Learning Outcomes

1 Discuss the external & internal environment

of marketing, and explain how it affects a firm
2
Describe the social factors that affect
marketing
3
Explain the importance to marketing
managers of current demographic trends
4
Explain the importance to marketing
managers of growing ethnic markets
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 Learning Outcomes

5
Identify consumer and marketer reactions
to the state of the economy
6 Identify the impact of technology on a firm
7
Discuss the political and legal
environment of marketing
8
Explain the basis for determining
strengths and weaknesses
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 The External
Marketing Environment

Discuss the external

environment of marketing,
and explain how it affects a
firm

1
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 Target Market

A defined group most likely to buy a product

Changes as consumers age
External elements change consumers
desires

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1
 The External Environment
Unless marketing managers understand the
external environment, the firm cannot
intelligently plan for the future.

Environmental Management is
when a company implements strategies
that attempt to shape the external
environment within which it operates.

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1
 Process of Performing an External Audit
Researcher may be asked to monitor various sources
of information such as key magazines, trade journals,
newspapers and other secondary data such as the
internet.
Researcher may also perform a periodic external
audit (observation)
You may also interview key personnel or people in
positions to solicit more information.
The researcher must gather competitive intelligence
& information about possible changes in their Macro-
environment.

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 Social Factors

Describe the social factors

that affect marketing

2
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 Social Factors

Attitudes

Values

Lifestyle

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2
 American Values
Core American Emerging Trends
Values
Self-Sufficiency Getting off the grid

Upward Mobility Meaningful green

Work Ethic EcoTechMed

Conformity

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2
 The Influence of
Values on Buying Habits
Ranked Characteristics of Product Quality
Reliability

Durability

Easy maintenance

Ease of use

Trusted brand name

Low price

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2
 Role of Families and Working Women

Growth of dual-income families results in

increased purchasing power

Approximately 59 percent of work-age

females are in the workforce

Working wives bring in 45 percent of the

total family earnings.

The phenomenon of working women has

probably had a greater effect on marketing
than any other social change.
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2
 Technology and Time Use
Leisure time accounts for less than 6
hours a day
About 40 percent of American adults
check work email on vacation
Constant digital immersion can
decrease a persons attention span.

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2
 Demographic Factors

Explain the importance

to marketing managers of
current demographic trends

3
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 Demographic Factors
People are the basis for any market
Demographic characteristics relate to buyer
behavior
Demographic cohorts have their own
needs, values, and consumption patterns.

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3
 Tweens
Pre- and early adolescents, age 8 to 12

Population of 20 million

Directly spend about $50 billion annually

Parents spend $150 billion on tweens

annually
View TV ads as just advertising

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3
 Teens
Population of about 25 million

Spend approximately 72 hours per week

tuned in electronically
View shopping as a social sport

50 million teens around the world are on

Facebook

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3
 Generation Y

Born between 1979 and 1994

Surpassed population of baby boomers
Two Stages: 1) Those born in 1994 fit closer
to the Teen cohort. 2) Those born in 1979
have established careers and started
families.
Purchasing power of $200 billion annually

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3
 Generation X
Born between 1965 and 1978

Population of 40 million
Independent, resilient, adaptable,
cautious, and skeptical

71 percent have children under age 18

Home ownership is an important goal
Avid buyers of the latest clothes,
technology, and recreational products
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3
 Baby Boomers
Born between 1946 and 1964

Population of 75 million
Working longer to compensate for
economic downturn, which affected
retirement savings
The market of services directed at seniors
is one of the fastest growing business
markets

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3
 Growing Ethnic Markets

Explain the importance to

marketing managers of
growing ethnic markets

4
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 Economic Factors

Identify consumer and

marketer reactions to the
state of the economy

5
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 Economic Factors
Consumers
Income

Purchasing
Power

Inflation

Recession

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 ESTIMATED MONTHLY INCOME
(Source: PSRC/AGB data)

% Pop HH
Estimated Monthly Total
Income Philippines Metro Manila

Upper A P 100, 000 +

Upper B P 50, 001 - 99, 999 1% 6%

Upper Middle C1 P 30, 001 - 50, 000 7% 14%

Middle C2 P 15, 001 - 30, 000 18% 28%

Lower DE P 15, 000 - Below 74% 52%

 Consumers Incomes
Median U.S. household income
in 2010 was approximately
$50,000.

Incomes have risen at a slow pace

in recent years.

Education is the primary

determinant of earning potential.
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5
 Purchasing Power is

a comparison of income
versus the relative cost of a set
standard of goods and
services in different
geographic areas.

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5
 Inflation is

a measure of the decrease in

the value of money, expressed
as the percentage reduction in
value since the previous year.

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5
 Recession is

a period of economic activity

characterized by negative
growth, which reduces
demand for goods and
services.

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5
 Technological Factors

Identify the impact of

technology on a firm

6
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 Political and Legal Factors

Discuss the political and

legal environment
of marketing

7
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 Political and Legal Factors

Laws and Regulations Protect:

New technology
Society
Businesses
Consumers

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7
 State Laws
Legislation that affects marketing varies
state by state.
California: bans trans fats in restaurants and
bakeries.
Bawal ang Plastic
Higher Vat 12% increase to 14%
SinTax Law

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7
 Regulatory Agencies

Consumer Protects consumer safety in

Product Safety and around their homes
Commission

Federal Trade Prevents unfair methods of

Commission competition in commerce

Food & Drug Enforces safety regulations for

Administration food and drug products

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7
 Ecological Factors
Are those physical and natural
resources being used as inputs in the
production of final product.
Climate
Costs of Electricity

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Nature of an Internal Audit /
Assessment
Basis for Objectives & Strategies

Internal strengths/weaknesses
External opportunities/threats
Clear statement of mission

Copyright 2007 Prentice Hall

Internal Audit / Assessment

Parallels process of external audit

Information from:
Management
Marketing
Finance/accounting
Production/operations
Research & Development
Management Information Systems

Copyright 2007 Prentice Hall

 Process of Performing an Internal Audit
Representative managers and employees from throughout the
firm need to be involved in determining strengths and
weaknesses of the firm.
Internal audit requires gathering and assimilating information
about the firms management, financial condition, processes,
and their different functions.
Substantial basis is necessary to pinpoint the strengths and
weaknesses of the firm.
The researcher may compare these information with industry
norms and as well as with practices of their
major competitors.

