In order to correctly identify opportunities and monitor threats, the company must begin with athorough understanding of the marketing environment in which the firm operates. The marketingenvironment consists of all the actors and forces outside marketing that affect the marketingmanagement’s ability to develop and maintain successful relationships with its target customers.Though these factors and forces may vary depending on the specific company and industrialgroup, they can generally be divided into broad micro environmental and macro environmentalcomponents.
For most companies, the micro environmental components are: the company,suppliers, marketing channel firms (intermediaries), customer markets, competitors, and publicswhich combine to make up the company’s value delivery system. The macro environmentalcomponents are thought to be: demographic, economic, natural, technological, political, andcultural forces. The wise marketing manager knows that he or she cannot always affectenvironmental forces. However, smart managers can take a proactive, rather than reactive,approach to the marketing environment.
As marketing management collects and processes data on these environments, they must be ever vigilant in their efforts to apply what they learn to developing opportunities and dealing withthreats. Studies have shown that excellent companies not only have a keen sense of customer butan appreciation of the environmental forces swirling around them.
By constantly looking at thedynamic changes that are occurring in the aforementioned environments, companies are better prepared to adapt to change, prepare long-range strategy, meet the needs of today’s andtomorrow’s customers, and compete with the intense competition present in the globalmarketplace. All firms are encouraged to adopt an environmental management perspective in thenew millennium.A company’s marketing environment
consists of the actors and forces outside marketing thataffect marketing management’s ability to develop and maintain successful relationships with itstarget customers.1). Being successful means being able to adapt the marketing mix to trends and changes thisenvironment.2). Changes in the marketing environment are often quick and unpredictable.3). The marketing environment offers both opportunities and threats.4). The company must use its marketing research and marketing intelligence systems to monitor the changing environment.5). Systematic environmental scanning helps marketers to revise and adapt marketing strategiesto meet new challenges and opportunities in the marketplace. The marketing environment ismade up of a:
1. Micro environmental2. Macro-environment
1. Micro Environmental
The microenvironment consists of five components. The first is the organization’s internalenvironment—its several departments and management levels—as it affects marketingmanagement’s decision making. The second component includes the marketing channel firmsthat cooperate to create value: the suppliers and marketing intermediaries (middlemen, physicaldistribution firms, marketing-service agencies, financial intermediaries). The third componentconsists of the five types of markets in which the organization can sell: the consumer, producer,reseller, government, and international markets. The fourth component consists of thecompetitors facing the organization.
The fifth component consists of all the publics that have anactual or potential interest in or impact on the organization’s ability to achieve its objectives:financial, media, government, citizen action, and local, general, and internal publics. So themicroenvironment consists of six forces close to the company that affect its ability to serve itscustomers:a. The company itself (including departments). b. Suppliers.c. Marketing channel firms (intermediaries).d. Customer markets.e. Competitors.f. Publics. 1. The Company’s Microenvironment
As discussed earlier the company’s microenvironment consists of six forces that affect its abilityto serve its customers. Lets discuss these forces in detail: a. The Company The first force is the company itself and the role it plays in the microenvironment. This could bedeemed the internal environment.1). Top management is responsible for setting the company’s mission, objectives, broadstrategies, and policies.2). Marketing managers must make decisions within the parameters established by topmanagement.3). Marketing managers must also work closely with other company departments.
Areas such asfinance, R & D, purchasing, manufacturing, and accounting all produce better results whenaligned by common objectives and goals.4). All departments must “think consumer” if the firm is to be successful. The goal is to providesuperior customer value and satisfaction. b. Suppliers
Suppliers are firms and individuals that provide the resources needed by the company and itscompetitors to produce goods and services. They are an important link in the company’s overallcustomer “value delivery system.”1). One consideration is to watch supply availability (such as supply shortages).2). Another point of concern is the monitoring of price trends of key inputs. Rising supply costsmust be carefully monitored. c. Marketing Intermediaries
Marketing intermediaries are firms that help the company to promote, sell, and distribute itsgoods to final buyers.1). Resellers are distribution channel firms that help the company find customers or make salesto them.2). These include wholesalers and retailers who buy and resell merchandise.3). Resellers often perform important functions more cheaply than the company can performitself. However, seeking and working with resellers is not easy because of the power that somedemand and use. Physical distribution firms
help the company to stock and move goods from their points of origin to their destinations. Examples would be warehouses (that store and protect goods beforethey move to the next destination). Marketing service agencies
(such as marketing research firms, advertising agencies, mediafirms, etc.) help the company target and promote its products. Financial intermediaries (such as banks, credit companies, insurance companies, etc.) helpfinance transactions and insure against risks. d. Customers The company must study its customer markets closely since each market has its own specialcharacteristics. These markets normally include:1).
