Operations and resources
● Marketing mix and strategies
● Indirect competitors
FIGURE 2.6 The marketing plan
Executive summary
The executive summary provides a brief overview of the marketing plan. The purpose is to outline the
main features of the marketing plan that will help the organisation to achieve its objectives. The exec-
utive summary is often the only part of a report that decision makers read, so it needs to effectively
communicate the key issues.
Introduction
Brief details on the internal environment of the organisation are provided in this section — its history,
size, locations, number of employees, revenue, profitability and so on.
Situation analysis
This is a more detailed section of the marketing plan. It includes a thorough analysis of the macro‐ and
micro‐environmental factors. This situation analysis will typically be synthesised into a capstone SWOT
analysis for the organisation (an acronym for Strengths, Weaknesses, Opportunities and Threats). The
SWOT analysis is explained in more detail later in this chapter, including via a visual representation in
figure 2.8.
Objectives
The organisation’s overall objectives and mission statement are included in this section, along with the
marketing objectives that are intended to help achieve the organisation’s overall objectives. All objec-
tives should be:
• Specific
• Measurable
• Actionable
• Reasonable
• Timetabled.
Target market
The marketing plan should contain a description of the organisation’s target market segments, their
characteristics and how the target market and market segments were selected. It is important that the
description of the target market/segment is as specific as possible. For example, if it has been deter-
mined by the situation analysis that the target market is urban 25–30‐year‐old single males, this needs
to be what is stated, as opposed to a more general description such as ‘young single men’. Information
on how to effectively segment markets is contained in chapter 6 of this text.
Marketing mix strategy
Product
The product component of the strategy needs to be outlined, including an explanation of how the
product offers value to the target market. A discussion of branding should also be included. While you
might not include a total product concept analysis of the product in your marketing plan (see chapter 7
of this text), it may be a useful exercise to inform the product strategy that is outlined in the plan.
Price
Pricing objectives (e.g. cash flow, positioning and market share) and the pricing method(s) used to
determine prices for your product/s should be stated as part of the marketing mix strategy. Competi-
tors’ pricing should also be discussed. Pricing is discussed in chapter 8 of this text.
Promotion
The promotion mix (advertising, public relations, sales promotions and personal selling) that the organisation
wishes to pursue should be explained as part of its marketing strategy. Consideration should also be given to
additional marketing communication options, such as guerrilla marketing, sponsorship and viral marketing,
if appropriate for the organisation. Chapter 9 of this text explains the various elements of the promotion mix.
Distribution (place)
Distribution is a further aspect of the marketing mix strategy that should be outlined in order to explain
how the organisation’s products will be available to customers where and when they want them. The
distribution discussion should address the use of marketing intermediaries, if applicable. Chapter 10 of
this text explains key distribution issues that need to be considered by organisations.
People
For services products, a people strategy should be discussed as part of the marketing mix strategy,
including how the organisation will address the specific service product characteristics of intangibility,
inseparability, heterogeneity and perishability. These characteristics are explained in chapter 11. The people
strategy should also outline how the organisation will ensure that its staff are technically competent, able to
deliver high standards of customer service and able to promote products through personal selling.
Process
The systems and procedures, particularly for services products, that will be used to create the organisa-
tion’s product offering should be discussed in the marketing plan.
Physical evidence
For service products, the organisation should provide tangible cues as to the quality it offers. The organ-
isation’s physical evidence strategy may address issues such as shop fittings, background music and
staff uniforms.
Budget
It is important that the budgetary requirements of the marketing plan be outlined in detail, to demonstrate
how the plan can be implemented with available resources.
64 Marketing
Implementation
How the marketing plan will be put into practice should be explained, including specific steps and milestones,
as well as control mechanisms to ensure the implementation phase proceeds in accordance with the plan.
Evaluation
The plan needs to outline specific metrics (e.g. return on investment, market share) that will be used to
evaluate its success. These metrics can also be used by the organisation to inform both the refinement
of the current plan if necessary and the development of future marketing plans.
Conclusion/future recommendations
A brief summary/conclusion of the report should be provided, including recommendations for approval
and/or action (e.g. that the marketing plan be accepted by senior management for implementation, in
order to exploit market opportunities for growth).
Marketing metrics
Marketing metrics are measures that are used to assess marketing performance. The Australian Marketing
Institute offers a framework to guide marketers’ choice of metrics. The framework’s underlying principles
are that metrics should be linked to strategy and should include, as a minimum, four key elements: return on
marketing investment, customer satisfaction, market share in targeted segments and brand equity.
To give you an idea of the many different ways that marketers can measure performance, key marketing
metrics are summarised in figure 2.7.19
FIGURE 2.7 Best practice marketing metrics
● Sales (volume, or number value, ($), % to plan)

