POM Week 2 - Chap 3

Lecture 2
Analyzing the marketing environment

(from chapter 3, textbook)
Copyright ©2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781486002696/Armstrong/Principles of Marketing/6 th edition 1
Analysing the marketing environment
Learning objectives
Objective 1 Describe the environmental forces that affect the

company’s ability to serve its customers.
Objective 2 Explain how changes in the demographic and economic
environments affect marketing decisions.
Objective 3 Identify the main trends in the firm’s natural and
technological environments.
Objective 4 Explain the key changes in the political and cultural
environments.
Objective 5 Discuss how companies can react to the marketing
environment.
Copyright ©2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781486002696/Armstrong/Principles of Marketing/6e 2
Company-wide strategic planning:
Defining marketing’s role
A company’s marketing environment consists of

the actors and forces outside of marketing that
affect marketing management’s ability to build
and maintain successful relationships with target
customers. Companies constantly watch and
adapt to the changing environment.
Actors in the marketing environment
The company
Top
Finance
management
R&D Purchasing
Operations Accounting
Actors in the marketing environment: Suppliers
Suppliers form an important link in

the company’s overall customer
value delivery system.
Most marketers today treat their

suppliers as partners in creating
and delivering customer value.
Types of marketing intermediaries
Resellers
Find
Find &
& sell
sell to
to customers
customers
Physical distribution firms

Inventory & move goods
Marketing service agencies

Research, advertising, media &
consulting
Financial intermediaries
Finance transactions or insure against
risk © Getty Images Australia Pty Ltd
Financial intermediaries: Banks and insurance companies are among the many
financial intermediaries that comprise the broader value network in which a business
operates. Managing these relationships is also important.
Actors in the marketing environment:
Intermediaries, market research firms and
advertising agencies
Actors in the marketing environment: Competitors
To be successful, a company must

provide greater value than its
competitors.
Marketers must do more than simply

adapt to the needs of target consumers;
they must gain strategic advantage by
positioning their offerings strongly
against competitors.
Actors in the marketing environment: Publics
Financial
Media
public
Internal Government
public
Publics
Publics
Publics are…
any group that has
an actual or Citizens’
potential interest in General
action
or impact on an public
groups
organisation’s Local
ability to achieve public
its objective.
Actors in the marketing environment: Customers
Companies might target any or all of five types of customer markets:
Consumer
Consumer markets
markets
Business
Business markets
markets
Reseller
Reseller markets
markets
Government
Government markets
markets
International
International markets
markets
Each
Each market
market type
type has
has special
special characteristics
characteristics that
that calls
calls for
for
careful
careful study
study by
by the
the seller.
seller.
Discussion question
Consider the marketer of

a new energy drink.
How would each of the micro-
environmental factors be
involved in their marketing
efforts?
The company’s macroenvironment
Demographic environment
Demography is the study of human populations in terms of…
Population
Population size,
size, density
density &
& diversity
diversity
Location
Location &
& geographic
geographic population
population shifts
shifts
Age
Age &
& gender
gender
Family
Family size
size &
& structure
structure
Educational
Educational characteristics
characteristics
Occupation
Occupation
Race/Ethnicity
Race/Ethnicity
Other
Other relevant
relevant demographic
demographic statistics
statistics
Marketers
Marketers keep
keep close
close track
track of
of demographic
demographic trends
trends &
& developments
developments
Demographic Environment
• Demographic environment is
important because it involves people,
and people make up markets
• Demographic trends include age,
family structure, geographic
population shifts, educational
characteristics, and population
diversity
 Outcomes of change in, or changing

attitudes toward, the characteristics of a
population, such as age, gender, ethnic
origin, race, and social class
The Company’s
Macroenvironment
Baby Boomers
• Born 1946 to 1964
• rethinking the purpose and value of their work, responsibilities, and
relationships.
• spending more carefully and planning to work longer
• the wealthiest generation in U.S. history
Copyright ©2014 by Pearson Education

