MARKETING MANAGEMENT

Chapter Two: THE

MARKETING
ENVIRONMENT
Gashaw T (PhD),
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“It is useless to tell a river to stop running; the
best thing is to learn swimming in the direction
it is flowing”
ANONYMOUS

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Discussion Questions

• Why we study Marketing Environmnts?

• Take a position “The population growth of
Ethiopia hold the promise of huge potential
markets for consumer goods”

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Overview of Marketing Environment

 A company's marketing environment consists of the

actors and forces outside/inside marketing that
affect marketing management's ability to develop and
maintain successful relationship with its target
customers.
 The marketing environment offers both opportunities
and threats.

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Overview of Marketing Environment

By conducting systematic environmental

scanning, marketers are able to revise and
adapt marketing strategies to meet new
challenges and opportunities in the
marketplace.

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 Overview of Marketing Environment
Demographic- Technological-
Economic Marketing Natural
Environment Intermediaries Environment

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Suppliers Place Price Publics
Consumers

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Political- Social-
Legal Competitors Cultural
Environment Environment

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Classification Marketing Environment?

Marketing environment divides in to

external(micro and macro environment) and
Internal environment

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 Micro-Environment
The microenvironment consists of the actors close
to the company that affect its ability to serve its
customers.
The task environment includes the immediate
actors involved in producing, distributing and
promoting the offering.
 The main actors are the suppliers, distributors,
dealers, the target customers, the competitors and
the public.
In addition to task environment, the micro
environment consist internal environment (The
Company).

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Micro-environment

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Suppliers

Suppliers are organizations & individuals that

provide the resources needed to produce goods
and services.
 Provide raw materials, parts, components, supplies
or services required to produce and supply products
to customers
Suppliers are an important link in the company's
overall customer 'value delivery system’
They are critical to an organization's marketing success
and an important link in its value delivery system.

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Suppliers

 Marketing managers must watch supply

availability.
 They also monitor the price trends of their key
inputs.
 They have their own bargaining power in the
industry; they influence the costs of raw materials
& other inputs to a firm, & hence the profits a firm
can take home.
 Most marketers today treat their suppliers as
partners in creating and delivering customer value.
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Marketing Intermediaries

 Many organizations rely on marketing

intermediaries to ensure that their products reach
the final consumer.
 Marketing intermediaries help the company to
promote, sell, & distribute its goods to final buyers.
 The intermediaries between an organization and
its markets constitute a channel of distribution.
These include:
 Resellers are distribution channel firms that help the
company find customers or make sales to them.
 Physical distribution firms help the company to stock
and move goods from their points of origin to their
destinations.
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 Marketing Intermediaries
 Marketing services agencies are the marketing
research firms, advertising agencies, media
firms, and marketing consulting firms that help
the company target and promote its products to
the right markets.
 Financial intermediaries help finance
transactions or insure against the risks
associated with the buying and selling of goods.
 Today’s marketers recognize the importance of working
with their intermediaries as partners rather than simply
as channels through which they sell their products.
 Like suppliers, marketing intermediaries form an
important component of the organization overall value
delivery system.

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 Customers
• An organization should be concerned about
the constantly changing requirements of its
customers and should keep in touch with
these changing needs by designing and
implementing an appropriate information
gathering system
• Organizations closely monitor their
customer markets in order to adjust to
changing tastes and preferences.
• Each target market has distinct needs,
which need to be monitored.
• The company needs to study five types of
customer markets closely.
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Customers
B. A. Consumer markets: consist of individuals
and households that buy goods and services
for personal consumption.
C. Business markets: buy goods and services for
further processing or for use in their production
process.
D. Reseller markets: buy goods and services to
resell at a profit.
E. Government markets: are made up of
government agencies that buy goods and
services to produce public services or transfer
the goods and services to others who need
them.
F. International markets: consist of buyers in other
countries.

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Competitors

– Adopting the marketing concept mean that an

organization must provide greater customer value
than its competitors.
– Marketers must gain strategic advantage by
positioning their offers strongly against
competitors’ offerings in the minds of consumers.
– No single competitive marketing strategy is best
for all companies.
• Each firm should consider its own size and industry
position compared to those of its competitors.

