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THE MARKETING ENVIRONMENT

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THE MARKETING ENVIRONMENT Powered By Docstoc
					             Marketing Environment:
                     Content
1.   The company’s micro-environment
•    The company: employees, management, shareholders, BOD.
•    Suppliers
•    Marketing intermediaries: distributors, media, banks.
•    Customers
•    Competitors
•    Pressure groups

2.   The company’s macro-environment
3.   Political
4.   Economic
5.   Social
6.   Technological
7.   Ecological
8.   Legal
                          Marketing Environment:
                             LEARNING OBJECTIVES
By the end of this module you should be able to:

•   Explain the meaning of the marketing environment.

•   Describe the environmental forces that affect the company’s ability to serve its
    customers.

•   Explain how changes in the demographic and economic environments affect
    marketing decisions.

•   Identify the main trends in the firm’s natural and technological environments

•   Explain the key changes that occur in the political and cultural environments.

•   Discuss how companies can react to the marketing environment.

•   Recognise the importance of building relationships with relevant stakeholders.

•   Identify and interpret the marketing implications of significant changes in an
    organization's wider environment.

•   Understand the complex, dynamic and uncertain nature of the external
    environment and how it might be best managed in marketing terms.
                                                                                •    •Jude Asongw
    The marketing environment
            DEFINITION

The actors and forces that affect marketing
management’s ability to develop and maintain
  successful relationships with its target customers




                                              •   •Jude Asongwe
          THE MARKETING ENVIRONMENT/BUSINESS ENVIRONMENT
The company                                      MACRO ENVIRONMENT
                                           Government policies           Political
The micro environment                   Rules and regulations
                                       Laws, taxes, political stability/instability,regime in
                                       government
The macro
environment                                      MICRO ENVIRONMENT
                                       Company
                                       Departments: e.g. Financial, marketing, HR,
                                       Production etc.
                                       •Management/Board of directors
                                       •Shareholders
                                       •Employees
                          Financial Intermediaries                               Customers
                          Banks                        THE COMPANY                                   Social
       Economic           Credit Institutions                AND ITS                                Demographic
     Inflation,           Building Societies           ENVIRONMENT                                  Social Class
       Employment,                                                                                  Reference groups
                          Insurance companies
       GDP,GNP,NI,
                                   Marketing Intermediaries                   Local community HealthEducation
      Unemployment,
        wages,                     Suppliers                              Pressure groups           Communication
       Interest rates,                                                                              Culture
          Tax,                     Distributors/transporters
                                                             Think-tank consultancy
          deflation,               Media
           trade cycle,                                 Law firm                              Ecological
              exchange
                                   Retailers                                                  Polusion
                 rates,            Wholesalers                                            Climate change
                   Energy prices   Agents/brokers                                         Scarcity of oil
               economic growth                                                                              Natural disasters
                 Per Capita Income,                                                                  Recycling
                      competitors
                         Technological
                               Internet, digital, ATM                 Legal
                                EPSS, mobile, SMS,
                                                        Polusion law ,Alcohol law,consumer protection law
                                                        Employment law, product safety law
                                                        Human rights law, Business law                                          •   •Jude Asongwe
AN ALTERNATIVE WAY OF LOOKING AT THE ENVIRONMENT –
                MARKETING AUDITING
                                     General external
                                     environment

                                     Specific external
           Political                 environment             Economic
                                                     Customers
              Suppliers           Internal environment
                                      Internal
                                     environment

                       Company                        Policies

         media                          COMPANY          Culture
Social
                       Human                                            Techno
                       resource                                         logical
                                                      Production
            Pressure          Finance
            group                         Marketing

                                                          Bank
                         distributors
           Ecological
                                                            Legal
  THE MICRO ENVIRONMENT
         DEFINITION

The forces close to the company that affect its ability to
serve its customers – the company, market channel firms,
customer markets, competitors, marketing intermediaries,
supplies, which combine to make up the firm’s value
delivery system.




