COMM 223 — Marketing Management
Chapter 3: Analyzing the Marketing Environment
Based on: Armstrong, Kotler et al., Marketing: An Introduction, 7th Canadian Edition
Chapter Overview: This chapter examines the marketing environment — the actors and
forces outside marketing that affect a company's ability to build and maintain successful
relationships with target customers. It begins by distinguishing the microenvironment (close
actors) from the macroenvironment (larger societal forces). It then covers the six forces of
the macroenvironment in depth: demographic, economic, natural, technological,
political/social, and cultural. The chapter closes with a critical question: should companies
react passively to their environment or take a proactive stance to shape it? The central
message is that marketers must be environmental trend-trackers and opportunity-seekers,
constantly adapting — or leading — the changes around them.
1. The Microenvironment and Macroenvironment
A company's marketing environment consists of the actors and forces outside marketing that
affect marketing management's ability to build and maintain successful relationships with target
customers. Companies must constantly watch and adapt to the changing environment — or, in
many cases, lead those changes.
More than any other group in the company, marketers must be environmental trend trackers
and opportunity seekers. They have disciplined methods — marketing research, marketing
intelligence, and marketing analytics — for collecting information and developing insights. They
also spend more time in customer and competitor environments. By carefully studying the
environment, marketers can adapt their strategies to meet new marketplace challenges and
opportunities.
Environment Definition
Microenvironment The actors close to the company that affect its ability to engage and
serve its customers. Includes: the company itself, suppliers, marketing
intermediaries, customer markets, competitors, and publics.
Macroenvironmen The larger societal forces that affect the microenvironment. Includes
t six forces: demographic, economic, natural, technological, political,
and cultural. These forces shape opportunities and pose threats.
The Microenvironment
Marketing management's job is to build relationships with customers by creating customer value
and satisfaction. Marketing managers cannot do this alone — marketing success requires
building relationships with other company departments, suppliers, marketing intermediaries,
competitors, various publics, and customers. Together, these actors combine to make up the
company's value delivery network.
1. The Company
,In designing marketing plans, marketing management takes other company groups into account
— top management, finance, R&D, purchasing, operations, human resources, and accounting.
All of these interrelated groups form the internal environment. Top management sets the
company's mission, objectives, broad strategies, and policies. Marketing managers make
decisions within these broader strategies and plans. With marketing taking the lead, all
departments — from manufacturing and finance to legal and human resources — share the
responsibility for understanding customer needs and creating customer value.
2. Suppliers
Suppliers form an important link in the company's overall customer value delivery network. They
provide the resources needed by the company to produce its goods and services. Supplier
problems can seriously affect marketing:
• Supply shortages or delays, natural disasters, and other events can cost sales in the
short run and damage customer satisfaction in the long run.
• Rising supply costs may force price increases that can harm the company's sales
volume.
Most marketers today treat their suppliers as partners in creating and delivering customer value
— not just as vendors.
Real-World Example — IKEA: IKEA, the world's largest furniture retailer, attracted over
936 million store visits and 2.3 billion website visits in one year, generating more than
US$47 billion in sales. IKEA currently relies on about 1,000 suppliers in 51 countries. Its
design process for a new product can take up to three years. IKEA's designers start with a
basic customer value proposition and then work closely with key suppliers throughout —
refining the design, improving function, and reducing costs. IKEA describes the relationship
as 'growing together as partners with passion for creating a better life at home.' Suppliers
are not passive vendors — they are integral to the entire value delivery system.
3. Marketing Intermediaries
Marketing intermediaries help the company promote, sell, and distribute its products to final
buyers. They form an important component of the company's overall value delivery network.
Today's marketers recognize the importance of working with intermediaries as partners rather
than simply as channels through which they sell their products. There are four types:
Type of Role & Description
Intermediary
Resellers Distribution channel firms that help the company find customers or
make sales to them. Includes wholesalers and retailers that buy and
resell merchandise.
Physical Help the company stock and move goods from their points of origin
Distribution Firms to their destinations. Examples: shipping companies, warehousing
firms, logistics providers.
Marketing Services Marketing research firms, advertising agencies, media firms, and
Agencies marketing consulting firms that help the company target and promote
its products to the right markets.
