1. PowerPoint to accompany
Philip Kotler, Stewart Adam, Linden Brown & Gary Armstrong

2. The global marketing environment
Chapter 3
The global marketing environment

3. Chapter objectives
List and discuss the importance of the elements of the marketing organisation’s micro-environment, including the marketing organisation, marketing intermediaries, customers, competitors and publics
Explain the broad concept of the organisation’s macro-environment
Outline the key changes occurring in the organisation’s macro-environment including shifts in the demographic, economic, technological, political, cultural and natural environments. 3

4. Micro vs Macro Environments
Micro-environment
The forces close to the organisation that affect its ability to serve its customers:
the organisation,
market channel firms,
customer markets,
competitors and publics
Macro-environment
The larger societal forces that affect the whole microenvironment:
demographic,
economic, natural,
technological, political
forces
Micro vs Macro Environments p 76
First we need to define a:
Marketing environment: ‘The actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful transactions with its target customers.’ To be successful, an organisation must adapt its marketing mix to trends and developments in this environment. The marketing environment has a micro-environment and a macro-environment.
Next, we need to understand how consumers are involved in the marketing environment.
Consumerism: ‘An organised movement of consumers whose aim is to improve the rights and power of buyers in relation to sellers.’
Micro-environment: ‘The forces close to the organisation that affect its ability to serve its customer-the organisation, market channel firms, customer markets, competitors and publics.’
Macro-environment: ‘The larger societal forces that affect the whole micro-environment – demographic, economic, natural, technological, political and cultural forces.’ 4

5. The Marketing Organisation's
Micro-Environment 5

6. Figure 3.1: Actors in Microenvironment
Suppliers
Company
Marketing Inter- mediaries
Customers
Competitors
Publics
Major actors in the organisation’s micro-environment Figure 3.1 p 77). 6

7. The Marketing Organisation’s Micro-Environment
Marketing management has the task of attracting and building relationships with customers by creating customer value and satisfaction. However, marketing management does not accomplish this task alone. Its success will depend on other actors in the organisation’s micro-environment
The Marketing Organisation
Suppliers
Marketing Intermediaries
Customers
Competitors
Publics
The Marketing Organisation’s –Micro-Environment pp 77-81
Marketing management has the task of attracting and building relationships with customers by creating customer value and satisfaction. However, marketing management does not accomplish this task alone.
Marketing management’s success depends on other actors in the organisation’s micro-environment – other departments, suppliers, marketing intermediaries, customers, competitors and various publics. 7

8. The Marketing Organisation
Senior management sets the organisation’s mission, objectives, broad strategies and policies.
Marketing managers must make decisions within the plans made by senior management.
Senior management must approve marketing plans before they can be implemented.
In designing marketing plans, marketing management takes other organisation groups into account such as:
top management,
finance,
research and development (R&D),
purchasing,
manufacturing and
accounting.
1. The Marketing Organisation p 77 8

9. Figure 3.2: The Internal Environment
Finance
R & D
Senior
Management
Marketing
Purchasing
An organisation’s internal environment Figure 3.2 p 78
In designing a marketing plan, marketing management takes other organisation groups into account – groups such as top management, finance, research and development (R&D), purchasing, manufacturing and accounting. All these interrelated groups form the internal environment.
Accounting
Manufacturing

10. Marketing Orientation
Organisations that adopt a marketing orientation must ‘think customer’, and work together to exceed customers’ expectations. 10

11. Suppliers
Suppliers are an important link in the organisation’s overall customer ‘value delivery system’.
Marketing managers must watch for:
supply availability.
supply shortages or delays,
labour strikes
price trends of supplies
All of the above events can damage customer satisfaction in the long run.
Rising supply costs may force price increases that can harm the organisation’s sales volume.
2. Suppliers p 78
Suppliers are an important link in the organisation’s overall customer ‘value delivery system.’ They provide the resources needed by the organisation to produce its goods and services. Supplier developments can seriously affect marketing programs. Marketing managers must monitor supply availability. Shortages or delays, strikes and other events can cost sales and damage customer satisfaction in the long run.
Suppliers: ‘Firms and individuals that proved the resources needed by the company and its competitors to produce goods and services’ 11