Return on
● Marketing investment (costs, share of voice)
investment
● Bottom line (profit, share of industry profit)
● Churn — % of customers lost

Customer ● Number of complaints received/resolved
satisfaction ● % on-time delivery
● Retail queue waiting times
● % market share
Market
● % market share growth/decline
share
● Performance relative to competitors
● Awareness — % of target market

Brand
● Preference — % of target market
equity
● Loyalty — share of category purchases
It is important to remember that there is no one best marketing metric. In practice, different strat-
egies require different metrics and marketers need to select metrics accordingly. For example, Kellogg’s
objective was to revamp the way it used trade promotions in its overall marketing strategy. In trade
promotions, manufacturers such as Kellogg’s make payments known as rebates to grocers to display,
advertise and offer reduced prices on certain products at specified times. Kellogg’s knew almost nothing
about the effectiveness of the thousands of sales promotions that took place in the supermarkets every
year. The annual cost of Kellogg’s trade promotions was $600 million. Using marketing metrics such as
the sales uplift from the trade promotions, Kellogg’s found that 59 per cent of its trade promotion events
lost money for the company. Further, the profit generated by the other 41 per cent was almost entirely
eaten away by the events that lost money.20
While the use of the sales promotion metric (sales uplift from the trade promotion) was ideal for
Kellogg’s purposes, it would not be relevant for others. Let’s consider another example. A telecommuni-
cations company wanting to increase the profitability of its business customers would require a different
metric. Telecommunications business customers include small‐ to medium‐size businesses with up to
200 phone lines. A telecommunications company that wants to increase the profitability of its business
customers can conduct an experiment where some customers are offered specially designed calling plans
with unique pricing arrangements, while others are left the same. The success of this experiment can
be tracked using two marketing metrics — the customer’s ‘change in spend’ and the customer’s ‘churn
rate’ (proportion of customers choosing to change to another telecommunications company). Customers
participating in the experiment can be compared to a control group of customers who are continuing to
use existing calling plans. The change in spend and customer churn can help marketers to assess whether
the specially designed calling plans increase the profitability of business customers.
Marketing metrics are vital for marketers. Marketers need to be able to articulate the return on invest-
ment for a host of reasons. First, the ability to articulate a return on investment can provide a solid
rationale for continued funding for successful marketing programs — programs that might otherwise be
cut if perceptions are that a program is too costly or is a large budget item. For example, a marketing
director could potentially address or avert tough budget questions from a board of directors if they can
demonstrate that their $3 million program contributed more than $6 million in sales. Second, return
on marketing investment metrics can help marketers allocate resources where they are most effective.
Third, marketers can build and share a database of returns on investment that should assist in evaluating
the relative effectiveness of various programs.
Once marketers have gained a thorough understanding of their past performance they need to look
forward. Marketers need to predict what they think is likely to occur in order to plan how they will com-
pete in the market. A comprehensive understanding of the marketing environment is used to identify the
key factors that are likely to impact in the foreseeable future.
SWOT analysis
As we have explored earlier in this chapter, a multitude of factors are likely to impact a business.
When marketers conduct a situation analysis, they will always find that there are more factors that
need attention than they can possibly address within the constraints of the available time, money and
other resources. Marketers need to be able to isolate the key, or most important, factors that need to be
addressed to continue to compete effectively in the market. For example, while a garden nursery will
identify that drought and government‐imposed water restrictions will both have a large impact on its
business, government‐imposed water restrictions that do not allow people to water outdoor plants will
have a more immediate impact. Marketers need to be able to prioritise or rank the factors to determine
which factors will be used to inform their decision making. Factors included in a situation analysis are
expected to have an immediate and sufficiently large impact on the business. A situation analysis must
use insights from customers, partners, suppliers and other areas of the organisation.
Situation analysis involves identifying the key factors that will be used as a basis for the development
of marketing strategy. Marketers must be able to understand the current opportunities that are available
66 Marketing
in the market, the main threats that business is facing and may face in the future, the strengths that the
business can rely on and any weaknesses that may affect the business performance. Not surprisingly
the method used to identify these factors is known as a SWOT analysis. SWOT is short for strengths,
weaknesses, opportunities and threats.
Strengths are those attributes of the organisation that help it achieve its objectives: competitive
advantages and core competencies. Weaknesses are those attributes of the organisation that hinder it in
trying to achieve its objectives. Strengths and weaknesses are considered to be internal factors and there-
fore directly controllable by the organisation. Opportunities are factors that are potentially helpful to
achieving the organisation’s objectives. Note the emphasis on the word ‘potentially’ in the previous sen-
tence. Opportunities are only of benefit if the organisation responds effectively to them. Opportunities
are factors that are beyond the organisation’s direct control, though the organisation may be able to have
some influence over them. Threats are factors that are potentially harmful to the organisation’s efforts to
achieve its objectives. Like opportunities, threats are beyond the organisation’s direct control, but require
an effective response by the organisation. Opportunities and threats can arise from many different factors
in the organisation’s environment.
A SWOT analysis is often used to help frame marketing thinking. A SWOT analysis can help mar-
keters to identify ways to minimise the effect of weaknesses in their business, while maximising their
strengths. Ideally, marketers will seek to match their strengths against market opportunities that result
from competitors’ weaknesses or voids. A potential framework for conducting a SWOT analysis, along
with key factors to be considered, is outlined in figure 2.8.
FIGURE 2.8 A potential framework for a SWOT analysis
Favourable Unfavourable
Strengths Weaknesses
(Can be directly controlled
● What does your company ● What doesn’t your company

