topic 2 - marketing environment lect ppt

Topic 2ANALYSING THE

MARKETING ENVIRONMENT

Presented By :Ms Seema Agarwal

11/04/23 Ms Seema Agarwal 2

Chapter Objectives

1. Identify the five components of the marketing environment.2. Explain the types of competition marketers face and the steps

necessary for developing a competitive strategy.3. Describe how government and other groups regulate

marketing activities and how marketers can influence the political –legal environment.

4. Outline the economic factors that affect marketing decisions and consumer buying power.

5. Discuss the impact of the technological environment on a firm’s marketing activities.

6. Explain how the social-cultural environment influences marketing.

7. Describe the role of marketing in society and identify the two major social issues in marketing.

8. Identify the four levels of the social responsibility pyramid.


“To assure victory, always carefully survey the field before battle.”

- Sun Tzu (Chinese military strategist )


Marketing Environment

“ A company’s marketing environment consists of the

actors and forces that affect the company’s ability to develop and maintain successful transactions

and relationships with customers”

- Philip Kotler


Responding To The Marketing Environment There are three kinds of companies:

1. those who make things happen, 2. those who watch things happen, and 3. those who wonder what’s happened.

Successful companies recognize and respond profitably to unmet needs and trends.

Companies could make fortune if they could solve any of these problems:

A cure for cancer; Desalinization of seawater; Nonfattening tasty and nutritious food.


Examples:

Enterprising individuals and companies manage to create new solutions to unmet needs.

For Example: FedEx was created to meet the need for

next-day mail delivery. Amazon was created to offer more choice

and information for books and other products.


Types of environment

Companies interact with two types of environment: the ‘microenvironment’ and the ‘macroenvironment’.

The microenvironment comprises the company’s: suppliers, customers, marketing intermediaries and

competitors. The macroenvironment is made up of wider forces

that affect demand for a company’s goods. These forces include demographics, economics,

nature, technology, politics and culture.


SWOT Analysis

Identifying internal strengths (S) and weaknesses (W) and also examining

external opportunities (O) and threats (T)


The purpose of SWOT Analysis

It is an easy-to-use tool for developing an overview of a company’s strategic situation It forms a basis for matching your

company’s strategy to its situation


SWOT Analysis

©South-Western College Publishing

SS Things the company does well.Things the company does well.

WW Things the company does not do well.Things the company does not do well.

OO Conditions in the external environment that favor strengths.Conditions in the external environment that favor strengths.

TT Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness.

Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness.

Internal

External


SWOT is the starting point It provides an overview of the

strategic situation. It provides the “raw material” to do

more extensive internal and external analysis.


Opportunities

An OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment.

Possible Opportunities: Emerging customer needs Quality Improvements Expanding global markets Vertical Integration


Exhibit Framework for Market Opportunity

Identify the Unmet and/or Underserved Customer Need

Identify the Specific Customers a Company Will Pursue

Assess Advantage Relative to Competition

Assess the Company’s Resources to Deliver the Offering

Assess Market Readiness of Technology

Specify Opportunity in Concrete Terms

Assess Opportunity Attractiveness


Threats

A THREAT is a factor in your company’s external environment that poses a danger to its well-being.

Possible Threats: New entry by competitors Changing demographics/shifting demand Emergence of cheaper technologies Regulatory requirements


Opportunities and Threats form a basis for EXTERNAL analysis

By examining opportunities, you can discover untapped markets, and new products or technologies, or identify potential avenues for diversification.

By examining threats, you can identify unfavorable market shifts or changes in technology, and create a defensive posture aimed at preserving

your competitive position.


External Analysis.

A continuous process which includesA continuous process which includes

Scanning: Identifying early signals of environmental changes and trends

Monitoring: Detecting meaning through ongoing observations of environmental changes and trends

Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends

Assessing: Determining the timing and importance of environmental changes and trends for firms’ strategies and their management


The microenvironment The microenvironment can be separated into:

The internal environment and The external environment.

The internal environment consists of the: firm’s own management structure, the organisation’s strategies and objectives, and the departments within the company.

