Marketing Environment

Marketing – The Marketing Environment

The marketing environment • The forces that directly and indirectly influence an organization’s capability to undertake its business. • The trading forces operating in a marketplace over which a business has no direct control, but which shape the manner in which the business functions and is able to satisfy its customers.

Marketing – The Marketing Environment

Is it not just the external environment? • The environment external to the firm constitutes a large part of the marketing environment but it is not the whole of the environment. • Included in the marketing environment is the internal environment - that is, factors internal to the firm which affect the marketing operation.

Marketing – The Marketing Environment

Internal environment Inside the firm. Micro-environment Forces acting directly on the firm Macro-environment -broad and general Environmental forces

Marketing – The Marketing Environment

Components of the marketing environment • The external environment consists of : • Macro-environment • -broad forces which shape the character of opportunities and threats • Micro-environment. • -the actors in the immediate environment

Marketing – The Marketing Environment

• Internal environment. • Forces and actors inside the firm that affect the marketing operation. • Composed of internal stakeholders and the other functional areas with the business organisation.

Controllability • The organisation has no control over the macro environment. It can only respond to changes taking place • The organisation has some degree of influence over the micro environment but by no means complete control • The organisation controls its own internal environment although this does not mean the marketing department or marketing manager has control

Marketing – The Marketing Environment

Why is it important? • An understanding of macro and micro marketing environment forces • Is essential for planning. • Helps a business to compete more effectively against its rivals. • Assists in the identification of opportunities and threats. • Enables an organization to take advantage of emerging strategic opportunities. Marketing – The Marketing Environment

Environmental scanning • Monitor - trends, issues, events • Identify - trends, issues, events that are significant to the organisation. • Evaluate - the impact of trends ,issues and events upon the organisation’s in current markets. • Forecast - where the trends are heading. Examine the threats and opportunities they are likely to bring in the future. • Evaluate - the impact of threats and opportunities on the firm’s long term strategy. Marketing – The Marketing Environment

Forecasts • • • • • • •

Forecasts are integral to: Marketing planning Analysis of market attractiveness The monitoring of marketing performance Resource allocation Product and stock management Marketing opportunity analysis is at the heart of marketing and this requires accurate sales forecasts

Marketing – The Marketing Environment

The internal or organisational environment • This refers to the other internal functions that impinge on the marketing function. • The internal or organisational environment includes – The human resource department – The operations department – The accounting and finance department – The research and development department

Marketing – The Marketing Environment

The internal environment • • • • •

Marketing is affected by Internal processes and procedures Allocation of responsibilities within the organisation Resource availability The extent to which the major functional areas work together supporting the marketing function to be customer orientated • The culture of the organisation • The attitude of internal stakeholder Marketing – The Marketing Environment

The micro-environment • This refers to the environment mostly closely linked to the organization • It comprises all those organizations and individuals who directly affect the activities of a company • All factors which impact directly on a firm and its activities in relation to a particular market • The actors in the immediate environment that affect the firm’s capability to operate effectively in its chosen market

Marketing – The Marketing Environment

Elements of the micro-environment • • • • • •

Customers Intermediaries Suppliers Competitors Local community Local government

Marketing – The Marketing Environment

• • • •

Employees Trade unions Intermediaries Co-operators (partner firms in an alliance) • Regulators

Regulatory environment • • • • • • • •

Legal environment Contract law Consumer law Product safety Trade descriptions Data protection Planning laws Environmental law

Marketing – The Marketing Environment

• Codes of practice • Advertising Standards Authority • Market Research • Direct selling • Trade associations • Codes of practice might not be legally binding but organisations are expected to comply.

The competitive environment • The starting point is to identify who are the competitors. Four categories can be identified. • Direct competitors - firms that produce a similar product which is a direct rival e.g. Coca Cola is a direct competitor of Pepsi Cola. • Close competitors - firms producing similar products e.g. Tango is a close competitor of Pepsi. • Substitutes -products that are different but might be bought instead. A packet of crisp rather than a bar of chocolate. • Indirect competition - all other firms are indirect competitors in that they compete for consumers’ money.