The Company’s
Macroenvironment
Generation X includes people born between 1965 and

1976
• High parental divorce rates
• Cautious economic outlook
• Less materialistic
• Family comes first

The Company’s
Macroenvironment
Millennials (gen Y or echo boomers) include those born between 1977

and 2000
• Most financially strapped generation
• Higher unemployment and saddled with more debt
• Comfortable with technology

The Company’s
Macroenvironment
Generational
marketing is
important in
segmenting people
by lifestyle of life
state instead of age

Demographic environment: Changing family
structure
Rise of single parent
families & families with
no children
Decline in household size
Increasing number of
working women
Increasing Diversity
Markets are becoming more
diverse
• International
• National
Includes:
• Ethnicity
• Gay and lesbian (LGBT)
• Disabled

Demographic environment: Population diversity
Regions in Viet Nam
N.
N. Mountains
Mountains &
& Midlands
Midlands Red
Red River
River Delta
Delta
Provinces/Cities:
Provinces/Cities: 14
14 Provinces/cities:
Provinces/cities: 11
11
Population:
Population: 11.5
11.5 mil
mil (13%)
(13%) Hà Nội Population:
Population: 20.4
20.4 mil
mil
(23%)
(23%)
%
% Urban:
Urban: 17%
17%
Hải Phòng %
% Urban:
Urban: 32%
32%
%
% TV
TV homes:
homes: 80%
80%
%
% TV
TV homes:
homes: 91%
91%
Ha Noi Urban: 2.9 mil.
Central
Central Highlands
Highlands
Provinces/cities:
Provinces/cities: 55 N.
N. Central
Central &
& Central
Central
Coast
Hoàng Sa
Huế Coast
Population:
Population: 5.5
5.5 mil
mil (6%)
(6%)
Đà Nẵng Provinces/cities:
14
%
% Urban:
Urban: 29%
29%
Population:
Population: 19.4
19.4 mil
mil (22%)
(22%)
%
% TV
TV homes:
homes: 85%
85%
%
% Urban:
Urban: 26%
26%
%
% TV
TV homes:
homes: 86%
86%
Da Nang Urban: 0.8 mil.
Mekong
Mekong Delta
Delta
Nha
Provinces/cities:
13 South-East
South-East
Trang
Population:
Population: 17.5
17.5 mil
mil (20%)
(20%) Provinces/cities:
HCM Population:
%
% Urban:
Urban: 25%
25% Population: 15.5
15.5 mil
mil (17%)
(17%)
Trường Sa
City
%
% TV
TV homes:
homes: 86%
86% %
% Urban:
Urban: 61%
61%
%
% TV
TV homes:
homes: 94%
94%
Cần Thơ
Can Tho Urban: 0.8 mil. HCM City Urban: 6.4 mil.
Source: GSO, Population Statistics 2014; KM Vietnam National Media Habit Survey
2014
11
VIETNAM POPULATION STRUCTURE
Population by gender and age group, 2014
Male Female
75+
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
6 5 4 3 2 1 0 1 2 3 4 5 6
% of total population 12
VIET NAM POPULATION STRUCTURE
Population 15-54 years by education attainment, 2014
Total Urban Rural

3% Completed university/
6% 5% Grade 9 or below
Higher education
13%
6% 4%
6% 9% Completed college/
9%
Grade 10-12
mid vocational education
11% 11%
9%
Not completed/attending mid
11% Completed upper secondary
vocational/college/university
14%
Completed upper secondary

12% Not completed/attending mid
vocational/college/university
69% Grade 10-12
60%
Completed college/mid vocation
42% Grade 9 or below
Completed university/higher
Total Urban Rural