The characteristics of the firm’s internal environment affect its ability to serve its customers.

The external environment comprises

suppliers, marketing intermediaries, customers, competitors and publics. As well as obvious groups such as shareholders, publics can also

include local interest groups who may have concerns about the marketer’s impact on the environment or on local employment.

The macroenvironment


Macro- EnvironmentMacro- Environment

DemographicsDemographics

SocialChangeSocial

Change

EconomicConditionsEconomicConditions

Political & Legal FactorsPolitical &

Legal Factors

TechnologyTechnology

CompetitionCompetition

Ever-ChangingMarketplace

EnvironmentalScanning

Target Market

ProductDistributionPromotion

Price

ProductDistributionPromotion

Price

External Environment is not controllable


Demographic Environment

Worldwide Population GrowthWorldwide Population Growth

Population Age MixPopulation Age Mix

Ethnic MarketsEthnic Markets

Household PatternsHousehold Patterns

Educational GroupsEducational Groups

Geographical Shifts in PopulationGeographical Shifts in Population

Shift from Mass Market to MicromarketsShift from Mass Market to Micromarkets


Demographic FactorsDemographic Factors

AgeAge

LocationLocation

EthnicityEthnicity

DemographicsDemographics


Demographic Environment

Baby Boomers- Born between 1946 and 1964.

Generation X - Born between 1965 and 1976

Generation Y - Born between 1977 and 1994

AgeAge Key GenerationsKey Generations


Demographic Factors

Generation Y: Born to Shop Age 16 and under Immense marketing impact Affected by change in

families, workforce, and technology

Generation X: Savvy and Cynical Between age 17--29 Materialistic, but critical Marketing challenge

AgeAge

The demographic environment itself is affected by changes in the mix of age groups in the population.

If the population becomes older, this will lead to rising demand for products and services consumed by older people and a similar fall in demand for products consumed by younger people.


AgeAge


Baby Boomers: America’s Mass Market Born between 1946 and 1964 Cherish youth, convenience, individualism Led to a personalized economy

with products/services that are: Custom-designed Convenient and immediate Value-added through features or price

Focus on family, health, convenience, finances, and reading


AgeAge


Older Consumers: Not Just Grandparents Age “50 plus” Healthier, wealthier, and better

educated Considerable purchasing power

for cars, home remodeling, and travel Market potential not fully

tapped due to misconceptions about “mature adults”


LocationLocation

Indians on the Move

Implications for real estate, retail location decisions, communications, and Internet

Immigrants add substantial amount of income yearly to economy




EthnicityEthnicity

Growing Ethnic Markets

U.S. population is shifting to society characterized by three ethnic minorities: African-Americans U.S. Hispanics Asian-Americans

Trend in U.S. is toward greater multiculturalism

Similar trend is prevalent in India also.

•The development of ethnic markets can also be relevant.

•In a number of countries, the ethnic mix of consumers is changing due to immigration and other factors. •This will be reflected in changing demands for various goods, not only from the specific ethnic group but from other consumers whose tastes have been affected by them.•Furthermore, as ethnic groups emigrate to other countries, their own tastes can affect those of consumers in the host nation (e.g. Asian foods are now sold in UK supermarkets).



EthnicityEthnicityNiche

Marketing (one segment)

NicheMarketing (one segment)

Adapting Promotion

(one message)

Adapting Promotion

(one message)

StitchingNiches(combine markets)

StitchingNiches(combine markets)

MarketingStrategies

forMulticultur

alMarkets

MarketingStrategies

forMulticultur

alMarkets


Demographics….

The demographic environment is also affected by the level of education in a country, since changes in education have an impact on the wealth of a nation and the tastes of its people.

The lifestyles of a population also have an impact on the macroenvironment facing marketers. In Western countries there has been a growth in

households made up of single people; and a large proportion of women now go out to work. This has resulted in an increase in the sales of convenience foods.

There is also a greater proportion of couples whose children have grown up and left home. Such couples have more disposable income to spend on luxuries, holidays and home improvements.


