Environmental Scanning & Marketing Planning
The marketing environment (internal, micro and macro), the 5 Ms and McKinsey 7S, suppliers, intermediaries, customer markets, competitor types and publics, the six macro forces (DENTPC), reactive vs proactive responses, and the marketing information system.
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Marketing Environment
Lecture on the marketing environment.
00:03Introduction: the company and its business environment02:06Focusing on target customers04:07Controllable vs uncontrollable factors05:09The internal environment06:10The microenvironment: suppliers, intermediaries, customers07:16Customer markets: consumer, business, reseller…09:17Competitors and publics11:23Can the microenvironment be controlled?12:23The macroenvironment: uncontrollable forces13:25Demographic factors: population, age, education15:29Social and cultural factors (e.g. the caste system)17:30Population change and economic factors19:30Technological factors (Tesla)20:31Political and legal factors: legislation22:33Recap: internal, micro and macro (PESTEL)1Why scan the environment?
- Marketing starts by recognising customer needs and wants, which means analysing the business environment and spotting opportunities. This is environmental scanning.
- Effective marketing planning is only possible after proper environmental scanning.
After the 2019 Easter Sunday attacks in Sri Lanka, many businesses and industries (tourism, hotels, retail) suffered badly. Any factor with a direct or indirect impact shapes a business's future. These forces change unexpectedly, so continuous monitoring and updating is essential.
The marketing environment is the internal and external factors and forces that affect the market for a product.
2The three layers of the environment
| Layer | What it is | Impact on the business |
|---|---|---|
| Internal | Factors inside the company | Controllable |
| Micro (task) environment | Actors close to the company | Direct |
| Macro environment | Larger societal forces | Indirect, but they still affect the market |
3Internal environment — 5 Ms & 7S
The 5 Ms
- Men (people)
- Money
- Machinery
- Material
- Market
McKinsey's 7S model
- Strategy
- Structure
- Systems
- Style
- Staff
- Skills
- Shared values
Functional areas such as top management, manufacturing, finance and accounting are also part of the internal environment. Changes in any of these directly affect product sales.
4Micro environment (task environment)
There are six groups that directly affect the company:
Suppliers
- Provide the resources needed to produce goods and services. They are an important link in the value delivery system.
- They can negotiate prices and bargain over terms.
- The number of suppliers for the same material affects industry attractiveness.
Marketing intermediaries
- Parties that promote, sell and distribute the product: resellers, physical distribution firms, marketing service agencies, financial intermediaries.
- Their own changes and objectives affect you directly.
- Modern marketers treat them as partners, not just channels.
Customers
Switching cost is the cost to the customer of moving to a competitor. High switching costs keep customers with you.
| Customer market | Who buys | Why |
|---|---|---|
| Consumer | Individuals and households | Personal consumption |
| Business | Organisations | Further processing or use in production |
| Reseller | Wholesalers and retailers | Resell at a profit |
| Government | Government agencies | Produce public services or transfer to those who need them |
| International | Buyers in other countries | Any of the above |
Competitors
Firms offering similar products to your target market. The aim is a strategic advantage over them. Strategies depend on size and industry position:
| Type | Meaning |
|---|---|
| Market leader | Largest market share and highest profit |
| Market challenger | Always challenges the leader |
| Market follower | Copies the leader's strategies |
| Market nicher | Serves a focused niche others ignore |
- Leader: Coca-Cola
- Challenger: Pepsi; locally, Elephant House soft drinks
- Followers: smaller local cola brands copying the leader
- Nichers: speciality or health drinks such as king coconut water, craft sodas and energy drinks for a narrow segment
Publics (seven types)
A public is any group with an actual or potential interest in, or impact on, the organisation's ability to achieve its objectives.
| Public | Example |
|---|---|
| Financial | Banks and investors: affect the ability to obtain funds |
| Media | Newspapers, TV, online media: news, features, editorial opinion |
| Government | Regulate public safety, truth in advertising |
| Citizen-action | Consumer organisations, environmental groups, minority groups |
| Local | Neighbourhood residents, community organisations |
| General | The public's attitude towards the company's products and activities |
| Internal | Workers, managers, volunteers, board of directors |
5Macro environment (DENTPC)
The external forces with no direct relationship to the company that still affect the market. There are six of them.
