BE200 Summary Prepared By: Honey Bonny((أبومحمد

BE200 Summary Prepared by: Honey Bonny((أبومحمد

Fall semester 2011 – 2012

Prepared by:

Honey Bonny

أبومحمد

Part two: Markets

Chapter Four

The marketing environment:

Topic Outline:

The Company’s Microenvironment

The Company’s Macroenvironment

Responding to the Marketing Environment

Introduction:

• The marketing environment consists of the actors and forcesoutsidemarketing that affectmarketing management’s abilitytodevelop and maintainsuccessfulrelationshipswithcustomers.
• Successful companies know the vital importance of constantlywatching and adapting to the changingenvironment.The marketing environment offers bothopportunities and threats. Some companies fail to deal with these changessuch asthe airlines corporations (Sabena and TWA) – the flying bank – have faced crises because they ignored environmental changes for too long.
• The marketing environment consists ofMicroenvironment & Macroenvironment:

• Microenvironment: (consists ofactorscloseto the company that affectits ability to serve its customerssuch as the company, suppliers, marketing intermediaries, customer markets, competitors and publics).

Principle actors in the company’s microenvironment

• In designing marketing plans,marketing managementtakes other company groups into account. These interrelated groups form internal environment:

1. Top management: sets the company’s mission, objectives, broad strategies and policies.
2. Finance: concern with finding and allocatingfunds to implement the marketing plan.
3. R&D: designingsafe and attractiveproducts.
4. Purchasing:gettingsuppliers and materials.
5. Operations: produce the desiredquality and quantity products.
6. Accounting:measurerevenues and coststo help Marketingknow how well it is achieving its objectives.

The company’s internal environment

• Suppliers form an important link in the company’s overall customer value delivery system.
• Suppliersare those firms & individuals thatprovideresourcesneeded by companyandits competitorstoproducegoods and service.
• Marketers treat their suppliers as partners to create and delivercustomer value.
• Marketing manager must:

-Watch supply availability:supplyshortage or delays can cost salesin the short runanddamagecustomer satisfactioninthe long run.

-Monitor the price trends of their key inputs.

• The marketing intermediariesare firms thathelpthe company topromote, selldistributeitsproducts to final buyers.
• The marketing intermediaries include:

-Resellers:are distribution channel firms that helpcompanyfindcustomerormakesales to them such aswholesalers and retailers.

-Physical distribution firms:helpcompany to stockandmovegoodsfrompoints of origintodestinations.A company must determine the best ways to store and shipgoodsby the transportation firms.

-Marketing services agencies:are marketing research firms, advertising agencies, media firms, & marketing consulting firms that help company targetpromote its productstorightmarkets.

-Financial intermediaries:includebanks, creditcompanies, insurance companies that helpfinance transactionsorinsureagainst risksassociated with buying & selling of goods.

Company study 6 types of customer markets:

1. Consumer markets:Individualshouseholds that buygoods and servicesforpersonal consumption.
2. Business markets:buygoods and servicesforfurther processingorforuse in their production process.
3. Reseller markets:buygoods and servicestoresell at a profit.
4. Institutional markets:are made up ofschools, hospitals, nursing homes, prisons and other institutions that providegoods and servicesto people in their care.
5. Government markets:Government agencies that buygoods and servicesto produce public servicesortransfer goods and services to others who need them.
6. International markets:consist of buyersin other countries, including consumers, producers, resellersgovernment.

• The marketing concept states that, to be successful, a companymustprovidegreater customer value and satisfactionthan itscompetitors do.
• So, firms must gain strategic advantage by positioningtheir offeringsagainst competitors’ offeringsin the mindsofconsumers.
• No singlecompetitive marketing strategyis best forall companies. Each firm should considerits own sizeindustry positioncompared to those of its competitors.

For example: some large companies such as the international oil companies may use certain strategies that smaller firms cannot use.