Economic FactorsEconomic Factors

Distribution of Consumer

Income


Income

InflationInflation

RecessionRecession

Key Economic Factors of Interest to Marketers

Key Economic Factors of Interest to Marketers

Factors that influence consumer buying power and marketing strategies,



Rising Incomes

Most of the households earn “middle-class” income

Dual -income familiesare rising

More discretionary income for high-quality, high-priced goods and services


Income


Income

The economic environment is important to marketers because it affects the amount of money people have to spend on products and services.



InflationThe devaluation of money by reducing what it

can buy through persistent price increases

InflationThe devaluation of money by reducing what it

can buy through persistent price increases

Prices rise with no wage increase,purchasing power decreases

Increase profit margins by increasing efficiency

Consumers reaction: Search for lowest prices Rely on coupons and sales



RecessionRecession

Income, production and employment fall

Reduced demand for goods and services

Marketing strategies: Improve existing products Introduce new products Maintain customer services Emphasize top-of -the line products

UnemploymentThe proportion of people in the economy who do not have jobs and are actively looking for work.


Economics

Economies around the world not only vary in their absolute or total level of wealth but also in how their wealth is spread within the population.

For example, poor countries may be classified either as: those which have a highly unequal spread of wealth or those where it is more evenly shared.

The former group of countries may be markets for luxury goods, despite the level of poverty.

In contrast, the second type of country may be more attractive to marketers of inexpensive goods for the mass market.


Marketers must consider the economic environment of other nations

Changes in foreign currency rates may affect marketing decisions

Recessions in one part of the world may be offset by prosperity in another

The International Economic The International Economic EnvironmentEnvironment


Natural Environment

Shortage of raw materials

Increasedenergy costs

Anti-pollutionpressures

Governmentalprotections


Nature Shortage of Raw materials:

This is important to marketers insofar as it is the source of many raw materials and fluctuation in supply can affect the prices paid for purchases.

Increasing Costs Furthermore, the increasing cost of some raw materials has meant that recycling

of some materials, such as aluminium, has become economic. The increased cost of energy is also having an effect on the types of products

that appeal to consumers. For example, in some countries there is a trend towards small cars and

products that save energy.

Anti-Pollution Pressures: There is increasing pressure from public opinion as to where raw materials are

sourced from, and their effect on the natural environment. Paper manufacturers have had to pay attention to sourcing pulp from renewable

forests, where trees are replanted to make up for those which have been felled. There is also pressure on them not to use chemicals and bleaches in their

processing of paper. Changing Role Of Government –

Governments vary in their concern and efforts to promote a clean environment.

Finally, due to developments in technology, it is possible for manufacturers and consumers to cause less damage to the environment. Various European countries encourage the use of catalytic converters in cars to

reduce the levels of poisonous gases that are emitted into the atmosphere.


Technological and Resource FactorsTechnological and Resource Factors

The technological environment represents the application of knowledge in science, inventions, and innovations to marketing.

New technology helps firm cope

with other environmental factors

Rapidly changing force which creates many new marketing opportunities but also turns many existing products extinct

TechnologyTechnology


Technology

Although firms can offer customers a wider array of advanced products, changes in technology also mean that there may be more than one technical solution to a customer’s needs.

Today there is a struggle between suppliers of different types of hi-fi equipment.

Technological developments affect how people work and do business. For example, the falling cost of telecommunications

coupled with their increased sophistication has meant that it is possible for individuals to work away from the office.

In the future this could lead to lower usage of transportation systems.

Furthermore, the falling cost of technology has meant that many more small firms can function in areas such as publishing and film production, which used to be the domain of large organisations.


Technology….

Marketers have to consider how their product may need to be developed over time, if it is to remain competitive. For example, Apple Computer gained an advantage over

IBM and IBM compatibles through the use of its Graphic User Interface (GUI), which meant that the users can manipulate pictures on the computer screen rather than use complex commands.

This made it much easier to use than IBM personal computers.

