Marketing Course Code: BBA-201

Chapter 3
Analyzing the Marketing Environment
The Microenvironment and Macroenvironment
The marketing environment consists of the actors and forces outside marketing that affect
marketing management’s ability to build and maintain successful relationships with target
customers.

It consists both of the micro and macro environment.

The microenvironment
Microenvironment: The actors close to the company that affects its ability to serve its customers the
company, suppliers, marketing intermediaries, customer markets, competitors, and publics.

The Company:
In designing marketing plans, marketing management takes other company groups into account
groups such as top management, finance, research and development (R&D), purchasing, operations,
human resources, and accounting. All of these interrelated groups form the internal environment.

Top management sets the company’s mission, objectives, broad strategies, and policies.

Marketing managers make decisions within these broader strategies and plans. Marketing managers
must work closely with other company departments. With marketing taking the lead, all
departments—from manufacturing and finance to legal and human resources share the
responsibility for understanding customer needs and creating customer value.

Suppliers:
Suppliers form an important link in the company’s overall customer value delivery network. They
provide the resources needed by the company to produce its goods and services.

Supplier problems can seriously affect marketing. Marketing managers must watch supply
availability and costs. Supply shortages or delays, natural disasters, and other events can cost sales
in the short run and damage customer satisfaction in the long run. Rising supply costs may force
price increases that can harm the company’s sales volume.

Marketing intermediaries: are firms that help the company to promote, sell and distribute its goods
to final buyers.

Resellers are distribution channel firms that help the company find customers or make sales to
them. These include wholesalers and retailers that buy and resell merchandise.

Physical distribution firms help the company stock and move goods from their points of origin to
their destinations.

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By: Muhammad Bilal Ahsan Roll no: 2015
Marketing Course Code: BBA-201

Marketing services agencies are the marketing research firms, advertising agencies, media firms,
and marketing consulting firms that help the company target and promote its products to the right
markets.

Financial intermediaries include banks, credit companies, insurance companies, and other
businesses that help finance transactions or insure against the risks associated with the buying and
selling of goods.

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 also must 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 with those of its competitors. Large firms with dominant
positions in an industry can use certain strategies that smaller firms cannot afford. But being large is
not enough. There are winning strategies for large firms, but there are also losing ones. And small
firms can develop strategies that give them better rates of return than large firms enjoy.

Public: Any group that has an actual or potential interest in or impact on an organization’s ability to
achieve its objectives.
We can identify seven types of publics:

 Financial publics: This group influences the company’s ability to obtain funds. Banks,
investment analysts, and stockholders are the major financial publics.
 Media publics: This group carries news, features, editorial opinions, and other content. It
includes television stations, newspapers, magazines, and blogs and other social media.
 Government publics: Management must take government developments into account.
Marketers must often consult the company’s lawyers on issues of product safety, truth in
advertising, and other matters.
 Citizen-action publics: A company’s marketing decisions may be questioned by consumer
organizations, environmental groups, minority groups, and others. Its public relations
department can help it stay in touch with consumer and citizen groups.
 Internal publics: This group includes workers, managers, volunteers, and the board of
directors. Large companies use newsletters and other means to inform and motivate their
internal publics. When employees feel good about the companies they work for, this positive
attitude spills over to the external publics.
 General public: A company needs to be concerned about the general public’s attitude
toward its products and activities. The public’s image of the company affects its buying
behavior.
 Local publics: This group includes local community residents and organizations. Large
companies usually work to become responsible members of the local communities in which
they operate.

Customers
Customers are the most important actors in the company’s microenvironment. The aim of the entire
value delivery network is to engage target customers and create strong relationships with them.

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By: Muhammad Bilal Ahsan Roll no: 2015
Marketing Course Code: BBA-201

The company might target any or all of five types of customer markets.

 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 use in their production
processes, whereas reseller markets buy goods and services to resell at a profit.

 Government markets consist of government agencies that buy goods and services to
produce public services or transfer the goods and services to others who need them.

 International markets consist of these buyers in other countries, including consumers,

producers, resellers, and governments.

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

The Macroenvironment
Macro environment: The larger societal forces that affect the microenvironment—demographic,
economic, natural, technological, political, and cultural forces.

