1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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)