Lecture 1b – Marketing Environment

Define Marketing environment
The marketing environment is a term refering to the FACTORS and FORCES (of the environment) that affect a FIRM´S ABILITY TO BUILD AND MAINTAIN successful CUSTOMER RELATIONSHIPS.

The three levels of the environment are:

1.) Micro (internal) environment – small forces within the company and forces CLOSELY INFLUENCING the company and DIRECTLY AFFECTS the organization’s relationships.

2.) Meso environment – the industry in which a company operates and the industry’s market(s).

3.) Macro (national) environment – larger societal forces that affect the microenvironment.[1]

Draw a diagram to illustrate the marketing environment
Draw a diagram to illustrate the marketing environment
Define internal marketing environment
Define micro marketing environment
Micro environment refers to the forces CLOSELY INFLUENCING the company and DIRECTLY AFFECTS the organization’s relationships.

-There are five components associated with the micro environment of an organization:
1. The organisation itself
2. Suppliers
3. Competitors
4. Customers
5. Intermediaries
6. Public

– The company has an element of control of how it operates in this environment.

Discuss the organisation itself as part of the micro environment
– Employees (in all deparments), equipment, finance

– The main focus of all the departments must be the customer oriented behavior that ensures the delivery of superior value to customers and this is made possible through the efforts of the marketing department.

– Each of these departments influences marketing decisions;

Especially TOP MANAGEMENT
>> The mission statement & long term goals or objectives of the organization are firstly developed by the top management of the organization.The top management of the organization has confined the area in which marketing manager takes his decisions.

OTHER DEPARTMENTS
– The marketing manager works in collaboration with other departments of the Business Organization because most of the activities of the entire organization are interrelated with each other.
– For example, research and development have input as to the features a product can perform
– Accounting approves the financial side of marketing plans and budget in customer dissatisfaction.

Discuss suppliers as part of the micro environment
– The second component of the micro marketing environment.

– Marketing managers must watch supply availability and other trends dealing with suppliers to ensure that product will be DELIVERED to customers in the TIME FRAME required in order to maintain a strong customer relationship.

– The PRICES of the key inputs are also analyzed by the management of the organization because it directly affects the costs of the organization which is resultantly influence the price of its final products.

Discuss competitors as part of the micro environment
– Competitors are also a factor in the micro-environment and include companies with similar offerings for goods and services.

– To remain competitive a company must consider their competitors while considering its own size and position in the industry.
>> The company should develop a strategic advantage over their competitors.

Discuss intermediaries as part of the micro environment
The organizations that assist in promoting, selling & distribution of products to final customers of specific organization are called marketing intermediaries and are considered the utmost factors the micro environments.

– They match the distribution of end products to the customers.

1- Physicial distribution firms: firms that help in distrbution of goods from the manufacturing stire to the selling points. e.g. warehouses.
2 – Marketing service agencies: help with targeting and protmotino of an orgs. products.
3- Financial intermidiaries: The finance is provided with the help of financial intermediaries like banks etc, which insure the risks of the organization.

Discuss customers as part of the micro environment
Another aspect of micro-environment is the customer market. There are different types of customer markets including;

1. consumer markets; made up of individuals who buy goods and services for their own personal use or use in their household

2. business markets; those that buy goods and services for use in producing their own products to sell

3. government markets; consists of government agencies that buy goods to produce public services or transfer goods to others who need them

4. Reseller markets; includes businesses that purchase goods to resell as is for a profit (same as market intermediaries)

5.international markets: include buyers in other countries and includes customers from the previous categories.

Discuss the public as part of the micro environment
The final aspect of the micro environment is publics, which is any group that has an interest in or effect on the organization’s ability to meet its goals.

For example;
– Financial publics can hinder a company’s ability to obtain funds affecting the level of credit a company has.
– Media public include newspapers and magazines that can publish articles of interest regarding the company and editorials that may influence customers’ opinions.
– Government public can affect the company by passing legislation and laws that put restrictions on the company’s actions.
– Citizen-action publics include environmental groups and minority groups and can question the actions of a company and put them in the public spotlight

What factors make up the micro environment?
SICC-P

– SUPPLIERS

– INTERMEDIARIES:

– COMPETITORS:

– CUSTOMERS:

– PUBLIC:

Define macro marketing environment
The major external and uncontrollable factors that influence an organization’s decision making, and affect its performance and strategies. (its ability to satisfy customers)

The organization along with its other forces carries its functions in the larger area of the macro environment.
*** The macro-environment refers to all forces that are part of the larger society and affect the micro-environment***

There are certain factors and forces of macro environment that are responsible for the provision of opportunities & threats to the organization

– Factors affecting organization in Macro environment are known as PESTEL, that is: Political, Economical, Sociocultural, Technological, Environmental and Legal.