by the company)
Internal factors
do well? do well?
● What do your customers ● What do your customers
compliment you on? complain about?
● What makes your company ● What are the unmet needs
stand out from competitors? of your sales force?
● What advantages does your ● What disadvantages does
company have when your company face?
compared with others?
Opportunities Threats
(Cannot be directly controlled
influenced by the company)

by the company — may be
● Are there emerging trends ● What do your competitors

External factors
that fit with your company’s do better than you?

strengths? ● Are there emerging trends
● Are there things that your that threaten your business?
competitors don’t do well?
● Are customer and client
tastes changing?
Figure 2.9 shows a very basic example of a SWOT analysis for a retail shop. This SWOT analysis,
combined with an evaluation and understanding of the effectiveness of past marketing and business
approaches, provides the retail shop with the information it needs to consider possible actions.
For example, given its strengths, the retailer could concentrate its marketing efforts on current customers,
adjusting stock on hand to meet current customer needs. This strategy would reduce stock costs, increase
cash flow and improve business performance. However, given one of its identified threats is the trend
towards increased competition, it may also consider the possibility of adding a second, high‐traffic location
to counter the competitors’ moves. Further, the SWOT analysis identified an increase in leisure time and a
change to working hours. The retail shop could consider changing opening hours to grow retail shop revenue.
These are just three possible responses to the strengths, weaknesses, opportunities and threats identi-
fied. There are many others that would need to be considered. Armed with this SWOT information, the
organisation can begin to shape its marketing plan.
FIGURE 2.9 An example of a SWOT analysis for a retail shop
Favourable Unfavourable
Strengths Weaknesses
● Excellent sales staff with strong ● Currently struggling to meet

Internal factors
knowledge of existing products deadlines. Too much work? Not

● Good relationship with customers enough people?
● Good internal communications ● High rental costs
● High traffic location ● Market research is out of date
● Successful marketing strategies ● Cash flow problems
● Reputation for innovation ● Holding too much stock
● Poor record keeping
Opportunities Threats
● Growing customer base ● Competitors have a similar

External factors
● Increased flexibility in working product

hours, more time to go shopping ● Competitors have launched a
in trading hours new advertising campaign
● Increased leisure time means ● Competitor opening a shop
more shopping time nearby
● Downturn in economy may mean
people are spending less
SPOTLIGHT
How ‘gamification’ can make transport systems and choices work