12. Marketing Intermediaries (1)
Marketing intermediaries help an organisation to promote, sell and distribute its goods to final buyers. They include:
Resellers
help the organisation find customers or make sales to them
Physical Distribution Firms
help the organisation stock and move
goods from their points of origin
to their destinations.
3. Marketing Intermediaries pp 78-79
Marketing intermediaries ‘help an organisation to promote, sell and distribute its goods to final buyers. They include resellers, physical distribution firms, marketing services agencies and financial intermediaries.’
Resellers: help the organisation find customers or make sales to them
Physical distribution firms: ‘Warehouse, transportation and other firms that help the organisation stock and move goods from their points of origin to their new destination’. 12

13. Marketing Intermediaries (2)
Marketing Services Agencies
are the facilitating agencies—marketing research companies, advertising agencies, media firms,export
consulting agencies and marketing consulting
firms that help the organisation target and promote its products to the right markets
Financial Intermediaries
include banks, credit organisations, insurance organisations and other businesses that help to finance transactions or insure against the risks associated with the buying and selling of goods
Marketing Intermediaries continued p 79
Marketing services agencies: ‘Marketing research companies, advertising agencies, media firms, marketing consulting agencies and other service providers that help the organisation target and promote its products to the right markets’.
Financial intermediaries: ‘Banks, credit companies, insurance companies and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods’. 13

14. Customers
The marketing organisation must study its customer markets closely. The organisation can operate in five types of customer markets:
Consumer markets
Business markets
Reseller markets
Government markets
International markets
Customers p 79
The marketing organisation must study its customer markets closely, the organisation can operate in five types of customer markets.
These markets are discussed in further detail in the next slide in Figure 3.3 p 79. 14

15. Figure 3.3: Types of Customer Markets
Types of Customer Markets Figure 3.3 p79
1. Consumer markets: individuals and households that buy goods and services for personal or household consumption.
2. Business markets: organisations that buy goods and services for further processing or for use in their production process.
3. Reseller markets: organisations that buy goods and services in order to resell them at a profit.
4. Government markets: government agencies that buy goods and services in order to produce public services or transfer those goods and services to others who need them.
5. International markets: overseas buyers including consumers, producers, resellers and governments.
Each market type has special characteristics that call for careful study by the seller. 15

16. Competitors
Every organisation faces a wide range of competitors. The marketing concept states that, to be successful, an organisation must provide greater customer value and satisfaction than its competitors.
No single competitive marketing strategy is best for all organisations. Each marketer should consider its own size and industry position compared with those of its competitors.
5. Competitors p 80
Every organisation faces a wide range of competitors. The marketing concept states that, to be successful, an organisation must provide greater customer value and satisfaction that its competitors. No single competitive marketing strategy is best for all organisations. Each marketer should consider its own size and industry position compared with those of its competitors. 16

17. Publics
The organisation’s marketing environment also includes various publics. A public is any group that has an actual or potential interest in, or impact on, an organisation’s ability to achieve its objectives. Every organisation is involved with seven types of publics
6. Publics pp 80-81
The organisation’s marketing environment also includes various publics. Every organisation is involved with seven types of publics.
Public: ‘Any group that has an actual or potential interest in, or impact on, an organisation’s ability to achieve its objectives’
These publics are discussed in further detail in the next slide in Figure 3.4 p 80 17

18. Figure 3.4: Types of Publics
Types of Publics Figure 3.4 p 80
1.  Financial publics influence the organisation’s ability to obtain funds. Banks, investment houses and shareholders are the major financial publics.
2. Media publics are those that carry news, features and editorial opinion. They include newspapers, magazines and radio and television stations.
3. Government publics – management must take government development into account. Marketing management often needs to consult the organisation’s lawyers on issues of product safety, truthful advertising or resellers’ rights.
4. Citizen-action publics – consumer groups, environmental groups, minority groups and other public interest groups may question an organisation’s marketing decisions.
5. Local publics – every organisation has local publics such as neighbourhood residents and community protection organisations.
6. General publics – a marketing organisation needs to be concerned about the general public’s attitude toward its products, services and activities. The public’s image of the organisation affects its buying.
7. Internal publics – an organisation’s internal publics include its wage earners, salaried and commission employees, volunteers, managers and the board of directors. When employees feel good about their organisation, this positive attitude spills over to eternal publics. 18

