Chapter 3 Scanning Marketing Environment DR RUSHDY WADY
The objectives Of this Chapter is to Describe the environmental forces that affect the company’s ability to serve its customers. 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.
THE MARKETING ENVIRONMENT INTRODUCTION INTERNAL ENVIRONMENT EXTERNAL ENVIRONMENT SWOT ANALYSIS THE MARKETING ENVIRONMENT INTRODUCTION INTERNAL ENVIRONMENT EXTERNAL ENVIRONMENT SWOT ANALYSIS
Marketing Environment We have discussed before the meaning of Marketing and we said that marketing is .
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 whole microenvironment.
The Marketing Environment Demographic Company Economic Cultural Company Publics Suppliers Competitors Customers Natural Political Intermediaries Technological
The Microenvironment Company Publics Competitors Intermediaries Suppliers Forces Affecting a Company’s Ability to Serve Its Customers Competitors Intermediaries Customers
The Company’s Microenvironment Company’s Internal Environment- functional areas such as top management, finance, and manufacturing, etc.
Suppliers - provide the resources needed to produce goods and services and are an important link in the “value delivery system”.
Suppliers Marketers must watch supply availability and pricing Effective partnership relationship management with suppliers is essential
Marketing intermediaries Help to promote, sell and distribute goods to final buyers Include resellers, physical distribution firms, marketing services agencies and financial intermediaries Effective partner relationship management is essential
Marketing services agencies are the marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right markets. Financial intermediaries help finance transactions or insure against the risks associated with the buying and selling of goods.
Marketing intermediaries form an important component of the company’s overall value delivery system. -Today’s marketers recognize the importance of working with their intermediaries as partners rather than simply as channels through which they sell their products.
The Company’s Microenvironment Customers - five types of markets that purchase a company’s goods and services.
Types of Customer Markets International Markets Consumer Markets Company Government Markets Business Markets Reseller Markets
Customers - Consumer markets consist of individuals and households that buy goods and services for personal consumption - Business markets buy goods and services for further processing or for use in their production process. Reseller markets buy goods and services to resell at a profit. - Government markets are made up of government agencies that buy goods and services to produce public services or transfer the goods and services to others who need them. - International markets consist of buyers in other countries, including consumers, producers, resellers, and governments.
Competitors - those who serve a target market with similar products and services against whom a company must gain strategic advantage.
Marketers must gain strategic advantage by positioning their offers strongly against competitors’ offerings in the minds of consumers. - No single competitive marketing strategy is best for all companies. Each firm should consider its own size and industry position compared to those of its competitors.
Publics - A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives.
Types of Publics Financial i.e. Banks Media i.e. Newspapers Government i.e. Regulations Citizen-Action i.e. Consumer Groups Local i.e. Neighborhood Residents General Public Internal i.e. Employees
Financial publics influence the company’s ability to obtain funds. Media publics carry news, features, and editorial opinion. Government publics regulate public safety, truth in advertising, and other matters.
Citizen-action publics include consumer organizations, environmental groups, minority groups, and others. Local publics include neighborhood residents and community organizations.
The general public may be concerned about the company’s products and activities. Internal publics include workers, managers, volunteers, and the board of directors.
The Macroenvironment Demographic Cultural Economic Political Natural Forces that Shape Opportunities and Pose Threats to a Company Political Natural Technological
The Company’s Macroenvironment Demographic - studies populations in terms of age, gender, race, occupation, location 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.
The Company’s Macroenvironment Technological - forces that create new technologies, creating new product and market opportunities. Political - laws, agencies and 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.
Key U.S. Demographic Trends Changing Age Structure Population is getting older Changing Family Structure Marrying later, fewer children, working women, and nonfamily households Geographic Shifts Moving to the Sunbelt and suburbs (MSA’s) Increased Education Increased college attendance and white-collar workers Growing Ethnic and Racial Diversity 72% Caucasian, 13% African-American, 11% Hispanic & 3% Asian
Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. It involves people, and people make up markets. Changes in the world demographic environment have major implications for business. The single most important demographic trend in the United States is the changing age structure of the population.
