Applied

Marketing
Session 3:
The
Marketing
Environment
Marketing Orientation
“ A marketing-orientated firm looks outward to the environment in which it operates,
adapting to take advantage of emerging opportunities and minimize potential
threats.”

The Marketing Environment

Organisations operate in a dynamic and constantly changing environment.
Businesses need to respond quickly to changing market.
Changes in customer wants and needs must be anticipated and responded to by
changing goals to suit.
Organisations must:
• Scan their environment
• Identify forces relevant to the organisation and its industry
• Respond to threats and opportunities
• Monitor the outcome of planned activity
• Continue to scan the environment

The Macro Environment

PESTEL Analysis
This is used to assess the impact of these
factors on the market. The macro
environment is part of the environment of
which the organisation has no control but
must have a proactive response to.

PESTEL analysis is also referred to as

PEST, PESTEL, SLEPT, STEEPLE (Extra
E stands for Ethics) and PESTER (R
stands for Regulation).
Political environment refers to the issues relating to government e.g. stability,
policies, orientation, support as well as sectional pressure groups.

Economic environment refers to the economy, e.g. business cycle, inflation,

unemployment, GNP trends etc. which impact on the market.

Socio-cultural environment refers to how we live our life, changing trends,

beliefs, attitudes and cultures along with changing demographics.

Technology refer to the issues relating to technological developments,

government investment in technology and product life cycles.

Environmental or ecological issues relate to green issues, sustainability,

environmental protection and environmental pressure groups.

The legal environment refers to any laws or regulations that govern the
industry . Pharmaceutical and gaming industries have regulations that affect the
ways in which they market.

How can the Macro Environment affect a b2b Organisation?

Test Your Knowledge
1. Which of the following are elements of the economic environment?
a. Disposable income, social media and interest rates
b. Climate change, inflation and GDP
c. Exchange rates, age distribution and taxation
d. Inflation, unemployment and taxation

Ethics – Macro Factor

A variation on the PESTEL model identified earlier is
STEEPLE, which includes ‘ethical’ factors to those that
should be monitored in the macro environment
(alongside political, economic, social/cultural,
technological, environmental and legal).

Marketing ethics is said to be the “Principles and

standards that define acceptable marketing conduct as
determined by various stakeholders”

Specific ethical issues in marketing can include:

• Truth telling
• Taste and decency
• Vulnerability
• Pressure
• Privacy
• Confusion
• Bribery and inducement

Corporate Social Responsibility (CSR) – Macro Factor

“Corporate social responsibility (CSR) refers to the ethical principle that an
organisation should be accountable for how its behaviour might affect society and
the environment.”
CSR considers the total effect of all marketing decisions on society and includes
issues such as:

• Environment and sustainability

• Demonstrating a transparent approach to business
• Trading methods e.g. the rise of Fair Trade
• Employee considerations e.g. work/life balance, pension schemes, ethical
employers
• Excessive profits and excessive bonuses for senior leaders
• Followers of rules and regulations
• Bribery and inducements
• Health e.g. obesity, pharmaceutical industry
• Inappropriate advertising e.g. unhealthy food to children

The Micro Environment

The micro environment comprises of all individuals and organisations that affect a
business’s ability to serve its customers.

The micro-environment in essence includes all external stakeholders plus

competitors. An organisation can use the marketing mix to influence/impact all
stakeholders. Micro- environmental analysis should include:

Customers – looking at both existing and potential customers; who they are, their
choice criteria, how, when and where they buy and which benefits they seek
Competitors – identifying major competitors and their objectives and strategies,
strengths and weaknesses as well as their size, market share and profitability
Distributors – to help understand the strengths and weaknesses of different
channels
Suppliers – identifying who the suppliers are and their strengths and weaknesses

The business micro environment refers to the factors that directly impact a
company's operations, performance, and profitability. These factors are typically
within the control of the company and include its suppliers, customers, competitors,
and other stakeholders.

Here are some common examples of the business micro environment:

Suppliers: The suppliers of raw materials, components, and services used in a
company's products or services.
Customers: The individuals or organizations that buy a company's products or
services.
Competitors: Other companies that offer similar products or services to the same
market.
Intermediaries: Third-party companies that help a company distribute its products or
services to customers.
Publics: Groups that can influence or be influenced by a company's activities, such
as the media, government, and local communities.

Analysing the Micro Environment

The Porter’s 5 forces model provides a

way of assessing the likely strength of
competition in any given market.

Competitive rivalry within an industry

looks at the number of existing
competitors and their strength to
understand the intensity of rivalry that
exists.

Threat of new entrants looks at the ability of new competitors to enter the market
which will depend on factors such as how tightly the sector is regulated.

