MARKETING ENVIRONMENT

The actors and forces outside marketing that affect marketing management’s ability to build and
maintain successful relationships with target customers.

IMPORTANCE OF MARKETING ENVIRONMENT

Its present and future existence, profits, image, and positioning depend on its internal and
external environment.

Essential for planning - an understanding of the external and internal environment is essential for
planning for the future.

Understanding Customers - Thorough knowledge of the marketing environment helps marketers

acknowledge and predict what the customer actually wants.

Tapping Trends - Breaking into new markets and capitalizing on new trends requires a lot of insight
about the marketing environment.

Threats and Opportunities - Sound knowledge of the market environment often gives a first-mover
advantage to the marketer as he makes sure that his business is safe from future threats and taps the
future opportunities.

Understanding the Competitors - A better understanding of the marketing environment allows the
marketer to understand more about the competitions and about what advantages do the competitors
have over his business and vice versa.

LEVELS OF MARKETING
Internet Micro-Environment
Involves individuals or organizations that a firm deals with on a regular basis as Suppliers,
Competitors, Customers, Market intermediaries and Company. They all have direct interest in the
activities of the firm and are clearly affected by its actions.

Internet Macro-Environment
involves factors outside of direct control of the business such as the Demographic, Economical, Political,
Social cultural, Technological, Environmental and Legal.

Micro-Environment
Company

 Marketing must consider other parts of the organization including finance, R&D, purchasing,
operations and accounting.
 Marketing decisions must relate to broader company goals and strategies
 The company has a duty to satisfy the people at large along with competitors and the
consumers.
 Create goodwill among public, help to get a favorable response for a company.
  Companies must put their primary energy into effectively managing their relationships with
their customers, distributors and suppliers.
 Companies would be wise to spend time monitoring all their public understanding their needs
and opinions and dealing with then constructively.
 In the modern business public have assumed important role and their presence in the micro
environment of business.

Suppliers
 The suppliers provide Raw material, Energy, Labour, Capital etc.
 Marketers must watch supply availability and pricing
 Effective partnership relationship management with suppliers is essential
 Regarding the suppliers, the organization can think of availing the required material or labor
according to its manufacturing program. It can adopt such a purchase policy which gives
bargaining power to the organization.
 The relationship between suppliers and the firm epitomize a power equation between them.
This equation is based on the industry conditions and the extent to which each of them is
dependent on the other.
 Suppliers are either individuals or business houses. They combined together; provide resources
that are needed by the company. Now the company necessarily should go for developing
specifications, searching for potential suppliers, identifying and analyzing the suppliers and
thereafter choose those suppliers who offer best mix of quality, delivery reliability, credit,
warranties and obviously low cost.
 The development in the supplier’s environment has a substantial impact on the operations of
the company. In recent trends companies can lower their supply cost and increase their product
quality.

Market intermediaries
 Channel through which a company link with customers
 Manufacturer, C & F agent, distributer, wholesaler, retailer, customer
 Distribute goods to final buyers and helps company to sell and promotions
 Market intermediaries are either individuals or business houses who come to the aid of the
company in promoting, selling and distributing the goods to the ultimate consumers.

Any type of intermediary the company must take into active consideration, the following aspects:
(i) The company has also to constantly review the performance of both middlemen and others helping
its efforts periodically.
(ii) Middlemen come into being to help overcome the discrepancies in quantities place, time,
assortment and possession that would otherwise exist in a given condition.
(iii) It is advantageous and also efficient to work through the established Marketing channels instead of
creating one and thus going for experiments.
(iv) The manufacturer has to decide the most cost-effective method of intermediaries to reach the
product to consumer that will help to increase the profit.

Customers
 Public that generates the demand
 These are of following types
 - Public
- Government
- Business
• There is only one valid definition of business purpose, that is to create a customer. The business
enterprises aim to earn profit through serving the customer demand.
• Now a days, a business firm to be successful, must find customers for its products. Products
sales depend mainly on the degree of consumer satisfaction.
• This is the reason that gives more importance to customer satisfaction surveys. Normally the
customers are not in a same group, they are individuals, business enterprises, institutions and
government.
• From the company’s point of view, it is always better to have customer from various groups and
legions for that easily sustains demand for the company’s product.

Competition
 Demand for a firm’s products or services is also affected by nature and intensity of
competition
 Conducting competitor analysis is critical for success of the firm
 A marketer must monitor its competitors’ offerings to create strategic advantage
 The competitive environment consists of certain basic things which every firm has to
take note of. No company, howsoever large it may be, enjoys monopoly. In the original
business world, a company encounters various forms of competition. The most common
competition which a company’s product now faces is from differentiated products of
other companies.
 For example, in the Color Television Market, Philips TV faces competition from other
companies like Sony, Toshiba, and others. This type of competition is called brand
competition.
 The consumer wants to purchase a two-wheeler, the next question in his mind is with
gear or without gear, 100 cc or more than that, self-starter or kick starter, etc. This type
is otherwise known as ‘Product form competition’.
 For a company to grasp the full range of its competition is to take the viewpoint of a
buyer. What does a buyer think about that which eventually leads to purchasing
something?

