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Topic

The Marketing Environment


Roadmap: Previewing the Concepts

1. Describe the environmental forces that affect


the company’s ability to serve its customers.
2. Explain how changes in the demographic and
economic environments affect marketing
decisions.
3. Identify the major trends in the firm’s natural
and technological environments.
4. Explain the key changes in the political and
cultural environments.
5. Discuss how companies can react to the
marketing environment.
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Case Study
McDONALD’S – Facing New
Challenges
Challenges Marketing Initiatives
 Faces shifting consumer  Focus on core competency
lifestyles and preferences of consistent products and
for healthier foods. reliable service.
 Low ratings of food and  Offers upscale alternatives
service quality. including McCafe and
 Atmosphere not upscale. Bistro Gourmet.
 Image is perceived as  Eliminates “supersize,”
being uncultured, uncool, offers healthier food
and unclassy by younger options, and introduces Go
target markets. Active! Adult Happy Meal.
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 The Marketing Environment in India is undergoing a
rapid transformation and this is particularly
significant for Indian companies.

 Many companies have started utilizing the


opportunities that are emerging in a changing
environment.

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Identifying and Responding to the
Major Market Environment Forces

 Many of the industries lost its competitive advantage to


new entrants in 1980 and thereafter
 HM and premier automobiles lost their pre-eminent
position in the Indian market to MUL ‘s maruti 800
M&M was shaken up by maruti udyog’s gypsy petrol
jeeps which caught the imagination of the youth .It has to
redesign its product portfolio.
HLL was cornered by Nirma as they were servicing
different market segment
TV giants NELCO , Crown,Bush lost to ONIDA and
Videocon which further lost to BPL and Sony

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Videocon launched its washing machine in
1988 and then suddenly glut in the market.
 Videocon has also become the larger
producer of picture tubes after acquiring the
picture tube business from Thomson
Electronics
 Ranbaxy, had become an important player in
international market through R&D initiatives
and acquisitions

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Marketing Environment

 Consists of actors and forces outside the


organization that affect management’s ability
to build and maintain relationships with
target customers.
– Studying the environment allows marketers to
take advantage of opportunities as well as to
combat threats.
– Marketing intelligence and research are used to
collect information about the environment.

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Marketing Environment

 Includes:
– Microenvironment: actors close to the
company that affect its ability to serve its
customers.
– Macroenvironment: larger societal forces
that affect the microenvironment.
• Considered to be beyond the control of
the organization.

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Marketing Environment

 Actors in the microenvironment


include:
– The company itself
– Suppliers
– Marketing intermediaries
– Customers
– Competitors
– Publics

Copyright 2007, Prentice Hall, Inc. 3-9


The Macroenvironment

 The company and all of the other actors


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

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The Macro environment

 Forces in the macroevironment can be


categorized as:
– Demographic
– Economic
– Natural
– Technological
– Political
– Cultural

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Demographic Environment

 Demographics:
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.
Copyright 2007, Prentice Hall, Inc. 3-12
Demographic Environment

 Baby Boomers:
– 78 million born between 1946 and 1964.
– Equal 28% of population.
– Earn more than 50% of all personal
income.
– Almost 25% belong to racial or ethnic
minority.
– Spend a lot on anti-aging products and
services.
– Are likely to postpone retirement.
Copyright 2007, Prentice Hall, Inc. 3-13
Demographic Environment

 Generation X:
– 45 million born between 1965 and 1976.
– Defined by shared experiences:
• Increasing divorce rates.
• More of their mothers employed.
– Cynical of frivolous marketing pitches.
– Care about the environment.
– Prize experience, not acquisition.

Copyright 2007, Prentice Hall, Inc. 3-14


Demographic Environment

 Generation Y:
– 72 million born between 1977 and 1994.
– Have large amount of disposable income.
– Comfortable with computer technology.
– Tend to be impatient and “Now-Oriented.”
– Many product lines targeted at those who
are part of Generation Y:
• Teen and young adult games
• Clothes, furniture, food

Copyright 2007, Prentice Hall, Inc. 3-15


Hero provokes
the teenager to
be a receiver of
innovations

(1977-1994)

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Indian Demographic Report
 With an estimated population of 1.1 billion,
India is the world's second most populous
country.
 Almost 70% of Indians reside in rural areas,
although in recent decades migration to larger
cities has led to the exponential rise in the
urban population.
 India's largest urban agglomerations are
Mumbai, Chennai, Kolkata, Delhi, Hyderabad,
and Bangalore
 The growth rate of India’s population between
2000-2005 was 1.55%. It will decline to .75% by
2025-203
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Demographic Environment

 Almost 40% of Indians are younger than 15


years of age
 As per Census In India 2001 , 15.35% - 6
years of age or less , 34% is less than 25
years of age , and another 24 % of this
population belongs to 25-34 years , above
the age of 54 years are only 40%
 The changing age structure of the India
population is the single most important
demographic trend.
– DINKS.

