Understanding the Macro and Micro Environment

See Past Exam Papers for Sample Questions

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Learning outcomes

Elements of the marketing environment Macro and Micro environmental analysis Understanding Consumer Buyer

Behaviour Understanding Industrial Buyer Behaviour Defining and analysing competitive forces

The Macro MarketingEnvironment

Copyright: Southwestern Publications 2006

1. The Competitive Environment

Competitive EnvironmentCompetitive Environment: competitive products, substitute products for one another, companies competing for your consumer’s purchasing power. Monopoly – examples in Ireland? Deregulation movement - ex Oligopoly - ex

Direct Competitive Products

Which would you buy?

Indirectly Competitive Products products than can be substituted for

one another

Plastic Containers vs. Glass vs. Tin vs. Aluminum

Sugar vs. Artificial Sweeteners Typewriter vs. PC Ocean Liner Vs. Air Travel

Developing a Competitive Developing a Competitive StrategyStrategy Should we compete? If so, in what markets should we

compete? How should we compete?

Involves: Researching the market Identifying current &potential

competitors Anticipating competitive actions

2. Political-Legal Environment

Component of the marketing environment consisting of laws and interpretations of laws that require firms to operate under competitive conditions and to protect consumer rights.

Deregulation – Increases Competitiveness

Regulatory Forces Government : Consumer

Safety Commission, IFSRA, Environmental Protection Agency, Health and Safety etc

Consumer interest groups

PETA Special-interest groups

ISME Self-regulatory groups

Advertising

Companies fight unjust regulations

Regulations can present new opportunities

Political lobbying Boycotts

Political action committees

Controlling the PL Environment

Is Horticulture industry regulated?

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3. The Economic Environment

Factors influencing consumer buying power and strategies (stage of the business cycle, inflation, unemployment, resources, income etc)

The Wealth effect (Ireland)

The figures on the map show the level of average new car prices in each market compared to the average for all euro currency markets. Index 100 represents the European average

Source: Fact Finders 2006

Fastest Growing Market for New Car – Eastern Europe (Latvia 49% increase on 2005)

During prosperous times car manufacturers will add luxury extras

The Wealth Effect

Inflation and DeflationInflation and Deflation

Inflation: The devaluation of money by reducing what it can buy through continued price increases. (Ireland)

Deflation: Falling prices

* Lowest annual EU rates: Netherlands (3.0%/1.9%), Portugal (3.1%/-1.2%), Ireland (3%/-2.4%). Highest rates: Latvia (15.6%/7.7%),

Lithuania (12.2%/6.9%).

UnemploymentUnemployment The proportion

of people in the economy who do not have jobs and are actively looking for work.

IncomeIncome Discretionary income: the amount of

money people have to spend after paying bills and necessities.

Resource AvailabilityResource Availability Demarketing: reducing consumer

demand for a good or service to a level that the firm can supply.

4. The Technological Environment

The technological environment: application of knowledge in science, inventions, and innovations to solve problems

Toyota PriusHeating Technologies

Technology Advances Consumer Needs

Technology increases exponentially New technology as a key to long-term

competitive advantage create more efficient operation or better

products may render existing products obsolete

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5. The Social-Cultural Environment

The relationship between marketing and society and its culture

Issues: Obesity in

Children Negative Body

Images Video Games Healthy Eating

etc ..

Cultural Environment: Elements of Culture

1. Language2. Manners & Customs3. Technology & Material Culture4. Social Institutions – business, family,

political- Latin America 5. Education –transmitting values, skills,

attitudes etc6. Aesthetics – attitude toward beauty, art,

music etc 7. Religion

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World’s Religions

Christianity - 2.0 billion followers Islam - 1.2 billion followers Hinduism - 860 million followers Buddhism - 360 million followers Confucianism - 150 million followers

Religion can affect marketing strategy

Social Environment: Role of Families and Working Women

Working women has had a greater effect on marketing than any other social change

Increases in females in the workforce

Purchasing power from dual-career families is rising

Cost is more important to women. Quality is more important to men.

