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The marketing environment surrounds and impacts upon the organization. There are three key perspectives on the marketing environment, namely the 'macro-environment,' the 'micro-environment' and the 'internal environment'.
The micro-environment

This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, 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 and organization, but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). 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.

1 The micro-environment

The term micro-environment denotes those elements over which the marketing firm has control or which it can use in order to gain information that will better help it in its marketing operations. In other words, these are elements that can be manipulated, or used to glean information, in order to provide fuller satisfaction to the company’s customers. The objective of marketing philosophy is to make profits through satisfying customers. This is accomplished through the manipulation of the variables over which a company has control in such a way as to optimise this objective. The variables are what Neil Borden has termed ‘the marketing mix’ which is a combination of all the ‘ingredients’ in a ‘recipe’ that is designed to prove most attractive to customers. In this case the ingredients are individual elements that marketing can manipulate into the most appropriate mix. E Jerome McCarthy further dubbed the variables that the company can control in order to reach its target market the ‘four Ps’. Each of these is discussed in detail in later chapters, but a brief discussion now follows upon each of these elements of the marketing mix together with an explanation of how they fit into the overall notion of marketing.
1.1 The ‘four Ps’ and the marketing mix

The ‘four Ps’ stands for:

1. Product
2. Price
3. Place and
4. Promotion

Product and price are obvious, but perhaps place and promotion need more explanation.

Place, it is felt, might better be termed ‘placement’ because it comprises two distinct elements. The first element is channels of distribution that is the outlets and methods through which a company’s goods or services are sold. Thus a channel can be certain types of retail outlet or it can be salespeople selling a company’s industrial products through say a channel which comprises buyers in the chemical industry. The other part of place refers to logistics that relates to the physical warehousing and transportation of goods from the manufacturer to the end customer. Thus, placement might be a better descriptor as it refers to the placing of goods or services from the supplier to the customer. In fact, place has its own individual ‘mix’ which is termed the ‘distribution mix’.

Promotion also has its individual ‘mix’ that is called the ‘promotional mix’. This comprises advertising, selling and sales promotion. In fact promotion is a misnomer, because in advertising agency circles the mention of promotion usually means ‘sales promotion’. Some writers are now separating selling away from promotion and calling it ‘people’ because it is too important an element of marketing to be lumped in with promotion, although in reality it is still promotion (through word of mouth). This fifth P (people) are those who contact customers on a regular basis with the objective of ultimately gaining orders and these people comprise the salesforce. We can thus see that selling is a component part of overall marketing. There are two more Ps for service marketing, but these are dealt with later.

2 The proximate macro-environment

The term macro-environment denotes all forces and agencies external to the marketing firm itself. Some of these forces and agencies will be closer to the operation of the firm than others, e.g. a firm’s suppliers, agents, distributors and other distributive intermediaries and competing firms. These ‘closer’ external constituents are often collectively referred to as the firm’s proximate macro-environment to distinguish them from the wider external forces found, for example, in the legal, cultural, economic and technological sub-environments.

This consists of people, organizations and forces within the firm’s immediate external environment. Of particular importance to marketing firms are the sub-environments of suppliers, competitors and distributors (intermediaries). These sub-environments can each have a significant effect upon the marketing firm.
2.1 The supplier environment

This consists of other business firms or individuals who provide the marketing firm with raw materials, product constituents, services or, in the case of retailing firms, possibly the finished goods themselves. Firms, whether they be retailers or manufacturers, will often depend on numerous suppliers. The buyer/supplier relationship is one of mutual economic interdependence, both parties relying on the other for their commercial well-being. Although both parties are seeking stability and security from their relationship, factors in the supplier environment are subject to change, such as industrial disputes which will affect delivery of materials to the buying company, or a sudden increase in raw material prices which forces suppliers to raise their prices. Whatever the product or service being purchased by the marketing firm, unexpected developments in the supplier environment can have an immediate and potentially serious effect on the firm’s commercial operations. Because of this, marketing management, by means of the marketing intelligence component of its marketing information system, should continually monitor changes and potential changes in the supplier environment and have contingency plans ready to deal with potentially adverse developments.
2.2 The distributive environment

Much reliance is placed on marketing intermediaries such as wholesalers, factors, agents and distributors to ensure that their products reach the final consumer. To a casual observer, it may seem that the conventional method of distribution in any particular industry is relatively static. This is because changes in the distributive environment occur relatively slowly, and there is therefore a danger of marketing firms failing to appreciate the commercial significance of cumulative change. Existing channels may be declining in popularity over time, while new channels may be developing unnoticed by the marketing firm. Nowhere has this ‘creeping’ change been more apparent over recent years in the UK and other parts of the world than in the retailing of fast moving consumer goods (fmcg). In the 1960s well over half of all fmcg retail trade was accounted for in the independent sector plus a further large proportion to the Co-operative Societies. Nowadays, the sector represented by the larger food multiples has well in excess of this proportion.
2.3 The competitive environment

Management must be alert to the potential threat of other companies marketing similar and substitute product whether they are of domestic or foreign origin. In some industries there may be numerous world-wide manufacturers posing a potential competitive threat and in others there may only be a few. Whatever the type, size and composition of the industry, it is essential that marketing management has a full understanding of competitive forces. Companies need to establish exactly who their competitors are and the benefits they are offering to the market. Armed with this knowledge, the company will have a greater opportunity to compete effectively.
3 The wider macro-environment

Changes in the wider macro-environment may not be as close to the marketing firm’s day-to-day operations, but they are just as important. The main factors making up these wider macro-environmental forces fall into four groups.

1. Political and legal factors
2. Economic factors
3. Social and cultural factors
4. Technological factors

(Often referred to as the ‘PEST’ factors in the marketing analytical context, a useful aide-memoire, although in some texts it is sometimes referred to as ‘STEP’). To this is sometimes added ‘Competitive factors’ and although ‘PEST’ analysis relates to a specific organisation ‘Competitive factors’ tend to be subsumed under ‘Economic factors’. Such a PEST analysis means listing all possible points that may affect the organisation under review under each of the P.E.S.T. headings. Recently, some texts have added ‘L’ (standing for legal) and ‘E’ (standing for environmental) to this classification, making the acronym ‘PESTLE’. Even more recently, some writers have incorporated yet another ‘E’ (standing for ecological) with the new acronym ‘STEEPLE’.
3.1 The political and legal environment

To many companies, domestic political considerations are likely to be of prime concern. However, firms involved in international operations are faced with the additional dimension of international political developments. Many firms export and may have joint ventures or subsidiary companies abroad. In many countries, particularly those in the so-called ‘Third World’ or more latterly termed ‘Developing Nations’, the domestic political and economic situation is usually less stable ...
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