Last updated: June 24, 2019
Topic: BusinessMarketing
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Marketing Environment.

The major goal of every company is being successful and achieving maximum level of productivity. In order to obtain the best results, many managers of companies do their best to carry out the most efficient marketing policy which would make the company occupy a decent place in the market. The role of applying the correct marketing strategy cannot be doubted because it’s one of the crucial points in the company’s general strategy. By planning all of the elements of marketing mix which include product, price, promotion, and place, management is able to ensure a competitive place in the market for the company. In order to be successful, the company needs to have a wide selection of products which answer the needs of customers, an efficient pricing strategy which would motivate customers buy products from this very company and not from competitors, an effective system of promotion, and well-balanced channels of distribution.

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All of these components have to be planned by the company very carefully. However, even when all this analysis has been made on the highest level, it’s necessary for the company to pay attention to the environment in which the company functions. The role of marketing environment in the framework of the general external environment can be represented through the following scheme of an “onion”. This approach “distinguishes between three different degrees of interaction:

v  Organization (or internal environment). This includes those activities, contained totally within the organization itself, which make up the daily life of most organizations;

v  Marketing environment. This is the area of external environment which has the most immediate impact on organizations, and is generally recognized by them;

v  External environment. This is often not recognized as a force impinging on organizations; and yet, it may well contain the major factors which determine the performance of the organization.” (Mercer, 1992, p. 141).

Scheme 1. External environment of organizations. Source:  Adapted from Mercer, 1992, p. 140

The analysis of marketing environment is crucial for managers of the company because in many ways the strategy of the company is determined by the environment in which it functions. It’s impossible for managers to carry out strategic decisions based only on the internal characteristics of the company without the analysis of external forces which characterize the marketing environment. All of the decisions have to be in respect with the external factors because they all influence the activities of the company in many ways.

In order to provide the most efficient policy, the marketing environment and competitor analysis for the company should include research provided on the following components:

•         SWOT analysis: strengths (internal); weaknesses (internal); opportunities (external); threats (external)

•         PEST analysis (political factors; economic factors; socio-cultural factors; technological factors)

•         Five forces analysis. (Marketing Teacher for Marketing Learners, p.1-3).

Political factors are particularly important to analyze because legislation plays a very important role in decision-making of the company’s managers. Even though some steps in marketing policy can be considered efficient generally, they might not be accepted due to the legislation in the country. For example, the monopoly regulation in different countries has many different characteristics, and some decisions made by marketing managers might turn out very dangerous in those countries where monopoly legislation is very strict. However, in other countries the fact that some company will occupy a monopoly position in the market will be not as harmful for its reputation due to some existing loop-holes in the legislation. Political factors also have a different kind of influence on the companies. It’s also necessary to mention that “pressure group campaign directly to change legislation, but also work indirectly to change the public’s buying habits. For example, the UK’s Ministry of Agriculture which is, as part of its role, supposed to look after consumers’ interests has been accused of being simply a mouthpiece of the farming industry”. (Mercer, 1992, p. 154). For the company to occupy a decent share of market, it needs to be very careful with the analysis of all the existing political issues. To sum up the mentioned issues, we can conclude that they generally include: monopolies legislation; environmental protection laws; taxation policy; employment laws; government policy; legislation (Marketing Teacher for Marketing Learners, p.2).

Economic factors have a deep impact on the marketing policy of the company as well. They are perhaps the most important factors, and therefore they need very close attention. “The major economic factors which influence the marketing strategy of the company are inflation; employment; disposable income; business cycles; energy availability and cost” (Marketing Teacher for Marketing Learners, p.3). It’s very important for the company to provide the detailed analysis of the mentioned economic factors, especially if it’s considering entering a new market. All those factors are easy to analyze if the company just functions in its native country but once it has to expand its influence on other markets, it’s very necessary to collect all of the data which deals with the economic situation in the country. For example, the analysis of the disposable income is particularly important because it shows how much money customers are going to spend on the products, and what the pricing strategy is going to be. If the income is high enough, the company can introduce luxury specifications of products because they will be met with high demand. However, the low level of income in the country means that consumers will not be able to spend much money on the products, and they would prefer to buy products at the lower cost.