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 Competitors

Three levels of competition exist.

I. Direct competitors are firms competing for the
same customers with the similar products .
II.Competition exists between products that can
be substituted for one another.
III. Competition exists among all organizations
that compete for the consumer's
purchasing power.

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 Publics
A public is any group that has an actual or
potential interest in or impact on an organization‘s
ability to achieve its objectives.

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Publics
• Financial publics influence the company’s ability to
obtain funds.
• Media publics carry news, features, and editorial
opinion.
• Government publics regulate public safety, truth in
advertising, and other matters.
• Citizen-action publics include consumer organizations,
environmental groups, minority groups, and others.
• Local publics include neighborhood residents and
community organizations.
• The general public may be concerned about the
company’s products and activities.
• Internal publics include workers, managers,
volunteers, and the board of directors
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The Internal Environment (The Company)
– In designing marketing plans, marketing managers takes
other company groups into account.
– All departments need to think customer and work together.
– All groups should work in harmony to provide superior
customer value and relationships
– Marketing managers must work closely with other
company departments
– The marketing man need to
• Coordinate company internal marketing activities
• Coordinate marketing with other functional areas
– They also need to identify the competencies, capacities
and resources of the organization.
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The Macro-Environment

• The macro-environment consists of the

larger societal forces that affect the
microenvironment.

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The Macro-Environment

The company and all the other actors operate in

a larger macro environment of forces that shape
opportunities and pose threats to the company.
• The macro environmental factors cannot
be eliminated through the efforts of the 
marketing department.
– So the marketing manager should be proactive
in accessing & anticipating the changes of the
marketing environment.
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The Macro-Environment

Includes factors that can influence an

organization but that are out of their direct
control.
Consists of the larger force that affects the
micro/task environment that is demographic,
economic, natural, technological, political and
cultural forces.

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The Company’s Macroenvironment

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Demographic Environment

Demography is the study of human

populations in terms of size, density,
location, age, gender, race, occupation, and
other statistics.
 It involves people, and people make up markets.
 The characteristics in this environment are important to
marketers because they are closely related to the demand
for many products.
 Marketers keep close track of demographic trends and
developments in their markets, both at home and abroad .
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Demographic Environment

• Important demographic characteristics

and trends in the largest world
markets:
Population Size and Growth Trends
Changing Age Structure of a Population
The Changing Family
Rising Number of Educated People
Increasing Diversity

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Economic Environment
The economic environment consists of factors
that affect consumer purchasing power and
spending patterns.
A marketing program is affected especially by
such economic factors as the current and
anticipated stage of the business cycle,
inflation, unemployment, interest rates, and
income.
The available purchasing power in an
economy depends on current income, prices,
savings, debt, and credit availability.

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Economic Environment

• Industrial economies are richer markets

• Subsistence economies consume most of their own
agriculture and industrial output
• Marketers should be aware of the following predominant
economic trends:
Income Distribution and Changes in
Purchasing Power
Changing Consumer Spending Patterns

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Natural Environment

 The natural environment involves the natural

resources that are needed as inputs by marketers or
that are affected by marketing activities.
 Marketers should be aware of several trends in the
natural environment.
 The first involves growing shortages of raw
materials.
 A second environmental trend is increased
pollution.
 A third trend is increased government intervention
in natural resource management.
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Natural Environment

 Fourth increased Energy costs, companies are

searching for practical means to harness
solar, nuclear, wind, and other forms of
energy.
 Fifth, Anti-Pollution Pressure Groups
 Enlightened companies are developing
environmentally sustainable strategies and
practices in an effort to create a world economy that
the planet can support indefinitely

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Political/Legal Environment
 Marketers need to monitor the changing
political environment because political
changes can profoundly affect a firm’s
marketing.
The political environment consists of laws,
government agencies, and pressure groups
that influence or limit various organizations
and individuals in a given society.
Well-conceived legislation can encourage
competition and ensure fair markets for
goods and services.
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Political/Legal Environment

Legislation Regulating Business

Even the most liberal advocates of free-market
economies agree that the system works best with
at least some regulation.
Thus, governments develop public policy to
guide commerce- sets of laws and regulations that
limit business for the good of society as a whole.