, Financial Banks, credit companies, insurance companies, and other
Intermediaries businesses that help finance transactions or insure against the risks
associated with the buying and selling of goods.
Real-World Example — Coca-Cola and Retail Partners: When Coca-Cola signs on as the
exclusive beverage provider for a fast-food chain (McDonald's, Wendy's, Subway), it
provides much more than just soft drinks. Coca-Cola assigns cross-functional teams
dedicated to understanding the finer points of each retail partner's business. It conducts
extensive research on beverage consumers and shares insights with its partners. It
analyzes demographics and helps partners determine which Coke brands are preferred in
their areas. It has even studied drive-through menu board design — layouts, fonts, letter
sizes, colours — to understand what induces consumers to order more. Its website
CokeSolutions.com provides retailers with business solutions, merchandising tips, social
media marketing advice, and sustainability guidance. This intense partnering has made
Coca-Cola the runaway leader in the fountain-soft-drink market.
4. Competitors
The marketing concept states that, to be successful, a company must provide greater customer
value and satisfaction than its competitors do. Marketers must do more than simply adapt to the
needs of target consumers — they must also gain strategic advantage by positioning their
offerings strongly against competitors' offerings in the minds of consumers.
No single competitive marketing strategy is best for all companies. Each firm should consider its
own size and industry position compared with those of its competitors. Large firms with
dominant positions can use certain strategies smaller firms cannot afford. But being large is not
enough — there are winning and losing strategies for firms of all sizes.
5. Publics
A public is any group that has an actual or potential interest in or impact on an organization's
ability to achieve its objectives. There are seven types of publics:
Type of Public Description
Financial Publics Influences the company's ability to obtain funds. Includes banks,
investment analysts, and stockholders.
Media Publics Carries news, features, editorial opinions, and other content.
Includes television stations, newspapers, magazines, blogs, and
social media.
Government Publics Management must take government developments into account.
Marketers must often consult lawyers on issues of product safety,
truth in advertising, and other matters.
Citizen-Action Consumer organizations, environmental groups, minority groups,
Publics and others who may question a company's marketing decisions. The
public relations department helps the company stay in touch with
these groups.
Chapter 3: Analyzing the Marketing Environment
Based on: Armstrong, Kotler et al., Marketing: An Introduction, 7th Canadian Edition
Chapter Overview: This chapter examines the marketing environment — the actors and
forces outside marketing that affect a company's ability to build and maintain successful
relationships with target customers. It begins by distinguishing the microenvironment (close
actors) from the macroenvironment (larger societal forces). It then covers the six forces of
the macroenvironment in depth: demographic, economic, natural, technological,
political/social, and cultural. The chapter closes with a critical question: should companies
react passively to their environment or take a proactive stance to shape it? The central
message is that marketers must be environmental trend-trackers and opportunity-seekers,
constantly adapting — or leading — the changes around them.
1. The Microenvironment and Macroenvironment
A company's marketing environment consists of the actors and forces outside marketing that
affect marketing management's ability to build and maintain successful relationships with target
customers. Companies must constantly watch and adapt to the changing environment — or, in
many cases, lead those changes.
More than any other group in the company, marketers must be environmental trend trackers
and opportunity seekers. They have disciplined methods — marketing research, marketing
intelligence, and marketing analytics — for collecting information and developing insights. They
also spend more time in customer and competitor environments. By carefully studying the
environment, marketers can adapt their strategies to meet new marketplace challenges and
opportunities.
Environment Definition
Microenvironment The actors close to the company that affect its ability to engage and
serve its customers. Includes: the company itself, suppliers, marketing
intermediaries, customer markets, competitors, and publics.
Macroenvironmen The larger societal forces that affect the microenvironment. Includes
t six forces: demographic, economic, natural, technological, political,
and cultural. These forces shape opportunities and pose threats.
The Microenvironment
Marketing management's job is to build relationships with customers by creating customer value
and satisfaction. Marketing managers cannot do this alone — marketing success requires
building relationships with other company departments, suppliers, marketing intermediaries,
competitors, various publics, and customers. Together, these actors combine to make up the
company's value delivery network.
1. The Company
,In designing marketing plans, marketing management takes other company groups into account
— top management, finance, R&D, purchasing, operations, human resources, and accounting.
