Fundamentals of Marketing

(FOM)
Lecture 2

Marketing
Environment

Instructor:
Mr. Asadullah Lakho

3-1
Analyzing the Marketing
Environment
Topic Outline

• The Company’s Microenvironment

• The Company’s Macroenvironemnt
• Responding to the Marketing Environment
The Marketing Environment

The marketing environment includes the actors and forces outside

marketing that affect marketing management’s ability to build and
maintain successful relationships with customers
The Marketing Environment

Microenvironment consists of the actors close to the company that

affect its ability to serve its customers, the company, suppliers,
marketing intermediaries, customer markets, competitors, and
publics
The Company’s
Microenvironment
Actors in the Microenvironment
The Company’s
Microenvironment
The Company
• Top management
• Finance
• R&D
• Purchasing
• Operations
• Accounting
• Top Management:
• Connection to Marketing Environment: Top management sets the overall
direction and strategic objectives for the company, which includes defining
the market segments the company aims to target and the positioning it
seeks to achieve. They also allocate resources for marketing activities and
provide guidance on the company's overall marketing strategy.
• Finance:
• Connection to Marketing Environment: The finance department plays a
critical role in allocating budgets for marketing efforts. They evaluate the
potential return on investment (ROI) of various marketing initiatives and
ensure that funds are available to support the implementation of marketing
strategies.
• Research & Development (R&D):
• Connection to Marketing Environment: R&D departments work closely with
marketing to develop products or services that meet the needs and
preferences of the target market. They conduct market research to
understand customer demands, which informs product development
efforts. Additionally, they may work on innovations that can give the
company a competitive edge in the market.
• Purchasing:
• Connection to Marketing Environment: The purchasing department is
responsible for procuring the necessary resources and materials for the
company. They need to be aligned with marketing strategies, ensuring that
the company can meet customer demands efficiently and cost-effectively.
For example, they may need to source materials for new product launches.
• Operations:
• Connection to Marketing Environment: The operations department is
crucial for delivering products or services to customers. They need to be
aligned with marketing to ensure that production and delivery processes are
efficient and capable of meeting customer expectations. For instance, they
may adjust production schedules based on changes in demand identified by
the marketing team.
• Accounting:
• Connection to Marketing Environment: The accounting department tracks
and reports financial information related to marketing activities. They
monitor expenses, revenue generated from marketing efforts, and return on
investment. This information is essential for evaluating the effectiveness of
marketing campaigns and making informed decisions about future
marketing strategies.
The Company’s
Microenvironment
Suppliers
• Provide the resources to produce goods and services
• Most marketers today treat their suppliers as partners in creating
and delivering
• customer valueSupply shortages or delays, natural disasters, and
other events can cost sales in the short run and damage customer
satisfaction in the long run.
Most marketers today treat their suppliers as partners in creating and
delivering customer value. Morrison’s, one of the United Kingdom’s
leading supermarkets,
sells a large number of items, including seafood, dairy products, meat,
bakery goods,
and non-food grocery products. It has realized that the significance of
its relationship
with suppliers cannot be understated if it to succeed
in the competitive retail sector. It acknowledges that
the various awards it has achieved over the years—
including “Supermarket of the Year,” “Nations’ Best
Café,” and “Most Sustainable Retailer of the Year”—
could not have been achieved without good relations
with its suppliers
The Company’s
Microenvironment
Types of Marketing Intermediaries

Physical
Resellers distribution
firms

Marketing
Financial
services
intermediaries
agencies
The Company’s
Microenvironment
Marketing Intermediaries
Marketing intermediaries help the company promote, sell, and distribute
its products to
final buyers. They include resellers, physical distribution firms,
marketing services agencies, and financial intermediarie

Resellers are distribution channel firms that help the company find
customers or make sales to them. These include wholesalers and
retailers that buy and resell merchandise
Physical distribution firms help the company stock and move goods from
their points of origin to their destinations
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
include banks, credit companies, insurance companies, and other
businesses that help
finance transactions or insure against the risks associated with the
buying and selling
of goods.
The Company’s
Microenvironment
Competitors

