Poojan

Shah

Chapter 11: The marketing Environment and marketing analysis

Marketing the activity set of institutions, and processes for creating, communicating,
delivering and exchanging offerings that have value for customers, clients, partners and
society at large
To meet customer needs - and to devise ways they can convince employees to change if
necessary marketers need to understand both who they are competing with, and what
barriers to change currently exist in their own and partner organizations.
Hence, Marketers must be able to analyze the environment.

The Marketing Environment
Marketing environment all of the internal and external forces that affect a marketers ability
to create, communicate, deliver and exchange offerings of value
3 types of environments:
- Internal environment
o Refers to the organization itself and the factors that are directly controllable by
the organization
- Micro environment
o Comprises the forces and the factors that play inside the industry in which the
marketer operates
o Affects all parties in the industry, including suppliers, distributors, customers
and competitors.
- Macro environment
o Comprises the larger scale societal forces that influence not only the industry in
which the marketer operates, but all industries
o The factors include: political, economic, sociocultural, technological factors and
legal forces (PESTL framework)
Macro and micro environmental forces are outside of the organization, and cannot be directly
controlled
Environmental analysis - a process that involves breaking the marketing environment into
smaller parts in order to gain a better understanding of it.

 Poojan Shah

Internal Environment
Internal environment the parts of the organization, the people and the processes used to
create, communicate, deliver and exchange offerings that have value.
The organization can directly control its internal environment.
Strengths and weaknesses are internal factors that positively and negatively affect the
organization
Internal organization is affected by the personal and political natures of the people who make
it up.
The main parts of a typical organization usually include:
- Senior management responsible for marking decisions about the overall objectives
and strategy of the organization
- Middle management typically responsible for a department or a geographic region.
o Makes decisions about the overall objective and strategy of the department or
geographic region for which they have responsibility.
o To make sure the objective for their department or region are aligned with the
objectives of the organization as a whole
- Functional departments organizations can be structured around functional
departments and/or regions. It makes decisions about the overall objective and
strategy of their department. It includes:
o Marketing
o Sales
o Research and development
o Customer service
o Distribution/logistics
o Manufacturing
o Finance
o Human resources
o Administration
o Aim: to make sure the objectives of the organization and to manage their
departments to ensure the departmental objectives are achieved.
- Employees responsible for carrying out the work required to meet departmental
objectives. They are also the face of the organization
- External vendors (outsourcing) - if work can be done more efficiently by specialist
external providers, then organizations outsource functions.
o Represents a sift from the internal environment to the micro environment
results in a reduction In the level of control
o Organizations need to manage service relationships with their external provider
o It needs to ensure that the outsourced services remain consistent with its own
objectives and do not adversely effect its market perception.
Sales consultant/ sales officers - employees who have service roles
During economic down turns organizations tend to make drastic cuts to marketing budgets
Marketing is viewed as a cost than an investment
Marketing can help influence consumer behavior, set prices effectively, create value for
marketing expenditure and take advantage of emerging opportunities
Internal environment is not an isolated entity the internal environment is affected by what
happens in the less controllable external environment
External environment concerned with things that are outside the organization
- The people and processes that are outside the organization and cannot be directly
controlled

 Poojan Shah

- Marketers can only seek to influence the external environment

- E.g. movie studios cannot prevent people from copying DVDs from friends. But they
have warning about piracy on the DVD and lobby governments to introduce legal
penalties for doing so.
- Outsourcing - transferring an internal function to an external provider.
- Opportunities and threats are external environmental factors.
- External environment includes:
o Micro environment
o Macro environment

Micro Environment
Micro environment the forces within an organizations industry that affects its ability to
serve its customers and clients target markets, partners and competitors
Consists of customers, clients partners, and competitors
Not directly controllable by the organization
The organization can influence on the customers, clients, partners, competitors and other
parties
E.g. a survey by choice found that 60% of Jetstars customers were satisfies with the airlines
In analyzing the micro environment, marketers need to consider:
- Customer an clients
- Partners
- Competitors