                                                      •   Jude
         THE MICRO ENVIRONMENT:
                                             MICRO ENVIRONMENT
                                       Company -
                                       Management/BOD
                                       Shareholders
                                       Employees
                                       Departments: Finance, human resource,
                                       marketing, production.
                                                                                    Customers
                     Financial Intermediaries
                     Banks                           THE COMPANY
                     Credit Institutions
                     Building Societies
                                                        AND ITS
                     Insurance companies             ENVIRONMENT               Local community

                         Marketing Intermediaries                        Pressure groups
                         Suppliers
                         Distributors/transporters         Think-tank consultancy
                         Media
                         Retailers                     Law firm
                         Wholesalers
                         Agents/brokers                Publics




NB: Financial intermediary is still part of the marketing intermediary                           •   Jude
 PRINCIPAL ACTORS IN THE COMPANY’S
            MICRO ENVIRONMENT

              Company
                            Marketing
Suppliers                   intermediar         Customers
                                ies
              Competitors


                  Publics




                                          •   •Jude Asongwe
 THE MACRO ENVIRONMENT
            DEFINITION

The larger societal forces that affect the whole
microenvironment – Political, economic, social,
technological, ecological and legal factors




                                           •   •Jude Asongwe
                      THE MACRO MARKETING ENVIRONMENT


                                                    Political

                                         Government policies
                                       Rules and regulations
                                      Laws, taxes, political
           Economic                   stability/instability,regime in government     Social
         Inflation,
     Employment,                                                                    Demographic
    GDP,GNP,NI,                                                                     Social Class
Unemployment,                                                                       Reference groups
  wages,
                                                                                    Health
 Interest rates,
    Tax,
                                                                                    Education
    deflation,
                                              MACRO                                 Communication
      trade cycle,                            ENVIRONMENTAL                         Culture
          exchange                            FACTORS
            rates,                                                                        Ecological
               Energy prices
               economic growth                                                           Polution
                 Per Capita Income,                                                  Climate change
                      competitors                                                    Scarcity of oil
                                                            Legal                   Natural disasters
                   Technological                                                       Recycling
                 Internet, digital, ATM        Polusion law ,Alcohol law,consumer
                  APSS, mobile, SMS,           protection law
                                               Employment law, product safety law
                                               Human rights law, Business law

                                                                                                        •   Jude
                             ANALYSIS OF THE MACRO ENVIRONMENT
                           POLITICAL factor : Political is closely linked to the legal factor

•Political uncertainties/instability: E.g. in the middle east, in Iraq, Afghanistan etc. This can seriously disrupt businesses and
economic activities. Business will hardly survive in such politically unstable regions and countries.

•Government regulations and policies: e.g. alcohol and cigarette advertising regulations, policy on environment , prices,
employment etc

•Legislative structure- they regulate businesses: This includes all the laws which the government use to control businesses. This
will be fully examined under the legal environment.

•Monopoly restrictions: Government may pass laws to control monopolists for the interest of the public

•Political and government stability: The more stable a country is politically, the more investment can take place.

•Political orientations: different political parties and their different political and economic policies.
•Taxation policies: Government policy towards taxes: Some governments favour high taxes while others favour low taxes. This is
true for some political parties who may favour tax increases and other may favour low taxes.
•Employment legislation: Government pass employment laws when it comes to recruitment and selection of staff, equal
opportunities, contract laws, redundancy laws, wage laws etc to control businesses.
•Foreign trade regulations: Government may regulate international trade especially imports of certain kinds of products for the
interest of home infant industries.
•Environmental protection legislation: Governments of most countries pass environmental protection laws to protect the
environment against pollution. Pollution law is being passed by governments to curb the rate of pollution, recycling laws are being
passed by some governments for the above purpose.
•Interest rate control: Government controls the rate of interest to regulate the value of a currency and to control inflation.
•Price control: Government implement price controls to protect customers from business exploitation and to regulate the economy
especially during an inflationary situation. Prices for houses, electricity, gas, and other products may be controlled by the
government to prevent customers from exploitation especially from the private sector as a result of competition.
•Growth of public interest groups: There is the growth of public interest groups who now are part of the government body formed
to fight for the rights of the consumers and also some are fighting to protect the environment: Food standard Agency for instance is
fighting to protect customers from consuming protects that may damage their health.
•Increased emphasis on ethics and socially responsible actions: There is now an increase in the emphasis on ethics and socially
responsible actions by governments. Government is putting pressure on most companies to be ethically responsible and to provide
goods and services under social and environmentally friendly conditions.
                      ANALYSIS OF THE MACRO ENVIRONMENT
                                                ECONOMIC

•   Employment/unemployment: The higher the unemployment rate, the lower the demand and this has an
    effect on businesses.

