MASTERS OF BUSINESS ADMINISTRATION

DMBA119 : Marketing Management

SEMESTER 1

DMBA119
MARKETING MANAGEMENT
Unit: 3 - Marketing Environment 1
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Unit – 3
Marketing Environment

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TABLE OF CONTENTS

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity

1 Introduction - -
4
1.1 Objectives - -

2 Environmental Scanning - 1 5

3 Assessing The Micro Environment - -

3.1 The company - -

3.2 Intermediaries - -

3.3 Public - - 6-8

3.4 Competitors - -

3.5 Suppliers - -

3.6 Customers - 2

4 Company’s Macro Environment - 3 9 - 15

Difference Between Micro And Macro - 4
5 16 - 17
Environment

6 Techniques Of Environment Scanning - - 18 - 22

7 Summary - - 23 - 24

8 Glossary - - 25 - 26

9 Terminal Questions - - 27

10 Answers - - 28 - 29

11 References - - 30

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1. INTRODUCTION
In the previous unit we dealt with the traditional and modern components of marketing mix,
marketing planning, and marketing implementation and control. We also analysed how to develop an
effective marketing mix. Many people believe that organisations can survive if they are sure about the
management of their internal systems like business processes, flow of goods, and internal practices
of quality and cost control. But in reality, marketing planning, implementation, and control can only
succeed if the companies respond and adapt to the environmental changes. Though they significantly
cannot influence the external environment, they can be responsive to larger social and other
environmental changes, which are likely to affect the business in both short and long run. The
environment consists of various forces that affect the company’s ability to deliver products and
services to its customers. The environment can affect a company in many ways. A company can have
the best technologies, employees, and the best of suppliers but it can fail miserably if any of the factors
like exchange rate, policies of the host government, changing needs of customers, etc. start to act
against it. On the other hand, a mediocre company can be spectacularly successful if the factors in the
external environment start favouring its strategies and policies. It is imperative that companies keep
a close watch on the environmental factors that may affect them and prepare themselves adequately
to face the emerging challenges.

1.1 Objectives
After studying this unit, you should be able to:
• recognise the need for environment scanning

• analyse the components of an organisation’s

microenvironment

• describe the components of a company’s macro

environment

• differentiate between micro and macro environment

• explain the techniques of environmental scanning

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2. ENVIRONMENTAL SCANNING
Environmental scanning refers to the careful monitoring of an organisation's internal and external
environment for detecting early signs of opportunities and threats that may influence its present and
future marketing plans. It helps the marketer in taking decisions regarding where to compete, how to
compete, and on what to compete. The opportunity in business can be a trend or event that could lead
to a significant upward change in sales and profit patterns, given the appropriate strategic response.
In the absence of a strategic response, a threat will result in a significant downward departure from
current sales and profits. If the strategic uncertainty is important and urgent, marketing managers
may conduct an in-depth analysis to make an urgent decision. Environmental scanning helps
marketing managers discover the important forces outside an organisation, which will shape its
business about competitors. Marketing managers should continually track changes in the outside
world. Some organisations have a formal marketing intelligence unit, which collects data on the
external environment and feeds it into the decision-making unit of the firm. It helps decision-makers
stretch their ideas by incorporating new information into business planning. Whether the
information required is just to make the marketing managers aware of marketing trends or to be
incorporated into the marketing planning and budgeting will decide the immediacy and accuracy
level of the data collected from the market.

SELF-ASSESSMENT QUESTIONS – 1
True or False Questions:
1 Marketing managers should analyse the environment only when they have to introduce a new
product. (True/False)
Fill in the blanks:
2 _______________________ helps the company to find out important forces external to an
organisation that will shape its business in relation to competitors.

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3. ASSESSING THE MICRO ENVIRONMENT

Micro environment is the immediate environment in which marketers have to take decisions. The
players of this environment are called actors as they have a direct bearing on the marketing decisions.
This environment identifies the way a company does business and against whom it stands in the
market. For example, Nirma, a detergent company has defined its competitive environment by
identifying key players in business namely, the suppliers, competitors, intermediaries, and the
customers.

3.1 The company

Some company factors that affect the marketing decisions are:

• Culture and value system – Organisational culture can be viewed as the system of shared
values and beliefs that shape a company’s behavioural norms. A value is an enduring
preference as a mode of conduct or an end state. The value system of the founders of the
organisation has a lasting impact on it. The value system not only influences the working of
the company and the attitude of its people but also the choice of its business.
• Mission and objectives – The mission and objectives of the company guide the priorities,
direction of development, business philosophy, and business policy.
• Management structure and nature – Structure is the manner in which the tasks and sub-
tasks of the organisation are related. Structure is concerned with the hierarchical relationship
and the relationship between the management of different functional areas like the structure
of the top management and the pattern of share holding.
• Human resource – This concerns factors like manpower planning, recruitment and selection,
compensation, communication, and appraisal.

3.2 Intermediaries
Intermediaries are independent business units and they carry the company’s products and services
to the customers. Prominent intermediaries include wholesalers, retailers, merchants, selling agents,
brokers, etc. Their objective of being in business is different than being in a firm, so the intermediaries
will be interested in maximising their profits. Any trade promotion scheme will motivate them to push
competitors’ product deeper and faster.

