The Environments of Markets9/2/09

At the end of the lesson students should be able to:

1. Distinguish between the micro- and macro- environments in which a firm operates.

2. Explain the effects of the micro- and macro- environments on the marketing strategy of the firm.

The company must start with the marketing environment in searching for opportunities and monitoring threats.

The marketing environment consist of all the actors that affect the company’s ability to transact effectively with the target market.

The company’s marketing environment can be divided into the Microenvironment and the Macroenvironment.

The Microenvironment consists of the forces close to the company that affect its ability to serve its customers:

Marketing channel firms Company’s suppliers Competitors Customers

The Macroenvironment consists of the larger societal forces that affect the whole microenvironment:

Demographic forces Economic forces Natural forces Political forces Cultural forces

The job of marketing management is to create attractive offers for target markets.

Success is affected by the factors identified as part of the firm’s microenvironment.

Marketing mangers cannot simply focus on the target market but must also continuously monitor all these factors.

Suppliers are firms and individuals that sell to the firm the resources required to produce its goods and services.

Marketers must monitor events such as: (?) Supply availability Supply shortages and delays Labor strikes

Can affect sales in the short run and customer goodwill in the long run.

Increases in key input prices in the market must also be monitored. Can force price increases that can adversely affect

the company’s sales volume.

It is a common view that a company must satisfy the needs and wants of consumers better than its competitors in order to be successful.

The firm must adopt to the strategies of competitors who are serving the same target market.

Must gain competitive advantage by strongly positioning their offerings against the competitors’ offerings in the mind of the consumers.

Firms must find marketing strategies that best position them against competitors in their markets.

Marketing intermediaries are (?) firms that help the company to promote, sell,

and distribute its products to final buyers Types:

Middlemen Physical distribution firms Marketing service agencies Financial intermediaries

Distribution channel firms that help the company find customers or make sale to them.

Wholesalers and retailers who buy and sell merchandise.

Large middlemen (e.g. Sears, Wal-mart, Home Depot) organizations pose significant threats to the firm since they are large enough to dictate terms and deny access to large markets.

Company have to develop strong and mutually beneficial relationships with strategic middlemen in order to execute an effective marketing strategy.

Assist the company to stock and move goods from their points of origin to their destination.

Warehouses – store and protect goods before they move to the next destination.

Transportation firms – move goods from one location to another.

company must determine the best ways to store and ship goods, balancing such factors as cost, delivery speed, and safety.

Organizations that assist the firm in targeting and promoting its products to the right markets.

Marketing research firms Advertising agencies Media firms Marketing consulting firms

When choosing one of these firms must focus on:

Creativity, quality, service and price

The company has to review the performance of these firms regularly and consider replacing those that no longer perform well.

Finance transactions or insure against risks associated with the buying and selling of goods Banks, credit companies, insurance companies

Most firm and customers depend on these intermediaries to finance their transactions.

The company can suffer from rising credit costs and limited access to credit.

The company must develop strong relationships with important financial institutions.

The company must study its customer markets closely.

Five types of customer markets: Consumer markets

Individuals and households that buy goods for personal consumption.

Industrial markets Organizations that buy goods and services for further

processing or for uses in their production process. Government markets

Government agencies that buy goods and services in order to provide public services.

International markets Foreign buyers

Each market type has special characteristics that call for careful study by the company

The company and factors in its micro-environment all operate in a macro-environment that provides opportunities for and poses threat to its success.

The company must carefully watch and respond to these forces.

The economic environment consists of factors that affects consumer purchasing power and spending patterns.

Total buying powers depends on: Current income, prices, savings, and credit

Marketers should be aware of major trends in : Income and its distribution

income per capita Distribution of income in the economy among social classes

Upper class, middle class, working class, underclass Changing consumer spending patterns.

Trends in the proportion of total expenditures that households at different income levels spend on major categories of goods and services. Food, housing and transportation use up most household incomes.

Changes in major economic variables as income, cost of living, interest rates and savings and borrowings patterns have a large impact on the marketplace.

Companies must watch these variables using economic forecasting in order to take advantage of changes in the economic environment

The natural environment involve natural resources needed as inputs by marketers or which are affected by marketing activities.

Issues: Depletion of the earth natural resources Global warming Damage to the ozone layer – ban on some propellants used in

aerosol cans Raw material shortages – push up production costs Increased cost of energy Increased Levels of pollution – non- biodegradable packaging Government intervention in natural resources management

Marketing management must pay attention to the natural environment .

Marketers should not oppose regulations but should help in developing solutions to issues relating to materials, energy and pollution.

The political environment consist of laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society.

Reasons for government regulations: Protection of companies Protection of consumers Protect the interests of society

Marketers: need to know the national and local laws protecting

competition, consumers and society. be aware of the activities of public interest groups.

Institutional and other forces that affect society’s basic values, perceptions, preferences and behaviours.

People grow up in society that shape basic beliefs and values.

Cultural characteristics that can affect marketing decisions: Core and secondary beliefs and values Subcultures

Groups whose members share common beliefs, preferences and behaviours

Shifts in secondary cultural values E.g. impact of pop music (reggae and Rap) on young people’s clothing,

hairstyle and speech. Marketing response:

Producing products that promote self expression “social support “ products that improve direct communication

between people – health clubs , vacations, games, social substitutes (VCR, computers )

Projecting a good “corporate image” Products for nature enthusiasts