Chapter III
THE MARKETING ENVIRONMENT
Main concepts in this chapter:
1. Describe the environmental forces that affect the company’s ability to serve its
customers.
2. Explain how changes in the demographic and economic environments affect marketing
decisions.
3. Identify the major trends in the firm’s natural and technological environments.
4. Explain the key changes in the political and cultural environments.
5. Discuss how companies can react to the marketing environment.
Marketing Environment:
Consists of actors and forces outside the organization that affect management’s ability to build
and maintain relationships with target customers.
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Studying the environment allows marketers to take advantage of opportunities as
well as to combat threats.
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Marketing intelligence and research are used to collect information about the
environment.
The environment continues to change more rapidly and both consumers and marketers wonder
what the future will bring. Although every manager in an organization need to observe the
outside environment, marketing managers have two special aptitudes called Marketing Research
and Marketing Intelligence-for collecting information about the marketing environment. By
carefully studying the environment, marketers can adapt their strategies to meet new market
place challenges and opportunities.
The Marketing environment made up of a microenvironment and macroenvironment.
Microenvironment: The actors close to the company that affect its ability to serve its customersthe company, suppliers, marketing intermediaries, customer markets, competitors and publics.
Microenvironment includes: the company itself, supplies, marketing channel firms, customer markets,
competitors, and publics.
Macroenvironment: The larger societal forces that affect the microenvironment. These forces
are considered to be beyond the control of the organization.
Macroenvironment includes: demographic, economic, natural, technological, political, and cultural
forces.
THE COMPANY’S MICROENVIRONMENT:
The actors in the microenvironment:
1. Company’s Internal Environment:
a. Areas inside a company such as Top management, Finance, Research and
Development (R&D), purchasing, operations, and accounting.
b. Affects the marketing department’s planning strategies. Top management sets
the company’s mission, objectives and other strategies. Marketing managers make
decisions within the strategies and plans made by top management.
c. All departments must “think consumer” and work together to provide
superior customer value and satisfaction. Finance is concerned with funding
and using funds to carry out the marketing plans. R&D focuses on how to design
safe and attractive products. Purchasing department worry about getting supply
and materials, whereas Operations department is responsible for producing and
distributing desired quality and quantity of products. Accounting department has
to measure the revenues and costs and inform the marketing department, how well
it is achieving its objectives.
2. Suppliers
Suppliers are an important link in the “value delivery system.” Suppliers
provide resources needed to produce goods and services.
Marketing managers must watch Supplier’s availability-supply shortages or
delays, labor strikes that can damage customer satisfaction in the long run. Rising
supply costs may force price increase that can harm company’s sales volume.
Most marketers treat suppliers like partners in creating and delivering customer
value.
3. Marketing Intermediaries
Firms that help the company to promote, sell, and distribute its goods to final
buyers. Marketing intermediaries include
i. Resellers
ii. Physical distribution firms
iii. Marketing services agencies
iv. Financial intermediaries
Resellers are distribution channel firms that help the company to find its
customers or make sales to them. These include wholesalers and retailers who
buy and resell merchandise. Wal-Mart, Carrefour, Best Buy etc are examples of
big retailers.
Physical distribution firms help the company to stock and move goods from
their points of origin to their destinations. Working with a warehouse and
transportation firms, a company must determine the best ways to determine store
and ship goods looking at the factors such as cost, delivery, speed and safety.
Marketing services Agencies are the marketing research firms that help the
company target and promote its products to the right market.
Financial intermediaries include banks, credit companies, insurance companies
and other businesses that help the finance transactions or insure against risks
associated with the buying and selling goods.
4. Customers
Five types of markets that purchase a company’s goods and services.
i. Consumer
Consumer market consists of individuals and households that buy goods and
services for personal consumption.
ii. Business
Business markets buy goods and services for further processing or for use
in their production process.
iii. Reseller
Reseller markets buy goods and services to resell at a profit.
iv. Government
Government markets are made up of government agencies that buy
goods and services to produce public services or transfer the goods and
services to others who need them.
v. International
International market consists of buyers in other countries including
consumers, producers, resellers, and governments.
5. Competitors
The marketing concept states that for a company to be successful, it must provide
greater customer value and satisfaction than its competitors do.
a. Those who serve a target market with products and services that are viewed by
consumers as being reasonable substitutes.
b. Company must gain strategic advantage against these organizations. No single
competitive marketing strategy is best for all firms. Each firm should consider its
own size industry position compared to its own competitors.
6. Publics
A public is any group that has an interest in or impact on an organization's ability
to achieve its objectives. We can identify seven types of publics.
i. Financial public
These influence the company’s ability to obtain funds. Banks, investment
houses and stockholders are the major financial publics.
ii. Media public
These carry news, features etc. They include newspapers, magazines, and
radio and television stations.
iii. Government public
Management must take government developments into account.
Management must always follows the government rules and regulations
when doing businesses mainly on issues of product safety, truth in
advertising and other matters.
iv. Citizen-action public
A company’s marketing actions may be questioned by consumer
organizations, environmental groups and others. Public Relations
Department can help it stay in touch with consumer and citizen groups.
v. Local public
These include neighborhood resident and community organizations.
vi. General public
A company needs to be concerned about the general public’s attitudes
towards its products and activities. The public image of the company
affects its buying.
vii. Internal public
These include 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 their
company, this positive attitude spills over to the external publics.
THE COMPANY’S MACROENVIRONMENT
The company and all of the other actors operate in a larger macroenvironment of forces
that shape opportunities and pose threats to the company.
1. DEMOGRAPHIC ENVIRONMENT
The study of human populations in terms of size, density, location, age, gender, race, occupation,
and other statistics.
-Marketers track changing age and family structures, geographic population shifts, educational
characteristics, and population diversity.