• The publics defined as any group that has an actualorpotentialinterestin or impacton an organization’sability to achieveitsobjectives.
• There are 7 types of public:
• Financial publics:influence the company’s ability to obtainfundssuch asbanks, investment houses and stockholders.
• Media publics:includenewspapers, magazines and radio and televisionstationsthat carrynews, featuresopinion.
• Government publics:management must take government developments into account. Marketersmust often consultthe company’s lawyersonissuesofproductsafety, truth in advertising, and other matters.
• Citizen-action publics:a company’s decisions may be questionedbyconsumer organizations, environmental groups, minority groups, and others pressure group. The company’s public relations departmentcan help it stayin touchwithconsumer and citizen groups.
• Local publics:includeneighborhood residentscommunity organizations.
• General public:may be concerned about the company’s public imageinitsproductsandactivities that affect its buying.
• Internal publics:includeworkers, managers, volunteersthe board of directors.

• Macroenvironment: (consists of the larger societal forces that affect the microenvironmentsuch asdemographic, economic, natural, technological, political and culturalforces).

Influential forces in the company’s macroenvironment

• Demographic: is the study of human populationsin terms ofsize, density, location, age, sex, race, occupationandother statistics.
• Demographic environment is importantbecause it involves people, andpeoplemake upmarkets.
• The demographic factors of the market in which an organization operates, are used to segment the target population foreffectivemarketing.
• The demographic trendsthat have implications for marketing are: population growth, changing age and household structure, pressures for migration and increasing diversity of the population:

• Population growth trends:

• A growing populationmeansgrowinghuman needs to satisfy, offering marketersan indication of demand for certain goods and services.

• The world’s population (though not all countries) rate is growing at an explosive ratethat will soonexceedfood supplyand ability to sufficientlyservice the population. The greatest dangeris in thepoorest countrieswhere poverty contributes to the difficulties. Emerging marketssuch asChinaare receiving increased attention from global marketers.

• Changing age structure of the population:

The most important trend is thechanging age structureof the population. The population isagingbecause of a slowdownin the birth rate (in this country) andlife expectancyisincreasing.

The baby boomers-- include people born between 1946 and 1964 –

-Following World War II have produced a huge “bulge” in our population’s age distribution.

-The new prime marketis the middle age group (in the future it will be the senior citizen group). There are many subdivisions of this group:

Generation Xers(GenX) --includes peopleborn between 1965 and 1976 --

-This group lies in the shadow of the boomersandlack obvious distinguishingcharacteristics.

-They are a very cynical group because of all the difficulties that have surrounded and impacted their group.

Millennials or Echo boomers (Gen Y) -- include those born between 1977 and 2000 –

-They are thelargegrowingkid and teenmarket. This group is used to affluence on the part of their parents (as different from the Gen Xers).

-One distinguishing characteristicis their absolute fluencyandcomfortwithcomputer, digital, and Internettechnology (sometimes called Net-Gens).

-Generation Y represents an attractivetargetformarketers.

-Generational marketingis important in segmenting people bylifestyle of life state instead ofage.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 changing household:

• The ‘traditional household’ orideal family’ which has long been twoparents and twochildrenisnowdeclining. This is because of:

-Divorcing or separating.

-Choosing not to marry.

-Choosing tomarrylater.

-Marrying withoutintending to havechildren.

-Increased number of workingwomen

-Stay-at-home dads.

• Pressure for migration:

• International migrationisnothing new in human experience. People from one country may move to live and / or work in another country for many reasons, including greater job prospects, a better quality of life, betterweather, cleanerenvironmentand so forth.
• Immigrationcannotprevent the ageingofdevelopedcountries, but it may helpslow the processbynarrowing the ageingandfertilitygaps.

• Increasing diversity:

• The final demographic trend is the increasing diversity of the population. Markets are becoming more diverse:nationalandinternational.
• Business will do well to identify regional, national and local differences and to develop appropriate marketing strategies that take into account this diversity. (European market).
• Trends include:

Ethnicity.

-Ethnic purchasing power $300 billion.

-Growing market size.

-Avoid stereotyping.

-Use native languages.

-Choose ethnic media.

Sexual orientations.

Disabilities.

• Markets requirebuying poweras well aspeople.The economic environmentconsists of factors that affectconsumer buying power and spending patterns.
• Countries vary in their levels and distribution of income:

-Some countries havesubsistence economies – they consume most of their ownagriculturalandindustrialoutput, so they offer few market opportunities.

-And some other countries are industrial economies, which formrich markets.

