8/11/2009

Marketing Management

Marketing Environment

Marketing Environment
• The marketing environment consists of actors
and forces outside the organization that affect
management’s ability to build and maintain
relationships with target customers
• It consists of internal and external forces that
directly or indirectly influence an organization’s
marketing activities

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Marketing Environment
• Environment offers both opportunities and
threats.
• Marketing intelligence and research used to
collect information about the environment.

Why External Analysis?

External analysis allows firms to:

• discover threats and opportunities

• see if above normal profits are likely in an industry

• better understand the nature of competition in

an industry

• make more informed strategic choices

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Marketing Environment
• Includes:
– Micro environment: actors close to the company
that affect its ability to serve its customers.
– Macro environment: larger societal forces that
affect the microenvironment.
• Considered to be beyond the control of the
organization.

The Company’s Microenvironment

• Company’s Internal Environment:
– Areas inside a company.
– Affects the marketing department’s planning
strategies.
– All departments must “think consumer” and
work together to provide superior customer
value and satisfaction.

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Actors in the Microenvironment

The Company’s Microenvironment

• Suppliers:
– Provide resources
needed to produce
goods and services.
– Important link in the
“value delivery system.”
– Most marketers treat
suppliers like partners.

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The Company’s Microenvironment

• Marketing Intermediaries:
– Help the company to promote, sell, and distribute its
goods to final buyers
• Resellers
• Physical distribution firms
• Marketing services agencies
• Financial intermediaries

Resellers
• Resellers are distribution channel firms that help the
company find customers or make sales to them.
• wholesalers and retailers who buy and resell
merchandise.
• Resellers often perform important functions more
cheaply than the company can perform itself.
• However, seeking and working with resellers is not
easy because of the power that some
demand and use.

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Physical Distribution Firms

• Physical distribution firms help the company
to stock and move goods from their points of
origin to their destinations. Examples would
be warehouses (that store and protect goods
before they move to the next destination).

Marketing Services Agencies

• Marketing services agencies (such as
marketing research firms, advertising agencies,
media firms, etc.) help the company target and
promote its products to the right markets.

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Financial Intermediaries
• Financial intermediaries (such as banks, credit
companies, insurance companies, etc.) help
finance transactions and insure against risks
associated with buying and selling goods.

• Customers:
– Several types of
markets that
purchase a
company’s goods and
services
– Customer vs
consumer

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• Competitors:
– Those who serve a target market with products and
services that are viewed by consumers as being
reasonable substitutes
– Company must gain strategic advantage against these
organizations
• Publics:
– Group that has an interest in or impact on an
organization's ability to achieve its objectives

The Purpose of
Five-Forces Analysis
• The five forces are environmental forces
that impact on a company’s ability to
compete in a given market.
• The purpose of five-forces analysis is to
diagnose the principal competitive
pressures in a market and assess how
strong and important each one is.

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Porter's Five Forces Model

Potential
entrants

Threat of
new entrants

Bargaining power Industry competitors Bargaining power

of suppliers of buyers
Suppliers Buyers
Rivalry among
existing firms

Threat of
substitutes

Substitute
products

Threat of New Entrants

Economies of Scale
Barriers to
Entry Product Differentiation

Capital Requirements

Switching Costs

Access to Distribution Channels

Government Policy

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Bargaining Power of Suppliers

Suppliers are likely to be powerful if:
Supplier industry is dominated by a
Suppliers exert power in
few firms
the industry by:
Suppliers’ products have few substitutes
* Threatening to raise
prices or to reduce quality
Buyer is not an important customer
Powerful suppliers can to supplier
squeeze industry Suppliers’ product is an important
profitability if firms input to buyers’ product
are unable to recover
cost increases Suppliers’ products are differentiated

Suppliers’ products have high

switching costs

Bargaining Power of Buyers

Buyer groups are likely to be powerful if:
Buyers are concentrated or purchases are
large relative to seller’s sales
Buyers compete with the
Purchase accounts for a significant fraction of supplying industry by:
supplier’s sales

Products are undifferentiated

* Bargaining down prices
Buyers face few switching costs
* Forcing higher quality
Buyer has full information
* Playing firms off of
Buyer presents a credible threat of each other
backward integration

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Threat of Substitute Products

Keys to evaluate substitute products:

Products
with similar Products with improving
function limit price/performance tradeoffs
the prices relative to present industry
firms can products
charge

Rivalry Among Existing Competitors

Intense rivalry often plays out in the following ways:

Competing for strategic position

Using price competition
Staging advertising battles
Increasing consumer warranties or service
Making new product introductions

Occurs when a firm is pressured or sees an opportunity

Price competition often leaves the entire industry worse off
Advertising battles may increase total industry demand, but
may be costly to smaller competitors

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The Macroenvironment

• The company and all of the other actors

operate in a larger macroenvironment of
forces that shape opportunities and pose
threats to the company.

The Company’s Macroenvironment

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The Company’s Macroenvironment

• Demographic:
– The study of human populations in terms of size,
density, location, age, gender, race, occupation, and
other statistics.
– Marketers track changing age and family structures,
geographic population shifts, educational
characteristics, and population diversity.

Economic Environment
Consists of factors that affect consumer
purchasing power and spending patterns.

• Changes in Income • Income Distribution

– 1980’s - 1990’s – 2000’s – – Upper class
…………………………………. – Middle class
– Working class
– Underclass

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Income Distribution

Walt Disney markets two distinct Pooh bears to match its two-tiered
market.

Natural Environment
• Involves the natural
resources that are
needed as inputs by
marketers or that are
affected by marketing
activities.

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Factors Impacting the Natural

Environment
Shortages of Raw Materials

Increased Pollution

Increased Government Intervention

Environmentally Sustainable Strategies

Technological Environment
• Most dramatic
force now
shaping our
destiny.

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Technological Environment

• Changes rapidly.
• Creates new markets and
opportunities.
• Challenge is to make
practical, affordable
products.
• Safety regulations result in
higher research costs and
longer time between
conceptualization and
introduction of product.

Political Environment

Includes Laws,
Increasing Legislation
Government
Agencies, and
Pressure Groups that
Changing Government
Influence or Limit Agency Enforcement
Various Organizations
and Individuals In a
Given Society. Increased Emphasis on Ethics
& Socially Responsible Actions

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Cultural Environment
• The institutions and
other forces that
affect a society’s
basic values,
perceptions,
preference, and
behaviors.

Cultural Environment
• 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.

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

Society

Nature

The Universe

References : Marketing Management – Philip Kotler

Principles of Marketing – Philip Kotler, Gray Armstrong

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