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ANALYZING THE MARKETING ENVIRONMENT

Lecture 3 POM BBA2K10 (A)

Class Agenda
The Companys Micro environment 2. The Companys Macro environemnt 3. Responding to the Marketing Environment
1.

Marketing Environment
Consists of actors and forces outside of the

organization that affect managements ability to build and maintain relationships with target customers.
Studying the environment allows marketers to

take advantage of opportunities as well as to combat threats. Marketing intelligence and research are used to collect information about the environment.

Marketing Environment
Includes:
Microenvironment:

Actors close to the company that affect its ability to serve its customers. Macroenvironment: Larger societal forces that affect the microenvironment.

The Microenvironment
Company itself Suppliers Marketing intermediaries Customers Competitors Publics

The Microenvironment
The company itself:
Areas/departments inside of a company. Affects the marketing departments planning

strategies. All departments must think consumer and work together to provide superior customer value and satisfaction.

The Microenvironment
Suppliers:
Provide resources needed to produce goods and

services. Important link in the value delivery system. Most marketers treat suppliers like partners.

The Microenvironment
Marketing intermediaries:
Help the company to promote, sell, and distribute

its goods to final buyers.


Resellers Physical distribution firms Marketing services agencies Financial intermediaries

The Microenvironment
Customers:
Five types of markets that may purchase a

companys goods and services.


Consumer Business Reseller Government International

The Microenvironment
Competitors:
Those who serve a target market with products

and services that are viewed by consumers as being reasonable substitutes for the firms products or services. Company must seek to gain strategic advantage against these organizations.

The Microenvironment
Publics:
Any group that has an interest in or impact on

an organizations ability to achieve its objectives.


Financial public Media public Government public Citizen-action public Local public General public Internal public

The Macroenvironment

The company and all of the other


actors operate in a larger macroenvironment of forces that shape opportunities and pose threats to the company.

The Macroenvironment

Forces in the macroenvironment can


be categorized as:
Demographic

Economic
Natural Technological Political Cultural

Demographic Environment
Demographics:
The study of human populations in terms of size,

density, location, age, gender, race, occupation, and other statistics. Marketers track changing age and family structures, geographic population shifts, educational characteristics, and population diversity at home and abroad.

Demographic Environment
The changing age structure of the U.S.

population is the single most important demographic trend.


Baby boomers, Generation X, and the Millennials

are key generational groups.

Demographic Environment
Baby boomers:
78 million born between 1946 and 1964. Nearly 30% of population. Spend $2.3 trillion annually and hold of the

nations financial assets. Spend $30 billion annually on anti-aging products and services; strong market for financial services, new housing, travel, etc. Are likely to postpone retirement.

Demographic Environment
Generation X:
49 million born between 1965 and 1976. Defined by shared experiences: Increased parental divorce rates and more employed mothers made Generation X the first of the latchkey kids. Gen X developed a more cautious economic outlook due to recessions and downsizing that were common when they grew up.

Demographic Environment
Generation X:

Cares about the environment. Prizes experience, not acquisition. Family comes first, career second. Skeptical of marketing messages; researches purchases carefully, uses communities to share information. Represents close to $1.4 trillion in annual purchasing power.

Demographic Environment
Millennials:
83 million born between 1977 and 2000larger

than baby boomer segment. Includes tweens, teens, and young adults. Ethnically diverse. Fluent with computer and digital technology. Personalization and product customization are key to marketing success.

Demographic Environment
The American family and household

makeup is changing:

Traditional households are in decline: Married couples with children = 23% Non-traditional households are growing: Married without children = 29% Single parents = 16% Non-family households = 32% Special needs of non-traditional households

are increasingly being considered by marketers.

Demographic Environment
Increasing diversity:
Ethnic segments will continue to grow. specially designed ads, products, and promotions at ethnic groups.
Marketing efforts are increasing toward: People with disabilities.

Economic Environment
Consists of factors that affect consumer
purchasing power and spending patterns.
Changes in income
1990sconsumption

Income distribution
Upper class: getting

frenzy, record debt 2000ssqueezed consumer Marketers focus on offering greater value

wealthier Middle class: shrinking in size Working class Underclass: remain poor

Natural Environment
Involves natural resources that are needed as

inputs by marketers or that are affected by marketing activities. Factors include:


Shortages of raw materials Increased pollution Increased government intervention Environmentally sustainable strategies

Technological Environment
Most dramatic force shaping our destiny. Changes rapidly, creating new markets and opportunities and/or danger of products becoming obsolete. Challenge is to make practical, affordable new products. Safety regulations result in higher research costs and longer time between product conceptualization and introduction.