• European Union enlargement and integration:
  

• The European Union was established in 1993 by the Treaty on European Union.
• The goal of EUis the achievement of greater economic integration among member states.

-Setcommonpolicieson product regulationandfreedomofmovement of all three factors of production (land, capital and labour).

-Make the movement of capital, labour, goods and services between the EU member states easy.

• Efficient firms can benefitfromeconomies of scale, increased competitiveness, lower cost, profitability and the ability to compete globally. Example:EU is being the home of 172 companies of fortune global 500companies.
• The competitive environmentmakes the existence of stateorprivatemonopolies more difficult and inefficientcompanies leave the market. So, consumersbenefitfromcompetitioncheaperproducts and services, more efficientproviders, increasedchoice and businessinnovation.

• Income distribution and changes in purchasing power:
  

• Where consumer purchasing powerisreduced, as in countries experiencing economic collapseor in an economic recession, financially squeezed consumersadjustto their changing financial situationsandspendmore carefully.
• They seek greater value in the products and services they buy. For example: ‘thrift shops’ have been booming in Japan, whose economy has been in recession. Value marketingbecomes the watchword for many marketers.Rather than offering high quality at high price, or lesser quality at very low prices,marketers have to look for ways to offer more financially cautious buyers greater value – just the right combination of product quality and good services at fair price.
• Marketers should also pay attention to income distribution as well asaverage income.
• Consumers with the greatest purchasing power are likely to belong to the higher socioeconomic groups:

-The uppereconomic strata of society are targets for expensive luxury goods.

-The middle income groups are more careful about their spendingbut can usually afford the good life some of the time.

-The lower strata will stick close to the basics of food, clothing and shelter needs.

-In some countries the underclassexists – people live below the poverty line.

• Changingconsumer spending patterns:

• Consumers at different income levels have different spending patterns. Some of these differences were noted over a century ago by Ernst Engelwhostudied how people shifted their spending as their income rose (Engel’s Law).
• He found that as family incomerises, the percentage spend on fooddeclines, the percentage spent on housing remains constant (except for such utilities as gas, electricity and public services, which decrease), and the percentage spent on savingsincreases.

• Natural environment involves the natural resourcesthat areneededasinputsbymarketersorthat areaffectedbymarketing activities.
• Marketers should be aware of several trends in the natural environment:

-Shortages of raw materials.

-Increasedpollution.

-Increasegovernment intervention.

-Environmentallysustainablestrategies.

• Growing shortages of raw materials:

• Some resourcessuch asair and water may become a big problemat the long run (air pollution and water shortage).
• Renewable resourcessuch asforests and food also have to be used wisely.
• Non-renewableresourcessuch asoil, coal and various minerals pose a serious problems.
• Firms making products that require thesescarce resourcesfacelarge costincreases.
• R&D and exploration firms can helpbydevelopingnewsources and materials.

• Increased cost of energy:

• Oil and Gashas created the most serious problemforfutureeconomic growthand added to concerns about high energy prices and security of supply.
• Many companies are searching for practical waystoharnesssolar, nuclear, wind and other forms of energy. Others are directing their research and development effortstoproducehigh energy-efficienttechnologiestomeet customers’ needs.

• Increased pollution and climate change:

• Industry has been largely blamed for damaging the quality of the natural environment due to:

-Disposal of chemical and nuclearwastes.

-The dangerous mercurylevels in the ocean.

-The quantityof chemicalpollutants in the soil and foodsupply.

-The non-biodegradablebottles, plastics and other packagingmaterials.

-The climate changeis another concern which are induced by carbon dioxide (CO2).

• Increased Government Intervention:

• Another trend is increased government intervention in natural resource management. The governments of different counties vary in their efforts to promote a clean environment:
• In some countries, industryhas been forcedrather thanpersuaded to ‘go green’.
• Environment protection agencies have been created to enforce pollution standardsand to conduct pollution research.For example:in the EU, new CO2 capping laws and schemes such the European Emissions Trading Scheme (ETS) for CO2 are used to help curb CO2 emissions. The aim is to reward industries that can reduce their CO2 output.
• Some companies are developing environmentally sustainable strategies and practices.For example:General Electric is using its ‘ecomagination’ to create products for a better world – cleaner aircraft engines, cleaner fuel technologies.

