THE MARKETING

ENVIRONMENT
 Marketing environment

 Forces that directly influence an organization’s

capability to undertake its business
 The trading forces operating in a market place over
which the business has no direct control but which
shape the manner in which the business functions & is
able to satisfy its customers
Is it not just the external
environment?
 The environment external to the firm which
constitutes a large part of the marketing
environment but is not the whole of the
environment
 Included in the marketing environment is the
Internal environment i.e. factors internal to
the firm which affect its marketing operations
Components of the marketing
environment
 External environment:-  Internal environment:-
Consists of:
- Macroenvironment: - Forces inside the firm that
Broad forces which shape affect its operations
up the opportunities & - Composed of stakeholders
threats and other functional areas
- Microenvironment: inside a business
organization
Forces in the immediate
environment
Controllability

 A firm has:
- No control over its macroenvironment. It can
only respond to the changes taking place
- Some control over its microenvironment
Why is it important?

 An understanding of macro and micro

environment forces:
- Essential for planning
- Helps a business to compete effectively
- Assists in the identification of opportunities and
threats
- Enable an organization to take advantage of
emerging strategic opportunities
Environmental scanning

 Monitor: trends, issues and events

 Identify: trends, issues, events that are significant to
the organization
 Evaluate: the impact of trends, issues and events
upon the organization in the current market
 Forecast: where are the trends heading? Examine
the threats & opportunities they are likely to bring in
future
 Evaluate: Impact of threats and opportunities on the
firm’s long term strategy
Forecasts

 Forecasts are integral to:

- Marketing planning
- Analysis of market attractiveness
- Monitoring of marketing performance
- Resource allocation
- Product & stock management
Internal or Organizational
environment
 These include:
- Human resource department
- Operations department
- Finance department
- R & D department
Internal environment

 Marketing is affected by:

- Internal processes and procedures
- Allocation of responsibilities within the
organization
- Resource availability
- Culture of the organization
- Attitude of internal stakeholder
Micro environment

 Refers to the environment more closely

linked to the organization
 It comprises of all those organizations &
individuals who directly affect the activities of
a company
Elements of a micro
environment
 Customers  Employees
 Intermediaries  Trade unions
 Suppliers  Co-operators (Partner
 Competitors firms in alliance)
 Local community  Regulators
 Local government
Regulatory environment

Legal environment: Codes of practice:

- Consumer law - Advertising Standards

- Planning laws Authority

- Environmental law - Market research

- Direct selling

- Trade associations
Competitive environment
 Starting point is to identify and categorize the
competitors:
- Direct competitors: Firms that produce a similar
product which is a direct rival e.g. Coke & Pepsi
- Close competitors: Firms producing similar products
e..g. Pharmaceutical products having the same
basic salt
- Substitutes: Products that are different but can be
considered for buying as an alternative e.g. Brownie
instead of Black forest cake, Banaspati Ghee
instead of Oil
- Indirect competitors: Firms that produce the same
products that fill the same needs as your own
product. E.g. book & e-book
Market environment

 Refers to the type of market the firm is

operating in
 The main types are:
- Consumer or B2C markets
- Business or B2B markets
- Government markets
- Reseller markets: Buyer is an intermediary
Macroenvironment

 Factors outside the area of

marketing which impact on
but which cannot be
influenced by the marketing
effort including –
demographics, macro-
economic factors, changes
in lifestyles etc.
Elements of macroenvironment

 Macroeconomic environment
 Political environment
 Social & cultural environment
 Demographic environment
 Technical environment
 Legal & regulatory environment
Macroeconomic environment
Economic Creates marketing opportunities.
growth. A major factor in the marketing growth.
Cyclical Fluctuations in the level of sales
fluctuations
Inflation Direct impact on costs & prices charged.
Indirect impact on customer demand
Unemployment Major impact on customer demand via
willingness & 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 & causes cost
push inflation
 Political environment

 Marketing is affected by:

- Government & local policies
- Tax regime – the level & nature of taxes
- The extent to which the government is
“business friendly”
- Trade policies
- Actions of special interest & pressure
groups
Social environment

 Consumer demand is affected by changes in:

- Population size and growth
- Demographic profile or the country (age
distribution, family size, income level etc.)
- Culture, beliefs and values of the community
- Lifestyle
Technological environment

 Invention of new goods & services

 Development of CAD – reduction in new product
development time
 Use of data bases in market research & direct
marketing e.g. Credit cards
 New technology facilitates mass customization
 More responsive operations – shorter lead times
 Development of e-commerce
SWOT & PEST
Positive Negative
Internal factors – Strengths- Weaknesses-
the internal Organizational Organizational
environment strengths weaknesses

External factors – Opportunities- Threats-

the PEST factors Resulting from Resulting from
changes in political, political, economic,
economic, social, social, technological
technological environment
environment