>> Minimal control over these forces

Dicuss “political” factors as part of the macro marketing environment
– Political factors that affect the company. The company/organization needs to consider the political environment when creating business strategies.

– Political stability affects business confidence.

– Legislation:
–> can directly affect the way businesses operate
–> Some examples of renationlising internationally own businesses.

Influence on Policy formation:
– Pressure groups (e.g. trade unions or green peace).
– The media.

However often business can anticipate issues by performing a political risk analysis. The political instability can influence the business and the duration of time that business/ organization is profitable.[9]

Taxation Policy
Trade regulations
Governmental stability
Unemployment Policy, etc.
political stability

What are examples of political factors that make up the macro environment
Political unrest
Taxation Policy
Trade regulations
Governmental stability
Unemployment Policy, etc.
political stability
Dicuss “Economical” factors as part of the macro marketing environment
The state of the wider economy influences the opportunities and threats of the organisation.
>>> The economic factors of the business environment are all the variables that IMPACT HOW THE CONSUMER SPENDS THEIR MONEY

– Economic growth rates
– Levels of (un)employment
– Costs of raw materials, such as energy, petrol and steel
– Interst rates
– Exchange rates
– Inflation rates
– Monetary policies
– Growth in spending power
– Rate of people in a pensionable age
– Recession or Boom
– Country development is an important factor to scan: developing or developed country?

^These vary from country to country and region to region.

Give an example of how an economic factor influenced an organisation´s ability to satisfy customer needs
MARS cooperation

– August 1998: Russia defaulted on its foreign loans and the rouble (Russian currency) crashed.
– Bands closed, people lost their savings and credit dried up.

– Consumer goods manufactureres operating in Russia were faced with a big problem. Small stores, suddenly in a weak financial position, were very worried about having money tied up in products sitting on shelves and hesitant to reorder new stock. Many large foreign-owned companies, under pressure from shareholders, quickly scaled back and aboned operations in Russia.

– MARS: economic losses already, sales revenue was dropping and economic situation was not likely to improve soon. Despite this, Mars decided to take a long-term perspective and invest in finding a solution to regin a foothold in the Russian market. Key problem: PHYSICAL AVAILABILITY (market based asset), due to empty selves and no orders to fill them.
– SOLUTION: huge financial risk in very unstable economic climate. Without orders they produced huge supply, which they gave to their distributors, who passed the products on to thousands of small Russian retailers. Enabled small retailers to fill their shelves without paying (until the product was sold and they reordered). >> Effect was immediate – the products were back on the shelves, consumers were buying the products, and distributors were back in bussiness. Mars products were RISK FREE for retailers.
– SUCCESS: Mars resumed distribution to existing outlets, but also more and more retailers wanted to stock Mars products. In a few years the Russian marketing team had significantly increased product availability to over 500,000 distribution points across the country. When the physical availbility problem was solved, Mars could resume other marketing activities (the cost of buying media space had dropped sig. in russia due to other company exists).
– When the Russian economy finally bounced back, Mars had secured a strong market presence and an excellent distribution network. The region is now one of the most financially valuabe for Mars gloablly.

Dicuss “Sociocultural” factors as part of the macro marketing environment
– Socio-cultural factors represent the culture of the society that an organization operates within.

– They may include demographics, age distribution, population growth rates, population age mix, level of education, distribution of wealth and social classes, ethnic markets, living conditions and lifestyle.

– Buyer behavior and consumer needs are largley driven by cultural norms.
– Knowledge of the socio-cultural environment matters for 2 main reasons:
1. Major factor in shaping marketing mix
2. Can pinpoint market opportunities.

Dicuss “Technological” factors as part of the macro marketing environment
– The technological environment is becoming a lot more important in the modern day business environment. New technology produces NEW OPPORTUNITIES for companies and organizations to CREATE, SELL AND PROMOTE A PRODUCT.