Demography: the study of human populations in terms of size, density, location, age, gender, face,
occupational and other statistics.

Changes in demographics result in changes in markets. There are some important demographic
trends in today’s world, such as the world population growth and the changing age structure of the
world population, where some parts of the world are aging and others have younger populations.

In the developed world, there are often generational differences to be found.

Baby boomers are the 78 million people born during the years following the Second World War and
lasting until 1964.

Generation X are the 45 million people born between 1965 and 1976 in the “birth death” following
the baby boom.

Generation Y or the Millennials are the 83 million children of the baby boomers born between 1977
and 2000.

Generation Z: People born after 2000 (although many analysts include people born after 1995) who
make up the kids, tweens, and teens markets.

They are characterized by a high comfort in technology. Changes can also be found in the family
structure. The traditional western household (husband, wife and children) is no longer typical.
People marry later and divorce more. There is an increased number of working women and
youngsters tend to stay at home longer. The workforce is also aging, because people need to work
beyond the previous retirement age. There are also geographic shifts, such as migration. These
movements in population lead to opportunities for marketing niche products and services. There are
also migration movements within countries, namely from the rural to urban areas, also called
urbanization.

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By: Muhammad Bilal Ahsan Roll no: 2015
Marketing Course Code: BBA-201

Economic environment: Economic factors that affect consumer purchasing power and spending
patterns.

There are also changes in customer spending patterns, such as the recent recessions, which can lead
to lifestyle changes. Marketers should also pay attention to income distribution and income levels.

The Natural and Technological Environments

The Natural Environment
The natural environment involves natural resources that are needed as inputs by marketers or that
are affected by marketing activities.

Changes in this environment involve an increase in shortage of raw materials, increased pollution
and increased governmental intervention.

Environmental sustainability involves developing strategies and practices that create a world
economy that the planet can support indefinitely.

The Technological Environment

The technological environment consists of forces that create new technologies, creating new
product and market opportunities.

It can provide great opportunities, but also comes with certain dangers.

The Political–Social and Cultural Environments

The Political and Social Environment
The political environment consists of laws, government agencies and pressure groups that influence
and limit various organization and individuals in a given society.

Current trends in our world today are increasing legislation affecting businesses globally and thus an
increase in governmental influence over businesses. There is also an increase in emphasis on ethics
and operating socially responsible.

Cause-related marketing refers to companies linking themselves to meaningful causes, to improve

company image.

The Cultural Environment

The cultural environment involves instructions and other forces that affect society’s basic values,
perceptions, preference and behavior.

Cultural factors influence how people think and consume.

Core beliefs are fundamental and passed on by parents and reinforced by the environment.

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By: Muhammad Bilal Ahsan Roll no: 2015
Marketing Course Code: BBA-201

Secondary beliefs are more open to change. People can vary in their views of themselves, of others,
of organization, but also in their views of society, nature and the universe.

Responding to the Marketing Environment

Someone once observed, “There are three kinds of companies: those who make things happen,
those who watch things happen, and those who wonder what’s happened.” Many companies view
the marketing environment as an uncontrollable element to which they must react and adapt. They
passively accept the marketing environment and do not try to change it. They analyze environmental
forces and design strategies that will help the company avoid the threats and take advantage of the
opportunities the environment provides.

Even more, rather than simply watching and reacting to environmental events, proactive firms take
aggressive actions to affect the publics and forces in their marketing environment. Such companies
hire lobbyists to influence legislation affecting their industries and stage media events to gain
favorable press coverage. They take to the social media and run blogs to shape public opinion. They
press lawsuits and file complaints with regulators to keep competitors in line, and they form
contractual agreements to better control their distribution channels.

Marketing management cannot always control environmental forces. In many cases, it must settle
for simply watching and reacting to the environment. For example, a company would have little
success trying to influence geographic population shifts, the economic environment, or major
cultural values. But whenever possible, smart marketing managers take a proactive rather than
reactive approach to the marketing environment.

In conclusion, firms should be pro-active rather than observing in respect to the marketing
environment.

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By: Muhammad Bilal Ahsan Roll no: 2015