Macro-Environment
Demographic
• Marketers are keenly interested in size and growth rate of population, Nations, Age distribution,
Sex, Education level, Household pattern, Regional characters
• This will define the demand of particular segment
• Demographic Environment: - Demographic factor include Size, growth rate, age composition,
sex composition etc. of population, Family size, Economic stratification of population,
Educational level, Caste, religion etc. All these demographic factors are relevant to business.
• These factors affect the demand for goods and services. High population growth rate indicates
an enormous increase in labor supply. Population with varied tastes, preferences, beliefs,
temperaments etc. gives rise to differing demand pattern and calls for different marketing
strategies.
Political
 Politics or the governing bodies have great influence over market environment
 The policies, tax and tariffs are deciding factors
 Pattern of government like Social, Capitalistic & Communist these are the kind of rules
 Political macro environment factors include things like tax policies, government-issued safety
regulations, the availability of government contracts, and even shifts in the controlling political
party
 International laws, such as trade agreements and tariffs, may affect the supply and demand
chains and available markets for many different companies as well.

Economical
 Income distribution
 Developed economies
 Developing economies
 Underdeveloped economies
 Raw material exporting Economies
 A market boom, recession, or growing inflation problem can all change the way an organization
plans for the future and operates in the present.
 Economic factors are often difficult to assess, since economic forecasts and analyses vary widely
between experts.
 Unemployment levels, comparative foreign exchange rates, and the state of the global economy
can all help or hurt a business' ability to get needed components and maintain a stable profit.

Social-cultural
 Society shapes our beliefs, values and norms
 Core beliefs
 Existence of Subcultures
 Shifts towards new culture
- Preserver - Changers
- Makers - Seekers
- Takers - Escapers
• The mood and demographics of the population make up the social area of macro environment
factors. For example, a society that places an emphasis on self-guided jobs with room for
creativity may cause organizations to redefine job descriptions and adapt the model of the
workplace to attract workers.
• Social trends, such as a preference for on-demand mobile media devices, can also influence
which products a company manufacturer and where it chooses to spend on advertising.

Technological
 The most dramatic force shaping our destiny
 Rapidly changing force which creates many new marketing opportunities but also turns
many existing products extinct
 Examples: Computer, Mobile phone
 Technological macro environment factors can influence how an organization does
business.
  A new type of machinery, computer chip, or product created through research and
development can help a company stay modernized and ahead of the market curve.
 Owners must be able to accurately identify which new developments will be truly
useful, and which are just fads.

Environmental
Natural Environment:
– Involves the natural resources that are needed as inputs by marketers or that are
affected by marketing activities
Trends
– Shortages of raw materials
– Increased pollution
– Increased government intervention
– Increased energy cost
Environmental concerns are important to businesses both in the short and long term.
– In the short-term, things like natural disasters can disrupt production and supply operations, or
even destroy company assets.
– Programs such as environmental risk assessment can help companies prepare to handle many of
the most likely short-term crises.
– In the long view, however, businesses may have an interest in ensuring that their supply chains
are not destroyed by unsustainable practices.

Legal
• Legal factors can limit or change how a business operates.
• For example, they may have to hire additional supervisory staff or purchase safety equipment
after a new health and safety law is passed.
• Child labor laws often limit the hours a minor can work and require set break periods.
• Contract or Lease of Contract.
GROUP ACTIVITY GROUP#___________

Toys R Us were essentially a victim of failing to adapt to a significantly

changing marketing environment. They maintained their large-scale supermarket
retailing model for over 50 years without considering trends in retail design,
retailing itself, changing consumer needs, technology and online factors.

Therefore, their marketplace and their marketing environment changed but they
didn’t – resulting in a bankruptcy situation.

In this activity, there is a short video to review. The task is to:

1. List all the factors and changes that contributed to the decline in Toys R Us
commercial success,
2. Categorize those factors into the main marketing environment components of:
the internal environment, the micro-environment, and the macro-environment, and
3. Rank the factors (based on the video and information) in terms of which ones
were the most significant in the downfall of Toys R Us.

• There was an emergence of specialist competitors, such as PC games and

apps
• Toys R Us were reliant on broad range and choice of toys in-store, which is
costly to maintain
• Their business model required large retail spaces and staffing (also
expensive)
• Kids were consuming less TV media and advertising
• Kids had a much broader choice of media options (e.g. YouTube and social
media)
• There was a much wider choice of “toys” (e.g. gaming) for kids
• They had made limited enhancements to their in-store experience over time
• Many retailers were trying to make their stores a “destination” and make
shopping exciting
• Their early online partnership with Amazon soured in the late 2000’s
• Walmart and Target use toy discounting to “loss lead” and win customer
traffic
• Walmart becomes No. 1 in toys in the USA market in 1998, due to its large
number of stores
• Toys R US were operating with a high level of debt
• The financial owners of the retail chain were “investors”, not really retail
experts