Consumer markets (B2C) directly to customers Business markets (B2B) business to business as opposed to individuals

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1 Week 3: The marketing environment - those conditions and influences impingeing or potentially impingeing on marketing - must be continuously monitored in order for an organisation to plan ahead. Need to know what changes are taking place around us to respond to changes as they are taking place. - the individuals, organisations and forces external to the marketing environment management function of an organisation that impinge on the marketing management s ability to develop and maintain successful exchanges with customers Major components - Micro (close to organisation) customers, competitors, suppliers, intermediaries and other shareholders - Macro-environment (more distant) economic, political/legal forces, technological, social/cultural forces. - Internal environment (within the organisation that is outside marketing function) Employees, equipment, finance, functional responsibilities Micro Environment - All those other organisations and individuals that directly or indirectly, affect the activities of the organisation. (sharp, 2013). - Marketing is the delivery of value to both org and customer. Bridge between the 2. Connecting. - Around org and customer are range The microenvironment and communication - New internet-based communications have enhanced the ability of companies to rapidly exchange information with suppliers and intermediaries. - some companies have used the internet to cut out intermediaries through disintermediation, which is bringing consumers directly in contact with the manufacturer. Party Customers - directly impact on the experience of another one customer - Customers can be actual (who you have now) or potential (who you might have in the future) Major customer groupings: o o Also o Consumer markets (B2C) directly to customers Business markets (B2B) business to business as opposed to individuals Reseller markets food products not directly sold. Sold to intermediaries to sell to customers Customers wants and needs always chnge marketers have to follow the changes to continue to satisfy needs/ pre empt needs - Very impt aspect Changes are led by evolving consumer preferences. Organisation should understand its market demand so it can predict consumer responses.--> eg on right Examples Eg. The change in the menus of fast food chains over the years. Most now include healthier options or low-calorie choices. Eg. Many coffee chains and chocolate manufacturers are promoting their choice to use fair-trade beans. Eg. In 2009, Cadbury had to act quickly after their decision to add palm oil to their milkchocolate blocks led to boycotts and consumer protests in NZL. Negative media led the company to reverse the decision and remove palm oil

2 Competitor s - other organisations trying to sell goods and services/ any alt provider that are sold by the market. - An alternative provider of the offer sought by the market Who are the competitors? - Direct (similar product) Hoyts vs Village Cinemas - Indirect (same need, different product) satisfy that same need with a different product. Eg village cinemas vs other org eg entertainment sporting event, videogame are indirect competitors - Need to monitor competitors from their chocolate bars. Direct: - Hoyts vs Village Cinemas - Coke vs Pepsi Indirect: - Hoyts vs other entertainment (videogame, rental) - Coke vs Energy drinks, water, coffee, juice Suppliers - Suppliers provide inputs to the business that are transformed by the organisation into value-added products for customers. Intermediar ies o Eg. Raw materials, equipment, resources printing company need materials and ink - Need for close r/s with suppliers (EG) - Increased collaboration = competitive advantage buyers and sellers are increasingly cooperative in their dealings rather than bargaining in a confrontational manner. - Value chains: may be many suppliers connected in a chain adding value. Range of suppliers. Farmer who sells to factory, sells to producer who processes it, convert another sells to make flour add value to end product. - Retailer uds their needs needs are met in long term Eg. Apple has made multi billion dollar investments to assist its suppliers in Asia to build factories (to manufacture iphone screens), to ensure Apple has high quality and low cost reliable supply, making it difficult to match Apple s features and prices. Marketing intermediaries help an org to promote, sell and redistribute its goods to final buyers. They include Resellers/ distributors/retailers food manufacturur Physical distribution firms experts in moving products from point A to point B Marketing services agencies advertising agency helping org to communicate with the customers/ market research firm helping gather info about needs Financial intermediaries org that sit between org and customers to ease financial pressure to make it easier for customers to buy a product Suppliers of raw materials are not intermediaries, as they do not "sit between" a manufacturer and its customers. Intermediaries such as wholesalers, retailers and agents are crucial interfaces between themselves and their final customers. Large firms usually find it difficult to deal with each one of their customers, so sell through intermediaries. Access to effective intermediaries can be crucial for marketing success. Eg. Food manufacturers who do not maintain shelf space in major supermarkets may find it hard to achieve large volume sales. Intermediaries need reassuarance about the company s capabilities as a supplier that can work with them to supply goods and services in a reliable and ethical manner. Many companies suffered because they failed to take adequate account of the needs of their intermediaries. Eg. The Body Shop and McDonald s have faced protests from their franchisees, which felt