– Technological factors refer to the rate of new inventions and development, changes in information and mobile technology, changes in internet and e-commerce or even mobile commerce, and government spending on research.
– There is often a tendency to focus Technological developments on digital
and internet-related areas, but it should also include materials development and new methods of manufacture, distribution and logistics.

– Attempt to use technology to reduce costs and develop new income streams.

e.g. 3D printing.

Dicuss “Environmental” factors as part of the macro marketing environment
– The environmental factors of the PESTLE analysis include natural resources that are affected by the processes of selling and marketing products or services.

– The two main environmental trends that need to be considered when evaluating the natural environment is the INCREASED POLLUTION & GROWING RAW MATERIAL SHOTAGE. Government regulations are creating practices that encourage environmental sustainability.
A business might for example utilize recyclable and biodegradable packaging, thus making the most of the environmental opportunities to create a sustainable organizatio in the current natural environment.

What are examples of environmental factors to consider?
– Competitive advantage
– Waste disposal
– Energy consumption
– Pollution monitoring, etc.
Dicuss “Legal” factors as part of the macro marketing environment
– The legal environment includes the laws and regulations of a state. >> The laws and regulations will influence the way in which an organization will market or sell the product and services.

– Employment law
– Health and safety
– Product safety
– Advertising regulations
– Product labeling
– Labour laws etc.[11]

In which countries do legal factors play a more significant role in the macro marketing environment of a company?
– More develped countries.
– MNCs are critizied for abusing the more “relaxed” laws of developing countries.

– The governments that have a well developed public policy about selling and marketing goods may limit competition and place other obligations on retailers

What is the difference between the macro and micro environment?
– Micro environmental components are related specifically to the organization, whereas macro environmental components are broader in nature & affect the entire industry of the region or country.

– Moreover the macro environmental factors cannot be eliminated through the efforts of the marketing department. So the marketing manager should be proactive in accessing & anticipating the changes of the marketing environment.

Discuss the marketing environment in relation to the job/decisions of a marketer
Micro and macro environments have a significant impact on the success of marketing campaigns, and therefore the factors of these environments should be considered in-depth during the decision making process of a strategic marketer.

Considering these factors will improve the success of your organisation’s marketing campaign and the reputation of the brand in the long term.

Why is it important for marketers to consider the marketing environment in which they operate?
– The effective organizations do not only focus their customers, but also the forces of the marketing environment.

– The marketing department & other management area of the organization consistently consider the dynamic aspect of the marketing environment so that they can BETTER ADAPT to EMERGING CHANGE, DEVELOP LONG RUN STRATEGIES, and MAINTAIN ABILITY TO SATISFY THE CURRENT AND FUTURE NEEDS of the CUSTOMERS and develop ability to effectively face the intense global competition.

What should analysis of the macro and micro marketing environment lead to?
Analysis of the micro (SICC-P; suppliers, intermdeiaries, customers, competitors and public) and macro (PESTLE – Political, economical, sociocultural, technological, legal and environmental), SHOULD FEED INTO A SWOT ANALYSIS, as it helps to determine the internal strengths and weakneses of the organisation and external threats and opportunities represented by macro-environment forces.
Define SWOT analysis
– Originated by Albert S. Humphrey in the 1960s, the tool is as useful now as it was then.

– SWOT analysis is a tool for assesing an ORGANISATION (internal) and its ENVIRONMENT (external).

>>> Used to analyse the micro and macro environment

– It is built up around the SWOT matrix, which stands for strength, weakness (internal factors) and opportunity and threats (external factors to the market).

Discuss the components of the SWOT matrix
Discuss the components of the SWOT matrix
– Strengths and weaknesses are internal factors.
– Opportunities and threats are external factors.

– A strength is a positive internal factor.
– A weakness is a negative internal factor.

– An opportunity is a positive external factor.
– A threat is a negative external factor.

Whats is the SWOT analysis also called
Strengths and weaknesses are often internal to your organization, while opportunities and threats generally relate to external factors.

For this reason, SWOT is sometimes called INTERNAL-EXTERNAL ANALYSIS and the SWOT Matrix is sometimes called an IE Matrix. >> For analysing micro environemt and macro environment.

What is the aim of a SWOT analysis
– To identify strengths, weakness, opportunities and threats.

– We should aim to turn our weaknesses into strengths, and our threats into opportunities. Then finally, SWOT will give managers options to match internal strengths with external opportunities. The outcome should be an INCREA IN “VALUE” FOR CUSTOMERS – which hopefully will improve our competitive advantage.

