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The Structure of the Marketing Environment The consumer occupies the core/central position of all business activities and hence occupies the Centre of the marketing environment. The organization with its resources and having a policy and structure surrounds the consumer with its particular market offering as do its competitors, suppliers and other intermediaries. This micromanagement of marketing is again affected by the macro environment, which consists of the government, technical, political, social, economic factors. This is graphically represented by below 1 .
The major external and uncontrollable factors that influence an organization’s decision making, and affect its performance and strategies. These factors include the economic factors; demographics; legal, political, and social conditions; technological changes; and natural forces. 2. Specific examples of macro environment influences include competitors, changes in interest rates, changes in cultural tastes, disastrous weather, or government regulations. PESTLE – Macro Environmental Analysis PESTLE The PESTLE Analysis is a framework used to scan the organization’s external macro environment.
The letters stand for Political, Economic Socio-cultural, Technological, Legal and Environmental. Some approaches will add in extra factors, such as International, or remove some to reduce it to PEST. However, these are all merely variations on a theme. The important principle is identifying the key factors from the wider, uncontrollable external environment that might affect the organization. The PESTLE Factors We start with the Political forces. First of all, political factors refer to the stability of the political environment and the attitudes of political parties or movements.
This may manifest in government influence on tax policies, or government involvement in trading agreements. Political factors are inevitably entwined with Legal factors such as national employment laws, international trade regulations and restrictions, monopolies and mergers’ rules, and consumer protection. The difference between Political and Legal factors is that Political refers to attitudes and approaches, whereas gal factors are those which have become law and regulations.
Legal needs to be complied with whereas Political may represent influences, restrictions or opportunities, but they are not mandatory. Economic factors represent the wider economy so may include economic growth rates, levels of employment ND unemployment, costs of raw materials such as energy, petrol and steel, interest rates and monetary policies, exchange rates and inflation rates. These may also vary from one country to another. Socio-cultural factors represent the culture of the society that an organization operates within.
They may include demographics, age distribution, population growth rates, level of education, distribution of wealth and social classes, living conditions and lifestyle. Technological factors refer to the rate of new inventions and development, changes in information and mobile technology, changes in internet and e-commerce or even mobile commerce, and government spending on research. There is often a tendency to focus Technological developments on digital and internet-related areas, but it should also include materials development and new methods Of manufacture, distribution and logistics.
Environmental impacts can include issues such as limited natural resources, waste disposal and recycling procedures. Additional Considerations A newer force which is gaining in importance is ethics. These can be defined by the set of moral principles and values that govern the actions and decisions of an individual or group. Ethics and morals serve as guidelines on how to act rightly and justly when individuals are faced with moral dilemmas. This force could include corporate social responsibility, fair trade, affiliation between corporations and charities.
A particular problem may exist with how ethical factors relates to legal forces as they may be at different stages in development. Something may be ethical but not protected by law, whereas other activities may not be ethical, but are legal. A PESTLE analysis should feed into a SOOT analysis as it helps to determine the threats and opportunities represented by macro-environment forces that he organization usually cannot control. On an international basis, it is best to perform the analysis on a country-by-country basis because factors can differ greatly between countries (or even regions).
Marketing Environment – Micro The micro marketing environment consists of certain forces that are part of an organizations marketing process, but remain external to the organization. This micro marketing environment that surrounds organizations can be complex by nature; however the company has an element of control over how it operates within this environment. Marketing helps you to manage and aka sense of this complexity. The illustration above summarizes the order of the immediate external marketing environment that businesses operate in.
Current and Potential Customers Your customers are vital to the growth and sustainability of your company. In order to grow you must locate customers, understand their needs and then satisfy those needs both efficiently and profitably. Competitors Your competitors however have the same remit as you when it comes to sourcing and satisfying the needs of the customer. They will make it difficult to liaise with customer groups, as by definition they are largely pursuing the name sets of customers as you.
As a marketer, you must therefore not only monitor what competitors are doing in the external marketing environment today, but to also anticipate their likely response to your campaigns and to predict what they will do tomorrow. Intermediaries (Distributors/Wholesalers/ Retailers) Your business may require a network of wholesalers, distributors and/or retailer. These ‘intermediaries’ provide an invaluable service in getting your products to the customer. You must therefore think carefully about how best to distribute your goods and build relationships.
This area can be fierce in intention as not everyone can get access to the channels of distribution that they want. Suppliers One other important area to consider in the external marketing environment is your suppliers. A key supplier can be an important part of your business and may even attribute to your competitive advantage. Losing important suppliers can interrupt production flow or your competitive edge and prevent you from getting your product to your customers. Choice of suppliers, negotiation of terms and relationship building all become important tasks of the marketer.
The wider marketing environment, discussed in a separate knowledge sheet, covers all other influences that might provide opportunities or threats to the organization. These include technological development, legal constraints, the economic environment and coloratura changes. This brief overview of the world in which companies operate in demonstrates that there are many relationships that matter. These need to be managed if the company is to conduct its business successfully. The main responsibility for managing these relationships lies within the marketing department.
Using a SOOT SOOT is an important tool in auditing the external and internal environment f the organization. A SOOT Analysis should be more than a basic listing of strengths, weaknesses, opportunities and threats. Most organizations have the same, common-sense type of threats, such as competitors, technological changes, regulation and deregulation, or weaknesses such as high price, but these are all very general, hard to control elements meaning the utility can be quite limited. As Cornfield’s Professor Malcolm McDonald puts it, real SHOTS should be more concise and specific.