13
3% Source: KM Vietnam, National Media Habit Survey 2014
6%
Population 15-54 years by working status, 2014
Total Urban Rural
Attending school
Housewife/man
72% 71% 73%
Working
Not working,
not looking for job
Not working, looking
for a job
Not working,
Notjob
looking for working, not
5% 5%
2% 5% looking for a job
2% 2%
8% 8% 8% WorkingHousewife/man
14% 15% 13% Attending school
Total Urban Rural

6% 3%
13% 5% Grade 9 or below 14
6% 4% Source: KM Vietnam, National Media Habit Survey 2014
OVER VIEW OF MEKONG DELTA VS. VIET NAM
POPULATION STRUCTURE
Population 15-54 years by socio-economic level (1) ,2014
Viet Nam Mekong Delta

Total Urban Rural Total Urban Rural
3% Level 1 4% 2%
10% Level 4 12% 10% Level 4
23% 14% 13%
Level 2
20% Level 3 22% 23%
Level 3
Level 3 24%
31% Level 2 Level 2
32%
30%
Level 4
Level 1 29% Level 1
66%
28% 58%
52%
40% 37%
16%
Total Urban Rural Total Urban Rural

6% 3% 3%
13% 5% Grade 9 or below 6% 13% 5% Grade 9 or below
(2) 6%
See Appendix for definition 4%
of socio-economic Level 6% 4%
Base: Population6% 15-54 years 9% 6% 9%

9% 9%
Grade 10-12 Grade 10-12
11% 11% 11% 11%
9% 9% 15
Source: KM Vietnam, National Media Habit Survey 2014
11% 11%
Discussion question
Do marketers need to develop

separate products or marketing
programs for each of the
different generations?
Changing age structure: Generational segments
Economic environment
The
The economic environment consists
consists of
of factors
factors that
that affect
affect
consumer
consumer purchasing
purchasing power
power &
& spending
spending patterns,
patterns, including
including
changes
changes in…
in…
Income
Income &
& income
income distribution
distribution
Spending patterns
Economic Environment
• Interest rates, inflation, unemployment, economic growth, and

other factors that affect the general health and well-being of a
nation or the regional economy of an organization
• Managers usually cannot impact or control these.
• Economic forces have profound impact on the firm.
Changes in income
Value marketing involves
ways to offer financially
cautious buyers greater
value—the right
combination of quality
and service at a fair
price
Changes in Consumer Spending Patterns
As income rises:
• The percentage spent on food declines
• The percentage spent on housing remains constant
• The percentage spent on savings increases
Natural environment
The natural
natural environment
environment involves
involves the natural resources
resources that
that
are needed
needed as
as inputs
inputs by
by marketers
marketers or
or that
that are
are affected
affected by
by
marketing activities.
Key natural environment issues:
Shortages of raw materials
Increasing
Increasing pollution
pollution
Rise
Rise in
in government
government intervention
intervention
Technological environment
Perhaps the most

dramatic force
shaping our future,
the technological
environment,
involves forces that
create new
technologies, new
products and market
opportunities.
Technological environment
Discussion question
Give examples of how new

technologies have influenced
what we buy, how we pay and
how we shop.
Political and social environment
The
The political
political environment
environment consists
consists ofof laws,
laws, government
government
agencies
agencies and
and pressure
pressure groups
groups that
that influence
influence oror limit
limit various
various
organisations
organisations and
and individuals
individuals in
in aa given
given society.
society.
Key political issues:
Legislation
Legislation affecting
affecting business:
business:
•• Increasing
Increasing legislation
legislation
•• Changing
Changing government
government agency
agency enforcement
enforcement
Emphasis
Emphasis on
on ethics
ethics and
and socially
socially responsible
responsible
behaviour:
behaviour:
•• Social
Social responsibility
responsibility
•• Cause-related
Cause-related marketing
marketing
Cultural environment
The
The cultural
cultural environment
environment is is made
made upup of
of institutions
institutions and
and
other
other forces
forces that
that affect
affect aa society’s
society’s basic
basic values,
values,
perceptions,
perceptions, preferences
preferences andand behaviours.
behaviours.
The
The persistence
persistence of
of culture
culture
Core
Core beliefs
beliefs && values:
values: relatively
relatively
resistant
resistant to
to change
change
Secondary
Secondary beliefs
beliefs &
& values:
values: more
more
open
open to
to change
change
Cultural environment: People’s views of…
Themselves Others Organisations
Nature Society Universe
41
Shifts in Secondary Cultural Values
People’s view of themselves
• People vary in their emphasis on serving
themselves versus serving others.
• People use products, brands, and services
as a means of self-expression, and they
buy products and services that match their
views of themselves.
People’s view of others
• The Internet age would result in diminished
human interaction
• More “cocooning” – staying home, home cooked
meals
Cultural Environment
People’s view of organizations
• Decline of loyalty toward companies
People’s view of society
• Patriots defend it
• Reformers want to change it
• Malcontents want to leave it