Threat of substitutes addresses whether there are substitutes for the

product/service that will increase the competitiveness of the industry making existing
technologies redundant e.g. digital cameras as substitute for camera film or simply
offering more choice.
Bargaining power of suppliers – suppliers will have more power where there are
few suppliers relative to the number of organisations wishing to buy from them, the
cost of switching suppliers are high (as is still the case with banks, and used to be
the case with utility companies) or where supplier’s offerings are highly differentiated
– so buyers have a preference for a particular supplier.

Finally, bargaining power of customers – they will tend to be more powerful when
there are few buyers and lots of sellers (high competition); there are readily available
alternative sources of supply, plus substitutes; and where buyer switching costs are
low.

Organisations need to analyse their micro environment to identify opportunities and

threats arising from the 5 forces.

Porter's Five Forces framework -

Walt Disney Company

Threat of New Entrants - Disney's strong brand and intellectual property portfolio
make it difficult for new entrants to compete with the company.

Bargaining Power of Suppliers: Disney has significant bargaining power due to its
size and influence in the industry

Bargaining Power of Buyers: Disney's customers have significant bargaining

power

Threat of Substitute Products : The entertainment industry faces significant

competition from substitute products, such as video games, social media, and other
forms of digital entertainment

Intensity of Competitive Rivalry: The entertainment industry is highly competitive,

with many large and well-established players competing for market share
Test Your Knowledge

Which of the following best describes the external micro environment?

a. Customers, competitors, ethics, suppliers and distributors
b. Customers, competitors, stakeholders, suppliers and distributors
c. Customers, competitors, suppliers, staff and distributors
d. Competitors, ethics, suppliers, money and distributors

Organisation Types
The Public Sector includes activities revolve around
the provision of goods and services by the state or
government.
The Private sector includes commercial businesses
that usually exist to make a profit which is generally
distributed amongst owner or shareholders.
Internal Challenges in Meeting Customer Needs

The internal environment refers to all the

internal elements of the organisation and
should be assessed in order to establish
its ability to meet the challenges of the
external environment. It includes the
financial, human and physical resources
of the organisation, its skills and capabilities
along with its objectives, culture and attitude
too and management of risk.

Corporate Governance is the system of

rules, practices and processes by which a company is directed and controlled.
Corporate governance essentially involves balancing the interests of the many
stakeholders in a company - these include its shareholders, management,
customers, suppliers, financiers, government and the community. Since corporate
governance also provides the framework for attaining a company's objectives, it
encompasses practically every sphere of management, from action plans and
internal controls to performance measurement and corporate disclosure.

The Five Ms

SWOT Analysis

The marketing environment audit is then summarised in a SWOT analysis. This

allows the organisation to focus on its critical organisational strengths and
weaknesses from the internal analysis relative to the threats and opportunities faced
by the external micro and macro environments.
Business Vision and Mission
The vision for the organisation looks to the future and the mission then clearly
establishes what a business should be doing to provide a common purpose.
• Organisation’s fundamental reason for existing – its philosophy, values, priorities
and aspirations
• The scope of its core activities
• Key strengths, competencies and competitive
edge
• Main customers, products/services and markets
• Responsibilities towards society
Internal Influences on Objectives

The setting of organisational and marketing objectives will be influenced by the

internal skill, capabilities and resource (financial, human, physical) constraints within
the organisation. Corporate culture can also have a huge impact on objective setting
e.g. whether the organisation is a risk taker or not.
Examples of External Influences on Objectives
Competitors – organisations need to consider potential responses from competitors
as well as current behaviours
Customers – what do customers want now and in the future? How is their buying
behaviour likely to change?
Government and legislation – objectives need to be set within legal constraints but
also should be ethical.
Technological advances – how is technological advances changing the market?
Economic factors – the impact of a downturn or upturn in the economy on an
organisation and therefore, its objectives

Identifying Opportunities for Growth

Ansoff’s Matrix is used with the strategic objective to define the future direction of the
business. It’s a simple tool enabling the understanding of the fundamental generic
options when defining this future direction. It allows an organisation to go through
four options and evaluate their relevance in line with their strategic objectives.

Examples of the Marketing Environment’s Impact on Marketing Tactics

• Changing customer tastes can impact on the products and services we offer
• The economic climate can impact on the prices we charge
• Changes in technology can influence how the product is distributed
• Socio-cultural changes can impact on the promotional message
Test Your Knowledge
Which of the following best describes the internal marketing environment of an
organisation?
a. Customers, resources, competencies, goals and corporate governance
b. Resources, goals, competencies, CSR and ethics
c. Resources, competencies, corporate governance and goals
d. Risk management, goals, resources, suppliers and corporate governance