better for us
BARBARA T.H. YEN, GRIFFITH UNIVERSITY
Individual users and their behaviours are critical to how transport systems work. How can we better
incentivise their behaviour to achieve policy goals such as shifting transport modes and reducing road
trauma and traffic congestion?
68 Marketing
Peak‐hour congestion and peak loading, for example, are the twin most pressing issues for public
transport agencies around the world. The search for low‐cost ‘solutions’ to such problems is a continuing
challenge. By 2031, public transport patronage in many cities is expected [to] have doubled or even tripled
in 25 years. Australian governments at all levels recognise this increasing demand, but infrastructure
investments are facing long delays due to funding shortfalls. Instead of building costly new infrastructure —
for example, the A$5 billion Brisbane bus and train tunnel — can we use transport capacity more efficiently
to defer this investment? That is, how can we shift demand from peak to off‐peak times?
How about playing a game?
A game is viewed as ‘an activity that is voluntary and
enjoyable, and governed by rules’. Gamification incor-
porates elements of game play into an interactive
system without having a fully fledged game as the end
product. Gamification can be defined as the ‘use of
game design elements in non‐game contexts’. It intro-
duces competition and social activity into behavioural
interventions. The participants, such as public transport
passengers, become ‘players’ who can win individual or
group rewards if they adjust their behaviour.
Recent evidence underlines the significance of a
gamified approach to behaviour change. Currently,
there are few case studies in the transport field. These may not be branded directly as gamification,
but the concepts of these cases are borrowed from it.
Active travel
Gamified design has been used in the health field and can dramatically transform people’s health and
physical activity levels. One example from the UK is the Beat the Street initiative. In Reading, it has
encouraged thousands of residents to walk and cycle for health benefits.
Another example of such programs in Australia is Healthy Active School Travel. This is a free, tailored
program proven to help primary school students, parents and teachers to leave the car at home and use
sustainable travel modes to get to school. Examples include walking, cycling, riding a scooter, or taking
public transport. In participating schools in Brisbane, the program has helped to convert 35 per cent of
single‐family car trips to school to an active and healthy transport mode.
For these games, leaderboards are compiled and reported at all competition levels. Peer encourage-
ment is strong. Low‐cost rewards like stickers encourage students to make positive changes in their
travel behaviour or participate in events such as scooter safety skills sessions.
Engagement remains strong throughout the year as each month has a new focus and a new prize.
Examples include prizes for the ‘most children walking to school’ in March, the ‘most children bike
riding’ in April, and the ‘most children scootering’ in May.
Public transport
Gamification schemes have just been introduced in a public transport context for the first time via
Singapore’s INSINC program. This aims to shift demand from peak to off‐peak shoulder times in
Singapore’s public transport system. The scheme manages peak‐hour congestion by offering incentives
for commuters to travel in off‐peak periods. These incentives include random (raffle‐like) rewards, social
influence and personalised offers. A six‐month research pilot, launched in January 2012, achieved a
7.49 per cent shift from peak to off‐peak hours for all commuter trips.
Road safety
There are many gamified schemes and interventions to improve road safety, especially when it comes to
young drivers. It is well established that they are over‐represented in numbers of road accidents in any
driver demographics. In Australia, people in the 17–25 age group made up 12.4 per cent of the popu
lation, but 20.5 per cent of driver deaths and 20.2 per cent of all deaths in 2014.
To motivate young people to drive more safely, many interventions have been developed. Car insur-
ance companies have designed some interventions. Examples include:
• GAMETUNED in the UK
• S‐Drive in Australia
• paying accident insurance by the kilometres driven in the Netherlands
• SmartDrive in New Zealand
• a return insurance premium scheme in Norway
• starting bonuses in Sweden.
These gamified programs are designed to promote safe driving. Such programs fall into two categ-
ories: monetary rewards and a reward point scheme.
What’s next?
Gamification is based on sound psychological and social theory and has had success in the trans-
port field. The important questions confronting transport agencies are not if and how gamification
works, but where it may be useful and how to design a successful intervention. We know most
about the approach’s efficacy in schools, but less about its efficacy with adults and in the transport
context.
There is ample scope to harness a gamification approach in Australia to achieve transport‐system‐
oriented goals. Radio Frequency Identification card or app technology could be used to encourage
better use of new bicycle/pedestrian path infrastructure, or local area walking and cycling.
The potential to combine games and rewards with public transport travel is significant. It could provide
additional behaviour change rewards for off‐peak travel, encourage walking instead of vehicle access to
public transport, or reward use of alternative public transport stops to avoid congested stations.
The outcomes could be tied to business‐based travel plans where businesses can show improve-
ments in their bottom lines from encouraging mode shift from car to public transport or active travel.
Some of the incentives may then be underwritten through their savings.
QUESTION
Use the information in this Spotlight, and any other necessary research, to develop a SWOT analysis
for gamification of transport systems. What are some other industries that have adopted gamification to
appeal to their customers? Do you think this is an effective strategy? Why or why not?
1. You are a marketer responsible for encouraging more people to take public transport. You have
enjoyed considerable success in this role, but you need to pinpoint the specific marketing tactics
that encourage more people to take public transport. What marketing metric will you use to under-
stand which tactics were effective in achieving that goal?
2. You have a new employee in your marketing department and you need them to undertake a situation
analysis. In your own words, explain to your new employee how they should approach a situation
analysis.
3. Review the retail shop SWOT analysis in figure 2.9 and the surrounding discussion. Imagine you are
the marketing manager for the retail shop. How would you respond in order to effectively manage
the identified strengths, weaknesses, opportunities and threats?
4. You are the marketing manager for Snickers bars. Analyse two competitors. What are their strengths
and weaknesses?
70 Marketing
SUMMARY
2.1 Describe the marketing environment and the purpose of environmental analysis.
The marketing environment refers to all of the internal and external forces that affect a marketer’s
ability to create, communicate, deliver and exchange offerings of value. Marketers seek to under-
stand, respond to, and influence their environment. They use environmental analysis to break the
marketing environment into smaller parts in order to better understand it.
2.2 Explain the factors at work in the organisation’s internal environment.
The internal environment refers to its parts, people and processes. An organisation is able to directly
control the factors in its internal environment. A thorough understanding of the internal environment
ensures that marketers understand the organisation’s strengths and weaknesses, which positively
and negatively affect the organisation’s ability to compete in the marketplace.
Different parts of organisations often have different goals. The most successful organisations
manage to align the goals of each part of the organisation to the overall market orientation of the
business. This is most likely to occur when each person and department understands their contribu-
tion and the contribution of other departments.
2.3 Understand the importance of the different micro‐environmental factors.
The micro environment consists of customers, clients, partners, competitors and other parties that
make up the organisation’s industry. The organisation cannot directly control its micro environment,
but it can exert some influence over it.
Marketers must understand and respond to the current and future needs and wants of their target
market. They must understand how each of their partners’ processes work and how their partnerships
benefit each party. They must also understand the risks involved in working with partners and the relative
power balance between the organisation and each partner. Suppliers are a particularly crucial partner.
Marketers must identify, assess, monitor and manage risks to supplies and risks to the price of supplies.
To succeed, marketers must ensure their offerings provide their target market with greater value than their
competitors’ offerings. Thus, marketers seek to understand their competitors’ marketing mix, sales vol-
umes, sales trends, market share, staffing, sales per employee and employment trends. Marketers should
analyse total budget competition, generic competition, product competition and brand competition.
2.4 Outline the different types of macro‐environmental forces.
The macro environment encompasses uncontrollable factors outside of the industry: political, econ-
omic, sociocultural, technological, environmental and legal forces. Political forces describe the
influence of politics on marketing decisions. Economic forces affect how much money people and
organisations can spend and how they choose to spend it. Sociocultural forces affect people’s atti-
tudes, beliefs, behaviours, preferences, customs and lifestyles. Technological forces are those arising
from the search for a better way to do things. Technology changes the expectations and behaviours
of customers and clients as well as how organisations work with their partners and within society.
There is a wide range of environmental factors that companies need to be mindful of, including
ecological and environmental aspects such as weather, climate and climate change. Laws and regu-
lations are closely tied to politics and establish the rules under which organisations must conduct
their activities. The most significant laws and regulations for marketers are related to privacy, fair
trading, consumer safety, prices, contract terms and intellectual property.
2.5 Conduct a preliminary situation analysis.
Situation analysis involves assessing an organisation’s current position and situation. Together with
organisational objectives, situation analysis is used as the platform for marketing planning. Essen-
tially, a marketing plan communicates how marketers plan to get from the current situation to where
senior management thinks their organisation should be.
Marketing metrics are used to measure current performance and the outcomes of past activities.
A SWOT analysis is used to identify strengths (those attributes of the organisation that help it achieve its
objectives), weaknesses (those attributes of the organisation that hinder it in trying to achieve its objec-
tives), opportunities (factors that are potentially helpful to achieving the organisation’s objectives) and
threats (factors that are potentially harmful to the organisation’s efforts to achieve its objectives).
KEY TERMS
economic forces Those factors that affect how much people and organisations can spend and how they
choose to spend it.
environmental analysis A process that involves breaking the marketing environment into smaller
parts in order to gain a better understanding of it.
environmental forces The environmental factors that affect individuals, companies and societies.
external environment The people and processes that are outside the organisation and cannot be
directly controlled.
internal environment The parts of the organisation, the people and the processes used to create,
communicate, deliver and exchange offerings that have value. The organisation can directly control
its internal environment.
internal marketing A cultural framework and a process to achieve strategic alignment between
front‐line employees and marketing.
laws Legislation enacted by elected officials.
macro environment The factors outside of the industry that influence the survival of the company;
these factors are not directly controllable by the organisation.
marketing environment All of the internal and external forces that affect a marketer’s ability to
create, communicate, deliver and exchange offerings of value.
marketing metrics Measures that are used to assess marketing performance.
marketing planning An ongoing process that combines organisational objectives and situation
analyses to formulate and maintain a marketing plan that moves the organisation from where it
currently is to where it wants to be.
micro environment The forces within an organisation’s industry that affect its ability to serve its
customers and clients — target markets, partners and competitors.
opportunities Factors that are potentially helpful to achieving the organisation’s objectives.
political forces The influence of politics on marketing decisions.
regulations Rules made under authority delegated by legislation.
situation analysis An analysis that involves identifying the key factors that will be used as a basis for
the development of marketing strategy.
sociocultural forces The social and cultural factors that affect people’s attitudes, beliefs, behaviours,
preferences, customs and lifestyles.
strengths Those attributes of the organisation that help it achieve its objectives.
SWOT analysis An analysis that identifies the strengths and weaknesses and the opportunities and
threats in relation to an organisation.
threats Factors that are potentially harmful to the organisation’s efforts to achieve its objectives.
weaknesses Those attributes of the organisation that hinder it in trying to achieve its objectives.
CASE STUDY
CHECKING THE PULSE: ARE WE SATISFYING OUR EMPLOYEES?
YU‐TING HUANG, GRIFFITH UNIVERSITY (CO‐AUTHOR)
Consider the following scenario. A marketing manager produces a 100‐page marketing plan outlining
how employees will be motivated to implement the company’s marketing strategies. The plan is
emailed to all company employees with one sentence: ‘Here’s the plan’. On the distribution list are
72 Marketing
employees from the production line to employees in the call centres. The email is sent once, and
there is no follow up. Weeks pass and management wonders why employees aren’t changing their
behaviour.
The marketers in charge of the planning process failed to clearly communicate the plan internally,
lobby support and provide helpful short‐hand reminders about the strategy to ensure that the larger
team (e.g. company employees) responsible for its implementation understood it. The good news is
that this can easily be avoided. Internal marketing is the function used to implement such a plan. The
following section outlines one example of an internal marketing audit conducted recently for a service
organisation. Recall that internal marketing is comprised of three main business functions — namely,
communications, training and market research — that marketers can use to encourage employees to
work together towards one common goal.
The internal marketing audit