| Force | Meaning | Trends to know |
|---|---|---|
| D – Demographic | People make up markets: age, gender, race, occupation, size, density, location | Changing family structure · geographic shifts · changing age structure · increased education · growing ethnic and cultural diversity |
| E – Economic | Factors affecting purchasing power and spending patterns: GDP, income distribution, interest rates | Inflation and recession · economic development · changing spending patterns · changes in income |
| N – Natural | Natural resources used as inputs or affected by marketing; climate, disasters | Shortages of raw materials · increased pollution · government intervention |
| T – Technological | Knowledge, innovation, research: creates opportunities and threats | Rapid pace of change · unlimited opportunities · increased regulation · practical, affordable products |
| P – Political | Laws, government agencies, pressure groups that influence or limit business. Good legislation encourages competition and fair markets | Increasing legislation to protect groups · changing enforcement · emphasis on ethics and social responsibility |
| C – Cultural | Institutions and forces shaping basic values, perceptions, preferences, behaviours, passed from parents and reinforced by schools, religion, business and government | Values about oneself, others, organisations, society, nature, the universe |
Demographic · Economic · Natural · Technological · Political · Cultural. Compare with PESTEL, which uses similar ideas.
6Responding to the environment
🐢 Reactive approach
Act on an opportunity or threat only after the change occurs. Treat the environment as uncontrollable: watch and adapt.
🚀 Proactive approach
Believe environmental forces can be influenced or controlled in the firm's favour, using political, psychological and public-relations skills:
- hire lobbyists to influence legislation
- stage media events for good press
- file lawsuits and complaints to keep competitors in line
- form contracts to control distribution channels
7Marketing information system (MIS) & planning
The people, equipment and procedures that gather, sort, analyse, evaluate and distribute needed, timely and accurate information to marketing decision makers.
It draws on:
- Internal records: sales, costs, inventory, orders, receivables, customer databases.
- External sources: marketing intelligence (competitors, trends) and marketing research.
Environmental scanning, supported by the MIS, feeds marketing planning: setting objectives, choosing target markets and designing the marketing mix based on the opportunities and threats found.
Expect:
- Define the marketing environment and explain micro vs macro with examples
- The six micro actors (with the 5 customer markets, 4 competitor roles and 7 publics)
- The six macro forces with trends
- Reactive vs proactive responses
- What an MIS is
- "Why is understanding the environment essential?" Use Sri Lankan examples: the Easter attacks, the 2022 economic crisis, fuel shortages, the polythene ban.
8Quiz 03: model answer
From Week 04/Quiz 03.docx in the Marketing folder.
Question: Why do you think understanding the marketing environment is essential to a business?
What the model answer covers:
- Define the marketing environment
- Describe the factors in it: the micro environment and the macro environment (demographic, economic, natural, technological, political and cultural)
- Take each factor and explain why understanding its trends helps a business thrive through the right marketing actions
9Quick revision sheet
| Concept | Remember it as |
|---|---|
| Marketing environment | Internal + external forces affecting the market |
| Internal | 5 Ms (men, money, machinery, material, market) + McKinsey 7S |
| Micro (task) | Company, suppliers, intermediaries, customers, competitors, publics: direct |
| Customer markets | Consumer, business, reseller, government, international |
| Competitor roles | Leader, challenger, follower, nicher |
| Publics (7) | Financial, media, government, citizen-action, local, general, internal |
| Macro | DENTPC: indirect |
| Reactive vs proactive | Adapt after the change vs influence it (lobbying, PR, lawsuits, contracts) |
| MIS | People + equipment + procedures delivering timely, accurate information |
| Planning | Scan first, then plan |
?Self-check quiz
10 questions on this week. Answer them all, then press Check my answers. Your best and latest scores are saved and shown on the subject page.