Consumer markets (individuals and households that buy goods and services for personalconsumption).2). Business markets (buy goods and services for further processing or for use in their production process).3). Reseller markets (buy goods and services in order to resell them at a profit).4). Government markets (agencies that buy goods and services in order to produce publicservices or transfer them to those that need them).5). International markets (buyers of all types in foreign countries)
Every company faces a wide range of competitors. A company must secure a strategic advantageover competitors by positioning their offerings to be successful in the marketplace. No singlecompetitive strategy is best for all companies. f. Publics
is any group that has an actual or potential interest in or impact on an organization’sability to achieve its objectives. A company should prepare a marketing plan for all of their major publics as well as their customer markets. Generally, publics can be identified as being:1). Financial publics–influence the company’s ability to obtain funds.2). Media publics–carry news, features, and editorial opinion.3). Government publics–take developments into account.4).
Citizen-action publics–a company’s decisions are often questioned by consumer organizations.5). Local publics–includes neighborhood residents and community organizations.6). General publics–a company must be concerned about the general public’s attitude toward its products and services.7). Internal publics–workers, managers, volunteers, and the board of directors.
The Company’s Macro environment
The company and all of the other actors operate in a larger macro environment
of forces thatshape opportunities and pose threats to the company. There are six major forces (outlined below)in the company’s macro environment. There are six major forces (outlined below) in thecompany’s macro environment.a. Demographic. b. Economic.c. Natural.d. Technological.e. Political.f. Cultural.
Environment Demography is the study of human populations in terms of size, density, location, age, sex, race,occupation, and other statistics. It is of major interest to marketers because it involves people and people make up markets. Demographic trends are constantly changing. Some more interestingones are.1). The world’s population (though not all countries) rate is growing at an explosive rate that willsoon exceed food supply and ability to adequately service the population. The greatest danger isin the poorest countries where poverty contributes to the difficulties.
Emerging markets such asChina are receiving increased attention from global marketers.2). The most important trend is the changing age structure of the population. The population isaging because of a slowdown in the birth rate (in this country) and life expectancy is increasing.The baby boomers following World War II have produced a huge “bulge” in our population’sage distribution.
The new prime market is the middle age group (in the future it will be the senior citizen group). There are many subdivisions of this group.a). Generation X–this group lies in the shadow of the boomers and lack obvious distinguishingcharacteristics. They are a very cynical group because of all the difficulties that have surroundedand impacted their group.
b). Echo boomers
(baby boomlets) are the large growing kid and teen market. This group is usedto affluence on the part of their parents (as different from the Gen Xers). One distinguishingcharacteristic is their utter fluency and comfort with computer, digital, and Internet technology(sometimes called Net-Gens).c). Generational marketing is possible, however, caution must be used to avoid generationalalienation. Many in the modern family now “telecommute”–work at home or in a remote officeand conduct their business
using fax, cell phones, modem, or the Internet In general, the population is becoming better educated.
The work force is be-coming more white-collar.Products such as books and education services appeal to groups following this trend. Technicalskills (such as in computers) will be a must in the future. The final demographic trend is theincreasing ethnic and racial diversity of the population. Diversity is a force that must berecognized in the next decade. However, companies must recognize that diversity goes beyond ethnic heritage. One the important markets of the future are that disabled people (a market larger any of our ethnic minority groups).
b. Economic Environment
The economic environment includes those factors that affect consumer purchasing power andspending patterns. Major economic trends in the United States include:1). Personal consumption (along with personal debt) has gone up (1980s) and the early 1990s brought recession that has caused adjustments both personally and corporately in this country.Today, consumers are more careful shoppers.
(trying to offer the consumer greater value for their dollar) is a very seriousstrategy in the 1990s. Real income is on the rise again but is being carefully guarded by a value-conscious consumer.
is still very skewed in the U. S. and all classes have not shared in prosperity. In addition, spending patterns show that food, housing, and transportation stillaccount for the majority of consumer dollars. It is also of note that distribution of income hascreated a “two-tiered market” where there are those that are affluent and less affluent. Marketersmust carefully monitor economic changes so they will be able to prosper with the trend, notsuffer from it .
c. Natural Environment
The natural environment involves natural resources that are needed as inputs
by marketers or that are affected by marketing activities. During the past two decades environmental concernshave steadily grown. Some trend analysts labeled the specific areas of concern were: 1).Shortages of raw materials.
