ORGANIZING THE MARKETING EFFORT

THE CORPORATE ENVIRONMENT FOR MARKETING PLANNING

The marketing environment represents a mix between the internal and external forces which
surround an organization and have an impact upon it, especially their ability to build and
maintain successful relationships with target customers.
The marketing environment consists of the INTERNAL and EXTERNAL environments.

CORPORATE
ENVIRONME
NT
INTERNAL
ENVIRONME
NT

EXTERNAL
ENVIRONME
NT

The Internal environment is made up of factors within the organization itself that can be
controlled by the organization. It comprises the 5 Ms of Management i.e. Man, Machine,
Money, Materials and Methods.
1. Man: Man in management is referred to as a human resource. It is the recruitment,
selection, training, promotion and grievances handling of personnel. Payments of
compensation gratuity, termination of services are the few issues that have to be dealt
effectively to retain the talent within an organization.
2. Material: Material is a basic ingredient in management, be it a service industry or a
product industry. Most of the industries locate themselves in a way that ensures easy
access to materials required.
3. Machine: Machines are the basic tools to produce goods or to generate services.
Selection of an appropriate machine not only enhances efficiency but also saves times
and increases revenue. Tailoring the requirement of the organization, Selections of a
right technical machine and equipment, availability of spare parts, evaluation of after
sales services, substitutes and technology and the organization budget are the crucial
criteria while purchasing a machine.
4. Money: Management is done to meet day to day business requirements and the funds
involved in meeting those requirements are known as working capital.
5. Method: Everything has a right way to do and this right way is known as a Method in
management. A set of procedures and instructions is known as a method. The visible
methods of a company include: Plans, Policies, Procedures, and Data.

INTERNAL
ENVIRONMEN
T
MANPOWE
MATERIAL
MACHINES MONEY
METHODS
R
S
The external marketing environment consists of the micro and macro environment.
I.

MICRO ENVIRONMENT refers to the forces closely influencing the company and directly
affects the organizations relationships. The factors include the company and its current
employees, its suppliers, marketing intermediaries, competitors, customers and the
general public. These forces can sometimes be controlled or influenced and are explained in
more detail in Porters 5 Forces.

MICRO
ENVIRONMENT

COMPANY

SUPPLIERS

MARKETING
INTERMEDIARI
ES

CUSTOMERS

COMPETIT
ORS

Company
1. Top managers: Sets the company mission, objectives, broad strategies, and policies
and approves the marketing plans before it can be implemented.
2. Finance: It is concerned with finding and using funds to carry out the marketing plan.
3. Research and Development: Focuses on designing safe and attractive products.
4. Purchasing: Getting supplies and materials.
5. Manufacturing: Responsible for producing the desired quality and quantity of
products.

PUBLIC

6. Accounting: Measures revenue and cost to help marketing know how well it is
achieving its object.
Suppliers: Suppliers are important in the companys overall customer value delivery system.
They provide the resources needed by company to produce its goods and services.
Marketing Intermediaries: These are the firms that promote sell and distribute its good to
financial buyers. They include
1. Reseller: A company or individual (merchant) that purchases goods or services with
the intention of selling them rather than consuming or using them.
2. Physical Distributers: Help the company to stock and move goods from their points of
origin to their destinations. Balance factors for distributions include Cost, delivery,
speed, safety
3. Marketing Agencies: These include marketing research firms, advance agencies,
media firms and marketing consulting firms that help the company target and
promote its product.
4. Financial intermediaries: Help with financial transactions or insure against the risk
associated with the buying and selling of goods.
Customers
1. Customers markets (Business-to-Consumer (B2C)): Consists of individuals and
households that buy goods and services for personal consumption.
2. Business markets (Business-to-Business (B2B)): Comprises businesses that buy
goods and services for further processing or for use in their production process etc.
3. Government markets (Business-to-Government (B2G)): Made up of government
agencies that buy goods and services to produce public services and transfer the
goods and services to others who need them.
4. International markets: Cross-border markets including consumers, produces,
resellers, and government.
Competitors: All companies face competition. In order to survive and outmaneuver the
competition a company must employ advance strategies making use of market segmentation,
targeting and positioning. As Philip Kotler expressed the best way a company can grasp the full
range of its competition is to take view point of a buyer.
Public: Any group that has an actual or potential interest in or impact on an organizations
ability to achieve its objective.
1.
2.
3.
4.