•   Inflation/deflation rates: Inflation is the persistent and continuous rise in the prices of goods and services.
    The inflation rate affects the value of a currency and this can seriously affect demand, and will eventually
    affect business. For example in Zimbabwe the inflation rate is almost a 1000% and this has seriously affected
    demand, production and the value of the currency. It also has scared foreign investors. Therefore as a
    businesses, it is necessary to investigate the inflation rates of different countries because they affect the
    demand and production of goods and services.




                                                                                           •   •Jude Asongwe
               ANALYSIS OF THE MACRO ENVIRONMENT
                          ECONOMIC
•   Government economic objectives:
•   NI,GDP,&GNP trends
•   The Business /trade Cycle
•   BOP & BOT
•   Exchange rate
•   The impact of international trade
•   Interest rate
•   Prices
•   Competition
•   Demand
•   Money supply
•   Investment rates
•   Investment levels
•   Energy costs
•   Patterns of ownership
•   Economic stability/instability
•   Exchange rate
•   Income distribution and changes in purchasing power
•   Changing consumer spending pattern.
•   Economic growth and development
                   Social analysis
1.   Demographics: population size and growth trends, changing
     age structure of the population, the changing family,
     pressures for migration, rising number of educated people, &
     increasing diversity
2.   Lifestyles
3.   Education levels
4.   Attitudes
5.   Consumerism
6.   Health
7.   Reference groups
8.   Culture – persistence of cultural values, shift in secondary
     cultural values( people’s views of themselves, people’s view
     of others, peoples views of organisations, peoples view of
     society, people’s view of nature, people’s view of the
     universe)
                   ANALYSIS OF THE MACRO ENVIRONMENT

                                       SOCIAL
Demographic:
This is the study of the composition of a country’s population in
terms of age, gender, sex, occupation.
•Population
•Age composition
•Gender composition
•Marital status and household structure
•Income
•Migration: Immigration & Emigration (Net migration)
•Birth rate & Death rate
•Fertility rate.
•Trends in population
•The dependency ratio
•World population
•Aggregate population
•Population structure
•Regional distribution of population
•Ethnic groups
•Occupational structure
•The workforce in employment: some important trends
•The changing role of women in work and society
                                                       •   •Jude Asongwe
                                        SOCIAL
•    Social class
•    Culture
•    Reference groups
•    The family
•    Lifestyle
•    Education
•    Health
•    Communication

•    demographic factors such as:
1.   population size and distribution
2.   age distribution
3.   education levels
4.   income levels
5.   ethnic origins
6.   religious affiliations
7.   Gender composition.




                                                 •   •Jude Asongwe
            ANALYSIS OF THE MACRO
                ENVIRONMENT
TECHNOLOGICAL environment
•   New technologies : Digital, Internet.
•   The importance of New technology.
•   Communication
•   efficiency of infrastructure, including: roads, ports, airports, rolling stock,
    hospitals, education, healthcare, communication, etc.
•   industrial productivity
•   new manufacturing processes
•   new products and services of competitors
•   new products and services of supply chain partners
•   any new technology that could impact the company
•   cost and accessibility of electrical power
•   Fast pace of technological change
•   High research and development budgets
•   Increased regulation

                                                                      •   •Jude Asongwe
           ANALYSIS OF THE MACRO
               ENVIRONMENT
ECOLOGICAL
• Scarcity of resources e.g. petrol
• Over dependence on oil (petrol)
• Environmental pollution
• Climate change
• Natural disasters e.g. earthquakes, hurricane, Tsunami, floods
etc




                                                   •   •Jude Asongwe
                            ANALYSIS OF THE MACRO ENVIRONMENT
                                      LE GAL ENVIRONMENT
   •   This deals with Legislation imposed by governments
   •   The legal framework is made up of laws imposed by government of a particular country or region to
       control business and economic activities. Examples of laws can be seen below;

   •   Fair trading laws
   •   Laws Protecting the consumer
   •   minimum wage laws
   •   environmental protection laws
   •   worker safety laws : Health and safety laws
   •   Trade union laws
   •   copyright and patent laws
   •   anti- monopoly laws
   •   Sunday closing laws
   •   municipal licences
   •   laws that favour business investment
   •   Equal opportunity law.
   •   Marketing laws: advertising laws.
   •   Immigration laws
   •   Production and consumption laws : e.g. law on alcohol production and consumption, laws controlling or
       even banning smoking in public places.

