Chapter 2: The Global Marketing Environment

Baines, Fill, & Page: Essentials of Marketing

 Learning Outcomes

• Define the global marketing environment.

• Explain PESTLE analysis and show how it is used to
understand the external environment.
• Explain the environmental scanning process.
• Analyse the performance environment using an
appropriate model.
• Understand the importance of analysing an
organisation’s internal environment and identify the
key resources and capabilities.

Baines, Fill, & Page: Essentials of Marketing

 Case Insight – Michelin Tyres

• Michelin Tyres is market-leading in

the road haulage industry, and its
tyres are renowned for their
quality.
• Michelin have recently faced an
unexpectedly high influx of
imported tyres from emerging
economies in the East. These
tyres sell very cheaply due to low
manufacturing costs, but are not
such high quality.
• How could Michelin deal with this
unexpected competition?

Baines, Fill, & Page: Essentials of Marketing

 The Three Marketing Environments

Baines, Fill, & Page: Essentials of Marketing

 The External Marketing Environment

Baines, Fill, & Page: Essentials of Marketing

 The Political Environment: Business-
Government Relations
Several ways marketers conduct business–government relations in various
countries include:

• Lobbyist firms, with key industry knowledge, are engaged either permanently or as
needed. FROM-AMBANIS-TO-TATA-THE-RISE-AND-FALL-OF-NIIRA-RADIA
• Using public relations consultancies, e.g. Weber Shandwick, can be commissioned for
their political services.
• A politician can be paid a fee to give political advice on matters of importance to an
organization, where this is legal within that particular jurisdiction, and that politician is not
serving directly within the government in question on the same portfolio as that on which
they are advising.
• An in-house public relations manager might handle government relations directly.
• An industry association can be contacted to lobby on behalf of members (e.g. in the
European financial services industry, groups include the Banking Federation of the EU,
the European Savings Bank Group, and the European Association of Co-operative
Banks).
• A politician may be invited directly to join the board of directors, board of trustees, or
board of advisers of an organization.

Baines, Fill, & Page: Essentials of Marketing

 The Economic Environment

• Wage inflation – annual wage increases in a particular sector will depend on the
supply of labour in that sector. Where there is scarcity of supply, wages usually
increases (e.g. doctor).
• Price inflation – how much consumers pay for goods and services is dependent on
the rate of supply of those goods and services.
• Gross domestic product per capita –combined output of goods and services in a
particular nation determines relative wealth between countries when comparisons
are calculated per member of the population.
• Income, sales and corporation taxes –typically operating in all countries around the
world usually at different levels, substantially affecting how we market goods and
services. Pranab Mukherjee cut in car excise during 2007 recession.
• Exchange rates – the relative value of a currency vis-à-vis another currency impacts
on businesses operating in foreign markets or holding financial reserves in other
currencies.
• Export quota controls and duties – there are often restrictions placed on the amounts
(quotas) of goods (and services) that any particular firm or industry can import into a
country, depending on to which trading bloc or country a company or firm is
exporting.

Baines, Fill, & Page: Essentials of Marketing

 The Socio-Cultural Environment:
Demographics and Lifestyles

• Notably, some countries’ populations are set to fall (e.g. Japan and
Russia).
• The relatively large proportion of people in the 65-year-old-plus.
• In Europe, the trend is towards marrying later and a greater
tendency to divorce than in previous generations.

• There is a rise in industrialized nations of same-sex civil marriages

or partnerships.
• Md. Khalid – Samosas in Canada.
• Indian Pickles and curry.
• Saree and Burqa

Baines, Fill, & Page: Essentials of Marketing

 The Technological Environment

• New technology changes the way companies go to market through moves

towards more email and web-based marketing and greater efficiency in
direct and database marketing techniques (Sclater, 2005).

• Changes in technology particularly affect high-technology industries, where

firms must decide whether they wish to dominate that market by pushing
their own particular technology standards, and especially where new
technology renders existing standards obsolete.

• Firms’ actions are shaped by technological opportunity within the

technological environment (Wilson, 1997). For example, in the
pharmaceutical and chemical industries, companies have for a long time
developed new compounds based on modifications of compounds
registered for patents by their competitors in a process known as ‘reverse
engineering’.
• Mobile Industry in India.

Baines, Fill, & Page: Essentials of Marketing

 The Technological Environment
• Innovation becomes a necessary condition in the
strategic marketing decision-making of high-
technology firms. For less technology-intensive firms,
innovation of some form, whether it is process- or
product/service-focused, or at least rapid adoption of
new product/service variants based on competitors’
offerings, is still usually necessary to stay ahead of
the competition.

• Whitla (2009) suggests that the role and process of

crowdsourcing is to identify a task or group of tasks
which are currently conducted in-house. These
activities are then released to a ‘crowd’ of outsiders
who are invited to perform the task on behalf of the
company (for a fee or prize). This invite might either
be truly open to everyone or restricted in some way
to ensure that those that respond are only those
qualified to undertake the task. This new approach
can help marketers gain insights into both new
product/service development and marketing
communications.
Baines, Fill, & Page: Essentials of Marketing
 The Legal Environment
Laws and regulation are enacted in most countries ranging from the
transparency of pricing, the prevention of restrictive trade practices, product
safety, good practice in packaging and labelling, and the abuse of a
dominant market position, to codes of practice in advertising, to take just a
small selection.