Financial Public: Influences the companys ability to obtain funds.

Media Public: Carry news, features, and editorial opinion.
Government Public: Management must take government development into account.
Citizen-action Public: Public relations department can help it stay in touch with
costumers and citizens group.
5. General Public: Public image of the company.

6. Internal Public: Workers, managers, volunteers, and Board of Directors

II.

MACRO ENVIRONMENT: These factors include social, economic, political and legal
influences, together with demography and technological and Natural forces. These are
sometimes referred to as the PEST or PESTLE factors and are discussed in more detail in
PEST analysis and PESTLE analysis. The organization cannot control these forces, it can
only prepare for changes taking place.
1. Political and Legal forces: Includes laws, government agencies and pressure
groups that influence or limit various organizations and individuals in a given society.
Factors such as increasing legislation etc. also affect an organization.
2. Economic Environment: The economic environment consists of factors that affect
consumers purchasing and spending power.
Under economic environment,
manager generally studies the trends in gross national product, Patterns of real
growth in income, Variations in geographical income distribution, Borrowing pattern,
trends and governmental and legal restrictions.
3. Social and Cultural Forces: This consists of institutions and other forces that affect
a societys basic values, perceptions, preferences, and behaviors. Society and
culture shape basic beliefs and values. Major cultural values are expressed in how
people view themselves, their view of others and also their view of organizations
such as trade unions and corporations. Marketers must be fully aware of the sociocultural environment within which they operate to make them socially and culturally
acceptable. Social responsibility has crept into the marketing literature as an
alternative to the market concept.
Socially responsible marketing is that business firms should take the lead in
eliminating socially harmful products. Cultural forces like traditions and religion also
define how the consumers react to a certain product.
4. Demographic and Geographic Forces: Demography is the study of human
populations in terms of size, density, location, age, gender, race, occupation and
other statistics. Demographic data helps in preparing geographical marketing plans,
household marketing plans, age and gender plans. It influences behavior of
consumers which in turn will have direct impact on market place. A marketer must
communicate with consumers anticipate problems, respond to complaints and make
sure that the firm operates properly.
Forces that are in play due to the geography of a certain location, country or region
are known as Geographic Forces. Geographic regions also shape the wants and
demands of the market.
5. Technological Environment: External factors in technology that impact business
operations. Changes in technology affect how a company will do business. A
business may have to dramatically change their operating strategy as a result of
changes in the technological environment.

6. Natural Forces: The natural environment involves the physical environment and the
natural resources that are needed as inputs by marketers or that are affected by
marketing activities. Unexpected happenings from weather to natural disasters can
affect companies and their marketing strategies. Involves the natural resources that
are needed as inputs by marketers or that are affected by marketing activities.
Example: Company operations being affected due to natural calamities etc.

POLITICAL
AND LEGAL
TECHNOLOGI
CAL
SOCIOCULTURAL
MACRO
ENVIRONMEN
T

ECONOMIC
GEOGRAPHIC
DEMOGRAPHI
C
NATURAL

ORGANIZATIONAL CORPORATE STRATEGIES

Strengths, Weaknesses, Opportunities and Threats (SWOT Analysis)
SWOT is an important tool in auditing the external and internal environment of the organization.
Strengths and Weaknesses are internal environmental factors, while external environmental
factors are expressed through Opportunities and Threats.
Basically the SWOT analysis should be helpful in assessing the resources, capabilities and
vulnerable points which need improvement in order to develop competitiveness. It can also
provide a framework to review the strategy or direction of a company.