19. The Marketing Organisation's
Macro-Environment 19

20. Figure 3.5: Major Forces in the organisation’s Macro-Environment
Major Forces in the organisation’s Macro-Environment Figure 3.5 p
The organisation and its suppliers, marketing intermediaries, customers, competitors and publics all operate in a larger macro-environment of forces that shape opportunities and pose threats to the organisation. The macro-environment consists of the six major forces:
Demographic forces e.g. changing age and structure of the population, changing household, geographic shifts, better educated population, increasing ethnic diversity.
Economic forces e.g. changes in income, changing consumer spending patterns.
Natural forces e.g. shortages of natural resources, environmental damage, the greenhouse effect, increased cost of energy, government intervention and resource management.
Technological forces e.g. medical advances, internet, mobile ‘phones, TV, digital TV etc. as well as horrors such as nuclear weapons.
Political forces e.g. legislation regulating business, increased emphasis on ethics and social responsibility.
Cultural forces e.g. persistence of cultural values, subcultures, shifts in secondary cultural values influenced by celebrities, movie stars and popular music. All these influence peoples’ views of the previously mentioned forces. 20

21. Demographic Environment
Growing
Ethnic
Diversity
Age
Structures
Key
Demographic
Trends
Education
Demographic Environment p 82
Demography ‘is the study of human populations in terms of size, density, location, age, sex, race, occupation, and other statistics’. The demographic environment is of major interest to marketers because it involves people, and people make up markets.
Changing
Family
Structure
Geographic
Shifts

22. Demographic and Economic Environments
Demographic
Changing age structure of population
Changing household
Geographic shift in population
Better educated and more white-collar population
Increased ethnic diversity
Social
Changes in income
Changing consumer spending patterns
Demographic and Economic Environments pp 82-86
Changing age structure of the population--The world population was 6 billion in The population of Australia stood at Australia at 19,800,117 million is less than 1% of the world population. The population of In New Zealand is 3,850,000. (source: ABS 20 May 2003). The population of Australia is expected to be 24 million by There were two major impacts on the populations of developed countries in the late 20th century, apart from immigration – the slowdown in the birth-rate and the increase in the numbers of older people.
Baby boom: ‘The major increase in the annual birth-rate following World War II and lasting until the early 1960s. The ‘baby boomers,’ now moving into middle age, are a prime target for marketers’. The changing age structure of the population means that these differences will strongly affect marketers’ targeting strategies.
The changing household pp86-89-People are marrying later and having fewer children. The number of working mothers has also increased. Women account for almost 44% of the almost 10 million civilian workers in Australia.
The geographic shifts in population p 89--Australians are mobile, with a large number of people moving each year. Among the major trends are the following.
Movement to the sunshine state and the state of excitement.
Movement from rural to urban areas.
Movement from the city to the suburbs.
A better educated more white-collar population p90
Increasing ethnic diversity pp At least 58% of Australia’s population are second-generation Australians with the remaining 42% either born overseas or having one parent born overseas. All these demographic developments, together with lifestyle and other changes in the population have transformed the Australian marketplace from a mass market into more fragmented micro-markets. 22

23. Economic Environment Economic Development Changes in Income Key
Economic
Development
Changes
in Income
Key
Economic
Concerns for
Marketers
Economic Environment p 91
The economic environment ‘consists of factors that affect consumer-buying power and spending patterns’. Markets require buying power as well as people. Total buying power depends on current income, prices, savings and credit. Marketers should be aware of major trends in income and of changing consumer spending patterns.
Changes in income -- The Australian economy has grown strongly in the past twenty years, with the result that most Australians have experienced increased living standards, and this is reflected in their lifestyles. Deregulation and globalisation of financial, capital and product markets are some changes in the economy. The late 1990s saw a flight of capital from Asia, with a stalling of the economies in the South-East Asian region and in Japan. In 2000 Australia introduced a Goods and Services Tax (GST) and made major changes to the tax system.
Despite the recent fluctuations in economic conditions (China embracing free trade, anti-global capitalism demonstrations at World Trade Commission events, collapse of Ansett) incomes have risen in many important segments.
Marketers must also pay attention to income distribution. Value marketing has become the latest trend as markets look for ways to offer today’s more financially cautious buyers greater value – just the right combination of product quality and food service at a fair price.
Changing consumer spending patterns -- Table 3.2 (p96) shows the proportion of average weekly expenditures that households at different income levels spend on major categories of goods and services. Consumers at different income levels have different spending patterns, some of the differences noted by Ernst Engel more than a century ago. Engel’s Laws state that family spending patterns in response to increased income showed that as income rises, the percentage spent on food declines, the percentage spent on housing remains constant, and the percentage spent on savings and other categories increases
Changes
in Consumer
Spending Patterns

