• Marketing Environment Analysis is the

process of gathering, filtering and

analyzing information relating to the
marketing environment.
• It involves the process of tasks of
monitoring the changes taking place in the
environment & future position in respect of
each of the factors.
• The analysis spots the opportunities &
threats in the environment.
• To see which event & trends are favorable from the
standpoint of the firm & which are unfavorable; to figure
out the opportunities & threats hidden in the environment
events & trends.

• To project how the environment will be at a future point

of time.

• To assess the scope of various opportunities & shortlist

those that can favorably impact the business.
 AUDIT OF ENVIRONMENTAL INFLUENCES

ASSESSMENT OF THE NATURE OF THE ENVIRONMENT

IDENTIFICATION OF THE KEY ENVIRONMENT FORCES

IDENTIFICATION OF THE PRINCIPAL OPPORTUNITIES & THREATS

STRATEGIC POSITION
 ECONOMICS FACTORS
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• It creates an increased general awareness of
environmental changes on the part of management.
• It guides with greater effectiveness in matters relating
the government.
• It helps in marketing analysis.
• It suggest improvements in diversification & resource
allocation.
• It helps firms to identify & capitalize upon
opportunities rather than losing out to competitors.
• It provides qualitative information that can subsequently
be of value in designing the strategies.
• MACRO ENVIROMENT • MICRO ENVIRONMENT

1. DEMOGRAPHIC ENVIRONMENT 1. THE MARKET / DEMAND

2. SOCIO – CULTURAL 2. THE CONSUMER
ENVIRONMENT
3. ECONOMIC ENVIRONMENT
3. THE INDUSTRY
4. POLITICAL ENVIRONMENT 4. GOVERNMENT POLICIES
5. NATURAL ENVIRONMENT 5. THE COMPETITION
6. TECHNOLOGICAL ENVIRONMENT 6. SUPPLIERS RELATED
7. LEGAL ENVIRONMENT FACTORS
8. GOVERNMENT ENVIRONMENT
The marketing environment surrounds
and impacts upon the organization.
There are three key perspectives on
the marketing environment:

• The micro-environment
• The macro-environment
• The internal environment.
 The micro-environment

• This environment influences the organization directly.

• It includes :
1 suppliers who deal directly or indirectly
2 consumers and customers
3 other local stakeholders
• Micro tends to suggest small, but this can be
misleading.
• Micro describes the relationship between firms and
the driving forces that control this relationship.
• It is a more local relationship, and the firm may
exercise a degree of influence.
 The macro-environment

• This includes all factors that can influence an

organization, but that are out of their direct control.
• A company does not generally influence any laws .It is
continuously changing, and the company needs to be
flexible to adapt.
• There may be aggressive competition and rivalry in a
market.
• Globalization means that there is always the threat of
substitute products and new entrants.
• The wider environment is also ever changing, and the
marketer needs to compensate for changes in culture,
politics, economics and technology.
 The internal environment.

