The Marketing Environment
The marketing environment surrounds and impacts upon the organization. There are three key elements to the marketing environment which are the internal environment, the microenvironment and the macroenvironment. Why are they important? Well marketers build both internal and external relationships. Marketers aim to deliver value to satisfied customers, so we need to assess and evaluate our internal business/corporate environment and our external environment which is subdivided into micro and macro.
The macroenvironment is less controllable. The macro environment consists of much larger all-encompassing influences (which impact the microenvironment) from the broader global society. Here we would consider culture, political issues, technology, the natural environment, economic issues and demographic factors amongst others.
Again for Walmart the wider global macro environment will certainly impact its business, and many of these factors are pretty much uncontrollable. Walmart trades mainly in the United States but also in international markets. For example in the United Kingdom Walmart trades as Asda. Walmart would need to take into account local customs and practices in the United Kingdom such as bank holidays and other local festivals. In the United Kingdom 2012 saw the 60th anniversary of Queen Elizabeth II’s reign which was a national celebration.
The United States and Europe experience different economic cycles, so trading in terms of interest rates needs to be considered. Also remember that Walmart can sell firearms in the United States which are illegal under local English law. There are many other macroeconomic influences such as governments and other publics, economic indicators such as inflation and exchange rates, and the level nature of the local technology in different countries. There are powerful influencers such as war (in Afghanistan for example) and natural disasters (such as the Japanese Fukushima Daiichi nuclear disaster) which inevitably would influence the business and would be out of its control.
To summarise, controllable factors tend to be included in your internal environment and your microenvironment. On the other hand less controllable factors tend to be in relation to your macro environment. Why not list your own controllable versus uncontrollable factors for a business of your choice?
The internal environment has already been touched upon by other lessons on marketing teacher. For example, the lessons on internal marketing and also on the functions within an organization give a good starting point to look at our internal environment. A useful tool for quickly auditing your internal environment is known as the Five Ms which are Men, Money, Machinery, Materials and Markets. Here is a really quick example using British Airways. Looking internally at men, British Airways employees pilots, engineers, cabin crew, marketing managers, etc. Money is invested in the business by shareholders and banks for example. Machinery would include its aircraft but also access to air bridges and buses to ferry passengers from the terminal to the aircraft. Materials for a service business like British Airways would be aircraft fuel called kerosene (although if we were making aircraft materials would include aluminium, wiring, glass, fabric, and so on). Finally markets which we know can be both internal and external. Some might include a sixth M, which is minutes, since time is a valuable internal resource.
Let’s look at an example of how the internal environment would impact a company such as Walmart. We are looking at the immediate local influences which might include its marketing plans, how it implements customer relationship management, the influence of other functions such as strategy from its top management, research and development into new logistics solutions, how it makes sure that it purchases high-quality product at the lowest possible price, that accounting is undertaken efficiently and effectively, and of course its local supply chain management and logistics for which Walmart is famous.
The microenvironment is made from individuals and organizations that are close to the company and directly impact the customer experience. Examples would include the company itself, its suppliers, other marketing input from agencies, the markets and segments in which your business trades, your competition and also those around you (which public relations would call publics) who are not paying customers but still have an interest in your business. The Micro environment is relatively controllable since the actions of the business may influence such stakeholders.
Walmart’s Micro environment would be very much focused on immediate local issues. It would consider how to recruit, retain and extend products and services to customers. It would pay close attention to the actions and reactions of direct competitors. Walmart would build and nurture close relationships with key suppliers. The business would need to communicate and liaise with its publics such as neighbours which are close to its stores, or other road users. There will be other intermediaries as well including advertising agencies and trade unions amongst others.
Marketing Teacher designs and delivers online marketing courses, training and resources for marketing learners, teachers and professionals. View all posts by Tim Friesner
Environmental analysis is a strategic tool. It is a process to identify all the external and internal elements, which can affect the organization’s performance. The analysis entails assessing the level of threat or opportunity the factors might present. These evaluations are later translated into the decision-making process. The analysis helps align strategies with the firm’s environment.
Our market is facing changes every day. Many new things develop over time and the whole scenario can alter in only a few seconds. There are some factors that are beyond your control. But, you can control a lot of these things.
