Marketing Environment
Definition
 “The actors and forces outside marketing
that affect marketing mgt’s ability to build
and maintain successful relationships with
target customers” – Kotler
Today's markets change rapidly and
marketers need to adopt their strategies and
to meet new challenges and opportunities
The Environmental forces
Legal
Technological
factors
factors
Marketing Environment
-MicroConsumer
Political
factors
The Internal
Environment
COMPANY
Supplier
Economic
factors
Stakeholder
Environmental
factors
PESTLE
PESTLE
Marketing Environment
-Macro-
Socio- Cultural
factors
The Marketing Environment
Micro Environment

The actors close to the company that affect
its ability to serve its customers
Macro Environment

The larger societal forces that affect the
micro environment
Exercise :Internal Environment
 Men
 Money
 Material
 Machinery
 Markets
(Analyzing in the context of Sri Lankan
Airlines)
Micro Environment- Key
Stakeholders
Suppliers
Pressure
groups
Competitors
Company
Employees
& Unions
Customers
Share
holders &
creditors
Channel
Partners
(Intermediaries)
Strengths
Weakness
Brand
Product portfolio
Financial Resources
Managerial ability
Knowledge/Skill
Economies of scale
Technology
Lack of skilled labor
High labor turn over
Overcapacity
Poor internal communication
Supplier relationships
Opportunity
Threats
Investments
Diversifying portfolio
Global markets
Internet
Innovation
Demand for high quality products
Competitor activity
Supplier desertion
Market saturation
Substitute products
Resistance to change
Porters 5 Forces
Potential Entrant
(Threat of
Mobility)
Supplier
(Supplier Power)
Industry
Rivalry
Substitutes
(Threat of
Substitutes)
Buyer
(Buyer Power)
Industry Rivalry
 Sustainable competitive advantage through
innovation
 Competition between online and offline
companies
 Level of advertising expense
 Powerful competitive strategy
Apple vs Anroid
Bargaining Power of Suppliers
 Supplier switching costs relative to firm switching costs
 Degree of differentiation of inputs
 Impact of inputs on cost or differentiation
 Presence of substitute inputs
 Strength of distribution
channel
 Supplier concentration to
firm concentration ratio
 Employee solidarity (e.g.
labor unions)
 Supplier competition – ability
to forward vertically integrate
and cut out the BUYER
Bargaining Power of Buyers
 Buyer concentration to firm concentration ratio
 Degree of dependency upon existing channels of
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distribution
Bargaining leverage, particularly in industries with
high fixed costs
Buyer switching costs relative to firm switching
costs
Buyer information availability
Availability of existing
substitute products
Buyer price sensitivity
Differential advantage
(uniqueness) of industry
products
Key Accounts Chains
Threat of Substitutes
 Buyer propensity to substitute
 Relative price performance of substitute
 Buyer switching costs
 Perceived level of product differentiation
 Number of substitute products available in
the market
 Ease of substitution
 Substandard product
 Quality depreciation
Water vs Cola
Threat of New Competition
 The existence of barriers to entry (patents,

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rights, etc.)
Economies of product differences
Brand equity
Switching costs
Capital requirements
Access to distribution
Customer loyalty to established brand
Absolute cost
Industry profitability; the more profitable the
industry the more attractive it will be to new
competitors.
Analyzing the Macro
Environment
P
Political
E
Economic
S
Social
T
Technological
L
Legal
E
Environmental
Political factors
 Main concern for business is for stability in
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political decision making, a dependable planning
horizon and a positive climate
Alert management to impending legislation
Mobilize efforts to represent stakeholder interest
to the legislators
Develop awareness of the intentions of those
public bodies that can make decisions affecting
business operations
Identify changes out of electoral shifts
Implications of Political manifestos and
philosophies of the party
Economic factors
 Business cycle
 Inflation
 GDP
 Economic policies
 Employment levels
 Disposable income
Social factors
 Trends in population
 Dependency ratio
 Population structure
 Occupational structure
 Regional distribution
 Marital status and household structure
(Case: BMW)
Technological factors
 Technology is a primary driving force for
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social change
Computer, mobile media and
telecommunications are converging
Credit transfers rather than cash based
society
Rise of the knowledge worker
Rising proportion of IT and tele
communications ownership
(Case: Nike)
Ecological factors
 What are the issues that will directly and
indirectly impact the business
 How will the business mitigate this
challenge?
 Assess stakeholder impact
 Can the environmental issues be used to
ones advantage?
 What should be our strategic positioning?
(Case: Marks & Spencer)
Legal factors
 Legislation governing business
 Legislation governing trade practices
 Laws governing packaging
 Price ceiling