Customer and Clients
Marketers must understand the current and future needs and wants f their target market
They need to:
- Understand what their customers value now
- Be able to identify any changes in customer performance
- Be willing and able to respond to changes
- Anticipate how needs and wants might change in the future
- Be able to influence customer preferences
E.g. the obesity epidemic (a macro-environment factor) has affected customers and clients in
the micro environment
- Growing awareness of the issue will likely make individuals exercise, eat healthy,
parents will be more conscious of the food they give their children
In the business-to-business market, marketers need to be aware of the current and future
needs of their target markets
- E.g. changes in economic conditions, such as movements in interest rates will likely
have an impact on business investment and spending patterns

Partners
Logistic firms logistics I the term used to describe all the processes involved in distributing
products; it includes storage and transport
Financiers provide financial services such as banking, loans and insurance and the financial
systems infrastructure facilitates electronic payments transactions with partners and
customers
Advertising agencies small businesses ted to devise their own advertisements often with
the help of the publication, radio station or other medium they are advertising with. Larger
businesses can hire the services of advertising agencies

 Poojan Shah

Retailers the business from which customers purchase goods and services. Many retailers,
such as corner shops and supermarkets, sell mainly products made by others. Other business
make and retail their products, particularly small boutique businesses, service businesses
and business with an online shop
Wholesalers an intermediary acting between the producer and the retailer to provide
storage and distribution efficiencies to both
Suppliers provide the resources that the organization needs to make its products. Suppliers
are crucial business partners and they must be monitored doe continuity of supply and price
There are many risks with working with partners the balance of power between partners
can be skewed towards one at the expense of the other
E.g. Woolworths and Coles both sell Coca-Cola as a loss during price promotions this is
because Coca-Cola specials raw consumers to the store and thee customers often then
purchase other products as well the Coca-Cola company do not need to discount their
product in order to sell it to the supermarkets

Suppliers
Marketers need to know their existing and potential suppliers costs, availability, time frames
and planned inventories to determine how they can best create value.
Manage risks involved with suppliers
Need to be aware of and pre-empt any problems (e.g. labor strikes and stock shortage)
Marketers must identify, assess, monitor, and manage risks to suppliers and ricks to the price
of suppliers.

Competitors
Most successful businesses are the ones which focus on making their customers happy and
doing it better than their competitors can.
Types of competition:
- Pure competition numerous competitors offer undifferentiated products. Neither
buyer nor seller can exercise market power.
o E.g. markets for agricultural goods such as sugar and for financial securities such
as shares are the closest real-world approximations to pure competition In reality,
pure competition does not exist
- Monopolistic competition numerous competitors offer products that are similar,
promoting the competitors to strive to differentiate their products
o The market for laptop computers exhibits monopolistic competition. Acer, DELL,
Apple, Toshiba and many others all sell versions of essentially similar products,
through the products are differentiated by color packaging, price, memory,
processing speed and so on
- Oligopoly a small number of competitors offer similar, but somewhat differentiated
products, There are significant barriers to new competitors entering the market
o E.g. the Australian supermarket industry is an example, with Coles and
Woolworths selling over 75% of all groceries in Australia. Smaller operators, such
as Aldi and IGA, also exist
- Monopoly there is only one supplier and there are substantial, potentially
insurmountable, barriers to new entrants
o Many government services are essentially monopoly industries such as the
provision of roads and rails. These are maintained as monopolies when it is
considered inefficient or somehow undesirable to have competition.

 Poojan Shah

o This position can change, however, with some governments choosing to open up
some of their monopoly markets to private competition (e.g. electricity supply in
Queensland)
- Monopsony the market situation where there is only one buyer
o E.g. th federal government is the only buyer of fighter jets in Australia.
Levels of Competition
- Total budged competition
o Consumers have limited financial resources and therefore must make choices
about which products to consume and which to forgo
o Organizations ere competing against all alternative ways the consumer can
engage in an exchange of value
o E.g. a university student would like to attend a concert and the tickets are $120.
The concert is competing with all other possible uses of the students $120
refilling the car, weekly rent, food and other bills, leaving it in the banketc.
- Generic competition
o Consumers often have alternative ways to meet their product needs.
o Substitution: The same want or need can be satisfied by quite different products.
o E.g. Sydney Buses competes with City Rail and Black and White taxis for the
business of consumers needing to get from A to B. Bus, train and taxi rides are
quite different, but meet the same need
- Product competition
o Some products are broadly similar, but have different benefits, features and
prices that distinguish them from competing products.
o E.g. soft drinks, water, alcohol, coffee, and juice are all beverages that people
could purchase to drink.
- Brand Competition
o Some products are very similar, offering the same benefits, features and price to
the same target market
o E.g. Westpac, ANZ, the commonwealth bank, and the National Australian Bank all
offer savings account with similar minimum balances, interest rates, internet
banking facilities, distribution of ATMs, fees etc.