Socio-cultural factors are one of the crucial factors in the marketing environment due to the fact that marketing policy is always consumer-oriented. For example, as it was mentioned by Jeff Silverman, CEO, The Custom Foot, “the products we offer, while of the highest quality, do not constitute our real business.  The Custom Foot is in the business of satisfying the very particular size and style needs of our customers.” (McAlister, 16). The whole sense of providing efficient marketing policy is making sure all of the needs of consumers are satisfied so that they have motivation to go buy more products in the future. In order to meet all the needs of the consumers, it’s necessary for the marketing managers to learn everything about their cultural values, background, styles of life. Without this research provided on the highest level, there is no way for the company to provide efficient targeting of the group of customers.

Among socio-cultural factors the major ones are “demographics; distribution of income; social mobility; lifestyle changes; consumerism; levels of education. (Marketing Teacher for Marketing Learners, p.4) Socio-cultural factors are particularly important for analysis if the company is going to enter markets in foreign countries. There have been many cases when companies did not analyze the cultural traditions of the countries well enough, and their products were never purchased in that country. For example, one computer company wanted to enter Japanese market with a new training program for employees. However, the characteristic feature of this program was that it made a special sound when the wrong answer was given. This product was not met by the Japanese with any enthusiasm because a characteristic feature of their culture is that they do not want others to see their mistakes. In the case of this product, everybody would hear the sound and know that a mistake has been made. In order to prevent such a failure of the product, the marketing managers would have to analyze the features of the group at whom the product was targeted.

There have been many attempts to make a detailed analysis of customers’ preferences according to their characteristics. “According to the detailed research provided by Beneton & Bowles, the following 6 groups of customers were classified by the researchers:

v Outgoing optimists (32% of the sample). They were described as “outgoing, innovative, community-oriented, positive toward grooming, not bothered by delicate health or digestive problems or especially concerned with germs and cleanness);

v Conscientious vigilantes (28%). They were described by the researchers as “contentious, rigid, meticulous, germ-fighting with a high cleanliness orientation and sensible attitudes about food. They have high cooking pride, a careful shopping orientation, tend not to be convenience-oriented”;

v Apathetic indifferents (14%);

v Self-indulgents (13%);

v Contented cows (8%);

Worriers (5%). This category of customers was described as ‘irritable, concerned about health, germs, and cleanness, negative about grooming and breakfast, but self-indulgent with a low economy and high convenience orientation.” (Journal of Advertising Research).

The impact of technological factors on the marketing policy of the company is very large as well. The success of the product is well-determined with its unique features which make it different from the product offered by competitors. It’s always a good decision to provide production in those branches where the possibility of innovations is very high. As long as there is a possibility of coming up with some revolutionary invention, this particular branch will be very enticing for entering. It’s much easier to provide marketing policy with unique products because they are usually met by customers with lots of enthusiasm. However, if the company has nothing new to offer, the process of convincing customers in the benefits of the product is much more difficult and requires lots of efforts in promotion, which costs additional sums of money. If the company chooses a technologically attractive field, it has much higher possibility of success than it otherwise would have. All of the major technological factors include: “new discoveries and innovations; speed of technology transfer; rates of obsolescence; Internet; information technology.” (Marketing Teacher for Marketing Learners, p.5)

Even though the PEST analysis is very important in the research of marketing environment, competitor analysis is equally important. Competitors also influence the marketing policy of the company in many ways. The company always needs to make a detailed analysis of all the possible actions which competitors are going to make in order to be ready to answer them in the most efficient way. Without the knowledge of competitors, there is no way to win a decent share in the market. “If you know the enemy and know yourself, you need not fear the result of a hundred battles.  If you know yourself, but not the enemy, for every victory gained you will also suffer a defeat.  If you know neither the enemy not yourself, you will succumb in every battle.” (Sun Tzu – The Art of War). Sun Tzu’s point of view is completely correct in the present day realities. In order to be successful, the company needs to know all of the internal factors which influence its marketing policy, provide PEST analysis, and also devote lots of attention to the analysis of competitors. As long as it takes into consideration all of the mentioned factors, it will be successful. If one of the factors is missing, the company will be winning and losing, or even losing all the time.