Political Environment
Includes laws, government agencies, and

pressure groups that influence or limit various organizations and individuals in a given society. Areas of concern:
Increasing legislation. Changing government agency enforcement. Increased emphasis on ethics and socially

responsible behavior.

Cultural Environment
The institutions and other forces that

affect a societys basic values, perceptions, preferences, and behaviors.


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.
Marketers may be able to change secondary beliefs, but NOT core beliefs.

Cultural Environment
Societys major cultural views are expressed

in peoples views of:


Themselves Others Organizations Society Nature The universe

Responding to the Marketing Environment


Reactive responses:
Many firms simply react to changes in the

marketing environment.

Proactive responses:
Some firms attempt to manage the marketing

environment via aggressive actions designed to affect the publics and forces in the marketing environment.

Responding to the Marketing Environment


Examples of proactive responses:
Hiring lobbyists Running advertorials Pressing law suits Filing complaints

Forming agreements to control channels

PESTLE analysis

PESTLE is an analytical tool which considers

external factors and helps you to think about their impacts

PESTLE analysis
Is a useful tool for understanding the big picture of the environment in which you are operating By understanding your environment, you can take advantage of the opportunities and minimize the

threats.
This provides the context within which more detailed planning can take place to take full

advantage of the opportunities that present themselves.

The factors in PESTLE analysis


P Political

The current and potential influences from political pressures

E - Economic

The local, national and world economic impact

S - Sociological

The ways in which changes in society affect the organization

T - Technological

How new and emerging technology affects your organization

L - Legal

How local, national and global legislation affects the project

E - Environmental

Local, national and global environmental issues

PESTLE vs.SWOT
In contrast to a SWOT, PESTLE encourages you to think about the wider environment and what might be happening now and in the future which will either benefit or be of disadvantage to the organization, individual etc

a kind of radar which picks up trends and developments


in the external environment which can be used to inform longer term planning and strategy making

PESTLE
Political:

Government type and stability Freedom of the press, rule of law and levels of bureaucracy and corruption Regulation and de-regulation trends Social and employment legislation Tax policy, and trade and tariff controls Environmental and consumer-protection legislation Likely changes in the political environment

Economic:

Stage of a business cycle Current and projected economic growth, inflation and interest rates Unemployment and supply of labor Labor costs Levels of disposable income and income distribution Impact of globalization Likely impact of technological or other changes on the economy Likely changes in the economic environment

PESTLE
Sociological:

Cultural aspects, health consciousness, population growth rate, age distribution, Organizational culture, attitudes to work, management style, staff attitudes Education, occupations, earning capacity, living standards Ethical issues, diversity, immigration, ethnic/religious factors Media views, law changes affecting social factors, trends, advertisements, publicity Demographics: age, gender, race, family size

Technological:

Maturity of technology, competing technological developments, research funding, technology legislation, new discoveries Information technology, internet, global and local communications Technology access, licensing, patents, potential innovation, replacement technology/solutions, inventions, research, intellectual property issues, advances in manufacturing Transportation, energy uses/sources/fuels, associated/dependent technologies, rates of obsolescence, waste removal/recycling

PESTLE
Legal:

current home market legislation, future legislation European/international legislation regulatory bodies and processes environmental regulations, employment law, consumer protection industry-specific regulations, competitive regulations

Environmental:

Ecological environmental issues, environmental regulations customer values, market values, stakeholder/ investor values management style, staff attitudes, organizational culture, staff engagement

PESTLE analysis and projects


It is possible to use the PESTLE analysis on projects as

well for organizations It is not always needed, especially if the projects are small If PESTLE analysis is used for a project, then the focus should be on solving the focal problem and analyze how the external environment is affecting the process of solving the focal problem

Issues of concern
The main problem with these external PESTLE factors is that

they are continuously changing


Therefore PESTLE analysis should include a thorough

analysis of what is affecting the organization or a project Now, and what is likely to affect it in the Future
The result of a PESTLE analysis is usually a list of positive

and negative factors that are likely to affect a project


However, by themselves, theses factors they mean very little It is important to bear in mind, that PESTLE analysis requires careful

Application of results