• All factors that are internal to the organization

are known as the ‘internal environment’. They
are generally audited by applying the ‘Five Ms’
which are Men, Money, Machinery, Materials
and Markets. The internal environment is as
important for managing change as the external.
As marketers we call the process of managing
internal change ‘internal marketing.’
• Essentially we use marketing approaches to aid
communication and change management.
• The external environment can be audited
in more detail using other approaches
such as SWOT Analysis, Michael Porter’s
Five Forces Analysis or PEST Analysis
 External Macro environment
• The external macro environment consists
of all the outside institutions and forces
that have an actual or potential interest or
impact on the organization's ability to
achieve its objectives: competitive,
economic, technological, political,
legal, demographic, cultural, and
ecosystem.
 Competitive Environment
• It is impossible for an organization to develop strong
competitive positioning strategies without a good
understanding of its competitors and the strengths
and weaknesses of the competitors.
• Three levels of competition exist.
1. Direct competitors (ex. grocery stores).
2. Competition exists between products (ex.
margarine for butter).
3. Competition exists on the basis of the consumer's
purchasing power (ex. entertainment).
• Pure competition, Monopolistic competition,
Oligopoly, Monopoly
 Economic Environment
• The economic environment consists of factors that affect
consumer purchasing power and spending patterns.
Economic factors include business cycles, inflation,
unemployment, interest rates, and income. Changes in
major economic variables have a significant impact on
the marketplace.
• Why are superstars paid so much?
• Marketers can't control the problems that have cropped
up, and that may continue to develop, at various hot
spots across the global economy. But they can -- and
should -- take proactive steps to shelter their
organizations from unwanted consequences of a
worldwide downturn.
 Technological Environment
• The technological environment refers to
new technologies, which create new
product and market opportunities.
Technological developments are the most
manageable uncontrollable force faced by
marketers. Organizations need to be
aware of new technologies in order to turn
these advances into opportunities and a
competitive edge.
 Political and Legal Environment
• Organizations must operate within a framework of
governmental regulation and legislation.
Government relationships with organizations
encompass subsidies, tariffs, import quotas, and
deregulation of industries
• The political environment includes governmental
and special interest groups that influence and limit
various organizations and individuals in a given
society. The major purposes of business legislation
include protection of companies from unfair
competition, protection of consumers from unfair
business practices and protection of the interests of
society from unbridled business behavior.
 Demographic Environment
• Demographics tell marketers who are
current and potential customers; where
they are; and how many are likely to buy
what the marketer is selling. Demography
is the study of human populations in terms
of size, density, location, age, sex, race,
occupation, and other statistics.
 Cultural Environment
• Social/cultural forces are the most difficult
uncontrollable variables to predict. It is
important for marketers to understand and
appreciate the cultural values of the
environment in which they operate. The
cultural environment is made up of forces
that affect society's basic values,
perceptions, preferences, and behaviors.
 Ecosystem Environment
• The ecosystem refers to natural systems
and its resources that are needed as
inputs by marketers or that are affected by
marketing activities. Green marketing (the
greening of America) or environmental
concern about the physical environment
has intensified in recent years.
 External Microenvironment
• The external microenvironment consists of
forces that are part of an organization's
marketing process but are external to the
organization. These micro environmental
forces include the organization's market,
its producer-suppliers, and its marketing
intermediaries. While these are external,
the organization is capable of exerting
more influence over these than forces in
the macro environment.
 The Market
• Organizations closely monitor their customer
markets in order to adjust to changing tastes and
preferences. A market is people or
organizations with wants to satisfy, money to
spend, and the willingness to spend it.
• Consumer markets
• Business markets
• Reseller markets
• Government markets
• .International markets
 Suppliers
• Suppliers are organizations and
individuals that provide the resources
needed to produce goods and services
 Marketing Intermediaries
• Like suppliers, marketing intermediaries
are an important part of the system used
to deliver value to customers. Marketing
intermediaries are independent
organizations that aid in the flow of
products from the marketing organization
to its markets.
 Marketing Information
• External environmental sources provide
raw data for marketers to develop into
actionable, marketing information.
Environmental forces create challenges
and opportunities for the organization.
Marketers must react and adapt to
changes in their external environment.
Globalization is an example of an
opportunity for an organization.
 Introduction
• The model of the Five Competitive Forces was
developed by Michael E. Porter in his book „Competitive
Strategy: Techniques for Analyzing Industries and
Competitors“ in 1980.

• Since that time it has become an important tool for

analyzing an organizations industry structure in
strategic processes.

• Porter has identified five competitive forces that shape

every industry and every market.

• These forces determine the intensity of competition and

hence the profitability and attractiveness of an industry.
1.Bargaining Power of Suppliers
Supplier bargaining power is likely to be high
when:
• The market is dominated by a few large
suppliers rather than a fragmented source of
supply

• There are no substitutes for the particular

input

• The switching costs from one supplier to

another are high
 There is the possibility of the supplier integrating
forwards in order to obtain higher prices and
margins. This threat is especially high when
• The buying industry has a higher profitability than
the supplying industry

• Forward integration provides economies of scale

for the supplier

• The buying industry hinders the supplying

industry in their development (e.g. reluctance to
accept new releases of products)

• The buying industry has low barriers to entry.

 2. Bargaining Power of
Customers
Customers bargaining power is likely to be
high when
• They buy large volumes, there is a
concentration of buyers,
• The supplying industry comprises a large
number of small operators
• The supplying industry operates with high
fixed costs
• The product is undifferentiated and can
be replaces by substitutes
• Switching to an alternative product is relatively simple and
is not related to high costs

• Customers have low margins and are price-sensitive

• Customers could produce the product themselves

• The product is not of strategical importance for the

customer

• The customer knows about the production costs of the

product

• There is the possibility for the customer integrating

backwards.
 3.Threat of New Entrants
• The threat of new entries will depend on the extent to
which there are barriers to entry. These are typically
• Economies of scale (minimum size requirements for
profitable operations)