However, the introduction by Microsoft of Windows meant that IBM users could also have a pictorial display on their screens, and this reduced Apple’s advantage.

To regain the advantage Apple has recently introduced a new computer chip (PowerPC) which is supposed to be faster than the Pentium chip used by IBM.


Political and Legal FactorsPolitical and Legal Factors

Political / Legal FactorsPolitical / Legal Factors

Consumers

Businesses Society

New Technology

Government Laws and Regulations Protect



Marketing decisions are greatly influenced by developments in the political environment.

This environment is composed of: Laws Government agencies and Pressure groups that influence and control various

organizations and individuals in society. Laws define and protect the fundamental rights of individuals. Business needs legal support to:

Protect firms by defining and preventing unfair competition Protect consumers from unfair business practices and Protect the interest of the society

Marketing managers must have an up-to-date and complete knowledge about the laws governing marketing and distribution of goods.


Politics

This has implications for their obligations to customers and the wider public.

Customers are increasingly able to seek redress for faulty products, and those who live near manufacturing plants are able to claim compensation for pollution.

The political environment around the world has recently favoured the privatisation of public companies.

Such companies have also been able to compete more freely in the private sector.

Political changes in Eastern Europe have also meant that these markets are now open to marketers from around the world.



MRTP ACT, 1969FERA ACT, 1973Prevention of Food Adulteration Act, 1954Essential Commodities Act, 1955Drug and Cosmetics Act, 1940Trade and Merchandise Act,1958Weights and Measures Act, 1958The Consumer Protection Act, 1986

MRTP ACT, 1969FERA ACT, 1973Prevention of Food Adulteration Act, 1954Essential Commodities Act, 1955Drug and Cosmetics Act, 1940Trade and Merchandise Act,1958Weights and Measures Act, 1958The Consumer Protection Act, 1986

Regulatory Acts for Marketing Affairs


SOCIAL ENVIRONMENT

Burgeoning middle class Major changes in life style Increased urbanization More & more consumption orientation Double income & nuclear family on rise Living on credit become trend Boom in leisure activities Upwardly mobile social class on the rise


Social FactorsSocial Factors

ValuesValues

AttitudesAttitudes

LifestyleLifestyle




Social FactorsInfluence ...

Social FactorsInfluence ...

Products that people buy

Prices paid for products

Effectiveness of specific promotions

How, where, and when people expect to purchase products


Culture

People’s opinions and tastes are shaped by the society in which they live.

It should be noted that societies are not made up of homogeneous populations.

They contain sub-cultures, which are beliefs and values shared by smaller groups of people.

Such groups may arise out of a common race, religion, social activity or hobby.

Sub-cultures are important to marketers insofar as they may have different consumption habits from the rest of the population.


Culture….

The following are some aspects of culture that influence people’s consumption: the ‘core’ culture is that set of values handed down

from generation to generation and which is reinforced by social institutions such as schools and places of worship.

Core values are likely to be strongly held and it may be difficult for marketers to promote a message that runs counter to them.

More susceptible to change are secondary values. People’s opinions are influenced by the media,

role models and changing tastes.


Activity

Choose an industry about which you can get information from either newspapers or books.

Describe any political, economic, social and technological changes taking place that will affect the demand for the products/services produced by that industry.

Then explain what impact this is having on the marketing activities of the firms in that industry.

Where possible, collect relevant statistics and details of the source of the information.

The examples you use and the sources of information can be either local or international.


An example -It is based on an extract from a UK national newspaper.‘Within the UK a social change which is taking

place is the rise in the sales of ethnic foods. Last year £366 million was spent on such foods, an increase of 87 per cent in four years. Of this

figure Indian food is the most popular, accounting for £171 million. Furthermore 37

per cent of people questioned had tried cooking Indian meals at home. Industry experts say that the recession and the ease of ethnic cooking is

encouraging people to cook at home.’ The marketing impact of this information would

be on producers of ethnic cooking ingredients, whose forecasts of sales could take into account the news of a healthy and growing market.

topic 2 - marketing environment lect ppt

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