   To aim of imposing laws is to control business and economic activities, to protect customers from business
       exploitation, to prevent unfair trading, to protect the health of customers, to encourage the production,
       distribution and consumption of goods under social and environmentally friendly conditions.

• The above laws have Implications to the marketer.
As a marketer, an entrepreneur or a business; it is wise enough to always
Monitor these various legislations and respect them because of far reaching
                                                                                                          • •
Consequences which may arise as a result of total neglect.
                                                                                                                Jude
                                                                                                                  Asongw
                          Social environment

                       DIFFERENCES IN CULTURE
• What is culture?
Culture is sum total of belief, rituals, custom, tradition, norms etc that characterizes a
particular group of people, society, or organization.

•   The sum total of learned beliefs, values and custom that serve to direct

                  customer behaviour in a particular country market




                                                                          •   •Jude Asongwe
                    Differences in culture:
•     There exist cultural differences in different continents across the world with respect to the
      following:
1.    Language: People speak different languages e.g. English, Chinese, Malaysian, Russian,
      Polish etc
2.    Norms
3.    Values
4.    Rituals
5.    Custom and tradition also differs in different culture:
In Most Muslim countries, Pork, alcohol and other dangerous products are not
consumed because of their cultural and religious beliefs.

      What may be consumed in one part of the world, may not be consumed in another.
      What may be preferred by one country, may not be preferred by another.
      The business language used in one country may be different from another
      The way people behave in one country may be different from another
      The kind of cars people prefer may vary in different countries
      Values, norms and rituals vary across the world.
       Therefore, it is vital for marketers and businesses to study the customer market and
       examine the cultural composition and differences and try to produce goods to suit different
       cultures.



                                                                                 •   •Jude Asongwe
                   Green Marketing
This is concerned with the marketing of products under social and
environmentally friendly conditions:




                                                              •     •Jude Asongwe
                                    Ethics
• Ethics (from the Ancient Greek ἠθικός or "ethikos" meaning "Theory of
  living") is one of the five major branches of philosophy, which attempts to
  understand the nature of morality; to distinguish that which is right from that
  which is wrong. The Western tradition of ethics is sometimes called moral
  philosophy. Ethics in plain words means studying and analyzing right from
  wrong; good from bad.

•   Business ethics is a form of applied ethics that examines ethical rules and
    principles within a commercial context; the various moral or ethical problems that can
    arise in a business setting; and any special duties or obligations that apply to
    persons who are engaged in commerce.” Generally speaking, business ethics is a
    normative discipline, whereby particular ethical standards are advocated and then
    applied. It makes specific judgements about what is right or wrong, which is to say, it
    makes claims about what ought to be done or what ought not to be done. While there
    are some exceptions, business ethicists are usually less concerned with the
    foundations of ethics (metaethics), or with justifying the most basic ethical principles,
    and are more concerned with practical problems and applications, and any specific
    duties that might apply to business relationships.

                                                                          •   •Jude Asongwe
                    Marketing ethics
• Marketing ethics deals with the moral principles which marketers should
  follow: These principles determine what is right from what is wrong.
• Marketing which goes beyond the mere provision of information about
  (and access to) a product may seek to manipulate our values and
  behaviour. To some extent society regards this as acceptable, but where
  is the ethical line to be drawn?
• Pricing: price fixing, price discrimination, price skimming.
• Anti-competitive practices: these include but go beyond pricing tactics to
  cover issues such as manipulation of loyalty and supply chains. See:
  anti-competitive practices, antitrust law.
• Specific marketing strategies: greenwash, bait and switch, shill, viral
  marketing, spam (electronic), pyramid scheme, planned obsolescence.
• Content of advertisements: attack ads, subliminal messages, sex in
  advertising.
• Children and marketing: marketing in schools.
• Black markets, grey markets.


                                                              •   •Jude Asongwe
           Advertising regulations and
                     ethics.
•   Advertising regulation refers to the laws and rules defining the ways in which products can be
    advertised in a particular region. Rules can define a wide number of different aspects, such as
    placement, timing, and content. In the United States, false advertising and health-related ads are
    regulated the most. Many communities have their own rules, particularly for outdoor advertising.
    Sweden prohibits domestic advertising that targets children. Some European countries don’t allow
    sponsorship of children’s programs, no advertisement can be aimed at children under the age of
    twelve, and there can be no advertisements five minutes before or after a children’s program is aired.
    In the United Kingdom advertising of tobacco on television, billboards or at sporting events is banned.