Strengths represent those specific characteristics of the business that offer an advantage over
its competitors. These features are helpful when it comes to achieving objectives, so the
organization may seek to discover new means of using these strengths.
Weaknesses are characteristics that limit performance and could represent an obstacle in
achieving objectives. Therefore, new solutions should be found to eliminate or improve them.
Opportunities include external conditions that could help improve performance or that can be
capitalized upon or exploited.
Threats indicate external conditions and situations that could hinder performance, so ways of
defending against them can be explored.
Using SWOT, the company can estimate whether its objectives are attainable or not, given the
internal and external circumstances.

External Environment Analysis (Opportunity and Threats Analysis)

Marketing Opportunity is an area of buyer need in which a company can perform
profitability.
1. Intensive growth opportunities
Market-penetration strategy
Market-development strategy
Product-development strategy
2. Integrative Growth
Forward integration
Backward integration
Horizontal integration
3. Diversification Growth
Concentric diversification
An environment threat is a challenge posed by an unfavorable trend or
development that would lead, in the absence of defensive marketing action, to
deterioration in sales or profit.

Joint Venture
Concentric diversification
Horizontal diversification
Conglomerate diversification

Internal Environment Analysis (Strengths/Weaknesses Analysis)

Reviews of companys marketing, financial, manufacturing, and organizational
competencies and identify if it is strength or weakness.

Market development
Market penetration
Product development
Horizontal integration
Divestiture
Liquidation
Forward integration
Backward integration
Concentric diversification

SWOT (Strength-Weaknesses-Opportunity-Threat) Matrix

A matching tool that helps managers to develop four types of strategies:
SO Strategies use a firms internal strengths to take advantage of external
opportunities.
WO Strategies aim at improving internal weaknesses by taking advantages of
external opportunities.
ST Strategies use a firms strengths to avoid or reduce the impact of external
threats.
WT Strategies are defensive tactics directed at reducing internal weaknesses and
avoiding external threats.
STRENGTHS
SO STRATEGIES
ST STRATEGIES

WEAKNESSES
WO STRATEGIES
WT STRATEGIES

STRENGHTS

WEAKNESSES

OPPORTUNITES

SO STRATEGIES

WO STRATEGIES

THREATS

ST STRATEGIES

WT STRATEGIES

OPPORTUNITIES
THREATS

PEST and PESTLE ANALYSIS

The PEST and PESTLE Analyses are frameworks used to scan the organizations external
macro environment. The letters stand for Political, Economic Socio-cultural, Technological,
Legal and Environmental. PEST analysis is the most widely used when performing such
analysis. Some approaches will add in extra factors, such as International, or Ethical. However,
these are all merely variations on a theme. The important principle is identifying the key factors
from the wider, uncontrollable external environment that might affect the organization.

The PEST and PESTLE Factors

Political and Legal Factors (P and L): It refers to the stability of the political environment and
the attitudes of political parties or movements. This may manifest in government influence on
tax policies, or government involvement in trading agreements. Political factors are inevitably
entwined with Legal factors such as national employment laws, international trade regulations
and restrictions, and consumer protection. The difference between Political and Legal factors is
that Political refers to attitudes and approaches, whereas Legal factors are those which have
become law and regulations. Legal needs to be complied with whereas Political may represent
influences, restrictions or opportunities, but they are not mandatory.
Economic factors (E) represent the wider economy so may include economic growth rates,
levels of employment and unemployment, costs of raw materials such as energy, petrol and
steel, interest rates and monetary policies, exchange rates and inflation rates. These may also
vary from one country to another.
Socio-cultural factors (S) represent the culture of the society that an organization operates
within. They may include demographics, age distribution, population growth rates, level of
education, distribution of wealth and social classes, living conditions and lifestyle.
Technological factors (T) refer to the rate of new inventions and development, changes in
information and mobile technology, changes in internet and e-commerce or even mobile
commerce, and government spending on research. There is often a tendency to focus
Technological developments on digital and internet-related areas, but it should also include
materials development and new methods of manufacture, distribution and logistics.
Environmental Impact (E) includes issues such as limited natural resources, waste disposal
and recycling procedures.
A newer force which is gaining in importance is ethics. These can be defined by the set of
moral principles and values that govern the actions and decisions of an individual or group.
Ethics and morals serve as guidelines on how to act rightly and justly when individuals are faced
with moral dilemmas.
This force could include corporate social responsibility, fair trade, affiliation between
corporations and charities. A particular problem may exist with how ethical factors relates to
legal forces as they may be at different stages in development. Something may be ethical but
not protected by law, whereas other activities may not be ethical, but are legal.
PORTERS FIVE FORCES
Porters 5 Forces model is an excellent tool to analyze the structure of the competitive
environment. Two important forces are the bargaining power of customers and the bargaining
power of suppliers.
Supplier power is represented by their ability to determine the terms and price of supply and
will increase if there are fewer suppliers than buyers, if the organization is not a key customer
for the supplier, or if their industry is not attractive for suppliers.

