LESSON #03

THE MARKETING
ENVIRONMENT

Presented by:
Bwemelo, G.
College of Business Education

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Introduction
• All businesses operate in the marketing environment
• This includes factors inside and outside the business
firm
• The marketing environment is dynamic
• Change in the marketing environment affects the
marketing activities and decisions
 Learning Objectives
• Upon completion of this lesson you should be
able to:
– Define the term marketing environment
– Identify and describe the key components of the
• macro-environment
• micro-environment
• internal environment affecting marketing
 What is Marketing Environment?
• Marketing environment is a set of forces or
factors that directly or indirectly affect
marketing activities
 Components of the Marketing Environment

External Environment Internal Environment

• Policies
• Resources e.g. HR,
Financial resources,
Macro Environment Micro Environment Facilities
• Organizational
• Political & Legal • Competitors Culture
Factors • Market share
• Suppliers
• Economic Factors
• Intermediaries
• Social Factors
• Technological • Customers
Factors • Publics
 External Environment
• External Environment consists of Macro and Micro
Factors
• These factors create opportunities or threats in the
market
• Macro-environment refers to external forces or
variables that have indirect effect on marketing
activities of the firm.
– These factors are beyond the firm’s control.
• Micro-environment consists of factors that have direct
influence on marketing activities of the firm
– These are factors close the business firm

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 Political & Legal Environment
• Changes in government policy, laws and regulations
can affect marketing in different ways
• The government may introduce policies, laws and
regulations that create opportunities or threats for
businesses
• For example,
– The government may set indicative price. The company
has to comply and this will affect pricing decision
– The government may increase tax. This will affect pricing
decisions
– The government could ban making, importation, sales or
use of certain products e.g. ban on use of plastic bags, ban
on illicit spirits (“viroba”) etc.

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 Economic Conditions
• These are factors that affect consumer buying power and
spending patterns.
• These include: income level, employment status, economic
growth, exchange rates, interest rates, inflation.
• For example,
– There may be recession (decrease in consumer spending due to
decrease in income). This results in decrease in business sales
and this may have to make staff redundant
– Interest rates could go up. This would make borrowing more
expensive and so this may affect ability to expand the business
– Inflation may rise (general rise in price over time). This will
affect cost of production, product demand, consumer spending,
and pricing decisions

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 Socio-cultural Environment
• Socio-cultural factors include:
– Demographic characteristics such as population size, people’s
age, sex, income, marital status, family size, education and
occupation
– Culture in terms of people’s beliefs, values and lifestyles
– People’s attitudes toward a particular product or service
• The impact of social-cultural environment can be summarized as
follows:
– In estimating demand for the product, the population size must
be considered
– When designing the product it is important to consider the
cultural background of consumers. E.g. Changes in tastes,
fashions and lifestyles may reduce sales.
– Changes in lifestyles may affect popularity of products
 Technological Environment
• Changes and advancement technology affects
marketing in many ways
• The technology available in the world is changing the way
people communicate and the way firms do business.
• For example,
– New technology introduces faster machinery
– Use of IT and the Internet influences new sales
strategies
– Use of IT and the Internet enhances immediate
response and cost and time saving

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 Natural Environment
• Change in natural environment influences
demand for many products
• For example,
– Change in weather can damage or enhance sales of
certain products
• Bad weather may prevent customers coming into the shop
• Some businesses may have to close and lose sales due to
bad weather
• Bad weather may cause delivery of goods to customers
delayed

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Variables in the Micro-environment
• Customers. Changes in customer needs may create
certain opportunities or threats to the business.
• Competitors. Competition determines price of the
product and encourages technological innovation.
• Suppliers; provide resources needed by the company
to produce goods and services.
• Intermediaries: help the company to promote, sell,
and distribute its goods and services to final buyers.
Intermediaries include middlemen, physical
distribution firms and marketing service agencies.
• Publics: include financial publics, government public,
media publics and local publics.
 Competition
• Competition is a critical factor affecting sales
programs
• For example,
– Competitors may launch new products. This will force
your business to change some of sales strategies
– Competitors may lower their prices. This will compel
your business to lower price too to be competitive
and encourage customers to stay loyal to your
business
• Sales programs should be designed to gain a
differential advantage over competitors.

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 Internal Environment
• The variables in the internal environment include:
– Policies e.g. pricing policy, compensation policy etc.
– Financial resources; ability to pay, budget available
– Human resources e.g. availability of salespeople, skills of
salespeople, experience of salespeople, quality of
management etc.
– Availability of facilities
– Production capacity
– Product features and quality
– Promotion methods used
– Organization culture

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 Exercise
Complete the passage by filling in the blanks with the
correct key word(s) from the box provided.

Strengths, Opportunities, social environment,

weaknesses, macro-environment, micro-environment,
marketing environment, economic environment,
political environment, natural environment, internal
environment, marketing research.

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• Marketing activities of a firm are vitally affected by a
number of factors. These factors together form the
…………………………………………………………………….
• The marketing environment can be classified into
two broad categories external environment and
internal environment.
• External environment implies all external forces
within which a business firm operates.
• External environment is further divided into macro-
environment and micro-environment.

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• The ……….………………………………………… consists of
factors that indirectly affect the firm and cannot be
controlled by it. It includes concepts such as social-
cultural, economic, technological, political, and
natural forces.
• The …………………………….……….…………include the
demographic characteristics of human population in
terms of size, density, location, age, gender, race, and
occupation. This is a very important factor to study
for marketers and helps to divide the population into
market segments and target markets.

Monday, December 31, 2018 Prepared by Bwemelo G 17

The ………………………………..………………refers to the
purchasing power of potential customers and the ways
in which people spend their money. This factor affects
distribution of wealth and how people spend their
money.
The ………………………………………………………includes the
natural resources that a company uses as inputs and
affects their marketing activities. The concern in this
area is the increased pollution, shortages of raw
materials and increased governmental intervention.

Monday, December 31, 2018 Prepared by Bwemelo G 18

• The …………………………………… includes all laws, policies
and regulations that influence or limit other
organizations and individuals within a society.
• The ………………………………………….………………. refers to
the forces that are close to the firm and directly affect
its ability to serve its customers. It includes the
company itself, its suppliers, marketing intermediaries,
customer markets, competitors, and publics.
• Changes in the external marketing environment
produce threats that hurt marketing efforts, but also
create …………………….
• Examining the internal environment helps to identify
………..………………..and ………….……………of the company
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