All of these interrelated groups form the internal environment. Top management sets the
company's mission, objectives, broad strategies, and policies. Marketing managers make
decisions within these broader strategies and plans. With marketing taking the lead, all
departments — from manufacturing and finance to legal and human resources — share the
responsibility for understanding customer needs and creating customer value.
2. Suppliers
Suppliers form an important link in the company's overall customer value delivery network. They
provide the resources needed by the company to produce its goods and services. Supplier
problems can seriously affect marketing:
• Supply shortages or delays, natural disasters, and other events can cost sales in the
short run and damage customer satisfaction in the long run.
• Rising supply costs may force price increases that can harm the company's sales
volume.
Most marketers today treat their suppliers as partners in creating and delivering customer value
— not just as vendors.
Real-World Example — IKEA: IKEA, the world's largest furniture retailer, attracted over
936 million store visits and 2.3 billion website visits in one year, generating more than
US$47 billion in sales. IKEA currently relies on about 1,000 suppliers in 51 countries. Its
design process for a new product can take up to three years. IKEA's designers start with a
basic customer value proposition and then work closely with key suppliers throughout —
refining the design, improving function, and reducing costs. IKEA describes the relationship
as 'growing together as partners with passion for creating a better life at home.' Suppliers
are not passive vendors — they are integral to the entire value delivery system.
3. Marketing Intermediaries
Marketing intermediaries help the company promote, sell, and distribute its products to final
buyers. They form an important component of the company's overall value delivery network.
Today's marketers recognize the importance of working with intermediaries as partners rather
than simply as channels through which they sell their products. There are four types:
Type of Role & Description
Intermediary
Resellers Distribution channel firms that help the company find customers or
make sales to them. Includes wholesalers and retailers that buy and
resell merchandise.
Physical Help the company stock and move goods from their points of origin
Distribution Firms to their destinations. Examples: shipping companies, warehousing
firms, logistics providers.
Marketing Services Marketing research firms, advertising agencies, media firms, and
Agencies marketing consulting firms that help the company target and promote
its products to the right markets.
, Financial Banks, credit companies, insurance companies, and other
Intermediaries businesses that help finance transactions or insure against the risks
associated with the buying and selling of goods.
Real-World Example — Coca-Cola and Retail Partners: When Coca-Cola signs on as the
exclusive beverage provider for a fast-food chain (McDonald's, Wendy's, Subway), it
provides much more than just soft drinks. Coca-Cola assigns cross-functional teams
dedicated to understanding the finer points of each retail partner's business. It conducts
extensive research on beverage consumers and shares insights with its partners. It
analyzes demographics and helps partners determine which Coke brands are preferred in
their areas. It has even studied drive-through menu board design — layouts, fonts, letter
sizes, colours — to understand what induces consumers to order more. Its website
CokeSolutions.com provides retailers with business solutions, merchandising tips, social
media marketing advice, and sustainability guidance. This intense partnering has made
Coca-Cola the runaway leader in the fountain-soft-drink market.
4. Competitors
The marketing concept states that, to be successful, a company must provide greater customer
value and satisfaction than its competitors do. Marketers must do more than simply adapt to the
needs of target consumers — they must also gain strategic advantage by positioning their
offerings strongly against competitors' offerings in the minds of consumers.
No single competitive marketing strategy is best for all companies. Each firm should consider its
own size and industry position compared with those of its competitors. Large firms with
dominant positions can use certain strategies smaller firms cannot afford. But being large is not
enough — there are winning and losing strategies for firms of all sizes.
5. Publics
A public is any group that has an actual or potential interest in or impact on an organization's
ability to achieve its objectives. There are seven types of publics:
Type of Public Description
Financial Publics Influences the company's ability to obtain funds. Includes banks,
investment analysts, and stockholders.
Media Publics Carries news, features, editorial opinions, and other content.
Includes television stations, newspapers, magazines, blogs, and
social media.
Government Publics Management must take government developments into account.
Marketers must often consult lawyers on issues of product safety,
truth in advertising, and other matters.
Citizen-Action Consumer organizations, environmental groups, minority groups,
Publics and others who may question a company's marketing decisions. The
public relations department helps the company stay in touch with
these groups.