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Political/Legal Environment

Business legislation has been enacted for a number

of reasons.
 to protect companies from each other.
 to protect consumers from unfair business
practices.
 to protect the interests of society against
unrestrained business behavior.

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Political/Legal Environment

• Increased Emphasis on Ethics and Socially

Responsible Actions
– Socially Responsible Behavior: Enlightened companies
encourage their managers to look beyond what the regulatory
system allows and simply “do the right thing.”
 The boom in e-commerce and Internet marketing has created a
new set of social and ethical issues.
– Cause-Related Marketing: Many companies are now
linking themselves to worthwhile causes.
• Marketers must have a good working knowledge of the
major laws protecting competition, consumers, and
society.
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Political/Legal Environment

• Some of the laws an organization should

be aware of are as follows:
 Protection of intellectual rights
 Consumer Protection act
 Companies Act
 Regulatory commission
 Environmental protection laws
 Code of takeovers and mergers
 Laws with regard to media freedom and advertising
 Exchange control
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Technological Environment
 The technological environment refers to new
technologies, which create new product and market
opportunities.
 The technological environment is perhaps the most
dramatic force now shaping our destiny.
 Every new technology replaces an older technology.
 When there is a change (new invention), it affect (hurts)
the existing technology.
 It has tremendous impact on our life-styles,
our consumption patterns, and our economic
well being.
 Telemarketing, e-marketing and credit card
purchase are some examples of technological
innovations.
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Technological Environment
 Technological breakthrough can affect
markets in three ways
 By starting entirely new industries.
 By radically altering, or virtually destroying
existing industries.
 By stimulating markets and industries not
related to the new technology.

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Technological Environment

 Technology is mixed blessings

 improve our lives
 creating environmental and social problems

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Technological Environment

The marketer should watch the following trends in

technology:
 Fast Pace of Technological Change - Technology life
cycles are getting shorter.
 High R&D Budgets - Technology and innovations
require heavy investments in research and development.
 Concentration on Minor Improvements
 Increased Regulation - As products become more
complex, people need to know that they are safe.
 Thus, government agencies investigate and ban potentially
unsafe products.

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Cultural Environment
The cultural environment is made up of institutions and
other forces that affect a society’s basic values,
perceptions, preferences, and behaviors.
People grow up in a particular society that shapes their
basic beliefs and values.
 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
includes people view of themselves, others, organizations,
society and the universe.
 Although core values are fairly persistent, cultural swings do take
place.
 Marketers want to predict cultural shifts in order to
spot new opportunities or threats.
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Cultural Environment

Themselves
Themselves Society’s Major
Cultural Views Are
Others Expressed in
Others People’s Views of:

Organizations
Organizations

Society
Society

Nature
Nature

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The
The Universe
Universe •41
Impact of the Environment on
Marketing
• Environmental Factors both external to the
firm and within the organization affect the
feasibility of various marketing strategies
and programs.

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Impact of the Environment on
Marketing
• Environmental factors influence marketing
strategies and programs in four basic ways.
▫ Can constrain the organization’s ability to pursue
certain marketing strategies or activities.
▫ Determine the ultimate success or failure of
marketing strategies overtime.
▫ Can create new marketing opportunities for an
organization
▫ Environmental variables themselves are affected
and changed by marketing activities

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 Responding to the Marketing Environment
 Many companies view the marketing environment as an
uncontrollable element in which they must react and adapt.
They passively accept the marketing environment and do
not try to change it.
 Other companies take a proactive stance toward the
marketing environment.
A. Rather than simply watching and reacting, these
firms take aggressive actions to affect the publics
and forces in their marketing environment.
B. Such companies hire lobbyists to influence
legislation affecting their industries and stage
media events to gain favorable press coverage.

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Marketing Information System

• Marketing information system (MIS):

People, equipment and procedures to
gather, sort, analyse, evaluate and
distribute needed, timely and accurate
information to marketing decision makers.

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components of Marketing Information system

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