3 Other stakeholder s: Governmen t, financial community, pressure groups. Financial community - Made up of financial institutions that have supported, currently supporting or may support the organisation in the future. Includes shareholders. Shareholders- people who own organisation might impact on actions of organisation - organisations have an obligation to those who own the company not for charity, as investment o to maximise the return on the shareholders investment. But at the same time max customer satisfaction. Kotler 2010 Excessive customer focus good value to customers but shareholders not happy Excessive shareholder focus get massve return but org might not be focusing on the needs of customers The optimal balance perspective both receive fair value in the product process threatened by marketing strategies that were perceived as being against their own interests. - Govt Laws/legislation that impact upon r/s of org and Eg. Government agencies, such customers as Fair Work Australia, - Demands of the government take precedence over the regulate many activities that needs of customers. have a direct or indirect impact on what products a company can offer. Eg min wage law has added to the costs, leading to price rises for many labourintensive industries Eg. some companies had to close during the GFC because of lack of funding. Pressure groups - groups that stand for a cause, known as lobbying or advocacy group. - any local non-governmental org - have the ability to mobilise public opinion towards a firm: in favour/ in opposition ( f1 grand prix in Melbourne) - members may never be customers of company, yet can detract seriously from the image of the company that marketing department has developed - divided into those permanently fighting for a cause, and those that are set up to achieve a specific objective and dissolved when met. Influence activities of businesses by: - using propaganda to create awareness using social media or other media - seeking to represent the views of the group directly to businesses in a basis - resorting to direct action, ranging from boycotts to physical attacks on a company s property. result is often to change the organisation s behaviour, especially where large profits is uncertain Eg. Sectional groups - trade unions and employers associations Eg. Promotional groups - Tarkine National Coalition formed to lobby against development in the Tarkine wilderness of Western Tasmania. Eg. Ban Live Export campaign led by Animals Australia and RSPCA. sparked a huge public response and prompted government to ban live exports to several Indonesian facilities

4 Macro-environment Impacts on every other player in the system no control over the larger, wider forces that have influence over companies and economies. An individual firm is usually unabe to exert influence over their direction and nature. Macroeconomic Environment Economic Political Factors that affect consumer buying power and spending patterns Inflation Interest rates Employment levels Income - Disposable gross less taxes and deductions such as super - Discretionary disposable less cost of fixed expenses such as rent, food, clothing When consumer confidence is low, a high proportion of income tends to be saved. When confidence is high, consumers are more likely to borrow, so expenditure is greater than income. Laws, government agencies and pressure groups that influence and limit various org and indiv in a given society can lobby for change - Western countries are generally politically stable but governments in less developed countries are not. Makes it more risky for firms to market products there. - Difficult to gain market space due to restrictions on international companies in favour of local ones, or difficult to repatriate any profits if the currency is not traded - In countries with well-developed political systems, firms should try to predict the likely results and plan for changes to their marketing activities. - Governments are responsible for protecting the public interest at large, imposing further constraints (for example controls on pollution, which may make a manufacturing firm uncompetitive in international markets). - Government is responsible for formulating policies that can influence the rate of growth in the economy. - Supranational organisations can directly or indirectly affect companies. These include trading blocs-such as the European Union, Association of Southeast Asian Nations (ASEAN) and North American Free Trade Agreement (NAFTA)-and the influence of worldwide intergovernmental organisations (such as the World Trade Organization) whose members seek to implement agreed policy. Eg. Start of GFC Australia s economy remained strong due to mining revenue retail sales went down due to drop in consumer confidence Eg. Legislation regulating business Australian competition and consumer commission (ACCC): CCA competition and consumer act 2010 legislation that marketers have no control over, directly impact on what marketers can do. eg. Water boat manufacturers have safety legislations etc Australian government's drive for economic expansion and individual responsibility during the late 1980s changed public attitudes away from good citizenship and towards those of 'greed is good'.

