Chapter two

MARKETING ENVIRONMENT
Understanding the marketing environment in which the firm operates is very important to correctly identify opportunities
and monitor threats of the company. The marketing environment consists both outside and inside forces that affect the
marketing management’s functions and ability to develop and maintain successful relationships with its target customers.
The marketing environment is made up of micro environmental and macro environmental (Internal and External)
components though these factors and forces may vary depending on the specific company and industrial group. The micro
environmental components include: the company, suppliers, marketing channel firms (intermediaries), customer markets,
competitors, and publics which combine to make up the company’s value delivery system. The macro environmental
components are thought to be: demographic, economic, natural, technological, political, and cultural forces. Managers
should take a proactive, rather than reactive, approach to the marketing environment. By constantly looking at the dynamic
changes that are occurring in the company’s environments, companies are better prepared to adapt to change, prepare long-
range strategy, meet the needs of today’s and tomorrow’s customers, and compete with the intense competition present in
the global marketplace. Systematic environmental scanning helps marketers to revise and adapt marketing strategies to
meet new challenges and opportunities in the marketplace.
A. MARKETING MICRO ENVIRONMENT
The microenvironment consists of five components.
a. The company itself (including departments). Organization’s internal environment—its several departments and
management levels—as it affects marketing management's decision making
b. Marketing channel firms (intermediaries). Marketing channel firms that cooperate to create value: the suppliers and
marketing intermediaries (middlemen, physical distribution firms, marketing-service agencies, financial
intermediaries)
c. Customer markets the consumer, producer, reseller, government, and international markets.
d. Competitors consists of the competitors facing the organization
f. Publics that have an actual or potential interest in or impact on the organization’s ability to achieve its objectives:
financial, media, government, citizen action, and local, general, and internal publics.
1. The Company’s Microenvironment
a. The Company
The first force is the company itself and the role it plays in the microenvironment.
This could be considered as the internal environment.
1). Top management is responsible for setting the company’s mission, objectives, broad strategies, and policies.
2). Marketing managers must make decisions within the parameters established by top management.
3). Marketing managers must also work closely with other company departments.
Areas such as finance, R & D, purchasing, manufacturing, and accounting all produce better results when aligned by
common objectives and goals.
4). All departments must “think consumer” if the firm is to be successful. The goal is to provide superior customer value
and satisfaction.
b. Suppliers
Suppliers are firms and individuals that provide the resources needed by the company and its competitors to produce goods
and services. They are an important link in the company’s overall customer “value delivery system.”
1). One consideration is to watch supply availability (such as supply shortages).
2).Another point of concern is the monitoring of price trends of key inputs. Rising supply costs must be carefully
monitored.

Principal actors in the company's microenvironment

c. Marketing Intermediaries
Marketing intermediaries are firms that help the company to promote, sell, and distribute its goods to final buyers.
1). Resellers are distribution channel firms that help the company find customers or make sales to them.
2).These includes wholesalers and retailers who buy and resell merchandise.
3). Resellers often perform important functions more cheaply than the company can perform itself. However, seeking and
working with resellers is not easy because of the power that some demand and use.
Physical distribution firms help the company to stock and move goods from their points of origin to their destinations.
Examples would be warehouses (that store and protect goods before they move to the next destination).
Marketing service agencies (such as marketing research firms, advertising agencies, media firms, etc.) help the company
target and promote its products.
Financial intermediaries (such as banks, credit companies, insurance companies, etc.) help finance transactions and insure
against risks.
d. Customers
The company must study its customer markets closely since each market has its own special characteristics. These markets
normally include:
1). Consumer markets (individuals and households that buy goods and services for personal consumption).
2). Business markets (buy goods and services for further processing or for use in their production process).
3). Reseller markets (buy goods and services in order to resell them at a profit).
4). Government markets (agencies that buy goods and services in order to produce public services or transfer them to
those that need them).
5). International markets (buyers of all types in foreign countries).
e. Competitors
Every company faces a wide range of competitors. A company must secure a strategic advantage over competitors by
positioning their offerings to be successful in the marketplace. No single competitive strategy is best for all companies.
f. Publics
A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its
objectives. A company should prepare a marketing plan for all of their major publics as well as their customer markets.
Generally, publics can be identified as being:
1). Financial publics--influence the company’s ability to obtain funds.
2). Media publics--carry news, features, and editorial opinion.
3). Government publics--take developments into account.
4). Citizen-action publics a company’s decisions are often questioned by consumer organizations.
5). Local publics--includes neighborhood residents and community organizations.

3
Types of customer market
6). General publics: - a company must be concerned about the general public’s attitude toward its products and services.

7). Internal publics--workers, managers, volunteers, and the board of director

B. MARKETING MACRO ENVIRONMENT

The Company’s Marketing Macro environment

The company and all of the other actors operate in a larger macro environment of forces that shape opportunities and pose
threats to the company. There are six major forces (outlined below) in the company’s macro environment.
a. Demographic Environment
Demography is the study of human populations in terms of size, density, location, age, sex, race, occupation, and other
statistics. It is of major interest to marketers because it involves people and people make up markets. Demographic trends
are constantly changing. Some more interesting ones are.
1).The world’s population (though not all countries) rate is growing at an explosive rate that will soon exceed food supply
and ability to adequately service the population. The greatest danger is in the poorest countries where poverty
contributes to the difficulties. Emerging markets such as China are receiving increased attention from global
marketers.
2).The most important trend is the changing age structure of the population. The population is aging because of a
slowdown in the birth rate (in this country) and life expectancy is increasing.
Many in the modern family now “telecommute”--work at home or in a remote office and conduct their business using fax,
cell phones, modem, or the Internet In general, the population is becoming better educated. The work force is be-coming
more white-collar. Products such as books and education services appeal to groups following this trend. Technical skills
(such as in computers) will be a must in the future. The final demographic trend is the increasing ethnic and racial diversity
of the population. Diversity is a force that must be recognized in the next decade.
However, companies must recognize that diversity goes beyond ethnic heritage. One the important markets of the future are
that disabled people (a market larger any of our ethnic minority groups).