Businesses are greatly influenced by their environment. All the situational factors which determine day to day circumstances impact firms. So, businesses must constantly analyze the trade environment and the market.
There are many strategic analysis tools that a firm can use, but some are more common. The most used detailed analysis of the environment is the PESTLE analysis. This is a bird’s eye view of the business conduct. Managers and strategy builders use this analysis to find where their market currently. It also helps foresee where the organization will be in the future.
PESTLE analysis consists of various factors that affect the business environment. Each letter in the acronym signifies a set of factors. These factors can affect every industry directly or indirectly.
The letters in PESTLE, also called PESTEL, denote the following things:
- Political factors
- Economic factors
- Social factors
- Technological factors
- Legal factors
- Environmental factor
Often, managers choose to learn about political, economic, social and technological factors only. In that case, they conduct the PEST analysis. PEST is also an environmental analysis. It is a shorter version of PESTLE analysis. STEP, STEEP, STEEPLE, STEEPLED, STEPJE and LEPEST: All of these are acronyms for the same set of factors. Some of them gauge additional factors like ethical and demographical factors.
I will discuss the 6 most commonly assessed factors in environmental analysis.
P for Political factors
The political factors take the country’s current political situation. It also reads the global political condition’s effect on the country and business. When conducting this step, ask questions like “What kind of government leadership is impacting decisions of the firm?”
Some political factors that you can study are:
- Government policies
- Taxes laws and tariff
- Stability of government
- Entry mode regulations
E for Economic factors
Economic factors involve all the determinants of the economy and its state. These are factors that can conclude the direction in which the economy might move. So, businesses analyze this factor based on the environment. It helps to set up strategies in line with changes.
I have listed some determinants you can assess to know how economic factors are affecting your business below:
- The inflation rate
- The interest rate
- Disposable income of buyers
- Credit accessibility
- Unemployment rates
- The monetary or fiscal policies
- The foreign exchange rate
S for Social factors
Countries vary from each other. Every country has a distinctive mindset. These attitudes have an impact on the businesses. The social factors might ultimately affect the sales of products and services.
Some of the social factors you should study are:
- The cultural implications
- The gender and connected demographics
- The social lifestyles
- The domestic structures
- Educational levels
- Distribution of Wealth
T for Technological factors
Technology is advancing continuously. The advancement is greatly influencing businesses. Performing environmental analysis on these factors will help you stay up to date with the changes. Technology alters every minute. This is why companies must stay connected all the time. Firms should integrate when needed. Technological factors will help you know how the consumers react to various trends.
Firms can use these factors for their benefit:
- New discoveries
- Rate of technological obsolescence
- Rate of technological advances
- Innovative technological platforms
L for Legal factors
Legislative changes take place from time to time. Many of these changes affect the business environment. If a regulatory body sets up a regulation for industries, for example, that law would impact industries and business in that economy. So, businesses should also analyze the legal developments in respective environments.
I have mentioned some legal factors you need to be aware of:
- Product regulations
- Employment regulations
- Competitive regulations
- Patent infringements
- Health and safety regulations
E for Environmental factors
The location influences business trades. Changes in climatic changes can affect the trade. The consumer reactions to particular offering can also be an issue. This most often affects agri-businesses.
Some environmental factors you can study are:
- Geographical location
- The climate and weather
- Waste disposal laws
- Energy consumption regulation
- People’s attitude towards the environment
There are many external factors other than the ones mentioned above. None of these factors are independent. They rely on each other.
If you are wondering how you can conduct environmental analysis, here are 5 simple steps you could follow:
- Understand all the environmental factors before moving to the next step.
- Collect all the relevant information.
- Identify the opportunities for your organization.
- Recognize the threats your company faces.
- The final step is to take action.
It is true that industry factors have an impact on the company performance. Environmental analysis is essential to determine what role certain factors play in your business. PEST or PESTLE analysis allows businesses to take a look at the external factors. Many organizations use these tools to project the growth of their company effectively.
The analyses provide a good look at factors like revenue, profitability, and corporate success. If you want to take the right decisions for your firm, employ environmental analysis. The analysis you should conduct depends on the nature of your company.