Marketing EnvironmentsMarketing Environments

Professor Chip Besio

Cox School of Business

Southern Methodist University

Outline

The Company’s Environment — Macro- and Micro-Environments and their composition

Analysis of the Environment — S.W.O.T.

The Company’s Micro Environment - The 5 CsThe “5 Cs” can be used as a framework

to describe and analyze the company’s immediate environment Company Customers Competitors Channels Constituents

Company’s Internal EnvironmentCompany’s Internal Environment - functional areas such as top management, finance, and manufacturing, marketing, etc.

CustomersCustomers - buyers in markets that purchase a company’s goods and services

CompetitorsCompetitors - those who serve the target market with similar products/ services

The Company’s Micro Environment

Channels (Suppliers, Distributors, Channels (Suppliers, Distributors, Wholesalers and Retailers)Wholesalers and Retailers) - Provide the resources needed to produce goods and services and help the company to promote, sell, and distribute to final buyers

Constituents (stakeholders)Constituents (stakeholders) - any group that perceives itself having an interest in the company’s ability to achieve its objectives

The Company’s Micro Environment

Micro Environment -The MarketThe immediate environment for the

company is the market(s) in which it offers goods and/or services

Company

Competitors

Customers

Market

Constituents

Types of Markets

CompanyCompany

ConsumerMarkets

InternationalMarkets

GovernmentMarkets

BusinessMarkets

ResellerMarkets

Source: Prentice Hall

Micro Environment - Channels of DistributionThe market operates within a broader

framework which we call the channel of distribution

The channel of distribution involves a coordinated effort among different firms to offer products to an end user

Micro Environment - Channels of DistributionThe channel of distribution

Company

Competitors

Customers/ Intermediaries

Suppliers

Market

Channel of Distribution

End Users

Constituents

The Company’s Macro Environment Beyond the channel of distribution there are

other environmental factors that impact on the company and its market

Among them are: Society/CultureSociety/Culture - e.g., dual income households

are less likely to prepare meals in the home EconomyEconomy - e.g., recession reduces discretionary

spending by consumers, as well as investments by competitors and suppliers

Natural Environment – e.g., resources needed by marketers

The Company’s Macro Environment Among them are (continued):

DemographicsDemographics - e.g., the aging population dictates that more incontinence products will be needed in the future

Legal/RegulatoryLegal/Regulatory - e.g., EPA regulations regarding hazardous waste disposal could affect the demand for motor oil and batteries

TechnologyTechnology - e.g., low cost, high speed computers could allow quicker, more effective dissemination of information to the sales people and widely dispersed business units

Social/Cultural EnvironmentThe institutions

and other forces that affect a society’s basic values, perceptions, preference, and behaviors.

Social/Cultural EnvironmentCore 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.

Social/Cultural Environment Yankelovich Monitor has identified

eight major consumer value themes:1. Paradox

2. Trust not

3. Go it alone

4. Smarts really count

5. No sacrifices

6. Stress hard to beat

7. Reciprocity is the way to go

8. Me 2

www.yankelovich.com

ThemselvesThemselves

OthersOthers

OrganizationsOrganizations

SocietySociety

NatureNature

The UniverseThe Universe

Social/Cultural EnvironmentSociety’s Major Cultural Views Are Expressed

in People’s Views of:

Economic Environment

Changes in Income 1980’s – consumption

frenzy 1990’s – “squeezed

consumer” 2000’s – value marketing

Income Distribution Upper class Middle class Working class Underclass

Consists of factors that affect consumer purchasing power and spending patterns.

The Hourglass Economy

Natural Environment

Involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities.

Factors Impacting the Natural Environment

Shortages of Raw Materials

Increased Pollution

Increased Government Intervention

Environmentally Sustainable Strategies

Demography

Demographics: 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.

Changing American Family

Household makeup: Married couples with children = 34%, and

falling Married couples and people living with other

relatives = 22% Single parents = 12% Single persons and adult “live-togethers” =

32%

Geographic Shifts in Population

16% of U.S. residents move each yearGeneral shift toward the Sunbelt statesCity to suburb migration continuesMore people moving to “micropolitan”

areasMore people telecommute

Better Educated Population1980:

69% of people over 25 completed high school 17% had completed college

2002: 84% of people over 25 completed high school 27% had completed college

Currently, ⅔ of high school grads start college

Increasing DiversityU.S. is a “salad bowl”

Various groups mixed together, each retaining its ethnic and cultural differences

Increased marketing to: Growing ethnic communities Gay and lesbian consumers People with disabilities

Political Environment

Includes Laws, Government Agencies, and Pressure Groups that Influence or Limit Various Organizations and Individuals In a Given Society.

Increasing Legislation

Changing GovernmentAgency Enforcement

Increased Emphasis on Ethics& Socially Responsible Actions

Technological EnvironmentMost

dramatic force now shaping our destiny.

Technological Environment Changes rapidly. Creates new markets

and opportunities. Challenge is to make

practical, affordable products.

Safety regulations result in higher research costs and longer time between conceptualization and introduction of product.

The Company’s Macro EnvironmentThe broader corporate environment

Economy

Legal/RegulatoryTechnology

Social/Cultural Demographics

Company

Competitors

Customers/ Intermediaries

Suppliers

Market

Channel of Distribution

End Users

Constituents

Environmental Management Perspective Taking a proactive approach to managing

the microenvironment and the macro-environment to affect changes that are favorable for the company. How? Hire lobbyists , run “advertorials”, file law suits and complaints, and form agreements.

Responding to the Marketing Environment

Source: Prentice Hall

Environmental Analysis S.W.O.T.

What Is S.W.O.T. Analysis?

S.W.O.T. analysis groups observations of the company and its environment into:

Internal StrengthsStrengths WeaknessesWeaknesses

External OpportunitiesOpportunities ThreatsThreats

What Is S.W.O.T. Analysis? Strengths and weaknesses are factors specific

to company which contribute to either good performance (strengths) or poor performance (weaknesses).

Microsoft example: Strengths - Scale, excellent development capability;

Windows OS as a basis for development and product tie-ins; reputation with end users for ease of use

Weaknesses - Reputation for “vaporware;” broad scope makes focus on niches difficult

What Is S.W.O.T. Analysis? Opportunities and threats are based on the

activities in the company’s environment by others, including customers, competitors and suppliers and other constituents.

Examples include: Opportunities - Increasing computing power; increasing

penetration of PCs and handhelds; increasing availability and speed of internet access; bundling different software products

Threats - Government antitrust action; power of Intel as dominant supplier of microprocessors; investment by telephone and cable companies in internet “distribution”

What Is S.W.O.T. Analysis?

The same information can often be viewed as either an opportunity or a threat

Consider the company’s current position and determine the most likely effect (positive or negative) of the information

Why Is S.W.O.T. Analysis Important?

S.W.O.T. analysis is a useful tool for for assessing both the company and its environment

Identify ProblemIdentify Problem

Analyze Problem in

Pieces

Analyze Problem in

Pieces

Develop Recommend

-ations

Develop Recommend

-ations

S.W.O.T. AnalysisS.W.O.T. Analysis