24. Natural Environment Shortages of raw materials
Shortages of raw materials
Increased costs of energy
Increased pollution
Government intervention in natural resource management
Natural Environment pp 94-98
The natural environment ‘involves natural resources that are needed as inputs by marketers or which are affected by marketing activities’. During the 1960s public concern about damage to the natural environment began to grow. These concerns have continued to grow during the past three decades. Marketers should be aware of four trends in the environment.
These trends are discussed in further detail in the next slide. 24

25. Natural Environment Shortage of Raw Materials Government Energy
Shortage of
Raw Materials
Key Areas
of Concern
in the Natural
Environment
Government
Intervention
Energy
Costs
Natural Environment pp 94-98
 1.                  Shortages of raw materials. Air and water, which may seem to be infinite resources, are becoming polluted. Many parts of the world are also facing water shortages. Renewable sources need to be used wisely. The food supply can also be a major problem because the amount of farmable land is limited and because more and more of it is being developed for urban areas. Non-renewable resources such as oil, coal and various minerals pose a serious problem.
2.                  Increased cost of energy. One non-renewable resource, oil has created the most serious problem for future economic growth. The major industrial economies of the world depend heavily on oil and, until economical energy substitutes can be developed, oil will continue to dominate the world political and economic picture. Electric and solar substitutes have been researched, but as of yet only are used in very small markets.
3.                  Increased pollution. Despite its best efforts, industry will almost always damage the quality of the natural environment. However, this can create opportunities for products to help save the environment, smoke stack scrubbers, recycling centres, high-temperature incinerators, and landfill systems.
4.                  Government intervention in natural resource management. The governments of different countries vary in their concern and efforts to promote a clean environment. Various government agencies play an active role in environmental protection. For example, the state Environmental protection Authorities (EPAs) in Australia were created to deal with pollution.
Increased
Pollution 25

26. Example: Toyota targets the environmental concerns of motorists
“the environment concerns all motorists” Toyota advert p97
The advert is drawing attention to the Toyota Prius, one of the latest most environmentally friendly cars. This is alongside Toyota’s ‘plant a tree’ initiative with Planet Ark on national ‘plant a tree’ day. This combines a wide appeal to all demographic groups, promotes a technologically advanced car and shows social responsibility through environmentally friendly product development and community based action.
Question for students: Why does Toyota use such simple graphics for the advert?
Possible answers:
The simple graphics reinforce a clean, simple, environmentally friendly message.
The advert has two main motives 1) to promote Toyota as an environmentally friendly, socially responsible company 2) to inform the public of the benefits of the new Prius. The simple graphics do not distract from the informative aspects of the message.

27. Technological Environment
Fast Pace of
Change
High R & D
Budgets
Issues in the
Technological
Environment
Technological Environment pp 98-99
The technological environment is perhaps the most dramatic force now shaping our destiny. Technology has released medical wonders and advanced communication, however, it has also created mass means of destruction. Every new technology replaces an older technology, creating new markets and new opportunities.
Technological environment: ‘Forces that affect new technologies, creating new product and market opportunities’. The following are trends that must be carefully watched:
High R&D budgets
The largest spending on R&D by any country occurs in the United States. The American government has traditionally supplied almost half of those R&D funds that provide a rich source of new product and service ideas.
Concentration on minor improvements
As a result of the high cost of developing and introducing new technologies and products, many organisations are making minor product improvements instead of gambling on major innovations. Even basic research organisations such as Du Pont, Bell laboratories, Glaxo Welcome and Pfizer are being cautious.
Increased regulation
As products become more complex, the public needs to know that they are safe. Thus government agencies investigate and ban potentially unsafe products. Such regulations have resulted in much higher research costs and in longer times between new product ideas and their introduction.
Focus on Minor
Improvements
Increased
Regulation