Macro Environment
Marco-environment the factors outside of the industry that influence the survival of the
company; these factors are not directly controllable by the organization
Can be at any geographical level including local, state, country, or regional
Marketers can influence the macro environment, but not control. E.g. a company can lobby
government to reduce the tax on wine but they cannot directly control the rate set by the
government
Failure to plan based on emerging trends can lead to business closure
Marketers need to analyze the political, economic, sociocultural, technological and legal
forces (PESTL)

 Poojan Shah

Political Factors
Political forces the influence of politics on marketing decisions
Politics is directly relevant to the marketing organization through:
- Lobbying for favorable treatment at the hands of government
- Lobbying for a light-touch approach to regulation
- The very large market that the government and its bureaucracy comprise
- The ability of political issues to affect efforts at international marketing.
Larger organizations, or the bodies created to represent smaller ones can engage directly in
politics by seeking to influence law markers
Organization can campaign for legal or policy changes
Government/federal parties undertake lots of marketing activities. E.g. the federal
governments Department of Foreign Affairs and Trade runs advertising campaigns an
maintains its website to inform Australian travellers about law, customs and health.

Economic Forces

 Poojan Shah

Economic forces those factors that affect how much people and organizations can spend
and how they choose to spend it.
Components of this are: income, prices, level of savings, the level of debt, and the availability
of credit.
Economic forces change quickly and dramatically
Currency fluctuations affect e.g. the prices of exports and imports.
Increase or decrease in interest rates can have a significant impact on both consumer and
business confidence, and subsequent spending and investment patterns
Important consideration: *Global financial crisis - made up of global forces that are beyond
control of any individual organization or even government

Sociocultural Forces
Socio cultural the social and cultural factors that affect peoples attitudes, beliefs, behaviors,
preferences, customs and lifestyles
They comprehensively and persuasively influence the value people put on different product
offerings
Demographic characteristics influence behavior of society as a whole and the individuals
within it.
Key sociocultural factor is the natural environment society as become more concerned
about the sustainability of humankinds lifestyle.
The natural environment includes: sustainability, corporate social responsibility, global
warming, pollution, deforestation, salinity and carbon trading.

Technological forces
Technology s constantly improving, and is used in everyday life
It does not only change the expectations and behaviors of customers and clients, it has a huge
effect o how suppliers work
Technology although is the gadgets that make everyday activities much more easier, it is how
the GPS is better than physically using a map.
It is also a threat to marketers. E.g. Kodak, long established as a leading photography brand,
suffered massive down sizing and its business was severely threatened by the advent of
digital cameras in the 1900s.

Legal Forces
Laws legislation enacted by elected officials
Regulations rules made under authority delegated by legislation
They govern what marketing organizations can and cannot legally do
The most significant laws and regulations fall into the categories of: privacy, fair trading,
consumer safety, prices, contract terms and intellectual property
Many industries have adopted codes of self-conduct as a self-regulatory device. (Cheaper
method)

Macro Environment complexity
No factors of the Marco environment act in isolation they are all independent and a change
in one will have a consequence in another
E.g. the development of internet technology created a need for new laws to regulate online
conduct; an entire online economy developed; the provision of internet infrastructure and
the regulation of internet content has become a major political issue; the nature of

 Poojan Shah

relationship and how people spend their days has been fundamentally changed by the online
world
E.g. Emissions trading schemes and carbon tax proposals are generally based on the theory
that the price of product that generate more carbon pollution will increase as a result of the
scheme/proposal, reducing demand; where as carbon-friendly product will fall to be
relatively low in price; increasing demand. Hence in the future, products that emit larger
greenhouse gasses will be hardly be able to compete in the market.

