THE MARKETING ENVIRONMENT Palmer: Introduction to Marketing THE MARKETING ENVIRONMENT Chapter 2

SESSION OVERVIEW This session will: explore the external influences on marketing show how marketers must respond to a constantly changing social, economic, technical and political environment identify the internal environment of an organisation as crucial for the success of marketing plans

DEFINITION OF THE MARKETING ENVIRONMENT "... the individuals, organisations and forces external to the marketing management function of an organisation that impinge on the marketing management's ability to develop and maintain successful exchanges with its customers"

COMPONENTS OF THE MARKETING ENVIRONMENT Micro-environment Macro-environment Internal environment Macro tends to be long terms trends that impact upon an organisation Micro can changes that impact on a day to day basis e.g. your competitors launch a superior product this could impact upon your sales very quickly.

THE MICRO-ENVIRONMENT Comprises all those organisations and individuals who directly or indirectly affect the activities of a company. It includes: Customers Intermediaries Suppliers Other stakeholders

STAKEHOLDERS OF ORGANISATIONS Stakeholders include: Customers employees local communities government intermediaries suppliers financial community It is important to research and monitor key stakeholders and note they their interest or influence can change over time.

THE VALUE CHAIN Raw materials are progressively transformed by members of the micro-environment into high value products Only the consumer can define value added

THE VALUE CHAIN A value chain for coffee

RELATIONSHIPS BETWEEN MEMBERS OF THE MICRO-ENVIRONMENT Organisations that make up a firm’s micro-environment are referred to as the “environmental set” Membership and relationships between them change over time

THE MACRO-ENVIRONMENT Comprises general forces and trends rather than specific organisations: Macro-economic environment Political environment Social and cultural environment Demographic environment Technological environment Ecological environment This is more commonly expressed as PESTLE analysis. Note this is dynamic and changes over time which presents both opportunities and threats. For example, the recent recession has put a squeeze on consumer spending in supermarkets. However supermarkets have responded by offering more value products to an increasingly price sensitive customers. However they at the same time have been able to increase their range of own label products (they make more profit on these).

MACRO-ECONOMIC ENVIRONMENT How much money do consumers have available to spend? How much will they have in the future? How fierce is competition in the market? Useful to include

POLITICAL ENVIRONMENT What are politicians saying that might affect our customers and our marketing activities? Cuts in government spending?? New tax allowances?? What external pressures are influencing politicians? Useful to include

SOCIAL AND CULTURAL ENVIRONMENT What will be the challenges and opportunities arising from greater cultural diversity? Cultural convergence or a greater need for cultural identity? Attitudes to 24/7 society? Useful to include

DEMOGRAPHIC ENVIRONMENT More affluent, fit, elderly people in the population What other demographic trends have marketers reacted to? What changes should they be anticipating? Useful to include

TECHNOLOGICAL ENVIRONMENT How will new technology affect marketing? new products? new promotional media? new distribution channels? Useful to include

ECOLOGICAL ENVIRONMENT Growing concern about the ecological environment – e.g. global warming Ecological environment is a resource for business Good marketers need to be seen not to harm it Useful to include

MONITORING AND RESPONDING TO ENVIRONMENTAL CHANGE Organisations that do not adapt may decline and die To avoid this, organisations must: understand what is going on in their business environment respond and adapt to this change Information about the environment is crucial, but won’t produce decisions

SWOT ANALYSIS A framework for understanding internal strengths and weaknesses These are matched against external opportunities and threats

THE INTERNAL ENVIRONMENT Other internal functions, e.g. finance, operations, personnel impinge on the marketing function Marketing is affected by: organisational processes the allocation of responsibilities within the organisation

DON’T FORGET THE WORKERS…. In many services companies, marketing plans will be difficult to implement by a “bad employer” Timpson is a highly rated employer - contributes to marketing success

THE FLEXIBLE ORGANISATION Flexibility is needed to respond to environmental change Requires flexible labour force The organisation should be able to rapidly downsize / expand capacity

SUMMARY OF KEY POINTS Value is created through interaction with other individuals and organizations that make up the marketing environment. The marketing environment cannot be neatly divided into distinct areas. A good marketer should understand the complex linkages between different parts of the environment. Micro-environment influences may demand urgent attention, but macro-environment influences can have a more profound long-term effect on an organization’s marketing.