Marketing Environment

Last reviewed: February 2017

Abstract

A marketing environment is divided into micro environment, macro environment and meso or intermediate environment, which are affected by internal and external factors. An organization must be able to understand and assess their marketing environment. Since the last decade of the twentieth century, marketing environments have been greatly affected by a boom in information technologies and internationalization, as customers worldwide rely increasingly on the Internet for information and their consuming behavior. This has brought to the fore opportunities and complications, such as growing concerns about personal privacy online and Internet theft.

Overview

The term “marketing environment” refers to one of the factors of the marketing strategy devised by an organization. A marketing environment is formed by many different factors with characteristics such as national policies, demographics, and consumer behavior. These also include subsets like income, expenses, and resources that directly and indirectly affect the firm, the market, and consumers. Given the changes brought by the digital revolution to social, economic, technological, and market practices, the field of marketing environment has gained greater importance for firms because it helps assess future trends. In other words, marketing environment encompasses all the internal and external factors that constitute the environment in which marketing activities occur, and which determine actions such as marketing strategies and marketing mix.

“Marketing mix” is a term coined by Neil Borden in 1950. It refers to a strategic analysis of internal factors, in which firms use a series of tools to analyze the four basic variables of their marketing activities: product, price, place or distribution, and promotion. These variables are also commonly known as “the four Ps.” Product is the good or service—tangible or intangible—marketed to consumers. Price is the amount of money stipulated for the market exchange of the product. Place is where the product or service will be commercialized and distributed, and promotion includes all the communication activities involved in persuading consumers to purchase the product—and, ideally, keep returning for more.

It is important to bear in mind that many of the factors that influence the marketing environment are out of an organization’s control. A firm, then, must assess how easy or difficult it is to penetrate a market, and look at competition, regulations, and other factors it cannot control. Managers must remain vigilant, in order to identify market fluctuations that may bring both opportunities and threats, external and internal. While a firm may not be able to control these factors, they can plan and execute strategies to deal with them. Such strategies might include pricing strategies, location strategies, distribution channel selection, marketing plans, point of sale, outreach, and many others. In addition, a marketing manager must ensure that the marketing environment elements are coherent with all other marketing activities.

The technology sector is one of the most important of marketing environments. The rapid innovation or advances in technology can cause profound changes in firms and their production systems. The competitive environment is another important field, since it includes the varied organizations and consumers the market hopes to serve. Marketing environments are limited by various strictures, which include laws and regulations, production and marketing expenses, tariffs, and social, political and economic factors.

Micro, Macro, and Meso Environments. A market environment also focuses on different aspects of sales. There are three distinct levels—broken into subdivisions—which represent the focus of sales for an organization’s marketing mix, depending upon its product and target customer: micro environment, macro environment, and meso environment.

Microenvironments are organizational in reach; that is, they affect solely the organization and may often be influenced or controlled by the firm’s managers. Microenvironments are formed by forces that engage with the organization closely and affect its capacity to satisfy its customers. It includes, for example, a store or retailer, providers or suppliers, consumer markets or clients, market intermediaries or resellers, direct competitors, and the public at large. It also includes the firm’s employees, internal distribution, and technology. Managers may have ways of influencing or managing the dynamics of these elements in ways that do not occur with the macro environment.

Macro environments are contextual, that is, they affect the general context or all related organizations. Usually these changes are global factors, which managers are unable to control, such as demographic, economic, political and cultural changes, technological innovation, new legislation and government policies, market trends, and acts of nature. These present both threats and opportunities for the firm; in fact, something that may appear to be a threat at first glance, may be turned into an opportunity by using the appropriate marketing strategy. Among the most important tools used by organizations to analyze macro marketing environments is the political-economic-social-technological-environmental-legal, or PESTLE, analysis. Marketers, then, use this framework to study and monitor external marketing environments in order to identify weaknesses, threats, and opportunities.

The meso environment refers to an intermediate or transactional middle structure between the micro and the macro environments. It has no fixed set of factors but includes the organization’s culture, policies and procedures, stakeholders and allies, competitors, suppliers, resellers, and customer relations. Some have described it as the interacting factors between the supply and demand infrastructure within the micro and macro systems.

Market Types. Marketing environments are also related to different types of markets that is, who the target market or direct customers are. These customers may be other businesses, government institutions, members of the public, and employees. The types of markets organizations deal with are usually categorized as export markets, business-to-business (B2B), business-to-consumer (B2C), and government-to-consumer (G2C). Some firms sell to one of these markets only and other firms, to several different types of market.

An export market refers to a seller located in one country while its buyers are in a different one. B2B marketing refers to sales between organizations. These are often wholesale operations and subject to different regulations than those pertaining to products marketed to consumers in the general public. A can manufacturing firm that sells cans to soda bottling plants is an example of a business operating in a B2B market.