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Population Considerations

Concerned with the study of the quantifiable aspects of population structures,e.g., age, gender, size, race, occupation and location. Some factors to consider:

falling birth-rates the rise of the “mature” market segment the “household of one”

Demographic Factors

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Generation Y: Born between 1979 and 1994, size = marketing impact, fickle and skeptical group, techno’s

Generation X: Born between 1965 and 1978, time premium, majority have children and houses, savvy and cynical consumers

Baby Boomers: Born between 1946 and 1964

Younger Boomers (ages 41 to 49) Home is the castle, spend on kids

Older Boomers (ages 50 to 59) Spend on home upgrades & Holidays

Growing Ethnic and Community Markets

Irish population is becoming multicultural society and workforce

Growth in spending power in: Eastern European Populations African Populations Asian Populations

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‘Pink Pound’ -’Dorothy Dollar’

6. Natural Forces

Conserve natural habitats, resources, endangered species

Minimise environmental impact Sustainable resource use Recycle Energy efficient products ‘The Polluter Pays Principle’

The Micro Environment

Customers: needs,  wants and providing benefits for their customers. Failure = failed business strategy.

Employees: correct and motivated staff is essential to strategic planning. Training and development, service sector, competitive edge. (Cereality)

Suppliers: Price of raw material affect the marketing mix. Closer supplier relationships benefit strategy.

Shareholders: inward investment for growth. Satisfying shareholder needs can cause a change in strategy. (Sharwoods+internet companies, Birds Eye)

Media: Positive or adverse attention. Consumer programs

 

Consumer Buyer Behaviour

Chapter 5 of book Talk about 3 consumer roles – Consumer is a user,

a payer and a buyer;

User – concerned about product features and the uses they can be put to (JML ads on TV)Payer – concerned about price and credit deals available (0% down, 0% until…)Buyers – concerned with logistics of procuring the product (order by certain date for delivery before…)

Consumer Buyer Behaviour

Consumer Needs & Wants

Needs are unsatisfactory conditions of the consumer that prompt them to an action that will make the condition better

Wants are desires to obtain more satisfaction than is absolutely necessary

Food vs. Gourmet Food, Car vs. Porsche etc

Consumer Behaviour-Psychology

The perception of a consumer about a certain service/product is what matters.

Learning also features in consumer behaviour. Especially for a complex purchase.

Motivation is defined as a state of drive that impels behaviour towards a goal-object.

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Maslow’s Hierarchy of Needs

Abraham Maslow described motivation as a means of satisfying human needs.

1. Physiological Needs – Food, shelter2. Safety & Security Needs – car safety, fire safety3. Belongingness & Love Needs – Teenagers clothes4. Esteem & Ego Needs – Self Gift Giving5. Need for Self Actualization – Engage in self

improvement activities

Psychographics:Describing Consumer Behaviour

Psychographics is a facet of motivation and explains how a person acts during the consumption phase.

The way they act is guided by a person’s:ValuesSelf ConceptLifestyleVALS – values & LifestylesAttitudes

Individual Consumer Decision Making process

Step 1: Problem Recognition Step 2: Information Search Step 3: Alternative Evaluation Step 4: Purchase Step 5: Post purchase Experience

Chap 5 of Book

Industrial Buyer Behaviour

Who says that you will always market to an individual??

‘The decision-making process by which formal organisations establish the need for purchased products and services, and identify, evaluate, and choose among alternative brands and suppliers’

Kotler and Armstrong 1989

Industrial Buyer Behaviour

The process can be summarised as follows

- Problem Recognition- Need Description- Product Specification- Supplier Search

- Supplier Selection - Purchase Routine Specification - Performance Review

Analyzing Competitive Forces

Check Chapter 4 of Book, from pg 117

Competitor ResearchAuditing Current CompetitorsAuditing Potential New Competitors

See in chapter 4 a competitor Analysis Template