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TOPIC 2: ANALYZING THE MARKETING ENVIRONMENT
Introduction
• Excellent companies take an outside-in approach to their business operations.
• These companies monitor the changing environment and continuously adapt their
businesses to their best opportunities
• Company managers are faced with the responsibility of identifying major changes in the
environment.
• In this chapter, the major forces in the company’s marketing environment are discussed.
Meaning of the Marketing Environment
• A company’s marketing environment consists of factors that affect its ability to develop
and maintain successful transactions and relationships with its target customers.
• The factors and forces that affect a company’s ability to operate effectively in providing
products and service to its customers.
Note: The process of analyzing the environment is also known as environmental scanning.
Why Scan the Environment?
Environmental scanning is important to a company for a number of reasons
❖ To identify threats arising from the environment. A threat could be:
– A new competitor in a firm’s market.
– Price wars with competitors
– A competitor who has a new, innovative product or service
– Taxation introduced or increased on a firm’s products or services.
❖ Identify opportunities arising from the environment and exploiting them to firm’s
advantage. Opportunities could be:
– A developing market such as the internet
– Mergers, joint venture or strategic alliances
– A new international market
– A market vacated by an ineffective competitor.
❖ To identify a firm’s weaknesses. These are the lack of or inaccuracy of the firm’s
resources that should be converted into strengths. A weakness could be:
– Lack of marketing expertise
– Poor quality goods and services
– Undifferentiated products and services
❖ To identify a firm’s strengths. These are capabilities/ bundle of assets and skills that can
be used to exploit opportunities, combat threats and overcome weakness. A strength
could be: – Your specialist marketing expertise
– Quality products
– New innovative products or services
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❖To develop strategies that can enable a company to cope with the ever changing
environment
Components of the marketing Environment
The marketing environment can be divided into two components namely:
1. The micro-environment
2.The macro-environment
The micro-Environment
This can be subdividing into two;
a)The internal environment
b) The external environment
The internal environment
This consists of those forces within the company, i.e. firm’s capabilities or bundle of assets and
skills possessed by the company. They include:
•Marketing programmes
• Financial resources
•Research and development
•Purchasing
•Manufacturing, etc
These reveal a firm’s strengths and weaknesses.
The external environment
These consist of the actors and forces in the company’s immediate environment that affects its
ability to serve its markets. Such force include the company’s
•Suppliers
•Marketing intermediaries
•Customers
•Competition and
•The publics
These comprise the core marketing system of the company in its efforts to meet its primary goal
of profitability and customer’s satisfaction.
The Macro-Environment
•This consists of the larger societal forces that affect a company’s micro-environment.
•They include:- –The demographic environment
– Economic environment
– The physical environment
– Technological environment
– Political / legal environment
– The socio-cultural forces/environment.
•These force represent the uncontrollable marketing variables that the company must
monitor and respond to
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• The Macro and the external Micro-Environment both pose threats and spin opportunities
from the environment
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EXTERNAL MICRO-ENVIROMENTAL FACTORS
1.THE SUPPLIERS
These are business firms and individuals who provide resources needed by the company
to produce goods and services.
Companies must
•Develop specification
•Search for suppliers
•Qualify them and
•Choose those who offer the best mix of
– quality
– delivery reliability
– credit
– warranties and
– Low costs.
Developments in the suppliers’ environment can have a substantial impact on a company’s
marketing operations.
Marketing managers need to watch
i) The price trends of their key inputs
ii) Supply availability i.e. continuity
Marketing managers should avoid over relying on one supplier.
2.MARKETING INTERMEDIARIES
These are firms that aid a company in promoting, selling and distribution of its goods and
services to the final buyers. They include:
– Middlemen
– Physical distribution firms
– Marketing service agencies
– Financial intermediaries
a) Middlemen
They are business firms that help the company to sell its goods/services to the final
buyers; for example
i) Merchant middlemen – wholesaler and retailers
ii) Agent middlemen – brokers, sales representatives
b) Physical distribution firms
These firms assist the company in stocking and moving goods from their original location
to their destinations. For example
– Warehousing firms
– Transportation firms
Every company looks for the most effective modes of transportation balancing such
consideration as – cost
– delivery
– speed and
– safety
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c) Marketing service agencies
Examples here include:-
– marketing research firms
– advertising agencies
– media firms
– marketing consulting firms
They assist the company in targeting and promoting its products to right market.
d) Financial intermediaries
These include – banks
– credit companies
– insurance companies
These intermediaries provide financial assistance or insure risk associated with buying
and selling of products to companies or marketing organizations.
3.CUSTOMERS
These are the people that the company sells their goods to also known as the target market.
Five types of customers markets exist, namely:-
– Consumer markets – individuals and households that buy goods
and service for personal consumption
– Industrial markets – Organizations that buy goods and service
needed for producing other products and services for the purpose
of making profits and / or achieving other objectives
– Reseller markets – Organizations that buy goods and service for
the purpose of reselling them at a profit.
– Government and non profits markets – they buy goods and service
in order to provide public services or to transfer these goods and
service to others who need them.