B2C markets are usually those in which individuals buy goods and services directly from a business for individual consumption. G2C markets are those in which interactions are made between government agencies or institutions and citizens acting as consumers; an example for the latter is the use that individuals make of income tax forms and filing government forms online.

As markets globalize and become more complex, market profiles become increasingly sophisticated, including government-to-government, business-to-employee, consumer-to-consumer, and peer-to-peer. For any of these different types of markets, marketing strategies may vary greatly, responding to specific industrial and/or government standards and regulations, economic factors such as tariffs, exchange rates, and interest rates, demographic factors such as gender, age and nationality, and market and economic trends.

Further Insights

The internal marketing environment consists of all factors that ensure the achievement of organizational goals, and includes all its financial, material, and human resources. An organization’s material resources include its buildings, equipment, and infrastructure. An external environment consists of the micro and macro environments continuously interacting with each other in order to reach its goals. Customers are the most important factor for a marketing environment and the end goal of all its activities (Manea & Cetina, 2014).

Competitors also form an important part of the marketing environment. Its competitors are often visualized as other markets, of which three main basic types exist: monopolistic markets, oligopolistic markets, and perfect competition. In a monopoly or monopolistic market, one sole vendor or producer exists for a specific product. Penetrating a monopoly market is very costly and risky, as it presents many barriers and expenditures in time and resources. In some countries, a monopoly over a particular good—for example, utilities—is held by the government. In an oligarchy or oligopolistic market, an industrial field is dominated by very few firms, which share the available market. These markets are also difficult to penetrate; it some cases firms cooperate among themselves to place obstacles in the way of new competition, or alternatively, the barriers may be placed by governments in the form of very exacting or costly conditions and regulations. Finally, market share may be too small to seem attractive except for a few firms (Manea & Cetina, 2014).

The third market structure is perfect competition. In a market system of perfect competition, there are many producers, sellers and buyers. Obstacles are few or none, and at least in theory, prices are set by market forces of supply and demand. For instance, if a firm sets a higher price for its product, customers have the choice to look for a substitute among the available competition. Most real markets, however, are formed by a combination of different market types and the idea of a perfect free market is more ideal than real. Even in contemporary markets with the least restrictions, the free flow of goods is constrained by many barriers, such as regulations, taxes, tariffs, standards, available technology or raw material, and other legal, social, and political strictures.

Issues

Globalization has affected all marketing environments, directly or indirectly, particularly since the last decades of the twentieth century. These changes include technological advances and political and economic disruptions, which have led to new opportunities and business processes. Changes in technology have also led to a great transformation in the speed of conducting business; for instance, a customer may buy and pay for a product online for a business located in a different country and the purchased product will be shipped from a third country.

The globalization of products and services, then, is reflected in the emergence of new forms of doing business and transnational movement of goods in the international market. Moreover, according to experts, modern international trade allows competitive advantages in terms of different types of resources, such as capital, labor, raw materials, and technology. This allows for lower production and transaction costs and economies of scale. As more goods and services are produced cheaply, more people worldwide have access to a wide array of goods and technology produced inexpensively.

One of the most important marketing environments in the contemporary world relates to information technology. Information technology has changed fundamentally the ways in which industries and countries engage in commercial relationships. Customers have different expectations than in the late twentieth century regarding the availability and delivery of products and the customer service they expect from businesses. The channels through which these operations flow is information, and firms know that they need high quality and speedy channels of information in order to remain competitive and gain an edge in the competitive market.

On the other hand, this has brought to the fore issues of privacy and acceptable consumer trade-offs between individuals’ natural concern about their personal information and their willingness to trade some information in exchange for better access to information about available goods and services. Most concerns revolve around fears of illicit and unwarranted use of their personal information. Moreover, consumers have different privacy thresholds. Their concerns may be increased or minimized depending upon the firm collecting the information and the uses it will be given. It follows, then, that it is very important for firms that they be able to convey a feeling of trust to its customers. Some firms—such as health services, which are bound by privacy laws—will seem more trustworthy to consumers than others. But most firms find they must work harder at it. Finally, the growing efforts at increasing citizen surveillance and the abundant cases of Internet identity and information theft, have raised the levels of concern among many consumers.

Marketing environment research has found that age is also a factor in the privacy threshold levels of customers. Millennials—those who reached adulthood in the early 2000s—are found to be extremely comfortable with technology and constantly use a wide range of functions in electronic devices, such as cell phones, than any previous generation. They are considered, by experts, both information seekers and information creators par excellence (Keith & Simmers, 2013).