• High initial investments and fixed costs

• Cost advantages of existing players due to

experience curve effects of operation with fully
depreciated assets

• Brand loyalty of customers

• Protected intellectual property like patents,
licenses etc,
• Scarcity of important resources, e.g. qualified
expert staff
• Access to raw materials is controlled by existing
players,
• Distribution channels are controlled by existing
players,
• Existing players have close customer relations,
e.g. from long-term service contracts,
• High switching costs for customers
• Legislation and government action
 4. Threat of Substitutes
• Similarly to the threat of new entrants, the
treat of substitutes is determined by factors
like
• Brand loyalty of customers,
• Close customer relationships,
• Switching costs for customers,
• The relative price for performance of
substitutes
• Current trends.
 5.Competitive Rivalry between
Existing Players
Competition between existing players is likely to be high
when:
• There are many players of about the same size,
• Players have similar strategies
• There is not much differentiation between players
and their products, hence, there is much price
competition
• Low market growth rates (growth of a particular
company is possible only at the expense of a
competitor),
• Barriers for exit are high (e.g. expensive and highly
specialized equipment).
 SWOT Analysis
• SWOT analysis is a tool for auditing an
organization and its environment. It is the
first stage of planning and helps marketers
to focus on key issues. SWOT stands for
strengths, weaknesses, opportunities,
and threats. Strengths and weaknesses
are internal factors. Opportunities and
threats are external factors.
• In SWOT, strengths and weaknesses are
internal factors. For example: A strength
could be:
• Your specialist marketing expertise.
• A new, innovative product or service.
• Location of your business.
• Quality processes and procedures.
• Any other aspect of your business that adds
value to your product or service.
• A weakness could be:
• Lack of marketing expertise.
• Undifferentiated products or services (i.e.
in relation to your competitors).
• Location of your business.
• Poor quality goods or services.
• Damaged reputation.
• In SWOT, opportunities and threats are
external factors. For example: An opportunity
could be:
• A developing market such as the Internet.
• Mergers, joint ventures or strategic alliances.
• Moving into new market segments that offer
improved profits.
• A new international market.
• A market vacated by an ineffective competitor.
• A threat could be:
• A new competitor in your home market.
• Price wars with competitors.
• A competitor has a new, innovative product
or service.
• Competitors have superior access to
channels of distribution.
• Taxation is introduced on your product or
service.
• A word of caution, SWOT analysis can be
very subjective. Do not rely on SWOT too
much. Two people rarely come-up with the
same final version of SWOT. TOWS
analysis is extremely similar. It simply
looks at the negative factors first in order
to turn them into positive factors. So use
SWOT as guide and not a prescription.
• Simple rules for successful SWOT analysis.
• Be realistic about the strengths and weaknesses of your
organization when conducting SWOT analysis.
• SWOT analysis should distinguish between where your
organization is today, and where it could be in the future.
• SWOT should always be specific. Avoid grey areas.
• Always apply SWOT in relation to your competition i.e.
better than or worse than your competition.
• Keep your SWOT short and simple. Avoid complexity
and over analysis
• SWOT is subjective.
• Once key issues have been identified with your
SWOT analysis, they feed into marketing
objectives. SWOT can be used in conjunction
with other tools for audit and analysis, such as
PEST analysis and Porter's Five-Forces analysis
. So SWOT is a very popular tool with marketing
students because it is quick and easy to learn.
During the SWOT exercise, list factors in the
relevant boxes. It's that simple. Below are some
FREE examples of SWOT analysis - click to go
straight to them
• Do you need a more
advanced SWOT Analysis?
• Example 1 - Wal-Mart SWOT Analysis. Strengths - Wal-
Mart is a powerful retail brand. It has a reputation for
value for money, convenience and a wide range of
products all in one store. Weaknesses - Wal-Mart is the
World's largest grocery retailer and control of its empire,
despite its IT advantages, could leave it weak in some
areas due to the huge span of control. Opportunities - To
take over, merge with, or form strategic alliances with
other global retailers, focusing on specific markets such
as Europe or the Greater China Region. Threats - Being
number one means that you are the target of
competition, locally and globally.
• Example 3 - Nike SWOT Analysis. Strengths -
Nike is a very competitive organisation. Phil
Knight (Founder and CEO) is often quoted as
saying that 'Business is war without
bullets.'Weaknesses - The organisation does
have a diversified range of sports products.
Opportunities - Product development offers Nike
many opportunities. Threats - Nike is exposed to
the international nature of trade.
 PEST analysis
• Political factors
• Economic factors
• Social factors
• Technological factors
 Political Factors.

• The political arena has a huge influence upon the

regulation of businesses, and the spending power of
consumers and other businesses. You must consider
issues such as:
• 1.How stable is the political environment?
• 2.Will government policy influence laws that regulate or tax
your business?
• 3.What is the government's position on marketing ethics?
• 4. What is the government's policy on the economy?
• 5. Does the government have a view on culture and
religion?
• 6. Is the government involved in trading agreements such
as EU, NAFTA, ASEAN, or others?
 Economic Factors.

• Marketers need to consider the state of a trading

economy in the short and long-terms. This is
especially true when planning for international
marketing. You need to look at:
• 1. Interest rates.
• 2. The level of inflation Employment level per
capita.
• 3. Long-term prospects for the economy Gross
Domestic Product (GDP) per capita, and so on.
 Sociocultural Factors.

• The social and cultural influences on business vary from

country to country. It is very important that such factors
are considered. Factors include:
• 1.What is the dominant religion?
• 2.What are attitudes to foreign products and services?
• 3.Does language impact upon the diffusion of products
onto markets?
• 4.How much time do consumers have for leisure?
• 5.What are the roles of men and women within society?
• 6.How long are the population living? Are the older
generations wealthy?
• 7.Do the population have a strong/weak opinion on
green issues?
 Technological Factors.

• Technology is vital for competitive advantage, and is a

major driver of globalization. Consider the following
points:
• 1. Does technology allow for products and services to be
made more cheaply and to a better standard of quality?
• 2.Do the technologies offer consumers and businesses
more innovative products and services such as Internet
banking, new generation mobile telephones, etc?
• 3.How is distribution changed by new technologies e.g.
books via the Internet, flight tickets, auctions, etc?
• 4.Does technology offer companies a new way to
communicate with consumers e.g. banners, Customer
Relationship Management (CRM), etc?