MARKETING ENVIRONMENT

A company’s 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. The marketing environment offers both opportunities and threats. Successful
companies know the vital importance of constantly watching and adapting to the changing
environment. Too many other companies, unfortunately, fail to think of change as opportunity.
They ignore or resist critical changes until it is almost too late. Their strategies, structures,
systems and culture grow increasingly out of date. Corporations as mighty as IBM and General
Motors have faced crises because they ignored environmental changes for too long. There are
lessons here too for the food giants facing rising public and political concerns for obesity, as
intimated in the prelude case.
The marketing environment consists of a microenvironment and a macro environment. The
microenvironment consists of the forces close to the company that affect its ability to serve its
customers – the company, suppliers, marketing channel firms, customer markets, competitors
and publics. The macro environment consists of the larger societal forces that affect the whole
microenvironment – demographic, economic, natural, technological, political and cultural forces.

The company’s microenvironment

Marketing management’s job is to attract and build relationships with customers by creating
customer value and satisfaction. However, marketing managers cannot accomplish this task
alone. Their success will depend on other actors in the company’s microenvironment – other
company departments, suppliers, marketing intermediaries, customers, competitors and various
publics, which combine to make up the company’s value delivery network.

1. The company
In designing marketing plans, marketing management should take other company groups, such as
top management, finance, research and development (R&D), purchasing, manufacturing and

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accounting, into consideration. All these interrelated groups form the internal environment. Top
management sets the company’s mission, objectives, broad strategies and policies. Marketing
managers make decisions within the plans made by top management.
2. Suppliers
Suppliers are an important link in the company’s overall customer value delivery system.
They provide the resources needed by the company to produce its goods and services.
Supplier developments can seriously affect marketing. Marketing managers must watch supply
availability – supply shortages or delays, labour strikes and other events can cost sales in the
short run and damage customer satisfaction in the long run. Marketing managers also monitor the
price trends of their key inputs. Rising supply costs may force price increases that can harm the
company’s sales volume. Increasingly, today’s marketers are treating their suppliers as partners
in creating and delivering customer value.
3. Marketing intermediaries
Marketing intermediaries are firms that help the company to promote, sell and distribute its
goods to final buyers. They include resellers, physical distribution firms, marketing services
agencies and financial intermediaries. Resellers are distribution channel firms that help the
company find customers or make sales to them. These include wholesalers and retailers who buy
and resell merchandise. Selecting and working with resellers is not easy. No longer do
manufacturers have many small, independent resellers from which to choose. They now face
large and growing reseller organizations. These organizations frequently have enough power to
dictate terms or even shut the manufacturer out of large markets.
4. Customers
The company must study its customer markets closely. There are six types of customer market.
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, whereas reseller markets buy goods and services to resell at a profit.
Institutional markets are made up of schools, hospitals, nursing homes, prisons and other
institutions that provide goods and services to people in their care. Government markets are
made up of government agencies that buy goods and services in order to produce public services
or transfer the goods and services to others who need them. Finally, international markets consist
of buyers in other countries, including consumers, producers, resellers and governments.

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 5. Competitors
The marketing concept states that, to be successful, a company must provide greater customer
value and satisfaction than its competitors do. Thus, marketers must do more than simply adapt
to the needs of target consumers. They must also gain strategic advantage by positioning their
offerings 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. Large firms with dominant positions
in an industry can use certain strategies that smaller firms cannot afford.
6. Publics
The company’s marketing environment also includes various 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. Example of publics includes Financial publics, Media publics, Government publics,
Citizen action publics, Local publics, General public, and Internal publics

The company’s macro environment

The company and all the other actors operate in a larger macro environment of forces that shape
opportunities and pose threats to the company. The below are six most influential forces in the
company’s macro environment.
1. Demographic environment
Demography is the study of human populations in terms of size, density, location, age, gender,
race, occupation and other statistics. The demographic environment is of considerable interest to
marketers because it involves people, and people make up markets. Here, we discuss the most
important demographic characteristics and trends in the largest world markets.
Population size and growth trends
In any geographic market, population size and growth trends can be used to gauge its broad
potential for a wide range of goods and services.
Changing age structure of a population
The single most noticeable demographic trend in Europe and other developed countries,
including the US and affluent Asian countries, is the changing age structure of the population.
The changing family