Staples such as air, water, and wood products have been seriously damaged and non-renewablesuch as oil, coal, and various minerals have been seriously depleted during industrial expansion.
is a worldwide problem. Industrial damage to the environment is very serious. Far-sightedcompanies are becoming “environmentally friendly” and are producing environmentally safe andrecyclable or biodegradable goods. The public response to these companies is encouraging.However, lack of adequate funding, especially in third world countries, is a major barrier.
3).Government intervention in natural resource management has caused environmental concerns to be more practical andnecessary in business and industry. Leadership, not punishment, seems to be the best policy for long-term results. Instead of opposing regulation, marketers should help develop solutions to thematerial and energy problems facing the world.
4).Environmentally sustainable strategies.
The so-called green movement has encouraged or even demanded that firms produce strategiesthat are not only environmentally friendly but are also environmentally proactive. Firms are beginning to recognize the link between a healthy economy and a healthy environment.
d. Technological Environment
The technological environment
includes forces that create new technologies, creating new product and market opportunities. 1). Technology is perhaps the most dramatic force shaping our destiny 2). New technologies create new markets and opportunities.
3). The following trends are worth watching:
a). Faster pace of technological change. Products are being
technologically outdated at a rapid pace. b). There seems to be almost unlimited opportunities being developed daily. Consider theexpanding . fields of health care, the space shuttle, robotics, and biogenetic industries. c). The challenge is not only technical but also commercial–to make practical, affordableversions of . . products. d). Increased regulation. Marketers should be aware of the regulations concerning product safety,individual privacy, and other areas that affect technological changes. They must also be alert to . any.possible negative aspects of an innovation that might harm users or arouse opposition. e. Political Environment
The political environment includes laws, government agencies, and pressure groups thatinfluence and . limit various organizations and individuals in a given society. Various forms of legislation regulate business.
1). Governments develop
public policy to guide commerce–sets of laws and regulations limiting business for the good of society as a whole.
2). Almost every marketing activity is subject to a wide range of laws and regulations. Sometrends in the political environment include:
1). Increasing legislation to:
a).Protect companies from each other.
b).Protecting consumersfrom unfair business practices.
c).Protecting interests of society against unrestrained business behavior.
2). Changing government agency enforcement. New laws and their enforcement will continue or increase.
3). Increased emphasis on ethics and socially responsible actions. Socially responsible firmsactively seek out ways to protect the long-run interests of their consumers and the environment.
a). Enlightened companies encourage their managers to look beyond regulation and “do the rightthing.” b). Recent scandals have increased concern about ethics and social responsibility. c). The boom in e-commerce and Internet marketing has created a new set of social and ethicalissues. Concerns are Privacy, Security, Access by vulnerable or unauthorized groups.
f. Cultural Environment
The cultural environment is made up of institutions and other forces that affect society’s basicvalues, perceptions, preferences, and behaviors. Certain cultural characteristics can affectmarketing decision-making. Among the most dynamic cultural characteristics are: 1). Persistence of cultural values. People’s core beliefs and values have a high degree of persistence. Core beliefs and values are passed on from parents to children and are reinforced byschools, churches, business, and government. Secondary beliefs and values are more open tochange.
2). Shifts in secondary cultural values. Since secondary cultural values and beliefs are open tochange, marketers want to spot them and be able to capitalize on the change potential. Society’smajor cultural views are expressed in
a).People’s views of themselves.
People vary in their emphasis on serving themselves versusserving others. In the 1980s, personal ambition and materialism increased dramatically, withsignificant implications for marketing. The leisure industry was a chief beneficiary.
b).People’s views of others.
Observers have noted a shift from a “me-society” to a “we-society.” Consumers are spending more on products and services that will improve their livesrather than their image.
c). People’s views of organizations.
People are willing to work for large organizations butexpect them to become
increasingly socially responsible. Many companies are linkingthemselves to worthwhile causes. Honesty in appeals is a must.
d).People’s views of society.
This orientation influences consumption patterns. “Buy American”versus buying abroad is an issue that will continue into the next decade.
e).People’s view of nature.
There is a growing trend toward people’s feeling of mastery over nature through technology and the belief that nature is bountiful. However, nature is finite. Loveof nature and sports associated with nature are expected to be significant trends in the nextseveral years.
f).People’s views of the universe.
Studies of the origin of man, religion, and thought-provokingad campaigns are on the rise. Currently, Americans are on a spiritual journey. This will probablytake the form of “spiritual individualism.
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