• The technological environmentis the forces that createnewtechnologies, creatingnewproduct and marketopportunities.
• The technological environment changes rapidly. Marketers should be aware of the following trends in technology:

-Fast pace of technological change.

-Increased regulation.

• Fast pace of technological change:

• Every newtechnologyreplaces an oldertechnology. For example:transistorsreplace the vacuum-tubeindustry,photocopiersreplace the carbon-paper business, compact discs hurt replacerecords.
• Technologylife cycle are getting shorter. For example: the typewriter.

• Increased regulation:

• As products and technology become morecomplex, the public needs to know that these aresafe. Thus, government agenciessetsafety standardsfor consumer products and penalizecompanies that failto meet them.

• Political environmentconsists of laws, government agencies, and pressure groups that influenceorlimitvarious organizations and individuals in a given society.

-Increased legislation

-Increased emphasis on ethics and socially responsible actions

• Legislation regulating business:

• The governments develop public policy to guide commerce sets of laws and regulations that limit business for the good of society.
• Every marketing activity is subject to a wide range of laws and regulations.
• Understanding the public policy implications of a particular marketing activity is not a simple matter:

First, there are many laws created at different levels.

Second, the regulations are constantly changing – what was allowed last year may now be forbidden.

• Business legislation has been set for a number of reasons:

To protectcompany from each other.

Protectconsumers from unfair business practices.

Protectthe interests of society against un-restricted business behavior.

• Increased emphasis on ethics:

• Writtenregulationscannot possibly coverallpotentialmarketingabuses, and existinglaws are often difficult to enforce. However, business is also governed by social codes and rules of professional ethics.
• The leading companies encourage their managers to “do the right thing”. These socially responsible firms actively seek out ways to protect the long-run interests of their consumers and the environment.
• The boom in internetmarketing has created a new set ofsocial and ethicalissues.
• Critics worriesthat some companies know too much about certain customers and use digital data to take unfair advantage of consumers to learn more about their customer.
• As a result, consumer advocates and policymakers are taking action to protect consumer privacy.
• Cause-related marketinglets companies ‘do well by doing good’ by linking purchases of the company’s products or services with fund-raising for worthwhile causes or charitable organizations.
• Critics worries that cause-related marketingismore a strategyforsellingthan a strategyforgiving –that cause-related marketing is really ‘cause-exploitative’ marketing.

• Cultural environment is made up ofinstitutionsandother forcesthataffect a society’s basic values, perceptions, and behaviors.
• The following cultural characteristics can affect marketing decision making:

• Persistence of cultural values:

• People in a given society hold many beliefs and values.For example:many of us believe inworking, getting married, giving to charity and being honest.
• Core beliefs and valuesare persistent and are passedonfromparentstochildren and are reinforced byschools, worship houses, businesses, and government
• Secondary beliefs and valuesare more open to change and includepeople’s viewsofthemselves, others, organization, society, nature, and the universe. For example:believing in marriageis a core belief; believing that people should get married early in lifeis a secondary belief.
• Marketers havesome chance of changingsecondary values, butlittle chance of changingcore values.For example: family-planning marketers could argue more effectively that people should get married later than that they should not get married at all.

• Shifts in secondary cultural values:

The major cultural values of a society are expressed in people’s views of themselves and others, as well as in their views of organizations, society, nature and the universe:

• People’s views of themselves:

People vary in their emphasis on serving themselves versus serving others.Some people seekpersonal pleasure, wanting fun, change, and escape. Others seekself-realizationthroughreligion, recreation, or the avid pursuit of careersorother life goals. People useproducts, brands, and services as a means of self-expression, and they buy products and services that match their views of themselves.

In the 1980s, personal ambition and materialism increased dramatically, with significant marketing implications. In a "me society," people buy their "dream cars" and take their "dream vacations.

• People’s views of others:‘more cocooning’

Recently, observers have noted a shift from a me society to a "we society" in which more people want to be with and serve others.This trend suggests a greater demand for "social support" products and services that improvedirect communicationbetweenpeople, such ashealth clubs and family vacations.