The marketing environment Chapter 2 The marketing environment Learning objectives: Explain the components of the micro-environment Discuss how the variables in the market environment will influence the business Demonstrate the impact the macro-environment can have on a business Construct a SWOT analysis

The marketing environment Components of the marketing environment Macro-environment Political/ legal Physical Economic International Technological Socio-cultural Market environment Consumers Competitors Suppliers STRENGTHS Micro-environment The mission Marketing objectives Resources, skills and abilities The marketing instruments WEAKNESSES OPPORTUNITIES THREATS

The marketing environment contd. Micro-environment: consists of forces close to the business that affect its ability to serve its customers Variables in the micro-environment Variables Elements 1. Mission of the business Statement of scope and purpose This is the direction the company is going, it directs its actions and activities 2. Selection of target market Size Characteristics Total market, one segment Black, white, male, female, tall, short, fat, slim 3. Marketing objectives Profit Customer orientation Survival and growth Sales and market share Brand extension To realise a specific profit per square metre floor space, profit (gross or net) per line or item Satisfy customer needs and wants To develop new products or scale down on range of products To expand the geographic area, add new lines, differentiate product and service offering To add new complementary items to existing range 4. Resources, skills and abilities Product knowledge, finances, facilities 5. Marketing instruments Product or service Distribution Price Marketing communication Items available, level of service, range of sizes and quality Selected outlets, mail order, retailers or wholesalers Same as competitors’ or lower, or higher Advertising, personal selling, publicity, sales promotion

The marketing environment contd. Variables in the market environment Suppliers An important link in the organisation’s overall customer value delivery system The purchasing function is managed as part of the overall supply chain Directly affects the price of product/ service Consumers Five types of customer markets Consumer markets – used for personal consumption Industrial markets – used for further processing or for use in their manufacturing process Reseller markets – used for reselling at a profit Government markets - used to provide public services or to transfer to those in need International markets – foreign buyers, including all of the above

The marketing environment contd. Market environment: refers to the variables that may influenced by the organisation but which cannot be controlled by the organisation Variables in the market environment Competitors Positive aspects Keep excessive profits in check Stimulates higher profitability Promotes better service Encourages technological innovation Characteristics of competitive market structure Type of structure Number of competitors Product Example Monopoly One Almost no substitute Telkom Oligopoly Few Homogeneous or differentiated BMW, Mercedes-Benz, Engen, BP Monopolistic competition Many Product differentiation with many substitutes Computer companies Perfect competition Unlimited Homogeneous product Farmers’ market

The marketing environment contd. Macro-environment: refers to variables in the environment over which the individual business has no control and on which it has little effect Variables in the macro-environment Political and legal environment Political stability in a country International laws and regulations International Global village Instant communication Beware of legal and cultural differences Physical Availability of natural resources

The marketing environment contd. Variables in the macro-environment Technological Experiences changes on a daily basis Also impacts on socio-cultural and economic environments Economic Includes: inflation; interest rates; unemployment; consumer income; exchange rate; monetary policy, business cycle Socio-cultural Strongly influenced by technology and economy Includes: demographics; lifestyles, cultural values and subcultural influences

The marketing environment contd. SWOT Analysis – Internal factors Strengths Areas in which a business does particularly well, that set it apart from competitors Financial resources, image, market leadership, buyer/supplier relations, expertise, skills and intuitive knowledge Weaknesses Areas which a business needs to improve, should it not want its competitors to gain the competitive advantage Facilities, financial resources, management capabilities, marketing skills and brand image

The marketing environment contd. SWOT Analysis – External factors Opportunities Occurrences that can benefit the business Identification of a previously overlooked market segment, changes in competitive or regulatory circumstances, technical changes and improved buyer or supplier relationships Threats Factors that can harm the business Changes in the consumer market and unexpected increase in competition, problems with suppliers, punitive legislation, recession or an unfavourable rate of exchange

The marketing environment contd. Environmental Scanning Definition: the measurement, projection and evaluation of change in the different environmental variables It helps the business to capitalise on early opportunities It provides an early signal of impending problems or threats It sensitises a business to the changing needs and wants of its customers It provides a basis of objective information about the internal strengths and weaknesses It improves the image of the business by showing that it is sensitive and responsive to its environment

Questions Please discuss the 3 marketing environments and please provide 3 variables of each environments. (15) Please explain the SWOT analysis and its use by providing your own example for each factor. (10)