28. Political Environment
Legislation
Enforcement
Key
Trends in the
Political
Environment
Political Environment pp
Marketing decisions are strongly affected by developments in the political environment. The political environment ‘consists of laws, government agencies and pressure groups that influence and limit organisations and individuals in a given society’.
Legislation regulating business -- Legislation affecting business has increased steadily over the years. This legislation has been enacted for many reasons. The first is to protect organisations from each other. Business executives all praise competition but try to neutralise it when it threatens them.
Laws passed to define and prevent unfair competition are enforced by the Australian Competition and Consumer Commission (ACCC) The federal Trade Practices Act has the greatest impact. Part IV deals with anti-competitive practices. Individuals can take an organisation to task under state legislation for what they consider to be misleading advertising or other dubious activities. Part V deals with consumer protection.
A second purpose of government regulation is to protect consumers from unfair business practices. The third purpose of government regulation is to protect the interests of society against unrestrained business behaviour.
Changing government agency enforcement -- The effect of laws depends upon the emphasis given to enforcing them within the regulatory agency responsible for administering the law. Regulation varies in intensity with political agendas of sitting Prime Ministers and budget allocations.
Government regulatory agencies recently forced Pan Pharmaceuticals to withdraw its products from the marketplace.
Increased emphasis on ethics and socially responsible actions
Written regulations cannot possibly cover all potential marketing abuses, and existing laws are often difficult to enforce. However, beyond written laws and regulations, business is also governed by social codes and the rules of professional ethics. It was interesting to note that during the Pan Pharmaceuticals recall, the company did not come forward and offer refunds to the public nor did they publish a list of their recalled products.
Greater
Concern for
Ethics 28

29. Cultural Environment
The cultural environment is made up of institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviours. People grow up in a particular society that shapes their basic beliefs and values. They absorb a world view that defines their relationships to themselves and others. The following cultural characteristics can affect marketing decisions.
Cultural Environment pp
The cultural environment ‘is made up of institutions and other forces that affect society’s basic values, perceptions, preferences and behaviours’. People grow up in a particular society that shapes their basic beliefs and values. They absorb a world view that defines their relationships to themselves and others. The following cultural characteristics can affect marketing decisions.
Persistence of cultural values
People in a given society hold many beliefs and values. Their core beliefs and values have a high degree of persistence. Most Australians and New Zealanders believe in working, getting married, giving to charity and being honest. These shape more specific attitudes and behaviours found in everyday life.
Subcultures
Each society contains subcultures – groups of people with shared value systems based on common life experiences or situations. Catholics, teenagers and working women all represent separate subcultures whose members share common beliefs, preferences and behaviours. 29

30. Shift in Secondary Cultural ValuesOf
Organisations
Nature
Oneself
Society
the Universe
Others
People’s Views
Shift in Secondary Cultural Values pp
Although core values are fairly persistent, cultural swings do take place. Consider the impact of popular music groups, movie personalities and other celebrities on young people’s hairstyles, clothes, and sexual norms. The major cultural values of a society are expressed as:
People’s views of themselves. People vary in the emphasis they place on serving themselves versus serving others.
People’s views of others. More 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’s views of organisations. People vary in their attitudes towards corporations, government agencies, trade unions, universities and other organisations.
People’s views of society. People vary in their attitudes towards their society: from patriots who defend it, to reformers who want to change it, to malcontents who want to leave it.
People’s views of nature. People vary in their attitudes towards the natural world. Some feel ruled by it, others feel in harmony with it and still others seek to master it.
People’s views of the universe. Finally, people vary in their beliefs about the origin of the universe and their place in it. Although most Australians follow a particular set of religious beliefs, religions conviction and practice have been declining through the years.
 Responding to the marketing environment
Many companies view the marketing environment as ‘uncontrollable’ element to which they must adapt. They passively accept the marketing environment and do not try to change it. They analyse the environmental forces and design strategies that will help the company avoid the threats and take advantage of the opportunities the environment provides. Other companies take an environmental management perspective ‘rather than simply watching and reacting, these firms take aggressive action to affect the publics and forces in their marketing environment’. Marketing cannot always affect environmental forces – in many cases, it must settle for simply watching and reacting to the environment.