In order to provide the analysis of all possible competitors with the highest efficiency, Dr. Debbie Thorn McAlister suggests defining the following “levels of competition: implications for marketing strategy:

v  Product form/Brand:  Convince consumers that brand is better than others in product form;

v  Product class/Category:  Convince consumers that product form is best in category;

v  Generic:  Convince consumers that product category is best way to satisfy a need;

v  Total Budget:  Convince consumers that generic benefits are best way to spend discretionary budget.” (McAlister, p.8)

In scheme 2 the major level of competition for burgers are being represented. From this scheme it’s possible to tell that the simplest marketing tools can be applied on the first level in which burgers of different companies are competing. In this case success can be guaranteed by well-balanced pricing and focusing attention on the targeted group of customers. Customers are offered products with the same features, and there is no difference for them which one to get. In most cases, they will prefer the product with a lower level of price because other features of the products are the same.

Scheme 2. Levels of competition for burgers.

Competition in the product category “snacks” is more complicated because the products offered in this category do not have similar features and have a different background. For example, people who are fond of pizza, will prefer having a snack at Pizza-Hut or some other place like that to the visit to Burger King or McDonald’s. Besides, they have an alternative of going to the supermarket, buying sausages and making for example 20 sandwiches out of it which will last them for a week or so. In order to ensure company’s success on this level, it’s important to make sure that when consumers think about having a snack, they choose exactly the product of the company. For example, McDonald’s has applied many advertising strategies which help it to achieve this goal. One of the advertising strategies which it was using was the strategy of repetition according to which the same characteristics of the product are being repeated in the mass media so that customers remember them by heart. The agenda-making and cueing effects of advertising were also used by McDonald’s in order to fight with competitors. For example, it’s famous letter M always reminds us about the company, no matter where we see it. Due to the efficient marketing policy, when many consumers think about having a snack, they choose McDonald’s as the best place to go to. In this level, pricing cannot be the most efficient marketing tool. According to Warren Greshes, a former owner of a large sports chain “…you have to stand in front of your competition. You can’t just compete in price. Pricing is not a differentiating technique. Continually lowering your selling price, or having the lowest selling price never makes you indispensable to a customer. It only makes you easily replaceable”. (Cardona, 2004, v75).

The level of competition in food industry appears even more difficult for McDonald’s hamburgers to fight in, therefore it provides research on the targeted group of customers, and makes sure they go back to the restaurant over and over again. The customers might be going to expensive restaurants in the evening and buying groceries for meals at home, and there is no way for the company to prevent that from happening. However, they might want to go to McDonald’s from time to time to have snacks, and this is what the company level of service can have a direct impact on.

The level of budget competition and entertainment is even more complex than the level of competition in the food industry, and it requires an even more detailed analysis. Even though burgers are not able to compete with customer’s interest in TV-sets, vacation packages and other things on which they spend the family budget, they need to make sure customers always spend some of their budget on buying their hamburgers. This task might be not easy to achieve but application of marketing tools can help the company to succeed. The most important “stages of competitive analysis include:

1)  Identify all current and potential brand, product, generic, and total budget competitors;

2)  Assess each key competitor in terms of relevant characteristics, such as size, profitability, growth, objectives, strategies, etc.

3) Assess each key competitor’s strengths and weaknesses, as well as the major competencies that each competitor possesses;

4) Focus on each competitor’s marketing capabilities in terms of their products, pricing, distribution, and promotion;

5) Estimate each competitor’s most likely strategies and responses under different environmental situations, as well as their reactions to the organization’s own marketing efforts”. (McAlister, p. 12).

The importance of marketing environment analysis cannot be doubted. Without the knowledge of the environment, there is no way for marketing managers of companies to define the most efficient marketing tools which would work for the company. The knowledge of the environment gives the managers the understanding of customers needs, as well as the goals of competitors. The company doesn’t function in an isolated space, therefore it has to take into consideration many factors which influence its activity. It needs to know the political, social, economic and technological situation in the country where it provides its activity, and be aware of the actions of competitors. As long as all the research of environment is provided on the high level, the company is going to be successful in the market.

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