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Identifying and Responding to the Major
Macroenvironment Forces
– Population Growth – 85% is young market of people
aged 44
– Young group attracted competitors in the area of
soft drink,mobiles,motor-cycles, scooters, ready-
made garments
Bicycles street cat, hero ranger BSA mach
Benetton, big kids Kamp
– Role of woman – 50% of population , has changed
which resulted into whole range of new products-
ready to cook,ready-mixes,cooking range,chapatti-
maker,washing machine,vacuum cleaner,iron, ready-
to-eat cereal

Copyright 2007, Prentice Hall, Inc. 3-19


Targeting wives for
instrumental roles

SBI

Copyright 2007, Prentice Hall, Inc. 3-20


Identifying and Responding to the Major
Macro environment Forces

 more egalitarian relations between


the husband and the wife and also a
move toward more shared decision-
making patterns between parents and
children.
 Despite these changes, the fact
remains that most individuals
continue to value and give top
priority to the family, and families
continue to maintain strong kinship
bonds and ties.
Washing Machines , Kurkure , MDH
Masala
Ad’s giving total family picture and Love
,

Copyright 2007, Prentice Hall, Inc. 3-21


Identifying and Responding to the Major
Macro environment Forces
Value Systems
– Young children more influential about choice of product
Increasing literacy with more opportunities for
educational institution, magazines, newspapers, books
imply more demanding consumer
– Changes in value systems-a major sociological change
Strong family bondage and love for family as a core value
and the driving force in Indian market
e.g. the VicksVaporub story, Videocon washing machine “
you are ready for the show” , Magi noodles. Yeh Mom
Made hai - Rasna (weaving core Indian values into
marketing)

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7-11 years old are
able to handle
money

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– Indian consumer has acquired new values
because of their access to international media
and satellite channel like CNN , BBC , Star- Now
spending more time on leisure goods
Meant boom for travel industry , air-conditioners
,motor cars
credit cards – not willing to postpone the
gratification of his needs for tomorrow
Internet and computer education , Cyber café’s

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Identifying and Responding to the Major
Macro environment Forces

Geographical changes
 Significant population moves will determine the
marketing focus like choice of test marketing
stations, location of warehouse/depots and the
method of reaching out to these areas
 Migration of the population to the commercial hubs
Mumbai , Delhi
 This offered plenty of market opportunities for all
product and service organizations- be it products ,
restaurants , departmental stores or housing
finance schemes
 The trend to Bangalore – now a good test marketing
centre

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Political Environment

 Includes laws, government agencies, and


pressure groups that influence or limit
various organizations and individuals in a
given society.
 Areas of concern:
– Increasing legislation- the process of making law
– Changing government agency enforcement.
– Increased emphasis on ethics and socially
responsible behavior.

Copyright 2007, Prentice Hall, Inc. 3-26


Political-Legal Environment
Govt. Intervention in the industry is reality
 Norway bans Sales Promotion
 In India , food companies need approval to launch brands
that duplicate what already exists in market, such as
another cold drink , or a brand of rice .
 It is mandatory all veg. Items carry green dot and non-
veg carry red dot.
 In India all packaged products should have the maximum
retail price or MRP on the package.
 Auto Industries had to introduce expensive emission
controls in the car – Euro II compliance

Copyright 2007, Prentice Hall, Inc. 3-27


Political-Legal Environment
 In India , Delhi the state Govt. Implemented the
rule that public transportation vehicles like auto
rickshaws and buses use only compressed
Natural Gas ( CNG) as a fuel instead of Diesel and
petrol

 RBI in India is in process of formulating guidelines


to credit card companies , keeping in mind the
interest of consumers

Copyright 2007, Prentice Hall, Inc. 3-28


A marketer needs to understand these
policies but also the political
philosophy and ideology of major
political groups and individuals.
Responsible companies in India have
responded to these environmental
changes and have formulated policies
to address consumer complaints