Situation Analysis and Market Planning
Situation analysis an analysis that involves identifying the key factors that will be used as a
basis for the development of marketing strategy
Marketing planning an ongoing process that combines organizational objectives and
situational analysis to formulate and maintain a marketing plan that moves the organization
from there it currently wants to be.










e.g. a marketer is informed by top management that their objective for the next financial year
is to achieve the number 2 position in terms of market share for a product that was launched
12 months ago since the launch, the product has achieved 17% market share. To get the
second position, the marketer needs to increase market share by 10% to achieve a total of
27% market share. If successful the marketer will receive bonuses.
Marketers need to be able to analyze their current situation, understand not only their own
business, but also their competitors business and marketing environment.


Marketing Metrics
Marketing metrics are measures that are used to assess marketing performance.
Different marketing metrics is used for different situations. Common marketing metrics
include:
- Reaction rate the number of active customers at the end of a time period divided by
the number of active customers at the start of that time period
- Revenue total income from sales or products and services
- Share of requirements Brand purchases as a percent of total category purchases by
buyers of that brand.
(%)
()
=
()

- Op of mind awareness first brand mentioned when questioned about the category by
researchers

 Poojan Shah

- Willingness to recommend percent of survey customers who say they would

recommend the brand to a friend. Should correlate with top box satisfaction but may
not. The Recihheld question: How likely is it that you would recommend (company z)
to a friend or colleague?
- Willingness to search willingness to search (%) = percentage of customers willing to
delay purchase, change stores, or reduce purchase quantities to avoid switching
brands

1. E.g. Kelloggs objective was to revamp the way it used trade promotions in its overall
marketing strategy
o In trade promotions, manufacturers such as Kelloggs make payments called
rebates o grocers to display, advertise and offer reduced prices on certain
products at specific times
o Using marketing metrics such as sales uplift from the trade promotions
o Kelloggs found 59% of its trade promotions events lost money for the company
2. E.g. Telecommunications company wants to increase the profitability od its business
customers can conduct an experiment where some customers are offered specially
designed calling plans with unique pricing arrangements, while others are left the
same
o Uses 2 of the marketing metrics the customers; change in spend; and the
customers churn rate (proportion of customers choosing to change to another
telecommunications company)
Marketing metric are vital for marketers as:
o The ability to articulate a return on investment can provide a solid rationale for
continued funding for successful marketing programs
o Return on marketing investment metrics can help marketers allocate resources
where they are most effective
o Marketers can build and share a database o returns on investment that should
assist in evaluating the relative effectiveness of various programs
In summary, marketing metrics include four key elements:
1. Return on marketing investments
2. Customer satisfaction
3. Market share in targeted segments
4. Brand equity
Contents of a strategic marketing plan:
1. Executive summary
2. Company description
3. Strategic Focus and plan
4. Situation analysis
5. SWOT analysis
6. Product market focus
7. Marketing program
8. Financial Data and projections
9. Implementation plan
10. Evaluation and control
11. appendices

 Poojan Shah

SWOT analysis
Factors included in the situation analysis are expected to have an immediate and sufficiently
large impact on the business. It must use insights from customers, partners, suppliers and
other areas of the organization.
SWOT analysis - an analysis that identifies the internal strengths and weaknesses and the
external opportunities and threats in relation to an organization
Strengths attributes of the organization that help it achieve its objectives: competitive
advantages and core competencies
Weaknesses attributes of the organization that hinder it in trying to achieve its objectives
Strengths and weaknesses are directly controllable by the organization as they are internal
factors
Opportunities external factors hat are potentially helpful to achieving the organizations
objectives. They are only off benefit if the organization responds effectively to them
Threats External factors that are potentially harmful to the organizations efforts to achieve
its objectives
Threats and Opportunities are beyond the organization direct control.
A SWOT analysis helps marketers to identify ways to minimize the effect of weakness in their
business, while maximizing their strengths.

 Poojan Shah

E.g. Given its strengths, Hungry Jacks could concentrate its marketing efforts behind core
products such as its Whooper range, and core concepts such as burger, fries and drinks
o May consider adding more menu variety to cater for the light foods trend
o Could make ready made meals for distribution through super market chains
o
Marketing Opportunities (including redefining the market)