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The notion of the ideal family – mum, dad and two kids – has lately been losing some of its
lustre. People are marrying later and having fewer children. The specific figures may vary among
countries, but the general trend is towards fewer married couples with children.
Pressures for migration
The next few decades will see the emergence of a world where citizens in the affluent, developed
countries have few children while their counterparts in the less wealthy countries have many.
These conditions increase the pressures on international migration.

2. Economic environment
Markets require buying power as well as people. The economic environment consists of factors
that affect consumer purchasing power and spending patterns. Nations vary greatly in their levels
and distribution of income. Some countries have subsistence economies – they consume most of
their own agricultural and industrial output, hence offer few market opportunities. At the other
extreme are industrial economies, which constitute rich markets for different kinds of goods.
Marketers must pay close attention to major trends and consumer spending patterns both across
and within their world markets.
Income distribution and changes in purchasing power
Global upheavals in technology and communications in the last decade brought about a shift in
the balance of economic power from the West.
Changing consumer spending patterns
Generally, the total expenditures made by households tend to vary for essential categories of
goods and services, with food, housing and transportation often using up most household
income.

3. Natural environment
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. Protection of the natural environment will remain a crucial worldwide
issue facing business and the public. In many cities around the world, air and water pollution
have reached dangerous levels. World concern continues to mount about the depletion of the
earth’s ozone layer and the resulting ‘greenhouse effect’, a dangerous warming of the earth. And

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many of us fear that we will soon be buried in our own rubbish. Marketers should be aware of
four trends in the natural environment.
Shortages of raw materials
Air and water may seem to be infinite resources, but some groups see long-run dangers. Air
pollution chokes many of the world’s large cities and water shortages are already a big problem
in some parts of the world.
Increased cost of energy
One non-renewable resource – oil – has created the most serious problem for future economic
growth.
Increased pollution
Industry has been largely blamed for damaging the quality of the natural environment. The
‘green’ movement draws attention to industry’s ‘dirty work’: the disposal of chemical and
nuclear wastes, the dangerous mercury levels in the ocean, the quantity of chemical pollutants in
the soil and food supply, and the littering of the environment with non-biodegradable bottles,
plastics and other packaging materials.
Government intervention in natural resource management
The governments of different countries vary in their concern and efforts to promote a clean
environment.

4. Technological environment
The technological environment is perhaps the most dramatic force now shaping our destiny.
Technology has released such wonders as penicillin, organ transplants, notebook computers and
the Internet. It has also released such horrors as nuclear missiles, chemical weapons and assault
rifles, and such mixed blessings as cars, televisions and credit cards. Our attitude towards
technology depends on whether we are more impressed with its wonders or its blunders. The
technological environment is changing rapidly. Marketers should watch the following trends in
technology.
Fast pace of technological change
New technologies create new markets and opportunities. However, every new technology
replaces an older technology.
Concentration on minor improvements

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As a result of the high cost of developing and introducing new technologies, many companies are
tinkering – making minor product improvements – instead of gambling on substantial
innovations.
Increased regulation
As products and technology become more complex, the public needs to know that these are safe

5. Political environment
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 various organizations and individuals in a given society.
Legislation regulating business
Even the most liberal advocates of free-market economies agree that the system works best with
at least some regulation. Well-conceived regulation can encourage competition and ensure fair
markets for goods and services.
Growth of public interest groups
The number and power of public interest groups have increased during the past two decades.
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 rules of professional ethics.

6. 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
with others. The following cultural characteristics can affect marketing decision making.
Marketers must be aware of these cultural influences and how they might vary across societies
within the markets served by the firm.
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.

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Shifts in secondary cultural values
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 hair styling,
clothing and sexual norms.
The principal cultural values of a society are expressed in people’s views of themselves and
others, as well as in their views of organizations, society, nature and the universe.

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