•   It is also prohibited to advertise cars on the basis of how fast they can go and the relationship which
    the event has with the sport seen as a healthy pursuit, unlike smoking. Similarly alcohol advertisers in
    the United Kingdom are not allowed to discuss in a campaign the relative benefits of drinking, in most
    instances therefore choosing to focus around the brand image and associative benefits instead of
    those aligned with consumption. There are many regulations throughout Europe as well. In many non-
    Western countries, a wide-variety of linguistic (Bhatia 2000, pp. 217-218) and non-linguistic strategies
    (e.g. religion; Bhatia 2000, pp 280-282) are used to mock and undermine regulations.

•   Two of the most highly regulated forms of advertising are tobacco advertising and alcohol advertising.
•   In the UK, advertising regulation is governed by the Advertising Standards Authority. In the United
    States, the Federal Trade Commission is the highest authority on the subject. States and more local
    political divisions can have their own laws on the subject.




                                                                                         •   •Jude Asongwe
                    The quality Movement
Quality circus:
This is an association of workers in a particular organisation who decide to unite in order
to find solutions to the quality problems facing the organisation. This is very important in
organanistions because these groups play a key role in helping the company sort out
some of its problems:




                                                                                  •   •Jude Asongwe
                  Quality and customers
•   Quality is very vital in so far as the market is concerned. Poor quality products can affect the health of
    customers.
•   It is the responsibility of businesses to make sure the products there are producing is safe for customers.
•   Customers are becoming more and more concerned with what they eat. --- there have been an increase in
    the amount of quality conscious customers because of health reasons.
•   The government is also doing much work to protect the health of consumers by sensitising people about the
    dangers of junk food.
•   The Food standards agency, the International organisation for standardisation (ISO) and other non-
    governmental organisations and pressure groups are putting pressure on companies to produce healthy
    products for their customers.
•   Businesses should aim at delivering quality for their customers.
•   The higher the quality the higher the price and the lower the quality the lower the price therefore businesses
    should try to provide value for money for its customers. To provide high quality also cost money so many
    businesses cover up the cost involved in proving quality by charging high price. The price charge for products
    should be reasonable enough and should also be affordable.
•   Most fast food outlets and restaurants e.g. Nnados, KFC, Burger King, McDonalds etc are now seeing the
    importance of providing healthy options such as salads and vegetables because of the growing concern about
    the health related risk of consuming junk food. The government is also putting pressure on caterers to provide
    healthy options for customers.
•   Therefore the production and distribution of goods should be done under a health environment. If the input is
    unhealthy, then the output will likely be unhealthy.




                                                                                          •   •Jude Asongwe
               Key terms and definitions
Marketing environment: The actors and forces that affect marketing management’s
   ability to develop and maintain successful relationships with its target customers.
Cultural Environment: Institutions and other forces that affect society’s basic values,
   perceptions, preferences and behaviours.
Political Environment: Laws, government agencies and pressure groups that influence
   and limit various organisations and individuals in a given society.
Technological Environment: Forces that create new technologies, creating new
   product and market opportunities:
Natural / Ecological environment: Natural resources that are needed as inputs by
   marketers or that are affected by marketing activities.
Economic Environment: Factors that affect consumer buying power and spending
   patterns.
Demography: The study of human populations in terms of size, density, location, age,
   sex, race, occupation and other statistics.
Public: Any group that has an actual or potential interest in or impact on an
   organisation’s ability to achieve its objectives.




                                                                     •   •Jude Asongwe
       KEY TERMS AND DEFINITIONS
Suppliers: Firms and individuals that provide the resources needed by the
   company and its competitors to produce goods and services.
Marketing Intermediaries: Firms that help the company to promote, sell and
   distribute its goods to final buyers; they include physical distribution firms,
   marketing –service agencies and financial intermediaries.
Resellers – The individuals and organisations that buy goods and services to resell
   at a profit
Physical distribution firms – Warehouse, transportation, and other firms that help
   a company to stock and move goods from their point of origin to their
   destinations.
Marketing services agencies – Marketing research firms, advertising agencies,
   media firms, marketing consulting firms and other service providers that help a
   company to target and promote its products to the right markets.
Financial Intermediaries – 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.




                                                                      •   •Jude Asongwe
               QUESTIONS FOR REVISION
1.   Analyse the marketing environmental factors affecting companies.
2.   Explain the significance of ethics in marketing management.




                                                           •   •Jude Asongwe

				
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