– International markets – buyers found abroad including foreign
customers, producers, resellers and governments.
Examples include:
– Banks
– Personal customers markets
– Trust department markets
– Business customers
– Profit customers – high earner members e.g. estate agents and
stock brokers
– Importers and expositors.
NB
Each customer group exhibits specific characteristics that warrant careful study by the seller
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4. COMPETITORS
A company rarely stands alone in its efforts to service a given market. It is surrounded
and affected by a host of competitors. The competitors have to be identified, monitored
and outmaneuvered to capture and maintain customer loyalty.
5.PUBLICS
A public is a group that has actual or potential interest in or impact on a company’s
ability to achieve its objectives
A public can facilitate or impede a company’s ability to achieve its goals. The wise
company takes concrete steps to manage successful relations with its key publics.
Every company faces several important publics
– Financial publics –financial institutions affect the company’s
ability to obtain funds. Examples of financial instruction include
banks, investments houses, stock broker firms and insurance
companies.
– Media publics – companies must activate the goodwill of media
organizations, such as newspapers, magazines, radio and television
stations in order to set more and better media coverage in the form
of favorable news features and editorial comments
– Government publics – companies need to take government
developments into account in formulation of marketing plans
– Citizen action public/ lobby groups / pressure groups –company’s
market practices may be questioned by consumer organizations,
environmental groups, minority groups, etc.
– Local publics – every company faces local publics for example
neighborhood residents and community organizations. Companies
must deal with community issues, attend meetings, answer
questions, and make contribution to worthwhile causes.
– General public – A company needs to be concerned with the
general public’s attitude toward its products and practices. The
public image of the company affects its patronage.
– Internal publics –a company’s internal publics include blue collar
workers, while collar workers, managers etc. companies should
spend time monitoring all its publics, understanding their needs
and opinions and dealing with them constructively
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THE MACRO-ENVIRONMENT
The Demographic Environment-
This refers to the study of population. The environment is important in crafting marketing
strategy. The variables to consider include:
1. Population size
2. Geographical distribution
3. Population density
4. Mobility trends
5. Age distribution
6. Birth rates
7. Death rates
8. Life expectancy
9. Household/family size, makeup
10.Income/ wealth distribution
11.Socio-economic group: occupation ethnic groups
Political/legal environment
The political arena has a huge influence upon the regulation of business and the spending power
of consumers and other business. You must consider issues such as:
1. How stable/unstable is the political environment?
2. Will government policy influence laws that regulate or tax your business?
3.What is the government’s position on marketing ethics?
4.What is the government’s policy on the economy?
5. Does the government have a view on culture and religion?
6.What is the government’s role in commerce?
7. Political ideologies and their relation to commerce?
8. Tolerance to corruption/anti-corruption?
The legal issues must be taken into consideration before engaging in marketing activities. These
include:
1. Legislation
2. The legal system
3. Fiscal and monetary policies
4. Employment legislation
5. Consumer protection laws
6. Foreign trade regulations
7. Environment protection regulations
Economic Environment
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Marketing needs to consider the state of a country’s economy in the short and long-term.
Markers need to look at:
1. Interest rates
2. Money supply
3. Investment levels
4. Balance of payments
5. The level of inflation
6. Employment levels
7. Long-term prospects for the economy
8. Disposable and discretionary incomes of the population
9. Gross Domestic Product (GDP) per capita and so on.
Socio-cultural Environment
The social and cultural influences on business vary from country to country and region to region.
It is very important that such factors are considered. Factors include:
1. What is the dominant religion?
2. What are attitudes to products and services?
3. Does language impact upon the diffusion of products onto markets?
4. How much time do consumers have for leisure?
5. What are the roles of men and women within society?
6. Are the older generations wealthy?
7. Do the populations have a strong / weak opinion on green issues?
8. Demographics
9. Attitudes
10.Social class
11.Changes in consumers values and lifestyle
12.How much time do consumers have for leisure?
13.What are the roles of men and women within society?
14.How long is the population living?
15.Do the populations have a strong /weak opinion on green issues?
Technological environment
Technology is vital for competitive advantages, and is a major drive of globalization. This is the
most dynamic environment which must be appraised continuously to note any trends taking
place.
Consider the following points:
1. Does technology allow for products and services to be made more cheaply and to a better
standfard of quality?
2. Does technology offer consumers and business more innovative products and services
such as Internet banking, new generation mobile telephones, etc?
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3. How is distribution changed by new technologies e.g. books via the Internet, flight
tickets, auctions, etc?
4. Does technology offer companies a new way to communicate with consumers e.g.
banners, customer relationship management (CRM), etc?
Natural environment
This environment focuses on environment, topography, climate changes, natural calamities, etc.,
and how they can affect marketing operations.
1. Product resources
• Raw materials
• Energy resources
• Water resources
2. Climatic conditions
• Seasons
• Weather
3. Physical resources
• Topography
• Waterfalls
• Altitude
4. Pollution
• Air
• Water
5. Natural calamities
• Floods
• Earthquakes
• Disease outbreaks
• Storms
• Landslides
• Volcanic activity
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