The “traditional household” consists of a husband, wife, and children (and sometimes grandparents). In the United States today, married couples with children now make up only about 34 percent of the nation’s 105 million households, and this percentage is falling. The number of working women has increased greatly, growing from under 30 percent of the U.S. workforce in 1950 to just over 60 percent today.
This is a period of great migratory movements between and within countries. Over the past two decades, the U.S. population has shifted toward the Sunbelt states. The West and South have grown, while the Midwest and Northeast states have lost population. For more than a century, Americans have been moving from rural to metropolitan areas. The shift in where people live has also caused a shift in where they work. One in five Americans is now working out of the home with the help of electronic conveniences.
The U.S. population is becoming better educated In 2002, 84 percent of the U.S. population over age 25 had completed high school and 27 percent had completed college, compared with 69 percent and 17 percent in 1980. The workforce is also becoming more white collar. Between 1950 and 1985, the proportion of white-collar workers rose from 42 percent to 54 percent, that of blue-collar workers declined from 47 percent to 33 percent, and that of service workers increased from 12 percent to 14 percent.
The United States is called a melting pot—diverse groups from many nations and cultures have melted into a single, more homogenous whole. Instead, though, the United States seems to have become more of a “salad bowl” in which various groups have mixed together but maintained their diversity by retaining and valuing important ethnic and cultural differences.
Marketers are facing increasingly diverse markets, both at home and abroad. Most large companies now target specially designed products and promotions to one or more ethnic groups. Diversity goes beyond ethnic heritage. For example, many major companies have recently begun to explicitly target gay and lesbian customers. Another attractive segment is the more than 54 million people with disabilities in the United States; they represent almost $1 trillion in annual spending power. Marketers should pay attention to income distribution as well as average income.
Economic Environment Inflation and Recession Key Economic Concerns for Changes in Income Economic Development Key Economic Concerns for Marketers Inflation and Recession Changing Consumer Spending Patterns
Inflation Prices rise with no wage increase Purchasing Power decreases Increase profit margins by increasing efficiency Consumers reaction: Search for lowest prices Rely on coupons and sales Prices
Recession Income, production and employment fall Reduced demand for goods and services
Recession Marketing Strategies Improve existing products Maintain customer services Introduce new products Emphasize top-of -the line products
- The economic environment consists of factors that affect consumer purchasing power and spending patterns Nations vary greatly in their levels of distribution of income. - Subsistence economies are ones in which the population consumes most of their own agricultural and industrial output Industrial economies are those with rich markets for many different kinds of goods.
- Value marketing has become the watchword for many marketers - Value marketing has become the watchword for many marketers. They are looking for ways to offer today’s more financially cautious buyers greater value. Marketers should pay attention to income distribution as well as average income. In the United States, the top is populated by upper-class consumers, whose spending patterns are not affected by current economic events. The middle class is somewhat careful about its spending, but can still afford the good life some of the time. The working class must stick close to the basics of food, clothing, and shelter. The underclass must count their pennies when making even the most basic purchases.
Table 3. 1 shows the proportion of total expenditures made by U. S Table 3.1 shows the proportion of total expenditures made by U.S. households at different income levels for major categories of goods and services.
Consumers at different income levels have different spending patterns. Some of these differences were noted over a century ago by Ernst Engel, who studied how people shifted their spending as their income rose. Engel’s laws generally have been supported by later studies.
Natural Environment Shortages of Raw Materials Factors Affecting the Natural Environment Increased Pollution Governmental Intervention
- The natural environment involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities. Environmental concerns have grown steadily during the past three decades.
Marketers should be aware of several trends in the natural environment. - The first involves growing shortages of raw materials. Air and water may seem to be infinite resources, but some groups see long-run dangers. * A second environmental trend is increased pollution. Industry will almost always damage the quality of the natural environment. * A third trend is increased government intervention in natural resource management. The governments of different countries vary in their concern and efforts to promote a clean environment.