A survey was developed to understand the perceptions of employees of a service company as to
what improvements could be made to the internal marketing program. Each internal marketing item
(summarised in table 2.4) was measured on a five‐point scale, where five represented ‘strongly agree’
and one represented ‘strongly disagree’. The survey was collected online, allowing employees the
freedom to complete the survey at a time and place that was convenient to them.
Responses were anonymous and employees could not be individually identified in any way. The
effective respondent rate was 24.8 per cent, and data collected in the survey was analysed using stat-
istical software (SPSS). Descriptive statistics (see table 2.3) or frequencies were used to understand the
employees’ demographic characteristics (see table 2.4) and employee’s perceptions of current internal
marketing practice in the organisation. A mean (arithmetic average) score and standard deviations were
calculated for each internal marketing item, and the proportion of employees agreeing and disagreeing
with each item was also calculated so that an assessment of the organisation’s internal marketing could
be made. Higher standard deviations indicate higher degrees of heterogeneity. In simple terms, higher
standard deviations would indicate that while some employees agreed with a statement, there were some
others who disagreed with the statement. Considering both the mean and the standard deviation provides
market researchers with more information to diagnose the situation.
TABLE 2.3 Respondent characteristics
Item Female (n = 147) Male (n = 68)
Number % Number %
Age
21–30 86 58.5 20 29.4
31–40 30 20.4 26 38.2
41–50 26 17.7 11 16.2
51 & over 5 3.4 11 16.2
Marital
Married 44 29.9 24 35.3
Not married 103 70.1 44 64.7
Degree
High school 7 4.8 4 5.9
Bachelor degree 133 90.5 61 89.7
Postgraduate degree 7 4.8 3 4.4
The vast majority of the employees were non‐married women (68.4 per cent). A majority of employees
(59.1 per cent) held a bachelor degree. The majority of female respondents (86 per cent) were between
the ages of 21 and 30, and the majority of male respondents (46 per cent) were between the ages of 21
and 40.
TABLE 2.4 Internal marketing employee perceptions
Items Mean (SD) % strongly agree % strongly disagree

