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1 The micro-environment
The term micro-environment denotes those elements over which the marketing firm has control or which it can
use in order to gain information that will better help it in its marketing operations. In other words, these are
elements that can be manipulated, or used to glean information, in order to provide fuller satisfaction to the
company’s customers. The objective of marketing philosophy is to make profits through satisfying customers.
This is accomplished through the manipulation of the variables over which a company has control in such a
way as to optimise this objective. The variables are what Neil Borden has termed ‘the marketing mix’ which
is a combination of all the ‘ingredients’ in a ‘recipe’ that is designed to prove most attractive to customers. In
this case the ingredients are individual elements that marketing can manipulate into the most appropriate mix.
E Jerome McCarthy further dubbed the variables that the company can control in order to reach its target
market the ‘four Ps’. Each of these is discussed in detail in later chapters, but a brief discussion now follows
upon each of these elements of the marketing mix together with an explanation of how they fit into the overall
notion of marketing.
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1.2 Models of marketing
Figure 1 attempts to sum up what is meant by marketing at a very simple level. In fact it is one of the earliest
models ever attempted to explain the meaning of marketing.
Information
Firm Customer
Operation
Figure 1 Simple diagrammatic representation of marketing
In Figure 1 we see information coming from customers to the supplying company. This information is noted
and goods or services are supplied to customers in line with customer needs. The information flow represents
an exchange of ideas whilst the operation flow represents an exchange of meanings.
Figure 2 is perhaps a more precise diagram of what is meant by marketing and one which we can begin to
understand from what has already been said.
Marketing Sales
Research Forecasting Buyer
Behaviour
Supplier Customer
Channels Logistics
Advertising Sales promotion
Figure 2 Model of the process of marketing
This more complex model better explains what we are now beginning to understand about marketing. The
bottom line represents the elements of the marketing mix over which a company has control. These elements
are manipulated in such a way as to best suit customers’ needs and tastes and this represents an operational
flow where things have to be done in order to arrive at the optimum marketing mix. Remember that there are
sub-mixes within the individual elements of the marketing mix. This bottom line also equates to the earlier
notion of the four Ps, or rather the five Ps, as personal selling has been separated from promotion and becomes
‘people’.
The top line represents an information flow from the market to the firm. Data is collected through discussions
and interviews with customers on and informal and formal basis. A whole range of techniques is available for
this process and this is collectively termed marketing research. A more advanced strategic model that
incorporates marketing research is embodied in a marketing information system (MkIS) and this is dealt with
in a later lecture. In addition, data is collected from customers in relation to their likely future purchases and
this is known as sales forecasting. Another raft of techniques is available for the subject of sales forecasting
which lies at the very heart of marketing and business planning.
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Thus we begin to see how marketing orientation works. Customers are the starting point and sales forecasting
and marketing research determine their likely requirements and tastes. This information is processed
internally within the organisation and products and promotional messages are devised to suit customers’ needs,
to allay their purchasing fears and to reinforce their expectations. Goods and services are supplied as and
when required in the quantities needed and when they are requested - not later and not earlier. This latter
point is reinforced, because modern marketing dictates that customers demand their goods as needed and this
lies at the base of the latest notion of ‘just-in-time’ manufacturing which relates to raw materials and
components. This is covered later in the text and it has tremendous implications for modern marketing.
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Board of directors
(responsible for policy making)
Company Secretary
General Manager
Corporate Strategy
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2 The proximate macro-environment
The term macro-environment denotes all forces and agencies external to the marketing firm itself. Some of
these forces and agencies will be closer to the operation of the firm than others, e.g. a firm’s suppliers, agents,
distributors and other distributive intermediaries and competing firms. These ‘closer’ external constituents are
often collectively referred to as the firm’s proximate macro-environment to distinguish them from the wider
external forces found, for example, in the legal, cultural, economic and technological sub-environments.
This consists of people, organizations and forces within the firm’s immediate external environment. Of
particular importance to marketing firms are the sub-environments of suppliers, competitors and distributors
(intermediaries). These sub-environments can each have a significant effect upon the marketing firm.
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3 The wider macro-environment
Changes in the wider macro-environment may not be as close to the marketing firm’s day-to-day operations,
but they are just as important. The main factors making up these wider macro-environmental forces fall into
four groups.
2. Economic factors
4. Technological factors
(Often referred to as the ‘PEST’ factors in the marketing analytical context, a useful aide-memoire, although in
some texts it is sometimes referred to as ‘STEP’). To this is sometimes added ‘Competitive factors’ and
although ‘PEST’ analysis relates to a specific organisation ‘Competitive factors’ tend to be subsumed under
‘Economic factors’. Such a PEST analysis means listing all possible points that may affect the organisation
under review under each of the P.E.S.T. headings. Recently, some texts have added ‘L’ (standing for legal)
and ‘E’ (standing for environmental) to this classification, making the acronym ‘PESTLE’. Even more
recently, some writers have incorporated yet another ‘E’ (standing for ecological) with the new acronym
‘STEEPLE’.
Many of the legal, economic and social developments, in our own society and in others, are the direct result of
political decisions put into practice, for example the privatization of state industries or the control of inflation.
In summary, whatever industry the marketing firm is involved in, changes in the political and legal
environments at both the domestic and international levels can affect the company and therefore needs to be
fully understood.