5 Social and cultural Demographic Technologica l Crucial for marketers to appreciate fully the cultural values of a society, especially where an organisation is seeking to do business in another country. - Attitudes to specific products change over time and at any one time can differ between groups in society. - Institutions and other forces that affect society s basic values, perceptions, preferences and behaviours - People grow up in a particular society that shapes their basic beliefs and values. - The following cultural characteristics can affect marketing decisions Persistence of cultural values Subcultures Shifts in secondary cultural values how people communicate (mobile phone) Cultural Convergence - An apparent decline in differences between cultures. - Desire of subcultures in one country to imitate the values of another culture - Many companies have sought to develop one core product for a global market Demography is the study of human population in terms of size, density, location, age, sex, race, occupation and other statistics measurable statistics Changing age structure of population Geographic shift in population (moving from one country to another) Better educated and more white collar population Increased ethnic diversity Most developed countries are experiencing an increase in the proportion of elderly people, and companies have responded with the development of residential homes and cruise holidays. Cyclical birth rates result in a demand for age-related products such as baby products, fashion clothing and family cars. Developing countries typically have a much younger population with an increasing demand for fashion, mobile phones and social activities. Eg. Maccas advertisement showed boy meeting with separated parents. Showed that number of families in the United Kingdom with single parents has risen from 8% in 1971 to nearly 25% in Forces that affect new technologies, creating new product and market opportunities New products mobile phones, new anti-cancer drugs New manufacturing possibilities - new ways to make products more efficiently, reduce cost New ways to communicate with customers Eg. Increase in life expectancy. Australia's ageing population means that there is a growing number of elderly people that have different needs and values Eg. increasing concern about the ecological environment. This shift in values has led to a greater variety of 'green' consumer products. Eg. Coca-Cola or McDonald's Fertility rate: Eg. dropped from 2.9 to 1.9 babies per woman between 1969 and 1979, and to 1.7 in Childless couples: Eg. United States - 20% United Kingdom 22% Ethnic diversity- In 2006, estimated that one quarter of all Australian residents (24%) were born overseas. Between 2005 and 2006, 180,000 people migrated to Australia. 72 per cent more than in the same period ten years previously Eg. Amazon used internet to offer book buyers a new way of browsing and buying books; itunes has had a major impact on retail music stores

6 communication medium. Using computer databases to target potential customers and to maintain a dialogue with established customers. New ways to distribute goods and services online products eg music/ movies Emergence of Amazon.com was seen as the prime signal of the demise of the traditional bookstore. considered world s largest online retailer. Borders group of bookstores collapsed partly due to Amazon. In 2009, Amazon sold 19% of all printed books, more than traditional booksellers. E-book reader Kindle accounts for approximately half of all e-book reader sales. Ecological Natural resources that are needed as inputs by marketers or which are affected by marketing activities Shortage of raw materials Increased cost of energy Increased pollution Govt intervention in natural resource management A marker-led company cannot ignore threats to the natural ecology, for two principal reasons: 1. There has been growing pressure on natural resources, including those that, directly or indirectly, are used in firms' production processes. This is evidenced by the extinction of species of animals and the depletion of hardwood timber resources. As a result of overuse of natural resources, many industry sectors, such as fishing, have faced severe constraints on their production possibilities. 2. The general public has become increasingly aware of ecological issues and, more importantly, some segments have shown a greater willingness and ability to spend money to alleviate the problems associated with ecologically harmful practices. Internal Firm has a little bit of control over components of an organisation, such as employees, physical tools and communication methods, which affect corporate culture Labour-intensive service industries have long realised that recruiting, training and motivating the right staff is an important basis for delivering value with customers. Simply having a strong marketing department does not guarantee that a firm will be best able to adapt to change Employees: - source of a company s success - building customer commitment - increase customer willingness to pay - improving level of customer satisfaction - employee job satisfaction is related to customer satisfaction - successful employee relations = competitive advantage During the late 1990s, such well-respected companies as Coles Myer in Australia and Marks & Spencer in the United Kingdom were accused of having internal structures and processes that were too rigid to cope with a changing external environment. In 2011, Australian business magazine BRW conducted a survey to find Australia's best companies to work for. Asked 55,400 employees from 207 companies to find out if they trusted their leaders, had pride in their company and liked the people they worked with. The number one spot went to Google

7 Australia, whose 312 employees benefit from a fun culture (bean-bag filled meeting rooms and ping-pong tables), perks (a free cafeteria) and appreciation and reward for staff. Staff have a sense of pride in the company and a sense of community within the workplace Monitoring and responding to change - being premptive so organisation is ready when changes do occur to avoid being shut down. - Information about a firm's environment becomes crucial to environmental analysis and response. - Information about the current state of the environment is used as a starting point for planning future marketing strategy. Also used to monitor the implementation of an organisation's marketing plans and to note the cause of any deviation from plan. - Information collection, processing, transmission and storage technologies are continually improving, as witnessed by the development of scanners and other computer-based information systems. These have enabled organisations to greatly enhance the quality of the information they have about their operating environment. However, need to learn to use this information to benefit themselves. Environmental scanning (Evans, 1988) - an early warning system for the environmental forces which may impact a company s products and markets in the future - scanning enables a company to act rather than react to opportunities/threats - should be long term (future) so they have as much notice as possible Swot Analysis - strengths, weaknesses, opportunities and threats. - Part of the marketing planning process a framework for assessing an organisation and its marketing environment

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