& agree (n) & disagree (n)
Internal communication
My organisation communicates a clear brand 3.5 (1.1) 55 (113) 19 (38)

image to me.
There is an internal communication program for 3.2 (1.1) 44 (90) 29 (60)

all employees in my organisation.
All communication materials reflect a consistent 3.2 (1.0) 45 (92) 28 (57)

style in my organisation.
Employees at all levels understand the direction and 3.0 (1.0) 38 (77) 35 (72)
key priorities of my organisation.
In my organisation, communications are 3.3 (1.1) 50 (102) 22 (46)

appropriate.
Messages that I receive are aligned with business‐ 3.3 (0.9) 48 (99) 30 (40)
wide communication.
74 Marketing
Items Mean (SD) % strongly agree % strongly disagree
& agree (n) & disagree (n)
Training
My organisation focuses efforts on training 3.5 (1.0) 57 (117) 42 (43)

employees.
My organisation provided an orientation program 3.4 (1.2) 56 (115) 26 (53)

for me.
The training in my organisation has enabled me to 3.3 (1.1) 47 (96) 23 (48)

do my job well.
My organisation teaches me why I should do things. 3.1 (1.1) 40 (81) 29 (59)
Skill and knowledge development happens as an 3.6 (1.1) 69 (141) 15 (31)

ongoing process in my organisation.
My organisation provides support to develop 3.2 (1.1) 47 (95) 30 (61)

my communication skills in order to achieve
organisational goals.
Internal market research
My organisation gathers employee feedback. 3.1 (1.1) 44 (90) 29 (60)
My organisation regularly seeks employee 3.1 (1.2) 39 (82) 32 (65)