Marketing – The Marketing Environment

Market structures • Economists analyse markets in terms of the degree of competition • Perfect competition - many firms selling homogeneous goods to customers who buy on price alone • Monopolistic competition - many firms each selling a differentiated good over which they have a monopoly • Oligopoly - competition between a small number of firms • Monopoly - a single supplier Marketing – The Marketing Environment

Porter’s five forces • Porter’s five forces analysis helps firms to analyse the strength of competitive threats. The five forces are: • The intensity of existing competition • Barrier (or lack of) to the entry of new competitors - how easy is it for newcomers to enter the market. • The threat of substitute products. • The bargaining power of customers - dominant customers will drive down price. • The bargaining power of suppliers - dominant suppliers will force up prices. • Profitability and the achievement of objectives will be affected by the combination of five forces. Marketing – The Marketing Environment

The market environment • This refers to the type of market in which the firm operates. • The market type impacts upon the marketing function. • The main types are: – – – –

Consumer or B2C markets Business or B2B markets Export markets Government markets - where the government is a large buyer – Reseller markets - where the buyer is an intermediary who sells on to someone else Marketing – The Marketing Environment

The macro-environment • Comprises general forces and trends rather than specific organizations -the big issues that affect all businesses active in the market • The macro-environment refers to the general environmental factors that influence the organization • Factors outside the area of marketing which impact on but which cannot be influenced by the marketing effort- including demographics, macroeconomic factors, natural environment state, changes in lifestyle Marketing – The Marketing Environment

Elements of the macro-environment • • • • • •

Macro-economic environment Political environment Social and cultural environment Demographic environment Technical environment Legal and regulatory environment.

Marketing – The Marketing Environment

The macro-economic environment Economic growth

Creates marketing opportunities. A major factor in market growth.

Cyclical fluctuations

Fluctuations in the level of sales.

Inflation

Direct impact on costs and prices charged. Indirect impact on customer demand.

Unemployment

Major impact on customer demand via willingness and ability to buy.

Interest rates

Direct impact on investment by business. Indirect impact on consumer demand in terms of the amount of discretionary spending.

Exchange rate

Fall in the exchange rate boosts exports, makes imports more expensive and causes cost push inflation.

Marketing – The Marketing Environment

The political environment • • • •

Marketing is affected by: Government and local government policies. The tax regime - the level and nature of tax. The extent to which the government is “business friendly”. • Government attitude to regulation. • Trade polices • The actions of special interest and pressure groups. Marketing – The Marketing Environment

The social environment • Impact on consumer demand of changes in: • Population size and growth • The demographic profile of the country (age distribution, family size, regional distribution of the population) • The culture, beliefs and valves of the community • Lifestyle Marketing – The Marketing Environment

The technological environment • Some ways in which technology affects marketing: • Invention of new goods and services. • CAD has reduced the lead time on new product development. • The pace of technological change has reduced the product life cycle. • The use of databases in market research and direct marketing. • The development of e-commerce. • More responsive manufacturing operations means shorter customer lead times. • New technology facilitates mass customisation Marketing – The Marketing Environment

The alphabet soup of environmental analysis PEST

SLEPT

SPECTACLES

PRESTCOM

PESTEL

Political Economic Social Technological

Social Legal Economic Political Technological

Social Political Economic Cultural Technological Legal Environmental Social

Political Regulatory Economic Social Technological Competitive

Political Economic Social Technological Aesthetic Customers Legal Environmental Sectoral

Marketing – The Marketing Environment

Organisational Market

SWOT and PEST Positive Internal factors- Strengths the internal Organisational environment strengths. External factors Opportunities resulting from -the PEST changes in the factors political, economic, social and technological environment. Marketing – The Marketing Environment

Negative Weaknesses Organisational weakness. Threats from the political, economic, social and technological environment.

A further acronym: PRESTCOM Political

Government policy, taxes etc.

Regulatory

Law and voluntary codes of practices

Economic

Macro-economic variables

Social

Demographics, culture, lifestyle

Technological

Processes and products

Competitive

Nature of the competition

Organisational

Internal environment

Market

Type of market.

Marketing – The Marketing Environment