Chapter Overview 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. 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 market. 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.

The sis marketing manager knows that they cannot always affect environmental forces. However, smart managers can take a proactive, rather than reactive, approach to the marketing environment. 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.

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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 tomorrows customers, and compete with intense competition present in the market place. 2. 1 Introduction A company's marketing environment consists of the actors and forces outside marketing that affects marketing management's ability to develop and maintain successful transactions with its target customers. Changes in the marketing environment are often quick and unpredictable.

The marketing environment offers both opportunities and threats. The company must use its marketing research and marketing intelligence systems to monitor the changing environment. Marketers use marketing intelligence and marketing research for collecting information about the marketing environment. By conducting systematic environmental scanning, marketers are able to revise and adapt marketing strategies to meet new challenges and opportunities in the marketplace. The marketing environment is made up of: 1. A micro environment and 2. A macro environment. 2. The Company's Micromanagement The micro environment consists of the forces close to the company that affect its ability to serve its customers. Marketing management's Job is to attract and build relationships with customers by creating customer value and satisfaction. However, marketing managers cannot accomplish this task alone. Their success will depend on other actors in the company's micromanagement which combine to makeup the company's value delivery system. The micro environment consists of six forces: 1 . The company itself (including departments) 2. Suppliers 3. Racket channel firms (intermediaries) 4. Customer market 5. Competitors 6. Publics 1. The Company In designing marketing plans, marketing management takes other company groups onto account-groups such as top management, finance, research and development (R&D), purchasing, manufacturing, and accounting. All these interrelated groups form the internal environment. Top management sets the company's mission, objectives, brand strategies, and policies. Marketing mangers make decisions within the plans made by top management, and marketing plans must be approved by top management before they can be implemented.

Marketing mangers must also work closely with other company departments. Finance is concerned with funding and using funds to carry out the marketing plan. The R department focuses on designing safe and attractive products. Purchasing worries about getting supplies and materials whereas manufacturing is responsible for producing the desired quality and quantity of products. Accounting has to measure revenues and costs to help marketing know how well it is achieving its objectives. Together, all of these departments have an impact on the marketing department's plans and actions.

Under the marketing concept, all of these functions must "think consumer," and they should work in harmony to provide superior customer value and satisfaction. 2. Suppliers Suppliers are firms and individuals that provide the resources needed by the company and its competitors to produce goods and services. Suppliers are an important link in the company's overall customer value delivery system. Supplier problems can seriously affect marketing. Marketing managers must watch supply availability - supply shortages or delays, labor strikes, and other events can cost sales in the short run and damage customer satisfaction in the long run.

Marketing mangers also monitor the price trends of their key inputs. Rising supply costs may force price increase that can harm the company's sales volume. . Marketing Intermediaries Marketing intermediaries help the company to promote, sell, and distribute its goods to final buyers. They include resellers, physical distribution firms, marketing service agencies, and financial intermediaries. Resellers are distribution channel firms that help the company find customers or make sales to them. These include wholesalers and retailers, who buy and resell merchandise.

Selecting and working with resellers is not easy. No longer do manufacturers have many small, independent resellers from which to choose. They now face large and growing reseller organizations. These organizations frequently have enough power to dictate terms or even shut the manufacturer out of large markets. Physical distribution firms help the company to stock and move goods from their points of origin to their destinations. Working with warehouse and transportation firms, a company must determine the best way to store and ship goods, balancing factors such as cost, deliver, speed, and safety.

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. When the company decides to use one of these agencies, it must choose carefully because these firms vary in creatively, quality, services, and price. 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.

Most firms and customers depend on financial intermediaries to finance their transactions. Like suppliers, marketing intermediaries form an important component of the company's overall value delivery system. In its quest to create satisfying customer legislations, the company must do more than Just optimize its own performance. It must partner effectively with marketing intermediaries to optimize the performance of the entire system. 4. Customers The company needs to study its customer markets closely. There are 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 for use in their production process. Reseller markets buy goods and services to resell at a profit. 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. 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. 5. 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 to 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. Small firms can develop strategies that give them better rates of return than large firms enjoy. 6. Publics The company's marketing environment also includes various 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. There are seven types of publics.

Financial publics influence the company's ability to obtain funds. Banks, investment houses, and stockholders are the major financial publics. Media publics carry news, features, and editorial opinion. They include newspapers, magazines, radio and television stations. 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. Local publics include neighborhood residents and community organizations. Large companies usually appoint a community relations officer to deal with the community, attend meetings answer questions, and contribute to worthwhile causes. General public: A company needs to be concerned about the general publics attitude toward TTS products and activities. The publics image of the company affects its buying. Internal publics 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 external publics. A Company can prepare marketing plans for these major publics as well as for its customer markets. The company would have to design an offer to his public that is attractive enough to produce the desired response. 2. 3 The Company's Macro Environment The company and all of the other actors operate in a larger macro environmental forces that shape opportunities and pose threats to the company.

The macro environment consists of the larger societal forces that affect the micromanagement. There are six major forces in the company's macro environment. 1 . Demographic environment 2. Economic environment 3. Natural environment 4. Technological environment 5. Political environment 6. Cultural environment 1 . Demographic Environment Demography is the study of human population in terms of size, density, location, age, gender, race, occupation, and other statistics. The demographic environment is of major interest to marketers because it involves people, and people make up markets.

Demographic trends are constantly changing. Some of the more interesting trends globally are: a) The world's population rate is growing at an explosive rate. B) The most important trend is the changing age structure of the population. C) Geographical shifts in population will also alter demographics. D) The population is becoming better educated. 2. Economic Environment Markets require buying power as well as people. The economic environment consists of factors that affect consumer purchasing power and consumption pattern or pending patterns.

The major factors that affect purchasing power include: a) Income, b) saving, and c) credit facilities Nations vary greatly in their levels and distribution of income. Some countries have subsistence economies - they consume most of their own agricultural and industrial output. These countries offer few market opportunities. At the other extreme are industrial economies, which constitute rich markets for many different kinds of goods. Marketers must pay close attention to major trends and consumer spending patterns both across and within their world markets. 3.

Natural Environment The natural environment involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities. Marketers should be aware of several trends in the natural environment. A) The first involves growing shortages of raw materials. B) A second environment trend is increased pollution. Industry will almost always damage the quality of the natural environment. Industrial damage to the environment has become very serious. Far-sighted companies are becoming "environmentally friendly' and are producing environmentally safe and recyclable or degradable products. ) Government intervention in natural resource management has caused environmental concerns to be more practical and necessary in business and industry. Instead of opposing regulation, marketers should help develop solutions to the material and energy problems facing the world. 4. Technological Environment The technological environment includes forces that create new technologies, creating new product and market opportunities. The technological environment is perhaps the most dramatic force now shaping our destiny. The technological environment changes rapidly.