Thailand Demographics:
More than 85% speak a Thai language and share a common culture. This core population
includes the central Thai (33.7% of the population, including Bangkok), Northeastern Thai or
Lao (34.2%), northern Thai (18.8%), and southern Thai (13.3%).
Population: 65,493,298
Age structure:
0-14 years: 21.2% (male 7,104,776/female 6,781,453)
15-64 years: 70.3% (male 22,763,274/female 23,304,793)
65 years and over: 8.5% (male 2,516,721/female 3,022,281) (2008 est.)
Population growth rate: 0.64% (2008 est.)
Sex ratio:
Under 15 years:
15-64 years:
65 years and over:
total population:
1.05 male(s)/female
0.98 male(s)/female
0.83 male(s)/female
0.98 male(s)/female (2008 est.)
Ethnic groups:
Tai (including Lao, who make up about ⅓ of the Thai population): 75%,
Chinese :
14%,
Others:
11%
Religions:
Buddhism :
Islam :
Christianity :
Hinduism:
Other (including Judaism):
94.6%,
4.6%,
0.7%,
0.1%,
0.1%
2. ECONOMIC ENIVRONMENT:
Market requires buying power as well as people. The economic environment consists of
factors that affect consumer purchasing power and spending patterns.
Thai Economy:
The economy of Thailand is lower middle income industrial developing nation, heavily
export-dependent, with exports accounting for 60% of GDP. The exchange rate has
reached 37.00/usd (GDP $7.3 trln baht) as of October 26, 2006, for a nominal GDP at
market rates of approximately US$ 200 bln. However, due to rapid appreciation in 2007,
nominal GDP hovers around $230 bln, slightly smaller than that of Guangdong. This
keeps Thailand as the 2nd largest economy in Southeast Asia, after Indonesia, a position
it has held for many years. Despite this, Thailand ranks midway in the wealth spread in
SouthEast Asia as its 4th richest nation per capita, after Singapore, Brunei, and Malaysia.
It is also an anchor economy for the neighboring least developed countries of Laos,
Burma, and Cambodia. Thailand's recovery from the 1997-98 Asian financial crisis relied
on exports, largely on external demand. Thailand has a strong automotive export industry
along with electronic goods manufacturing which has helped to strengthen the baht.
Agriculture has always been traditional income generation, but has declined in relative
terms in recent years as overall exports increased. Tourism has been on the rise as well,
but not without negative consequences. With the instability surrounding the recent coup,
however, the GDP growth of Thailand has settled at around 4% from previous highs of 57% under the previous administration, as locals as well as foreign companies hold
investment back due to political uncertainty.
3. NATURAL ENVIRONMENT:
Natural environment involves natural resources that are needed as inputs by marketers or
that are affected by marketing activities.
Factors include:
a. Shortages of raw materials.
Air and water may seem to be infinite resources. Water shortages are already a
problem in most of the industrial nations now. Renewable resources such as
Forests and food have to be used wisely. Non renewable resources such as Oil,
coal, various minerals pose a serious problem.
b. Increased pollution.
A second environmental trend is increased pollution. Industry will almost always
damage the quality of the natural environment. Disposal of Chemicals and nuclear
wastes, the dangerous mercury levels in the ocean, the quantity of chemical
pollutants in the soil and food supply, littering the environment with non bio
degradable wastes such as plastics, bottles and other packaged materials are very
big examples of Increased pollution.
c. Increased government intervention.
The governments of different countries vary in their concern and efforts to
promote a clean environment. Some rich countries like Germany are very strict on
environmental quality where some poor nations do little about pollution, largely
because they lack the needed funds or political will.
4. TECHNOLOGICAL ENVIRONMENT
The Technological Environment is perhaps the most dramatic force now shaping our
destiny. It includes forces that create new technologies, creating new product and market
opportunities.
The technological environment:
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Changes rapidly.
All of today’s common products were that were not available 100 years ago or even 30
years ago. Abraham Lincoln did not know about automobiles, airplanes, radios or the
electric light. John F Kennedy did not know about personal computers, cell phones, DVD
players or the internet.
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Creates new markets and opportunities.
New technology creates new markets and opportunities. However every new technology
replaces an older technology. Marketers should watch the technological environment
closely. Companies that do not keep up will soon find their products outdated. And they
will miss new product and market opportunities.
Total US R&D spending reached about $312 billion in 2005.
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Challenge is to make practical, affordable products.
Many companies are adding marketing people to R&D teams to try to obtain a stronger
marketing orientation. Scientists are speculating on fantasy products such as flying cars, 3
D televisions, and living in space colonies. The challenge in each case is not only
technical but also commercial- to make practical, affordable, versions of these products.
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As products and technology become more complex, the public needs to know that they
are safe. The government agencies investigate and ban potentially unsafe products.
Safety regulations result in higher research costs and longer time between
conceptualization and introduction of product.
5. POLITICAL ENVIRONMENT
Political environment includes laws, government agencies, and pressure groups that
influence or limit various organizations and individuals in a given society.
Areas of concern:
a. Increasing legislation.
b. Changing government agency enforcement.
c. Increased emphasis on ethics and socially responsible behavior.
6. CULTURAL ENVIRONMENT
The cultural environment is made up of institutions and other forces that affect a society’s
basic values, perceptions, preference, and behaviors. People grow up in a particular
society that shapes their basic beliefs and values.
a. Core beliefs and values are passed on from parents to children and are reinforced
by schools, churches, business, and government.
b. Secondary beliefs and values are more open to change.
i. Marketers may be able to change secondary beliefs, but NOT core beliefs.
Society’s major cultural views are expressed in people’s views of:
c. Themselves
d. Others
e. Organizations
f. Society
g. Nature
h. The universe