Cultural Environment
People’s view of nature

• Some feel ruled by it
• Some feel in harmony with it
• Some seek to master it
People’s view of the universe
• Renewed interest in spirituality
• Developed more permanent values
– family, community, earth,
– spirituality, ethics

Responding to the marketing environment
Reactive
Reactive approach
approach
Assumptions:
Assumptions: The
The environment
environment is
is largely
largely uncontrollable.
uncontrollable.
Strategies:
Strategies: Research,
Research, understand,
understand, react
react and
and adapt.
adapt.
Proactive
Proactive approach
approach
Assumptions:
Assumptions: The
The environment
environment is
is partially
partially controllable.
controllable.
Strategies:
Strategies:
•• Hire
Hire lobbyists
lobbyists to
to influence
influence legislation
legislation affecting
affecting their
their
industries.
industries.
•• Stage
Stage media
media events
events to
to gain
gain favourable
favourable press
press coverage/run
coverage/run
advertorials
advertorials to
to shape
shape public
public opinion.
opinion.
•• Instigate
Instigate legal
legal actions
actions and
and regulatory
regulatory complaints
complaints to
to keep
keep
competitors
competitors in
in line.
line.
•• Form
Form contractual
contractual agreements
agreements to
to better
better control
control distribution
distribution
channels.
channels.
Despite the unpredictability of the external

environment, enlightened marketing managers
take a proactive – rather than reactive –
approach to the marketing environment.
Responding to the Marketing
Environment
Views on Responding
Uncontrollable Proactive Reactive

• React and • Aggressive • Watching
adapt to actions to and reacting
forces in the affect forces to forces in
environment in the the
environment environment

POM Week 2 - Chap 3

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Lecture 2

Analyzing the marketing environment

Objective 1 Describe the environmental forces that affect the

A company’s marketing environment consists of

Suppliers form an important link in

Most marketers today treat their

Physical distribution firms

Marketing service agencies

To be successful, a company must

Marketers must do more than simply

Consider the marketer of

 Outcomes of change in, or changing

Copyright ©2014 by Pearson Education

Generation X includes people born between 1965 and

Copyright ©2014 by Pearson Education

Millennials (gen Y or echo boomers) include those born between 1977

Copyright ©2014 by Pearson Education

Copyright ©2014 by Pearson Education

Decline in household size

Copyright ©2014 by Pearson Education

Total Urban Rural

Completed upper secondary

Total Urban Rural

Total Urban Rural

Viet Nam Mekong Delta

Total Urban Rural Total Urban Rural

Base: Population6% 15-54 years 9% 6% 9%

Do marketers need to develop

• Interest rates, inflation, unemployment, economic growth, and

Key natural environment issues:

Shortages of raw materials

Perhaps the most

Give examples of how new

Key political issues:

Themselves Others Organisations

Nature Society Universe

Copyright ©2014 by Pearson Education

People’s view of nature

Copyright ©2014 by Pearson Education

Despite the unpredictability of the external

Uncontrollable Proactive Reactive

Copyright ©2014 by Pearson Education

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