1 Chapter 3 The Marketing Environment “Marketing does not take place in a vacuum.“

2 Marketing Environment Marketing Environment- consists of the actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful relationships with its target customers. Includes: Microenvironment - forces close to the company that affect its ability to serve its customers. Macroenvironment - larger societal forces that affect the microenvironment.

3 The Company’s Microenvironment Company’s Internal Environment- functional areas inside a company that have an impact on the marketing department’s plans. Suppliers - provide the resources needed to produce goods and services and are an important link in the “value delivery system”. Marketing Intermediaries - help the company to promote, sell, and distribute its goods to final buyers. i.e. resellers.

4 Company’s Internal Environment (Fig. 3.1)

5 The Company’s Microenvironment Customers - five types of markets that purchase a company’s goods and services. Competitors - those who serve a target market with similar products and services against whom a company must gain strategic advantage. Publics - any group that perceives itself having an interest in a company’s ability to achieve its objectives.

6 Types of Customer Markets (Fig. 3.2) Government Markets International Markets Reseller Markets Business Markets Consumer Markets Company

7 Steps in Analyzing Competitors (Fig. 18.4) Identifying the company’s competitors Assessing competitor’s objectives, strategies, strengths and weaknesses, and reaction patterns Selecting which competitors to attack or avoid

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9 Overall Cost Leadership Overall Cost Leadership Differentiation Focus Middle of the Road Middle of the Road Basic Competitive Strategies

10 Competitive Strategies: Value Disciplines Operational Excellence Customer Intimacy Product Leadership Companies Gain Leadership Positions by Delivering Superior Value to their Customers Through These Strategies:

11 Competitive Marketing Strategies Firms Competing in a Given Target Market Differ in their Objectives and Resources so May Choose the Following Forms:

12 Firm With the Largest Market Share Firm With the Largest Market Share Expand the Total Market Expand the Total Market Protecting Market Share Protecting Market Share Expanding Market Share Expanding Market Share Competitive Marketing Strategies Runner-Up Firms that Fight to Increase Market Share Runner-Up Firms that Fight to Increase Market Share Attack the Market Leader Attack the Market Leader Avoid the Market Leader Avoid the Market Leader Acquire Smaller Firms Acquire Smaller Firms Attack Other Firms Attack Other Firms

13 Runner-Up Firms that Want to Hold Their Share Without Rocking the Boat Runner-Up Firms that Want to Hold Their Share Without Rocking the Boat Follow Closely Follow Closely Follow at a Distance Follow at a Distance Competitive Marketing Strategies Firms that Serve Small Segments Not Pursued by Other Firms Firms that Serve Small Segments Not Pursued by Other Firms End-User Specialist End-User Specialist Customer-Size Specialist Customer-Size Specialist Service Specialist Service Specialist Quality- Price Specialist Quality- Price Specialist Geographic Market Specialist Geographic Market Specialist

14 Balancing Customer and Competitor Orientations Customer-Centered Competition -centered Product Orientation Competitor Orientation Customer Orientation Market Orientation Yes No YesNo

15 Major Forces in the Company’s Macroenvironment (Fig. 3.4)

16 The Company’s Macroenvironment Demographic - studies populations in terms of size, density, location, age, gender, race, occupation and other statistics. Economic - factors that affect consumer purchasing power and spending patterns. Natural - natural resources needed as inputs by marketers or that are affected by marketing activities.

17 Key U.S.Demographic Trends Changing Age Structure Population is aging; many divisions Changing American Family Later marriage, fewer children, working women, and nontraditional households Geographic Shifts Moving to the Sunbelt, suburbs, “micropolitan areas” Better-Educated & More White-Collar Increased college attendance and white-collar workers Increasing Diversity 72% Caucasian, 13% African-American, 11% Hispanic & 3% Asian

18 Age Distribution of the U.S. Population (78 million people born ) One of the most powerful forces shaping the marketing environment, 30% of population (45 million people born ) More skeptical, cynical of frivolous marketing pitches promising easy success (72 million people born ) Fluent and comfortable with computer, digital, and Internet technology (Net-Gens)

Discussion Connections Form small groups to identify a company that has done a good job of reacting to: Baby Boomers, or Generation X, or Echo Boomers What did the company do well? Compare this company to one that has done a poor job. What did they do poorly?

20 Economic Development Economic Development Changes in Income: Value Marketing Changes in Income: Value Marketing Changing Consumer Spending Patterns Changing Consumer Spending Patterns Key Economic Concerns for Marketers Key Economic Concerns for Marketers Economic Environment

21 Natural Environment Factors Affecting the Natural Environment Shortages of Raw Materials Increased Pollution Governmental Intervention Environmentally Sustainable Strategies

22 The Company’s Macroenvironment Technological - forces that create new technologies, creating new product and market opportunities. Political - laws, agencies and pressure groups that influence and limit organizations and individuals in a given society. Cultural - institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviors.

23 Technological Environment Faster pace of technological change; products are outdated at a rapid pace. Almost unlimited opportunities being developed daily in health care, space industry, robotics, and bio-genetic field. Challenge is not only technical, but also commercial – make practical, affordable versions of products. Increased regulation concerning product safety, individual privacy, and other areas that affect technological changes.

24 Increasing Legislation Increasing Legislation Changing Government Agency Enforcement Changing Government Agency Enforcement Includes Laws, Government Agencies, Etc. that Influence & Limit Organizations/ Individuals in a Given Society Includes Laws, Government Agencies, Etc. that Influence & Limit Organizations/ Individuals in a Given Society Increased Emphasis on Ethics & Socially Responsible Actions Increased Emphasis on Ethics & Socially Responsible Actions Political Environment

25 Cultural Environment People’s View of Organizations People’s View of Organizations People’s View of Nature People’s View of Nature People’s View of Themselves People’s View of Themselves People’s View of Society People’s View of Society People’s View of the Universe People’s View of the Universe People’s View of Others People’s View of Others Cultural Values of a Society Cultural Values of a Society

26 Responding to the Marketing Environment Environmental Management Perspective Taking a proactive approach to managing the microenvironment and the macroenvironment by taking aggressive (rather than passive) actions to affect the publics and forces in the marketing environment. How? Hire lobbyists, run “advertorials”, press law suits, file complaints, and form agreements.

27 Review of Concept Connections Describe the environmental forces that affect the company’s ability to serve its customers. Discuss the need to understand competitors as well as customers through competitor analysis. Explain the fundamentals of competitive marketing strategies based on creating value for customers. Illustrate the need for balancing customer and competitor orientations in becoming a truly market-centered organization. Explain how changes in the demographic and economic environments affect marketing decisions. Identify the major trends in the firm’s natural and technological environments. Explain the key changes in the political and cultural environments. Discuss how companies can react to the marketing environment.