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 Management as a whole
Management Owners / Approach /
Function
Employees (Skills)
Structures (Org Chart)
Facilities and Equipment
Product

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Marketing
Marketing Functions

1. Customer analysis
2. Selling products/services
3. Product & service planning
4. Pricing
5. Distribution
6. Marketing research
7. Opportunity analysis

Copyright 2007 Prentice Hall

Finance/Accounting
Finance/Accounting Functions

1. Investment decision (Capital budgeting)

2. Financing decision
3. Dividend decision
4. Financial analysis Key financial ratios

Copyright 2007 Prentice Hall

Production/Operations

Production/Operations Functions

Process
Capacity
Inventory
Workforce
Quality

Copyright 2007 Prentice Hall

Research & Development

Research & Development Functions

Development of new products before

competitors
Improving product quality
Improving manufacturing processes to
reduce costs

Copyright 2007 Prentice Hall

Management Information
Systems

Information Systems
Security
User-friendly
E-commerce

Copyright 2007 Prentice Hall

Processes

Flow of activities
Special Techniques
Systems
Unique Materials / Resources

Copyright 2007 Prentice Hall

Components of a SWOT Analysis
Examining internal strengths and weaknesses.

Focus on organizational resources:

Production costs
Marketing skills
Financial resources
Company or brand image
Employee capabilities
Technology

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5
 Environmental Scanning
Helps identify opportunities and threats.

Designing a marketing strategy is based

on six major environmental forces:
Social
Demographic

AP IMAGES/PRNEWSFOTO/PEPSICO
Economic
Technological
Political/Legal
Competitive
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5
 Exhibit 3.6 Examples of SWOT Factors

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reserved.
 SWOT Matrix

Four Types of Strategies

Strengths-Opportunities (SO)
Weaknesses-Opportunities (WO)
Strengths-Threats (ST)
Weaknesses-Threats (WT)

Ch 6 -47 Copyright 2007 Prentice Hall

 SO Strategies

Strengths
Weaknesses Use a firms
internal strengths
Opportunities
to take advantage
Threats SO of external
Strategies opportunities
SWOT

Ch 6 -48 Copyright 2007 Prentice Hall

 WO Strategies

Strengths
Weaknesses Improving internal
weaknesses by
Opportunities
taking advantage
Threats WO of external
Strategies opportunities
SWOT

Ch 6 -49 Copyright 2007 Prentice Hall

 ST Strategies

Strengths Use a firms

Weaknesses strengths
Opportunities to avoid or
Threats reduce the impact
ST of external
Strategies threats
SWOT

Ch 6 -50 Copyright 2007 Prentice Hall

 WT Strategies

Defensive tactics
Strengths aimed at reducing
Weaknesses internal
Opportunities weaknesses &
Threats avoiding
WT environmental
Strategies threats
SWOT

Ch 6 -51 Copyright 2007 Prentice Hall

 SWOT Matrix

Developing the SWOT

List firms key internal Strengths

List firms key internal Weaknesses
List firms key external Opportunities
List firms key external Threats

Ch 6 -52 Copyright 2007 Prentice Hall

 SWOT Matrix
Strengths S Weaknesses W
Leave Blank
List Strengths List Weaknesses

Opportunities O SO Strategies WO Strategies

Use strengths to take Overcoming weaknesses

List Opportunities advantage of by taking advantage of
opportunities opportunities

Threats T ST Strategies WT Strategies

Use strengths to avoid Minimize weaknesses and

List Threats threats avoid threats

Ch 6 -53 Copyright 2007 Prentice Hall

 STRENGTHS WEAKNESSES

1. Pioneer in Tunasan Area in the field of 1. Limited Area of the shop

Calibration Service
2. No Advertising edge
2. Knowledgeable Proprietor
3. Shortage of Manpower during peak
3. Efficient Diagnostic Tool
season
4. Long Duration of Warranty
4. Lounge Inappropriate for Customers

5. Unorganized Company and Customer

Information
OPPORTUNITIES SO Strategies WO Strategies

1.Growing number of vehicles 1 . Target new market segment (S1, O2)

1. Expansion of the Shop (W1, W4, O1,
O2,)
2.Untapped Market Segment 2 Penetrate neighboring barangays (S1,O1)

3.Advancement of Technology 2. Hiring of Experienced Employees

(W3,O1,O2)
4.Fluctuation of Diesel Price

THREATS ST Strategies WT Strategies

1.Threats of Indirect 1. Referral incentives for existing customers

Competitors 1 . Tie up with auto-repair shops (W2,T2)
(S1,S3,S4, T1)
2.Declining number of 2. Customer Relationship Management (W5,
customers during off peak 2. Conduct Trainings for the employees (S2,T4) T3)
season

3.Unstable Flow of
Customers

1.4.Immense Development of
Vehicles

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