• The marketing concept states that, to be successful, a company

must provide greater customer value and satisfaction than its
competitors do
• Firms must gain strategic advantage by positioning their offerings
against competitors’ offerings
• No single competitive marketing strategy is best for all
companies. Each firm should consider its own size and industry
position compared with those of its competitors
The Company’s
Microenvironment
Publics

• Any group that has an actual or

potential interest in or impact on
an organization’s ability to achieve
its objectives
• Financial publics
• Media publics
• Government publics
• Citizen-action publics
• Local publics
• General public
• Internal publics
Financial Publics:
• Explanation: These are groups that have a financial interest in the
company, such as investors, shareholders, creditors, and financial
analysts. They closely monitor the company's financial performance
and decisions.
• Example: A publicly traded company like Apple has a wide range of
financial publics, including individual shareholders, institutional
investors (like mutual funds), and financial analysts who track its
stock performance and earnings reports.
Media Publics:
• Explanation: Media publics encompass journalists, bloggers, and
influencers who cover or discuss the company's activities, products,
and reputation. They have the power to shape public opinion
through their reporting and commentary.
• Example: When Tesla announces a new product or faces a
controversy, it receives extensive coverage in various media outlets,
influencing how the public perceives the company.
Government Publics:
• Explanation: This includes government agencies, regulatory bodies,
and policymakers that can impact the company's operations through
legislation, regulations, and policies.
• Example: Pharmaceutical companies like Pfizer must navigate
complex regulations set by the Food and Drug Administration (FDA)
in the United States, which directly affects their product
development and approval processes.

Enthusiast or User Publics:

• Explanation: These are individuals or groups who use or are
passionate about the company's products or services. They can be
advocates, brand loyalists, or critics.
• Example: Apple's user community is an enthusiastic public that
actively participates in discussions, provides feedback, and
advocates for the brand through social media, forums, and events.
Local Publics:
• Explanation: These are groups or individuals in the company's
immediate vicinity, such as local communities, neighborhood
associations, and advocacy groups. They can influence the
company's operations through activities like zoning decisions,
permits, and community relations.
• Example: If a construction company plans to build a new facility in a
residential area, they would need to engage with the local
community to address concerns about noise levels, traffic, and
environmental impact.
General Public:
• Explanation: This represents the broader population or society at
large. Their opinions, attitudes, and behaviors can impact the
company's reputation and success.
• Example: Coca-Cola's marketing campaigns often target the general
public to shape positive perceptions of the brand and drive
consumer loyalty.
Internal Publics:
• Explanation: These are individuals or groups within the company,
including employees, managers, and shareholders. They have a
direct stake in the company's success and can influence its
performance and culture.
• Example: Employee satisfaction and engagement programs are
designed to foster a positive internal environment, which in turn can
lead to higher productivity and customer satisfaction.
The Company’s
Macroenvironment
The Company’s
Macroenvironment
Demographic Environment

Demography is the study of human populations

in terms of size, density, location, age, gender,
race, occupation, and other statistics
• Demographic environment is important
because it involves people, and people make up
markets
• Demographic trends include age, family
structure, geographic population shifts,
educational characteristics, and population
diversity
The Company’s
Macroenvironment
Demographic Environment

• Changing age structure of the population

• The post–World War II baby boom produced 78 million baby
boomers, who were born between 1946 and 1964
The
• youngest boomers are now in their 50s; the oldest are in their early 70s and
well into retirement.
The Company’s
Macroenvironment
Demographic Environment
• Generation X includes people born between 1965 and 1976
• High parental divorce rates
• Cautious economic outlook
• Less materialistic
• Family comes first
• Lag behind on retirement savings
The Company’s
Macroenvironment
Demographic Environment
• Millennials (gen Y or echo boomers) include those born between
1977 and 2000
• Comfortable with technology
• Includes
• Tweens (ages 8–12)
• Teens (13–19)
• Young adults (20’s)
• One thing that all millennials have in common is their comfort with digital
technology. They don’t just embrace technology; it’s a way of life.
• The millennials were the first generation to grow up in a world filled with
computers, mobile phones, satellite TV, iPods and iPads, and online social
media. As a result, they engage with brands in an entirely new way, such as
with mobile or social media.
The Company’s
Macroenvironment
Demographic Environment