suggestions.
My organisation collects data on employee 2.9 (1.0) 30 (61) 27 (45)

complaints.
My organisation does a lot of internal marketing 2.7 (1.0) 29 (39) 40 (81)

research.
My organisation talks with me to identify issues that 2.9 (1.1) 30 (62) 38 (77)
I may have.
My organisation surveys employees at least once a 2.8 (1.1) 27 (55) 39 (80)

year to assess the quality of employment.
On average, the mean (or arithmetic average) item scores were between 2.9 and 3.5, and standard devi-
ations were above 1 for the majority of items. Standard deviation scores above 1 suggest that employees
hold different perceptions about the same item. Closer examination of the data is needed to understand
the proportion of employees agreeing and disagreeing with each statement.
An examination of the proportion of employees disagreeing showed that as few as 15 and as many
as 42 per cent of employees disagreed with some items, suggesting there was considerable room for
improvement for the service organisation. For example, 40 per cent of employees disagreed or strongly
disagreed with the statement ‘My organisation does a lot of internal marketing research’.
QUESTIONS
1 Critically explain the results obtained in this study.
2 What are the current strengths and weaknesses of internal marketing?
3 How can internal marketing be improved in this service organisation?
4 Should future monitoring of employee perceptions occur? Why/why not?
ADVANCED ACTIVITY
Using the measures provided in the case study, conduct an internal market audit for a service organisation.
You should collect the perceptions of five employees. Average scores can be calculated in Excel.
MARKETING PLAN ACTIVITY

Look back through the background information that you collected in week one for your chosen
organisation and product. In terms of a preliminary situation analysis for your product, use figure 2.5 as
a guide for questions that may help you identify the most important factors to consider. Conduct some
additional research to identify more environmental (internal, micro environment and macro environment)
factors that may affect your chosen organisation and product. Your aim is to develop a comprehensive
list that will be further researched and refined as you develop your marketing plan.
Next use a SWOT analysis framework (see figure 2.8) to synthesise the information you compile.
Make sure that you put factors into the correct category (strengths, weaknesses, opportunities and
threats). Remember, strengths and weaknesses can be controlled by the company.
Finally, outline some preliminary marketing objectives that your marketing plan will be designed to
achieve, using this initial situation analysis as a guide.
Typical components of a marketing plan have been included in this chapter (figure 2.6), and a sample
marketing plan has been included in the appendix. These should give you an idea about where the
information for this chapter’s activity fits in an overall marketing plan.
WEBSITES
Australian legal obligations of marketing: www.business.gov.au/info/plan‐and‐start/develop‐your‐
business‐plans/marketing/legal‐obligations‐of‐marketing
New Zealand legal obligations of marketing: www.marketing.org.nz/Resources/Regulatory
Queensland Government’s example SWOT Analysis: www.business.qld.gov.au/business/starting/market‐
customer‐research/swot‐analysis/example‐swot‐analysis
ENDNOTES
1. Consumer trend report (market analysis report, June 2010).
2. Euromonitor international website, www.euromonitor.com.
3. Consumer trend report (market analysis report, June 2010).
4. Green Chef website, www.greenchef.com.
5. American Marketing Association (2007).
6. J. Moulds and E. Howard (2014), ‘10 things you need to know about sustainable palm oil’, The Guardian, 27 November,
www.theguardian.com.
7. L. Miles (2007), The last stand of the orangutan: state of emergency: illegal logging, fire and palm oil in Indonesia’s
national parks, UNEP/Earthprint.
8. International Union for Conservation of Nature (IUCN), ‘The IUCN Red List of Threatened Species’, Pongo abelii,
www.iucnredlist.org/details/39780/0.
9. M. Mazzoni (2014), ‘3P Weekend: 10 companies committed to sustainable palm oil’, Triple Pundit, 14 June,
www.triplepundit.com.
10. D. Harris (2016), ‘Mondelez cracks down on palm oil suppliers, pushes sustainability’, Food Dive, 17 November,
www.fooddive.com.
11. Only Good website, www.onlygood.co.nz.
12. M. Bingemann and M. Sainsbury (2009), ‘Telstra pulls $32m deal with Satyam’, Australian IT, 26 March, www.australianit.
news.com.au.
76 Marketing
13. L. Cutcher (2008), ‘Service sells: exploring connections between customer service strategy and psychological contract’,
Journal of Management and Organization, 14(2), pp. 116–26.
14. N. Shoebridge (2009), ‘Marketing’s moment of truth’, BRW, 26 March–29 April, p. 76.
15. J. Stensholt (2009), ‘Sky’s the limit’, BRW, 8–14 October, pp. 26–7.
16. T. Nolan (2011), ‘Big retailers wage war on web’, The 7.30 Report, 5 January, www.abc.net.au.
17. SBS (2012), ‘Factbox: carbon taxes around the globe’, www.sbs.com.au.
18. J. Summers and B. Smith (2010), Communication skills handbook, 3rd edition, John Wiley & Sons, Milton, Queensland,
p. 72.
19. Tourism Alliance Victoria (2003), ‘Drought & regional tourism’, issues paper, www.vtoa.asn.au; Australian Marketing
Institute (2004), ‘What value marketing: a position paper on marketing metrics in Australia’, discussion paper, www.ami.
org.au; Victorian Employers Chamber of Commerce (2007), ‘VECCI survey shows drought impacts disproportionately on
regional tourism businesses’, www.vecci.org.au.
20. Australian Marketing Institute (2004), ‘What value marketing: a position paper on marketing metrics in Australia’,
discussion paper, www.ami.org.au.
ACKNOWLEDGEMENTS
Photo: © Hello Fresh
Photo: © tristan tan / Shutterstock.com
Photo: © wavebreakmedia / Shutterstock.com
Photo: © Nils Versemann / Shutterstock.com
Photo: © wavebreakmedia / Shutterstock.com
Photo: © Monkey Business Images / Shutterstock.com
Photo: © Andrey_Popov / Shutterstock.com
Text: © The Conversation, John Rice and Nigel Martin, 16 July 2016, http://theconversation.com/can-a-
corpulent-woolies-discard-its-history-and-fight-off-aldi-63051
Text: © The Conversation, A. Ant Ozok, 22 November 2016, http://theconversation.com/cyber-monday-
gives-a-big-boost-to-mobile-commerce-68902
Text: © The Conversation, Barbara T.H. Yen, 16 May 2016, http://theconversation.com/how-gamification-
can-make-transport-systems-and-choices-work-better-for-us-57663