Copyright 2007, Prentice Hall, Inc. 3-29


Indian cellular Industry

 For the Indian cellular Industry , the year 2001


dawned with a big problem.
 The govt. which was deregulating the telecom
sector for past few years opened up the cell-phone
business and allowed fixed line service providers to
offer mobile phones in a limited area
 Fixed phone as mobile phone but in around 55Km
radius
 Foreign players to reconsider their investment plans
in India
 Hutchison freezes all funds flow into India

Copyright 2007, Prentice Hall, Inc. 3-30


Economic Environment
 Consists of factors that affect consumer
purchasing power and spending patterns.
– GDP is growing at the rate
 India’s economy has of 6 %
been showing vibrancy – Indian economy has been
growing well
and growth from 1991
– The per capita income is
ever since the Govt. growing at around 8%
initiated programs to – Nevertheless clear picture
ease Govt. Controls on comes when India is
industry and compared with other
commerce. countries
– Countries like Singapore ,
Thailand , China , and Sri
Lanka have a higher per
capita GDP than India

Copyright 2007, Prentice Hall, Inc. 3-31


Identifying and Responding to the
Major Macroenvironment Forces
 Rise in the standard of living of rural belt
 Govt. policies on the development of
infrastructure made marketers task simple
 Increased competition has forced near death of
inferior brands
 Alliances, mergers and acquisitions has
produced ready-made market for brands and
has helped increase distribution network
(Whirlpool acquiring Kelvinator, Coca-Cola
acquiring Parle brands,HLL acquiring Brooke
Bond Lipton Ltd., Tata Tea acquires Tetley.

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Several MNC’s entered
 GM with HM – Opel Astra
 Ford with M&M – Escort and Fiesta
 Honda with Siel
 Hyundai – South Korea
 GE with Godrej
 Whirlpool by acquiring Kelvinator India
Ltd
Electrolux by Kelvinator

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 Income Distribution : Marketers need
to understand the distribution system
of income to make more meaningful
conclusions for arriving at a specific
decision
 Lower income segment has be steadily
declining and middle income
household has been showing an
increase

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Changing consumption
pattern of Indian consumer
 Indian consumer going major transformation
 Exposure to international media , foreign
travel ,degree of urbanization ,education
levels , emergence of new job opportunities ,
in service sectors like IT , Call centers ,
Retailing
 Lifestyle products
 Shopping basket has increased
The Marketing strategy for companies needs
to be focused on the opportunities that
economic growth spins off .

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Natural Environment

 Involves natural resources that are


needed as inputs by marketers or that
are affected by marketing activities.
 Factors include:
– Shortages of raw materials.
– Increased pollution.
– Increased government intervention.
– Environmentally sustainable strategies.

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 Companies into environmentally
friendly products
 Green Marketing
 E.g Air (prevention and control of
pollution) Act 1981 insists that “ Eco
Marks” label in consumer products are
environmental friendly

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 The campaign against Coca Cola in a village
in Kerala alleging water shortages and
environ met deterioration in the vicinity –
Environmentalists actively campaigning
against pollution
 Steel companies have to spent huge amount
of money on pollution control equipment
 Auto Industries had to introduce expensive
emission controls in the car – Euro II
compliance
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 The soap industry have to increase its
biodegradability
 In India , Delhi the state Govt. Implemented
the rule that public transportation vehicles
like auto rickshaws and buses use only
compressed Natural Gas ( CNG) as a fuel
instead of Diesel and petrol
 Pollution under control certification is must

Copyright 2007, Prentice Hall, Inc. 3-39


Mc Donald's Initiative

Mc Donald's has introduced number of well publicized


environmental initiatives:
 Unbleached paper carry bags.
 Replacing polystyrene foam sandwich clamshells with
paper wraps and light weight recycled boxes.
 Mc Donald's received the EPA Waste Wise Partner of
the Year award for waste reduction effort: conserved
3,200 tons of paper and cardboard replacing sandwich
containers with single layer wraps.
 Resulted in spending $355 million on recycle content
products.

Copyright 2007, Prentice Hall, Inc. 3-40


Great opportunity awaits companies and
marketers who can create new solutions
that promise to reconcile prosperity with
environmental protection

Copyright 2007, Prentice Hall, Inc. 3-41


Technological Environment

 Most dramatic force shaping our destiny.


 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.

Copyright 2007, Prentice Hall, Inc. 3-42


Blessing Vs. Horror

 Penicillin , open heart surgery , birth


control pills

Vs
Hydrogen Bomb , nerve Gas and
submachine gun

Copyright 2007, Prentice Hall, Inc. 3-43


Figure 6-2: Virtual Reality Applications in Marketing

Virtual Reality technology lets users interact with computer-


generated worlds through sight, sound, and touch.