The main purpose of the analysis has to be to add value to our products and services so that we can RECRUIT NEW CUSTOMERS, REATIN LOYAL CUSTOMERS AND EXTEND PRODUCT OFFERINGS (SERVICES AND PRODUCTS) TO CUSTOMER SEGMENTS OVER THE LONG-TERM.
– If undertaken successfully, we can then increase our Return On Investment (ROI).

Can one SWOT analysis be done for the entire organisation?
– It is best to perform the analysis on a country-by-country basis because factors can differ greatly between countries (or even regions) –> It creates generic results, where it should be more specific.
Give examples of company strengths
Your specialist marketing expertise.
A new, innovative product or service.
Location of your business.
Quality processes and procedures.
Any other aspect of your business that adds value to your product or service.
Give examples of company weaknesses
Lack of marketing expertise.
Undifferentiated products or services (i.e. in relation to your competitors).
Location of your business.
Poor quality goods or services.
Damaged reputation
Give examples of company opportunities
A developing market such as the Internet.
Mergers, joint ventures or strategic alliances.
Moving into new market segments that offer improved profits.
A new international market.
A market vacated by an ineffective competitor.
Give examples of company threats
A new competitor in your home market.
Price wars with competitors.
A competitor has a new, innovative product or service.
Competitors have superior access to channels of distribution.
Taxation is introduced on your product or service.
What are the strengths of a SWOT analysis?
– Eocnomical and time effective
– understand your business better
– address weaknesses
– deter threats
– capitalise on opportunities
– take advantage of your strengths
– develop business goals and strategies for
achieving them.
What are the weaknesses of a SWOT analysis?
– A SWOT analysis can help you identify and understand key issues affecting your business, but it does not necessarily OFFER SOLUTIONS.

– When you are conducting a SWOT analysis, you should keep in mind that it is only one stage of the business planning process. For complex issues, you will usually need to conduct more in-depth research and analysis to make decisions.

– doesn’t prioritise issues
– doesn’t provide solutions or offer alternative decisions
– can generate too many ideas but not help you -choose which one is best
– can produce a lot of information, but not all of it is useful.

Give an example of a SWOT analysis (Disney)
Walt Disney is a worldwide entertainment and media company that has grown to diversify their business over the years. The company currently has a vast customer base, and with the intense competition springing up from other companies, there is the possibility that they are going to be sharing their customer base.

STRENGTHS:
– Wide coverage of Walt Disney’s cable networks: Walt Disney, without doubt, has a very great cable network that covers a vast area. They operate the ABC Family, Disney Channels Worldwide, and ESPN. The cable business has over a hundred channels available in about 34 languages and in 163 countries. They have about 123 million subscribers all around the world
– Control of STRONG BRANDS leading to a good market positioning: The company has some of the best media brands in their possession. Some of these brands include Marvel, Pixar, ESPN, Touchstone, and Lucasfilm – that are all known for high-quality content.

WEAKNESSES:
– Overdependence on a single region: Even with the way Walt Disney spreads its business across a lot of countries, North America remains its major source of revenue making about 77% of its total revenue from the United States and Canada alone. This makes them vulnerable to the regulation of these areas.
– Unfunded pension obligations: Even with the big figures being recorded as their net profits yearly, they still have a net liability amounting to about almost three billion dollars in unpaid pensions.

OPPORTUNITIES:
– Increase in the demand of online television and video globally: There has been a major improvement over the years regarding internet services which have brought about the rise in the demand for online video, among others. There will be an estimated $40 billion dollars of business in these areas by the year 2020. Walt Disney has been working their way to reaching more customers through online videos.
– Growing gaming market: The increase in internet speed and the advancement in the quality of games have created more growth for the gaming industry. The company has been looking into this lately and has been investing a lot in this regards.

THREATS:
– Increasing rate of piracy: Due to the advancement of technology, piracy of videos and other media has been made quite easy. This has led and will probably result in more losses on the part of the company. It will reduce the revenue generated from the sale of their DVDs, for example.
– Intense Competition: There is very high competition in the entertainment industry, which poses a major threat to Walt Disney. There is everything to compete for, ranging from the consumers to the advertisers.

Give a hypothetical SWOT analysis for an establisheed manufacturer of ready-prepared chicken meals
Give a hypothetical SWOT analysis for an establisheed manufacturer of ready-prepared chicken meals