Generational marketing is important in

segmenting people by lifestyle or life state
instead of age
The Company’s
Macroenvironment
Demographic Environment
More people are:
• Divorcing or separating
• Choosing not to marry
• Choosing to marry later
• Marrying without intending to have children
• Increased number of working women
• Stay-at-home dads
 The Company’s
Macroenvironment
Demographic Environment
• Growth in U.S. West and South
and decline in Midwest and
Northeast
• Moving from rural to
metropolitan areas
• Changes in where people work
• Telecommuting
• Home office
• Divorcing or separating
The Company’s
Macroenvironment
Demographic Environment

• Changes in the Workforce

• More educated
• More white collar
The Company’s
Macroenvironment
Demographic Environment
Increased Diversity

Markets are becoming more diverse

• International
• National
• Includes:
• Ethnicity
• Gay and lesbian
• Disabled
The Company’s
Macroenvironment
Economic Environment
Economic environment consists of factors that affect consumer
purchasing power and spending patterns
• Industrial economies are richer markets
• Subsistence economies consume most of their own agriculture and
industrial output
 The Company’s
Macroenvironment
Economic Environment

• Changes in income
• Value marketing involves
ways to offer financially
cautious buyers greater value
—the right combination of
quality and service at a fair
price
 The Company’s
Macroenvironment
Economic Environment
Changes in Consumer Spending Patterns

• Ernst Engel—Engel’s Law

• As income rises:
• The percentage spent on food declines
• The percentage spent on housing remains constant
• The percentage spent on savings increases
 The Company’s
Macroenvironment
Natural Environment
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
• Environmentally sustainable strategies
 The Company’s
Macroenvironment
Technological Environment
• Most dramatic force in changing
the marketplace
• Creates new products and
opportunities
• Safety of new product always a
concern
The Company’s
Macroenvironment
Political Environment

Political environment consists of laws, government agencies, and

pressure groups that influence or limit various organizations and
individuals in a given society
The Company’s
Macroenvironment
Political Environment

• Legislation regulating business

• Increased legislation
• Changing government agency
enforcement
• Increased emphasis on ethics
• Socially responsible behavior
• Cause-related marketing
The Company’s
Macroenvironment
Cultural Environment

Cultural environment consists of institutions and other forces that

affect a society’s basic values, perceptions, and behaviors
The Company’s
Macroenvironment
Cultural Environment
Persistence of Cultural Values

Core beliefs and values are persistent and are

passed on from parents to children and are
reinforced by schools, churches, businesses,
and government
Secondary beliefs and values are more open to
change and include people’s views of
themselves, others, organization, society,
nature, and the universe
 The Company’s
Macroenvironment Cultural Environment
Shifts in Secondary Cultural Values

• People’s view of themselves

• Yankelovich Monitor’s consumer
segments:
• Do-it-yourselfers—recent movers
• Adventurers
• People’s view of others
• More “cocooning”
The Company’s
Macroenvironment
Cultural Environment
Shifts in Secondary Cultural Values

• People’s view of organizations

• People’s view of society
• Patriots defend it
• Reformers want to change it
• Malcontents want to leave it
The Company’s
Macroenvironment
Cultural Environment
Shifts in Secondary Cultural Values

• People’s view of nature

• Some feel ruled by it
• Some feel in harmony with it
• Some seek to master it
• People’s view of the universe
• Renewed interest in spirituality
 Responding to the Marketing
Environment
Views on Responding

Uncontrollable Proactive Reactive

• React and • Aggressive • Watching and
adapt to actions to reacting to
forces in the affect forces forces in the
environment in the environment
environment