TOPIC 2

MARKETING SYSTEMS AND

ENVIRONMENT
 DEFINITION
 Marketing system is a systematic process
enabling marketers to interact with their
buyers and close deals. It includes price
mechanism, regulation system, individuals
and companies qualification credentials,
reputations and clearing that surrounds the
mechanism and make it operate in a social
context. It is a social network of buyers,
sellers and other actors that come
together to trade in a given product or
service.
 Participants in a market systems include:

 Direct marketing players- producers, buyers and

consumers who drive economic activity in the
market
 Suppliers of supporting goods and services such
as finance, equipment and business consulting
 Entities that influence the business environment
such as regulatory agencies, infrastructure
providers and business associations.
 ‘black market’ – indicates a lack of regulation, or
any trade, often illegal operating in violation of
official regulations
 Marketing Environment
The marketing environment consists of all the actors and forces outside marketing
that affect the marketing management’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 industrial group, they
can generally be divided into broad micro environmental and macro
environmental components. For most companies, the micro environmental
components are: the company, suppliers, marketing channel firms
(intermediaries), customer markets, competitors, and publics which combine to
make up the company’s value delivery system. The macro environmental
components are thought to be: demographic, economic, natural, technological,
political, and cultural forces. The wise marketing manager knows that he or she
cannot always affect environmental forces.
It focuses on the environmental factors that affect the marketing activities of
organisations. Such factors include demographic changes, changes in
fashions, changes in consumption due to economic development and political
changes. Marketers have to be aware of changes that take place in the
marketing environment, since these can have a major impact on how they
change and evolve their own marketing strategies.
1). Being successful means being able to adapt the marketing mix,
trends and changes in the environment.
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 strategies to meet new challenges and
opportunities in the marketplace. The marketing environment is
made up of a:
1. Micro environmental
2. Macro-environment.
 Micro Environmental
The microenvironment consists of five components;
 The first is the organization’s internal environment—its several departments and
management levels—as it affects marketing management's decision making.
 The second component includes the marketing channel firms that cooperate to
create value: the suppliers and marketing intermediaries (middlemen, physical
distribution firms, marketing-service agencies, financial intermediaries).
 The third component consists 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 the competitors facing the organization.
 The fifth component consists of all the public that have an actual 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 the microenvironment consists of six forces close to the company that affect its
ability to serve its customers: The company itself (including departments),
Suppliers, Marketing channel firms (intermediaries), Customer markets,
 a. The Company
 The first force is the company itself and the role it plays in the microenvironment.
This could be deemed the internal environment.
1). Top management is responsible for setting the company’s mission, objectives,
broad strategies, and policies.
2). Marketing managers must make decisions within the parameters established by
top management.
3). Marketing managers must also work closely with other company departments.
Areas such as finance, R & D, purchasing, manufacturing, and accounting
all produce better results when aligned by common objectives and goals.
4). All departments must “think consumer” if the firm is to be successful. The goal is
to provide superior customer value and satisfaction.
b. Suppliers
 Suppliers are firms and individuals that provide the resources needed by the
company and its competitors to produce goods and services. They are an
important link in the company’s overall customer “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 costs must be carefully monitored
 c. Marketing Intermediaries
 Marketing intermediaries are firms that help the company to promote,
sell, and distribute its goods to final buyers.
1). Resellers are distribution channel firms that help the company find
customers or make sales to them.
2). These include wholesalers and retailers who buy and resell
merchandise.
3). Resellers often perform important functions more cheaply than the
company can perform itself. However, seeking and working with
resellers is not easy because of the power that some demand 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 before they move
to the next destination). Marketing service agencies (such as
marketing research firms, advertising agencies, media firms, etc.)
help the company target and promote its products. Financial
intermediaries (such as banks, credit companies, insurance
 d. Customers

The company must study its customer markets closely since

each market has its own special characteristics. These
markets normally include:
1). Consumer markets (individuals and households that buy
goods and services for personal consumption).
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 public services or transfer
them to those that need them).
5). International markets (buyers of all types in foreign
countries).
 e. Competitors
Every company faces a wide range of competitors. A company must secure a
strategic advantage over competitors by positioning their offerings to be
successful in the marketplace. No single competitive strategy is best for all
companies.

f. 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. 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 public--a company must be concerned about the general public’s
attitude toward its products and services.
7). Internal public--workers, managers, volunteers, and the board of directors
 2. Marketing Macro Environment
The Company’s Macro environment and all of the other actors operate in a larger macro environment of forces that
shape opportunities and pose threats to the company. There are six major forces (outlined below) in the
company’s macro environment.
a. Demographic. b. Economic. c. Natural. d. Technological. e. Political. f. Cultural.
a. Demographic 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 interesting ones are:
1). The world’s population (though not all countries) rate is growing at an explosive rate that will soon exceed food
supply and ability to adequately service the population. The greatest danger is in the poorest countries where
poverty contributes to the difficulties. Emerging markets such as China are receiving increased attention from
global marketers.
2). The most important trend is the changing age structure of the population.
a). Generation X-this group lies in the shadow of the boomers and lack obvious distinguishing characteristics.
They are a very cynical group because of all the difficulties that have surrounded and impacted their group.