• Product Safety, Packaging, and Labelling - Generally, in the EU, product

labelling regulation tends to relate to recycling of packaging and waste to
ensure it complies with environmental regulations, whereas in the USA, for
example, packaging and labelling regulations are more concerned with fair
practice and ensuring that packaging does not contain misleading
advertising statements.

• Codes of Practice in Advertising - Advertising standards differ around the

world. In some countries, for example, the UK, advertising is self-regulated,
i.e. by the advertising industry itself. In other countries, advertising is
restricted by government legislation.

Baines, Fill, & Page: Essentials of Marketing

 The Legal Environment

• Sale of Goods Act

• Consumer Protection Act
• Taxation Laws
• Exim Policies
• Customs and excise laws
• Environmental Law
• Partnership Act
• LLP’s
• Company’s Act
– CSR
• Media and Telecom Laws
• IT Act
• Contract and Sale of Goods Act

Baines, Fill, & Page: Essentials of Marketing

 The Ecological Environment

In the 1990s, companies became concerned with the concept of

‘green’ marketing, and later in the 2000s with the concept of
marketing sustainability. Increasingly, consumers are worried about
the impact of companies on their ecological environments. They are
demanding more ‘organic’ food, incorporating principles of better
welfare for the animals they consume as food products and less
interference with the natural processes of growing fruit and
vegetables (e.g. the use of pesticides and chemical fertilizers).
Berlin
Metros in India
Odd Even
Bridging the regional disparity

Baines, Fill, & Page: Essentials of Marketing

 The Ecological Environment: Green
Marketing Strategies
Orsato (2006) suggests that a company can adopt one of the following four
different green marketing strategies:

• Eco-efficiency—developing lower costs through organizational processes such as

the promotion of resource productivity (e.g. energy efficiency) and better utilization of
by-products.
• Beyond compliance leadership—the adoption of a differentiation strategy through
organizational processes such as certified schemes to demonstrate their ecological
credentials, their environmental excellence, for example, the adoption of the UN
Global Compact principles or other Environmental Management System (EMS)
schemes and codes such as ISO14001.
• Eco-branding—the differentiation of a firm’s products or services to promote
environmental responsibility. Examples include Duchy Originals, the British Prince of
Wales’ food brand, the Thai King Bhumipol’s Golden Place brand, or the Toyota
Prius labelled as ‘mean but green’.
• Environmental cost leadership—the offering of products and services that give
greater environmental benefits at a lower price.

Baines, Fill, & Page: Essentials of Marketing

 World Demographics 2011

Baines, Fill, & Page: Essentials of Marketing

 Definitions of Environmental Scanning

• According to Aguilar (1967), environmental scanning

is the process of gathering information about a
company’s external events and relationships, in order
to assist top management in its decision-making, and
so develop its future course of action.

• It can be regarded as the internal communication of

external information about issues that may potentially
influence an organisation’s decision-making process,
focusing on the identification of emerging issues,
situations and potential threats in the external
environment (Albright, 2004).

Baines, Fill, & Page: Essentials of Marketing

 Information Requirements for Environmental
Scanning

• Customer and competitor information – including competitors’

prices, competitors’ new product introductions, competitors’
advertising/promotional programmes, competitors’ entry into
new markets and new product technologies, customers’
buying habits, customers’ product preferences, customers’
demands and desires.
• Company resources and capabilities – including company’s R
& D capabilities and resources, company’s advertising and
promotions resources, company’s sales capabilities/resources,
company’s financial capabilities/resources, company’s
management capabilities/resources.
• Suppliers of labour and funds – including availability of
external financing, availability of labour and new
manufacturing technologies (Beal, 2000).
• 3 CETT (COMPANY CONSUMER COMPETITOR
ENVIRONMENT TECH TARIFF)

Baines, Fill, & Page: Essentials of Marketing

 Understanding the Performance
Environment
• The performance environment consists of those organizations that
either directly or indirectly influence an organization’s operational
performance. There are three main types:

1. Those companies that compete against the organization in the

pursuit of its objectives.

2. Those companies that supply raw materials, goods, and services

and those that add value as distributors, dealers, and retailers,
further down the marketing channel.

3. Those companies that have the potential to indirectly influence the

performance of the organization in the pursuit of its objectives.
These organizations often supply services such as consultancy,
financial services, or marketing research or communication
agencies.

Baines, Fill, & Page: Essentials of Marketing

 Industry Analysis: Porter’s Five Forces

Baines, Fill, & Page: Essentials of Marketing

 Analysing the Internal Environment:
The Boston Box
Present Position

Future Position

Baines, Fill, & Page: Essentials of Marketing

 Portfolio Issues

• How fast will the market grow?

• What will be our market share?
• What investment will be required?
• How can a balanced portfolio be created from
this point?

Baines, Fill, & Page: Essentials of Marketing

 Summary

• Defined the global marketing environment.

• Explained PESTLE analysis and showed how it is
used to understand the external environment.
• Explained the environmental scanning process.
• Analysed the performance environment using an
appropriate model.
• Understood the importance of analysing an
organisation’s internal environment and identified the
key resources and capabilities.

Baines, Fill, & Page: Essentials of Marketing