As can be seen, changes in world economic forces are potentially highly significant to marketing firms,
particularly those engaged in international marketing. However, an understanding of economic changes and
forces in the domestic economy is also of vital importance as such forces have the most immediate impact.
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One such factor is a high level of unemployment, which decreases the effective demand for many luxury
consumer goods, adversely affecting the demand for the industrial machinery required to produce such goods.
Other domestic economic variables are the rate of inflation and the level of domestic interest rates, which
affect the potential return from new investments and can inhibit the adoption and diffusion of new
technologies. In addition to these more indirect factors, competitive firms can also pose a threat to the
marketing company so their activities should be closely monitored.
It is therefore vital that marketing firms continually monitor the economic environment at both domestic and
world levels. Economic changes pose a set of opportunities and threats, and by understanding and carefully
monitoring the economic environment, firms should be in a position to guard against potential threats and to
capitalize on opportunities.
Core cultural values are those firmly established within a society and are therefore difficult to change. They
are perpetuated through family, the church, education and the institutions of society and act as relatively fixed
parameters within which marketing firms are forced to operate. Secondary cultural values, however, tend to
be less strong and therefore more likely to undergo change. Generally, social change is preceded by changes
over time in a society’s secondary cultural values, for example the change in social attitude towards credit. As
recently as the 1960s, personal credit, or hire purchase as is sometimes known, was generally frowned upon
and people having such arrangements tended not to discuss it in public. Today, offering instant credit has
become an integral part of marketing, with many of us regularly using credit cards and store accounts. Indeed,
for many people it is often the availability and terms of credit offered that are major factors in deciding to
purchase a particular product.
Marketing firms have also had to respond to changes in attitude towards health, for example, in the food
industry people are now questioning the desirability of including artificial preservatives, colourings and other
chemicals in the food they eat. The decline in the popularity of smoking is a classic example of how changes
in social attitudes have posed a significant threat to an industry, forcing tobacco manufacturers to diversify out
of tobacco products and into new areas of growth.
Changes in attitudes towards working women have led to an increase in demand for convenience foods, ‘one-
stop’ shopping and the widespread adoption of such time-saving devices as microwave cookers. Marketing
firms have had to react to these changes. In addition, changes in moral attitudes from the individualism of the
‘permissive society’ of the 1960s and early 1970s to the present emphasis on health, economic security and
more stable relationships, are all contributory factors to a dynamically changing socio-cultural environment
that must be considered by companies when planning for the future.
One example of how technological change has affected marketing activities is in the development of electronic
point of sale (EPOS) data capture at the retail level. The ‘laser checkout’ reads a bar code on the product
being purchased and stores information that is used to analyse sales and re-order stock, as well as giving
customers a printed readout of what they have purchased and the price charged. Manufacturers of fast-moving
consumer goods, particularly packaged grocery products, have been forced to respond to these technological
innovations by incorporating bar codes on their product labels or packaging. In this way, a change in the
technological environment has affected the products and services that firms produce and the way in which
firms carry out their business operations.
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4 Other macro-environmental factors
The macro-environmental factors discussed are not intended to be an exhaustive list, but merely to
demonstrate the main areas of environmental change. Other sub-environments may be important to marketing
management, for example, in some countries the religious environment may pose an important source of
opportunities and threats for firms. In the UK, demographic changes are considered important by a number of
firms.
In general, the UK population has been stable at approximately 56 million for a number of years, but the birth
rate is falling, while people are living longer. Firms that produce goods and services suitable for babies and
small children (e.g. Mothercare) have seen their traditional markets remain static or decline slightly. Such
companies have tended to diversify, offering products targeted at older age groups. A larger older sector of the
population offers opportunities for firms to produce goods and services to satisfy their particular needs. The
over-55 age group is the modern marketer’s current major opportunity. In all advanced economies such as the
Australia, UK and USA it is this age group that has the largest disposable income, and special products and
services such as holidays and pension-related financial services are being marketed to this sector.
5 Summary
The company’s micro-environment has been discussed in terms of variables over which it has control relevant
to the marketing mix. This led to a description of marketing and its various sub-divisions including
information from the market-place in terms of forecasting and marketing research. Marketing was then looked
at alongside other business functions and its place in line management was noted. The company’s proximate
macro-environment was then examined under supplier, distributive and competitive environment environments
and finally the wider macro-environment was examined under the headings: political and legal, economic,
socio-cultural and technological environments. This can best be summed up by looking what has been
covered in terms of a number of layers in the environment from customers, to marketing and resources of the
company, to the organisation’s proximate macro-environment and finally to its wider macro-environment.
This is illustrated in Figure 5.
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.
POLITICAL
Place Promotion
Marketing Organisation
Competitors Intermediaries
TECHNOLOGICAL
The next layer concerns the proximate macro-environment factors cited under section 2. This also includes the
organisation’s ‘publics’ that is a public relations term dealt with later, but which essentially means any group
of individuals who are affected by or are in touch with the company in any context (e.g. those who supply
finance or those who live near the company’s manufacturing plant).
The next layer is the organisation’s strategic marketing planning and control system.
The tactics that deliver the strategy are the four Ps and these are in the next layer.
The final inner circle is the most important and it is customers from which all planning must start. The phrase
of being a ‘customer led’ organisation is at the very heart of marketing orientation and indeed tactics of
customer care help to cement long term customer relationships.