It is very difficult for experts to predict future changes in the global landscape of globalized digital marketing environments. The growing connectedness and the speed of local/global interactions, keeps information managers on the lookout for key trends. These advances have made the use of multiple devices commonplace and communication between businesses and customers, and businesses and suppliers, easier and faster. It makes problem solving easier and the movement of large caches of information efficient and fast. Moreover, current technology allows managers to overview transactional information, such as local and worldwide sales, in real time. Marketing managers, then, understand that technology plays a crucial role in the current and future developments of marketing environments. Technology is considered one of the most important elements in future marketing trends (Danciu, 2013).

Finally, international marketing experts highlight the growing importance of emergent economies in Africa, Asia, Latin America, the Middle East, and some European nations. These countries have been producing a growing number of companies increasingly aggressive in penetrating international markets. They present growing competition to established brands in developed nations, with better offerings in quality and price, lower margins and greater speed. Many experts also expect that by the mid-twenty-first century most of the middle classes, today located in developed nations, will reside in China and India. It has become extremely important, then, that managers be well-versed in global processes, virtual marketing environments, and, it follows, the wide diversity of cultures that compose the future market worldwide (Danciu, 2013).

Terms & Concepts

Citizen: Individuals considered as active members of a state or nation.

Consumer: In the field of marketing and business, individuals who purchase and enjoy the benefits of goods and services provided by firms or organizations.

Environment: System formed by interrelated natural and artificial elements, including the natural and social worlds.

Globalization: The increasing integration of national economies and societies worldwide, driven by technological advances and commercialization.

Macro: From the Greek term for “large.” Related to large-scale natural, social, or scientific phenomena.

Marketing: All actions related to the selling and promotion of goods and services.

Meso: From the Greek term for “middle.” Applied to intermediate periods, structures, or systems.

Micro: From the Greek term for “small.” A prefix that relates to a small unit or a small part of something larger.

Millennials: People born between 1981 and 1995, or alternatively, those who became adults around the turn of the century.

Strategy: A series of actions created to achieve a goal, including planning, implementing, and assessing all actions related to achieving short-, medium-, and long-term objectives.

Bibliography

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Andreaiana Mihaescu, V. A., Stoica, S., C., & Ivan, T., C. D. (2014). Influence of the marketing environment on the toy market. SEA: Practical Application of Science, 2(1), 48–54.

Ashill, N. J., & Jobber, D. (2014). The effects of the external environment on marketing decision-maker uncertainty. Journal of Marketing Management, 30(3-4), 268–294. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=94773134&site=ehost-live

Danciu, V. (2013). The future of marketing: An appropriate response to the environment changes. Theoretical & Applied Economics, 20(5), 33–52. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=87923952&site=ehost-live

Keith, N. K., & Simmers, C. S. (2013). Adapting the marketing educational environment for multicultural millenials: The Chinese experience. Academy of Educational Leadership Journal, 17(3), 83–92. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=87744079&site=ehost-live

Li, H., & Kannan, P. K. (2014). Attributing conversions in a multichannel online marketing environment: An empirical model and a field experiment. Journal of Marketing Research, 51(1), 40–56. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=95682359&site=ehost-live

Luigi, D., Gheorghe, O., & Mircea, F. (2015). Understanding the online consumer behavior and the usage of the internet as a business environment—A marketing research. Revista Economica, 67(3), 63–79. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=108596084&site=ehost-live

Manea, N. P., & Cetina, I. (2014). The influence of marketing environment on institutions of higher education in Romania. Contemporary Readings in Law & Social Justice, 6(1), 387–392.

Suggested Reading

Asare, A., Chelariu, C., Brashear, T., & Awudu, I. (2015). Part B: B2B and interorganizational issues in marketing: new perspectives on channels of distribution in dynamic markets: Value appropriation in dynamic environments: An analysis of digital marketing channels. AMA Summer Educators’ Conference Proceedings, 26, B-4. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=119938000&site=ehost-live

Burns, A.C., Veeck, A., & Bush. R. E. (2016). Marketing Research, Eighth Edition. New York, NY: Pearson.

Gillespie, K., & Hennessey, H. D. (2015). Global Marketing, Fourth Edition. London, UK: Routledge.

Jackson, R. W., & Wood, C. M. (2013). The marketing environment: A new paradigm. Academy of Marketing Studies Journal, 17(1), 35–50. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=87742556&site=ehost-live

Tantawy, R. Y., & George, B. P. (2016). Cultures within national cultures: international marketing within the domestic marketing environment. Economic Review: Journal of Economics & Business / Ekonomska Revija: Casopis Za Ekonomiju I Biznis, 15(1), 26–34. Retrieved October 23, 2016, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=119368385&site=ehost-live