Marketing – The Marketing Environment

The marketing environment

• The forces that directly and indirectly

influence an organization’s capability to
undertake its business.
• The trading forces operating in a
marketplace over which a business has no
direct control, but which shape the manner
in which the business functions and is able
to satisfy its customers.

Marketing – The Marketing Environment

 Is it not just the external environment?

• The environment external to the firm

constitutes a large part of the marketing
environment but it is not the whole of the
environment.
• Included in the marketing environment is the
internal environment - that is, factors internal
to the firm which affect the marketing
operation.

Marketing – The Marketing Environment

 Internal environment
Inside the firm.

Micro-environment
Forces acting directly
on the firm
Macro-environment
-broad and general
Environmental forces

Marketing – The Marketing Environment

 Components of the marketing environment
• The external environment
consists of :
• Macro-environment
• -broad forces which shape
the character of
opportunities and threats
• Micro-environment.
• -the actors in the
immediate environment
Marketing – The Marketing Environment
• Internal environment.
• Forces and actors inside
the firm that affect the
marketing operation.
• Composed of internal
stakeholders and the other
functional areas with the
business organisation.
 Controllability

• The organisation has no control over the macro

environment. It can only respond to changes
taking place
• The organisation has some degree of influence
over the micro environment but by no means
complete control
• The organisation controls its own internal
environment although this does not mean the
marketing department or marketing manager has
control

Marketing – The Marketing Environment

 Why is it important?

• An understanding of macro and micro marketing

environment forces
• Is essential for planning.
• Helps a business to compete more effectively
against its rivals.
• Assists in the identification of opportunities and
threats.
• Enables an organization to take advantage of
emerging strategic opportunities.

Marketing – The Marketing Environment

 Environmental scanning

• Monitor - trends, issues, events

• Identify - trends, issues, events that are significant
to the organisation.
• Evaluate - the impact of trends ,issues and events
upon the organisation’s in current markets.
• Forecast - where the trends are heading. Examine
the threats and opportunities they are likely to
bring in the future.
• Evaluate - the impact of threats and opportunities
on the firm’s long term strategy.
Marketing – The Marketing Environment
 Forecasts

• Forecasts are integral to:

• Marketing planning
• Analysis of market attractiveness
• The monitoring of marketing performance
• Resource allocation
• Product and stock management
• Marketing opportunity analysis is at the
heart of marketing and this requires
accurate sales forecasts
Marketing – The Marketing Environment
 The internal or organisational environment

• This refers to the other internal functions

that impinge on the marketing function.
• The internal or organisational environment
includes
– The human resource department
– The operations department
– The accounting and finance department
– The research and development department

Marketing – The Marketing Environment

 The internal environment

• Marketing is affected by
• Internal processes and procedures
• Allocation of responsibilities within the organisation
• Resource availability
• The extent to which the major functional areas
work together supporting the marketing function to
be customer orientated
• The culture of the organisation
• The attitude of internal stakeholder

Marketing – The Marketing Environment

 The micro-environment

• This refers to the environment mostly closely

linked to the organization
• It comprises all those organizations and individuals
who directly affect the activities of a company
• All factors which impact directly on a firm and its
activities in relation to a particular market
• The actors in the immediate environment that
affect the firm’s capability to operate effectively in
its chosen market

Marketing – The Marketing Environment

 Elements of the micro-environment

• Customers • Employees
• Intermediaries • Trade unions
• Suppliers • Intermediaries
• Competitors • Co-operators (partner
• Local community firms in an alliance)
• Local government • Regulators

Marketing – The Marketing Environment

 Regulatory environment

• Legal environment • Codes of practice

• Contract law • Advertising Standards
• Consumer law Authority
• Product safety • Market Research
• Trade descriptions • Direct selling
• Data protection • Trade associations
• Planning laws • Codes of practice
• might not be legally
Environmental law
binding but
organisations are
expected to comply.
Marketing – The Marketing Environment
 The competitive environment

• The starting point is to identify who are the competitors.

Four categories can be identified.
• Direct competitors - firms that produce a similar product
which is a direct rival e.g. Coca Cola is a direct competitor
of Pepsi Cola.
• Close competitors - firms producing similar products e.g.
Tango is a close competitor of Pepsi.
• Substitutes -products that are different but might be
bought instead. A packet of crisp rather than a bar of
chocolate.
• Indirect competition - all other firms are indirect
competitors in that they compete for consumers’ money.