Copyright 2007, Prentice Hall, Inc. 3-44


Innovation – An Intelligent
coffee table
 Microsoft has launched an entirely new
product category called surface
computing.
 Its a 30 Inch screen, which sits atop a
21 inch a long coffee table
 You can use your fingers to perform
tasks on the surface.
Refernce : 4P’s Businesss and Marketing – June , 2007

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 Dell , HP ,Apple and Microsoft with
“smart” mobile phones
 Less risk innovations like freeze-dried
coffee , combination shampoos ,
conditioners , antiperspirants and
Deo’s
 Technology with long term
consequences

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 Accelerating pace of change – personal
computers , digital wristwatches , video
recorders , fax machines , internet
 Unlimited opportunities of innovations-
AID cures , happiness pills , painkillers ,
robotics , safe contraceptives ,
nonfattening foods , fantasy products like
flying cars , 3-D TV’s

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 Greater emphasis on R&D – Ranbaxy , Zydus
, Cadilla , Dr. Reddy’s , Cipla (7-8%of sales )
 Increased Regulation of technology change
– The drugs controller of India is responsible
for approval of new drugs , clinical trials,
laying down standards for drugs ,control
over the quality of imported drugs ,etc.

Marketers must be aware of these regulations


when proposing launching new products

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Cultural Environment

 Sellers must examine the ways consumers


in different countries think about and use
products before planning a marketing
program.
 Business norms vary from country to
country.
 Companies that understand cultural nuances
can use them to advantage when positioning
products internationally

Copyright 2007, Prentice Hall, Inc. 3-49


4

It’s Not the Gift That Counts, but How Your Present It…

Arab World Do not give a gift when you first meet someone. It
may be interpreted as a bribe.
Do not let it appear that you contrived to present the
4-5 gift when the recipient is alone. It looks bad unless
you know the person well. Give the gift in front of
others in less –personal relationships.
Latin America Do not give a gift until after a somewhat personal
relationship has developed unless it is given to
express appreciation for hospitality.
Gift should be given during social encounters, not in
the course of business.
China Never make an issue of a gift presentation—publicly
or private.
Gifts should be presented privately, with the
exception of collective ceremonial gifts at banquets.
Irwin/McGraw-Hill
Copyright 2007, Prentice Hall, Inc. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights3-50
reserved.
Cultural Environment

 With 30 different languages , over 200


mother tongues and around 2000
dialects , India is a complex nation of
cultures and sub-cultures.
 Significant variation in food habit is
another aspect that reflects the
diversity of India
Understanding Diversity is critical to
marketing success.
Copyright 2007, Prentice Hall, Inc. 3-51
Cultural Environment

Gits India and Orkay India companies


specialized in supplying gourmet mixes
to house wives knows the taste well of
north and south India
HUL markets different blends of tea
under the same brand name to address
the regional preferences of consumers

Copyright 2007, Prentice Hall, Inc. 3-52


Marketing Mix Adaptation

In India, McDonald’s serves chicken, fish, and vegetable burgers,


and the Maharaja Mac—two all-mutton patties, special sauce,
lettuce, cheese, pickles, onions, on a sesame-seed bun.
Copyright 2007, Prentice Hall, Inc. 3-53
Cultural Differences

When Nike
learned that this
stylized “Air” logo
resembled “Allah”
in Arabic script, it
apologized and
pulled the shoes
from distribution.

Copyright 2007, Prentice Hall, Inc. 3-54


Colgate Goes to China

Using aggressive promotional and educational programs,


Colgate has expanded its market share from 7% to 35% in
less than a decade.
Copyright 2007, Prentice Hall, Inc. 3-55
U.S. Globalization

Many U.S.
companies
have made
the world
their
market.

Copyright 2007, Prentice Hall, Inc. 3-56


Responding to the
Marketing Environment

 Environmental Management
Perspective
– Taking a proactive approach to managing
the environment by taking aggressive
(rather than reactive) actions to affect the
publics and forces in the marketing
environment.

Copyright 2007, Prentice Hall, Inc. 3-57


 Exercise:
 List below the PEST factors that could influence marketing strategy.

 Political.
 1
 2
 3
 4
 5
 Economical
 1
 2
 3
 4]
 5
 Social
 1
 2
 3
 4
 5

 Technological
 1
 2
 3
 4
 5
 Demographic
 1.
 2.
 3.
 4.
 5.
 Copyright 2007, Prentice Hall, Inc. 3-58