b). Echo boomers (baby booklets) are the large growing kid and teen market. This group is used to affluence on the
part of their parents (as different from the Gen Xers). One distinguishing characteristic 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 generational alienation. Many in
the modern family now “telecommute”--work at home or in a remote office and 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. Technical skills (such as in computers) will be a must in the future. The final
 b. Economic Environment
The economic environment includes those factors that affect consumer purchasing power and spending
patterns. Major economic trends in the United States include:
1). Personal consumption. Today, consumers are more careful shoppers.
2). Value marketing (trying to offer the consumer greater value for their money) Real income is on the rise
again but is being carefully guarded by a value-conscious consumer.
3). Income distribution : Spending patterns show that food, housing, and transportation still account for the
majority of consumer money. It is also of note that distribution of income has created a “two-tiered
market” where there are those that are affluent and less affluent. Marketers must carefully monitor
economic changes so they will be able to prosper with the trend, not suffer 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 concerns have 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-renewable such as oil, coal, and various minerals have been seriously depleted during industrial
expansion.
2). Increased pollution is a worldwide problem. Industrial damage to the environment is very serious. Far-
sighted companies are becoming “environmentally friendly” and are producing environmentally safe
and recyclable 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 and necessary 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 the material and energy problems facing the world.
4). Environmentally sustainable strategies. The so-called green movement has encouraged or even
demanded that firms produce strategies that 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 the expanding fields
of health care, the space shuttle, robotics, and biogenetic industries.
c). The challenge is not only technical but also commercial--to make practical, affordable versions 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.
 The economic and technological environment affects the way firms and the whole economy use
resources. The economic environment is affected by the way all the elements of the macro-economic
system interact. The technological environment is singled-out to underscore the ever-increasing
importance of technology on how business is conducted.
 Technology is the application of science to convert an economy’s resources to output. Technology
affects marketing in two basic ways: with new products and with new processes. In modern economies,
the rate of technological change is very rapid.
 e. Political Environment
 The political environment includes laws, government agencies, and pressure groups that influence 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.
 Almost every marketing activity is subject to a wide range of laws and regulations. Some trends in the
political environment include:
Increasing legislation to:
a). Protect companies from each other.
b). Protecting consumers from 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 firms actively 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 right thing.”

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 ethical issues.
Concerns are Privacy, Security, and Access by vulnerable or unauthorized groups.
 f. Cultural Environment
The cultural environment is made up of institutions and other forces that
affect society’s basic values, perceptions, preferences, and behaviors.
Certain cultural characteristics can affect marketing 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. Eg most Americans believe in working
hard and being honest which shape their attitude and behavior in
their daily lives. Core beliefs and values are passed on from parents
to children and are reinforced by schools, churches, business, and
government. Secondary beliefs and values are more open to change.
Eg believing in marriage is a core belief but believing that people
should get married early in life is a secondary, marketers have a
chance of changing secondary values but little chance of changing
core values.
 Cont…
2). Shifts in secondary cultural values. Since secondary cultural values and beliefs are open to
change, marketers want to spot them and be able to capitalize on the change potential.
Society’s major cultural views are expressed in:
a). People’s views of themselves. People vary in their emphasis on serving themselves versus
serving others.
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
lives rather than their image.
c). People’s views of organizations. People are willing to work for large organizations but
expect them to become increasingly socially responsible.
d). People’s views of society. People’s orientation to their society influences their consumption
patterns, levels of savings and attitudes toward the marketplace. This orientation influences
consumption patterns.
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 abundant. However, nature is finite.
Love of nature and sports associated with nature are the most significant trends in the
current years. Eg tour operators are offering more wilderness adventures, and food
producers produce more healthy food.
f). People’s views of the universe. Studies of the origin of man, religion, and thought-
provoking ad campaigns are on the rise. Currently, marketers have noted an emerging
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 Responding to the Marketing Environment

Companies can passively accept the marketing

environment as an uncontrollable element to which
they must adapt, avoiding threats and taking
advantages of opportunities as they arise. Or they can
take an environmental management prospective
which is a management perspective in which the firm
takes aggressive actions to affect the publics and
forces in its marketing environment rather than
simply watching and reacting to them. Eg a company
would have a little success trying to influence
geographical population shifts, the economic
environment, or major cultural values. Whenever
possible the companies should try to be proactive
rather than reactive.
 Analyzing Marketing Opportunities and Developing Strategies

 Companies and their marketing departments’ success depends upon the careful analysis
of the marketing environment. Opportunities needs to be analyzed and captured in order
to make the profits. Changing market opportunities must be explored and pursued. In
order to correctly identify opportunities and monitor threats, the company must begin
with a thorough understanding of the marketing environment in which the firm operates.
Moreover, smart managers can take a proactive, rather than reactive, approach to the
marketing environment.
 Customers
•Market Potential (size, growth rate)
•Customer Behavior (wants and needs, segmentation, price sensitivity)
 Competitors
•Industry Structure Analysis (entry/exit barriers, buyers, sellers, substitutes)
•Competitor Response Profiles (capabilities, current and future actions)
 Company
•Economic Analysis (costs, break-even, profitability)
•Company Fit (strengths, weaknesses, resources, culture, goals)
 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 with threats. Studies have shown that excellent companies not only have a
keen sense of customer but an appreciation of the environmental forces swirling around
them. By constantly looking at the dynamic 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 and tomorrow’s customers, and
compete with the intense competition present in the global marketplace.