Concern for the natural environment has spawned the so-called green movement. Enlightened companies are developing environmentally sustainable strategies and practices in an effort to create a world economy that the planet can support indefinitely.
Technological Environment Rapid Pace of Change Unlimited Opportunities Technological Environment Issues in the Technological Environment Increased Regulation Practical, Affordable Products
Technological & Resource Factors New technology helps firm cope with other environmental factors New technology helps firm carrying out and easy apply of research Information technology helps economic growth
Technological Environment The technological environment is perhaps the most dramatic force now shaping our destiny. New technologies create new markets and opportunities. However, every new technology replaces on older technology. Marketers should watch the technological environment closely.
Political Environment Some Trends in the Political Environment Include: Increasing Legislation Designed to Protect Groups Changing Government Agency Enforcement Increasing Emphasis on Ethics and Socially Responsible Actions
Political Environment The political environment consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society. Well-conceived legislation can encourage competition and ensure fair markets for goods and services. Governments develop public policy to guide commerce. Legislation affecting business around the world has increased steadily over the years.
Understanding the public policy implications of a particular marketing activity is not a simple matter. Marketers must work hard to keep up with changes in regulations and their interpretations
Business legislation has been enacted for a number of reasons. The first is to protect companies from each other. The second purpose of government regulation is to protect consumers from unfair business practices. The third is to protect the interests of society against unrestrained business behavior. International marketers will encounter dozens, or even hundreds, of agencies set up to enforce trade policies and regulations.
Business is also government by social codes and rules of professional ethics. Enlightened companies encourage their managers to look beyond what the regulatory system allows and simply “do the right thing.” These socially responsible firms actively seek out ways to protect the long-run interests of their consumers and the environment.
The recent rash of business scandals and increased concerns about the environment have created fresh interest in the issues of ethics and social responsibility. The boom in e-commerce and Internet marketing has created a new set of social and ethical issues. Online privacy issues are the primary concern.
To exercise their social responsibility and build more positive images, companies are now linking themselves to worthwhile causes. Cause-related marketing has become a primary form of corporate giving. Cause-related marketing has stirred some controversy. Critics worry that cause-related marketing is more a strategy for selling than a strategy for giving. If handled well, cause-related marketing can greatly benefit both the company and the cause.
Cultural Environment Of Organizations Nature Oneself Society the Universe Others Cultural Values of a
The cultural environment is made up of institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviors. People grow up in a particular society that shapes their basic beliefs and values. Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government. Secondary beliefs and values are more open to change.
Although core values are fairly persistent, cultural swings do take place. Marketers want to predict cultural shifts in order to spot new opportunities or threats.
The major cultural values of a society are expressed in people’s views. People vary in their emphasis on serving themselves versus serving others. Recently, observers have noted a shift from a “me society” to a “we society” in which more people want to be with and serve others. People vary in their attitudes toward corporations, government agencies, trade unions, universities, and other organizations. By and large, people are willing to work for major organizations and expect, them, in turn, to carry out society’s work.
People vary in their attitudes toward their society. People vary in their attitudes toward the natural world. People vary in their beliefs about the origin of the universe and their place in it.
Responding to the Marketing Environment Environmental Management Perspective Taking a proactive approach to managing the microenvironment and the macro environment by taking aggressive (rather than passive) actions to affect the publics and forces in the marketing environment. How? Hire lobbyists , run “advertorials”, file law suits and complaints, and form agreements.
Many companies view the marketing environment as an uncontrollable element in which they must react and adapt. They passively accept the marketing environment and do not try to change it.
Other companies take a proactive stance toward the marketing environment. Rather than simply watching and reacting, these firms take aggressive actions to affect the publics and forces in their marketing environment. Such companies hire lobbyists to influence legislation affecting their industries and stage media events to gain favorable press coverage. They press lawsuits and file complaints with regulators to keep competitors in line, and they form contractual agreements to better control their distribution channels.
Rest Stop: Reviewing the Concepts Describe the environmental forces that affect the company’s ability to serve its customers. 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.