Buyer power refers to the pressure that customers exert on companies to obtain high quality
products and services at lower prices. Buyer power increases when there are few buyers and
many sellers in the field, or when products are not significantly differentiated and can be easily
substituted. For the seller, buyers demands represent costs. This means that the stronger the
buyer is, the less profit available for the seller, which is why many companies try to develop
strategies that reduce the power of buyers.
Another set of forces included in this model are the threats of new competition and substitute
new products.
Profitable markets are more likely to attract new entrants, especially if there is considerable
profit to be earned and barriers to entry are low. Newcomers increase the level of competition
and also decrease profitability for existing companies. However, there are methods to control
this threat, such as through regulation, patents, capital requirements, access to distribution,
brand identity, absolute cost advantages and government policy.
Substitute products are viable, alternative choices of products or services that the customer
can make which meet the same needs as the original product. An example would be MP3
downloads which meet the same need as CDs, or mobile phones with cameras which satisfy
the same need as digital cameras.
As with reducing the threat from new competitors, companies can use different strategies to
protect their products using trademarks, patents or strong branding to differentiate them from
substitute products.
Competitive Rivalry
The last force involved in this model is the intensity of competitive rivalry, which is the
major determinant of competitiveness of the industry for most companies. It also relates to the
rest of the forces described above. If an industry is easily accessible to new entrants or if it is
easy for customers to choose substitute products, we can say that competitive rivalry is likely to
be high.
Competitive rivalry also depends on factors such as the structure of competition, degree of
differentiation, or strategic objectives. As is mentioned in the video, two more forces can be
added; social factors and the economic environment. These can sometimes be seen in
government actions which have an important influence on business in some countries, and the
internal rivalry which occurs between departments of the same company.
Using the Model
In order to turn this model into an efficient tool, we need to work with real figures, otherwise it is
a subjective and abstract framework. We need to justify and quantify statements otherwise it will
remain purely conceptual. An in-depth analysis of the five forces would include questions on:
1. Key forces at work in the competitive environment
2. Underlying elements driving competitive forces
3. Whether there will be any change of competitive forces

4. Strengths and weaknesses of competitors in relation to the competitive forces

5. Whether competitive strategies can influence competitive forces
Having a clear view of these elements can help the organization decide where best to allocate
its resources.
REFERENCES
http://www.businessballs.com/pestanalysisfreetemplate.htm
http://businesscasestudies.co.uk/business-theory/marketing/marketing-and-the-businessenvironment.html#axzz3H8yW3q00
http://www.businessdictionary.com/definition/technologicalenvironment.html#ixzz3HV6D9A4iNatural
http://www.learnmarketing.net/environment.htm
http://www.marketingteacher.com/marketing-and-functions/
http://www.marketingteacher.com/marketing-environment/
http://oxlearn.com/arg_Marketing-Resources-Marketing-Planning_11_37
http://www.oxlearn.com/arg_Marketing-Resources-Porter's-Five-Forces_11_29
http://www.oxlearn.com/arg_PESTLE---Macro-Environmental-Analysis_11_31
http://www.vcapital.asia/5m/