CHAPTER 2 The Marketing Environment and Market Analysis

Uploaded by

Copyright:

Available Formats

CHAPTER 2 The Marketing Environment and Market Analysis

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CHAPTER 2 The Marketing Environment and Market Analysis

Uploaded by

Copyright:

Available Formats

CHAPTER 2

After studying this chapter, you should be able to:

Selling convenience: the rise of the meal kit

CHAPTER 2 The marketing environment and market analysis 43

2.1 The marketing environment

technological, environmental, legal) framework. Micro‐environmental and macro‐environmental forces

CHAPTER 2 The marketing environment and market analysis 45

Palm oil: looking for a sustainable solution

CONCEPTS AND APPLICATIONS CHECK

1. Describe the factors in the marketing environment.

2.2 Internal environment

CHAPTER 2 The marketing environment and market analysis 47

Manager, Manager, Manager, Manager,

Sales Sales Sales Sales Sales

CHAPTER 2 The marketing environment and market analysis 49

CONCEPTS AND APPLICATIONS CHECK

Customers and clients

CHAPTER 2 The marketing environment and market analysis 51

TABLE 2.1 Types of competition

Competitive Description Example

TABLE 2.2 Levels of competition

Level of Description Example

from competing products.

CHAPTER 2 The marketing environment and market analysis 53

CONCEPTS AND APPLICATIONS CHECK

2.4 The macro environment

CHAPTER 2 The marketing environment and market analysis 55

Social and cultural influences have a large influence on businesses.

Technology is vital for competitive advantage. Marketers must consider:

Marketers need to understand environmental influences including ecological

Marketers need to understand legal and regulatory influences such as:

CHAPTER 2 The marketing environment and market analysis 57

CHAPTER 2 The marketing environment and market analysis 59

Cyber Monday gives a big boost to mobile commerce

CONCEPTS AND APPLICATIONS CHECK

1. Identify six macro‐economic factors and explain their relevance to marketers.

CHAPTER 2 The marketing environment and market analysis 61

FIGURE 2.4 Marketing planning

Situation Organisational Marketing

Where we are now. + Where senior management How we plan to get

marketing plan as you work through this text.

Company analysis Market analysis

● The firm’s goals and objectives ● Size

Environmental analysis Competitive analysis

● Political ● Major competitors

FIGURE 2.6 The marketing plan

CHAPTER 2 The marketing environment and market analysis 63

FIGURE 2.7 Best practice marketing metrics

● Sales (volume, or number value, ($), % to plan)

● Churn — % of customers lost

● Performance relative to competitors

● Awareness — % of target market

CHAPTER 2 The marketing environment and market analysis 65

FIGURE 2.8 A potential framework for a SWOT analysis

● What does your company ● What doesn’t your company

influenced by the company)

● Are there emerging trends ● What do your competitors

that fit with your company’s do better than you?

CHAPTER 2 The marketing environment and market analysis 67