b. Economic Environment
The economic environment includes those factors that affect consumer purchasing power and spending patterns. Major
economic trends in the United States include:
1). Personal consumption (along with personal debt) has gone up (1980s) and the early
1990s brought recession that has caused adjustments both personally and corporately in this country. Today, consumers
are more careful shoppers.
2). Value marketing (trying to offer the consumer greater value for their dollar) is a very serious strategy in the 1990s.
Real income is on the rise again but is being carefully guarded by a value-conscious consumer.
3). Income distribution is still much skewed in the U. S. and all classes have not shared in prosperity. In addition,
spending patterns show that food, housing, and transportation still account for the majority of consumer dollars. It is
also of note that distribution of income has created a “two-tiered market” where there are those that are wealthy and
less wealthy. Marketers must carefully monitor economic changes so they will be able to prosper with the trend, not
suffer from it.

c. Natural Environment
The natural environment involves natural resources that are needed as inputs by marketers or that are affected by
marketing activities. During the past two decades environmental concerns have steadily grown. Some trend analysts labeled
the specific areas of concern were:
1). Shortages of raw materials. Staples such as air, water, and wood products have been seriously damaged and non-
renewable such as oil, coal, and various minerals have been seriously depleted during industrial expansion.
2). Increased pollution is a worldwide problem. Industrial damage to the environment is very serious. Far-sighted
companies are becoming “environmentally friendly” and are producing environmentally safe and recyclable or
biodegradable goods. The public response to these companies is encouraging. However, lack of adequate funding,
especially in third world countries, is a major barrier.
3). Government intervention in natural resource management has caused environmental concerns to be more practical and
necessary in business and industry. Leadership, not punishment, seems to be the best policy for long-term results.
Instead of opposing regulation, marketers should help develop solutions to the material and energy problems facing the
world.
4) Environmentally sustainable strategies. The so-called green movement has encouraged or even demanded that firms
produce strategies that are not only environmentally friendly but are also environmentally proactive. Firms are
beginning to recognize the link between a healthy economy and a healthy environment.
d. Technological Environment
The technological environment includes forces that create new technologies, creating new product and market
opportunities.
1). Technology is perhaps the most dramatic force shaping our destiny.
2). New technologies create new markets and opportunities.
3).The following trends are worth watching:
a). Faster pace of technological change. Products are being technologically outdated at a rapid pace.
b). There seems to be almost unlimited opportunities being developed daily. Consider the expanding fields of health care,
the space shuttle, robotics, and biogenetic industries.
c).The challenge is not only technical but also commercial to make practical, affordable versions of products.
d). Increased regulation. Marketers should be aware of the regulations concerning product safety, individual privacy, and
other areas that affect technological changes. They must also be alert to any possible negative aspects of an innovation
that might harm users or arouse opposition.

e. Political Environment
The political environment includes laws, government agencies, and pressure groups that influence and limit various
organizations and individuals in a given society. Various forms of legislation regulate business.
1). Governments develop public policy to guide commerce--sets of laws and regulations limiting business for the good of
society as a whole.
2). Almost every marketing activity is subject to a wide range of laws and regulations.
Some trends in the political environment include:-
1). Increasing legislation to:
a). Protect companies from each other.
b). Protecting consumers from unfair business practices.
c). Protecting interests of society against unrestrained business behavior.
2). Changing government agency enforcement. New laws and their enforcement will continue or increase. (See Table 3.2
for the various acts used to regulate and protect commerce and our economy.)
3). Increased emphasis on ethics and socially responsible actions. Socially responsible firms actively seek out ways to
protect the long-run interests of their consumers and the environment.
a) Enlightened companies encourage their managers to look beyond regulation and “do the right thing.”
b) Recent scandals have increased concern about ethics and social responsibility.
c) The boom in e-commerce and Internet marketing has created a new set of social and ethical issues. Concerns are
Privacy, Security, and Access by vulnerable or unauthorized groups.
f. Cultural Environment
The cultural environment is made up of institutions and other forces that affect society’s basic values, perceptions,
preferences, and behaviors. Certain cultural characteristics can affect marketing decision-making. Among the most
dynamic cultural characteristics are:
1). determination of cultural values. People’s core beliefs and values have a high degree of persistence. Core beliefs and
values are passed on from parents to children and are reinforced by schools, churches, business, and government.
Secondary beliefs and values are more open to change.
2). Shifts in secondary cultural values. Since secondary cultural values and beliefs are open to change, marketers want to
spot them and be able to take advantage of on the change potential.
Society’s major cultural views are expressed in:
a). People’s views of themselves. Serving themselves versus serving others, personal ambition and materialism
increased dramatically
b). People’s views of others. Observers have noted a shift from a “me-society” to a we-society.” Consumers are
spending more on products and services that will improve their lives rather than their image.
c). People’s views of organizations. People are willing to work for large organizations but expect them to become
increasingly socially responsible.
d). People’s views of society. This orientation influences consumption patterns.
e). People’s view of nature. Love of nature and sports associated with nature are expected to be significant trends in
the next several years.
f). People’s views of the universe. Studies of the origin of man, religion, and thought-provoking advertising
campaigns are on the rise.