Marketing – The Marketing Environment

 Market structures

• Economists analyse markets in terms of the

degree of competition
• Perfect competition - many firms selling
homogeneous goods to customers who buy on
price alone
• Monopolistic competition - many firms each
selling a differentiated good over which they have
a monopoly
• Oligopoly - competition between a small number
of firms
• Monopoly - a single supplier

Marketing – The Marketing Environment

 Porter’s five forces

• Porter’s five forces analysis helps firms to analyse the

strength of competitive threats. The five forces are:
• The intensity of existing competition
• Barrier (or lack of) to the entry of new competitors - how
easy is it for newcomers to enter the market.
• The threat of substitute products.
• The bargaining power of customers - dominant
customers will drive down price.
• The bargaining power of suppliers - dominant suppliers
will force up prices.
• Profitability and the achievement of objectives will be
affected by the combination of five forces.

Marketing – The Marketing Environment

 The market environment

• This refers to the type of market in which the firm

operates.
• The market type impacts upon the marketing
function.
• The main types are:
– Consumer or B2C markets
– Business or B2B markets
– Export markets
– Government markets - where the government is a large
buyer
– Reseller markets - where the buyer is an intermediary
who sells on to someone else

Marketing – The Marketing Environment

 The macro-environment

• Comprises general forces and trends rather than

specific organizations -the big issues that affect all
businesses active in the market
• The macro-environment refers to the general
environmental factors that influence the
organization
• Factors outside the area of marketing which
impact on but which cannot be influenced by the
marketing effort- including demographics, macro-
economic factors, natural environment state,
changes in lifestyle

Marketing – The Marketing Environment

 Elements of the macro-environment

• Macro-economic environment
• Political environment
• Social and cultural environment
• Demographic environment
• Technical environment
• Legal and regulatory environment.

Marketing – The Marketing Environment

 The macro-economic environment

Economic growth Creates marketing opportunities. A major factor in

market growth.

Cyclical fluctuations Fluctuations in the level of sales.

Inflation Direct impact on costs and prices charged. Indirect

impact on customer demand.
Unemployment Major impact on customer demand via willingness
and ability to buy.
Interest rates Direct impact on investment by business. Indirect
impact on consumer demand in terms of the
amount of discretionary spending.
Exchange rate Fall in the exchange rate boosts exports, makes
imports more expensive and causes cost push
inflation.

Marketing – The Marketing Environment

 The political environment

• Marketing is affected by:

• Government and local government policies.
• The tax regime - the level and nature of tax.
• The extent to which the government is
“business friendly”.
• Government attitude to regulation.
• Trade polices
• The actions of special interest and pressure
groups.
Marketing – The Marketing Environment
 The social environment

• Impact on consumer demand of changes in:

• Population size and growth
• The demographic profile of the country (age
distribution, family size, regional distribution
of the population)
• The culture, beliefs and valves of the
community
• Lifestyle

Marketing – The Marketing Environment

 The technological environment

• Some ways in which technology affects marketing:

• Invention of new goods and services.
• CAD has reduced the lead time on new product
development.
• The pace of technological change has reduced the
product life cycle.
• The use of databases in market research and
direct marketing.
• The development of e-commerce.
• More responsive manufacturing operations means
shorter customer lead times.
• New technology facilitates mass customisation
Marketing – The Marketing Environment
 The alphabet soup of environmental
analysis

PEST SLEPT SPECTACLES PRESTCOM PESTEL

Political Social Social Political Political

Economic Legal Political Regulatory Economic
Social Economic Economic Economic Social
Technological Political Cultural Social Technological
Technological Technological Technological Aesthetic
Legal Competitive Customers
Environmental Organisational Legal
Social Market
Environmental
Sectoral

Marketing – The Marketing Environment

 SWOT and PEST

Positive Negative

Internal factors- Strengths Weaknesses

the internal Organisational Organisational
environment strengths. weakness.
External factors Opportunities Threats from the
-the PEST resulting from political, economic,
factors changes in the social and
political, economic, technological
social and environment.
technological
environment.

Marketing – The Marketing Environment

 A further acronym: PRESTCOM

Political Government policy, taxes etc.

Regulatory Law and voluntary codes of practices

Economic Macro-economic variables

Social Demographics, culture, lifestyle

Technological Processes and products

Competitive Nature of the competition

Organisational Internal environment

Market Type of market.

Marketing – The Marketing Environment