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3.3 Public
Positive and favourable public opinion is crucial to marketing success since the public is the authority
that permits the existence and operation of competitive marketing systems.

This environmental factor includes the general public, its support, the government, and the set of
public who have a direct bearing on business. These public can be classified as welcome public, sought
public, and unsought public. For example,

• Investors and financial institutions are under the category of welcome public,
• Government and media are counted as sought public. Without their help, it is difficult to have
a positive impact on consumers and society.
• Pressure groups like consumer activists and environmental activists are unsought public
because they would create problems for the firm through their righteous activities.

As a marketer, one must understand that the general public grants the licence for conducting business
with an expectation that the company will practise fair play. Lack of this supportive framework as
evidenced by declining sales or adverse public opinion can lead to eventual failure of the firm as well
as the marketing system.

3.4 Competitors
Success or failure of an offer largely depends on how competitors react to the company’s offer. Godrej
was a successful refrigerator manufacturer. Once competition intensified, the company started losing
market share. Today, though there is a growth in refrigerator industry, Godrej as a brand is not
growing as fast as its competitors. Through the years, marketing systems have become increasingly
competitive. Traditional economic analysis views competition as a battle between companies in the
same industry or between substitutable products. However, marketers tend to accept the argument
that all firms compete for a limited discretionary buying power. Though we can say that Maruti, as a
car manufacturing company, is facing competition from other car manufacturers, ultimately, it is the
consumer’s disposable income for which shampoos, soaps, and scooters are also competing with
Maruti. A customer is expected to allocate his disposable income optimally and in the process a
category also competes with another category to be in the active consideration set of customers for
such an allocation. Industry has found numerous new uses for existing products, with the whole arena
of competition being expanded. While this forces businesses to reassess long-established marketing
practices, it also opens new avenues of business opportunity. The emergence of computers with

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multimedia as a tool of infotainment and knowledge-sharing devices has challenged traditional

products in the entertainment market.

3.5 Suppliers
An increase in the price of raw materials will have a bang-on effect on the marketing mix strategy of
an organisation. As a result, the prices may be forced up. This is the impact that the suppliers can have.
Closer relationship with suppliers is one way of ensuring competitive and quality products for an
organisation.

3.6 Customers
Organisations exist because of customers. No customer means, no business. Organisations’ survival
depends on how they meet the needs and wants of the customers and provide them with maximum
benefits. Failure to do so will result in a failed business strategy.

SELF-ASSESSMENT QUESTIONS – 2
Multiple Choice Questions:
3 A ______________________ is an enduring preference as a mode of conduct or an end state.
a) Culture
b) Value
c) Mission
d) Objective
Fill in the blanks:
4 _______________________ is the way in which the tasks and sub-tasks of the organisation are
related.
5 ________________________ are independent business units that carry the company products and
services to the customers.

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4. COMPANY’S MACRO ENVIRONMENT

The macro-environment consists of factors external to the company that may have a significant
impact on its marketing strategies. It can be listed as follows:

• Demographic
• Political and legal
• Economic, monetary, and natural
• Socio-cultural
• Technological

Demographic environment

Demography is the study of the population and its characteristics. Marketers are always interested in
population-related growth indices because the long-run market growth rate depends largely on
population growth. The demographic macro environment focuses on population-related factors such
as age, gender, income, education, and family structure. These factors influence consumer preferences
and demand patterns, making it essential for businesses to adapt their strategies accordingly. For
instance, the UK’s ageing population presents opportunities for healthcare providers and retirement-
focused businesses. Companies like Bupa have expanded services tailored to elderly care, recognising
this demographic trend. Similarly, a rising number of dual-income households has led to increased
demand for convenience products and services, such as ready-to-eat meals and childcare services.

• Population mix: If a majority of the population is vibrant and in the work force, then they
contribute towards the country’s growth and have higher power of consumption, but as the
population ages, their demand for products and services gets restricted.
• Country market – it is based on ethnicity and language based classification in India. Though a
market can be characterised by a geographical boundary to be called as a ‘country market’, like
Indian market, in reality it is the sum total of some sub-markets identified more closely with
the ethnicity and language based divisions in India. A consumer durable company has to offer
a festive discount program throughout the year in different parts of the country. For example,
during dussehra in east, onam in south, and diwali in the north.
• Education – Consumption patterns also vary depending on the education level of the people.
People who are educated and aware of their rights and demands will always make a concerted
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decision when compared to people who are illiterate. Example, in a country like U.S.A, where
there are a large number of educated people, consumption decisions are more on the basis of
brands, whereas in a sub Saharan African country, people will be involved in commodity based
decision making.
• Household patterns – This explains the family types in a demographical environment.
Household incomes are on a rise due to both husband and wife taking up careers. This has also
led to growth in consumption and use of products and services that provide more convenience
to the working woman. Example, market for fast food, restaurants, convenience, packaged and
processed food, and consumer durables like refrigerators, washing machines, and vacuum
cleaners are rising in India.
• Shifts in population – Over the years, a large number of people have moved out of villages and
rural areas to urban India in search of a job and better living conditions. These migrants are
responsible for taking urban brands to the rural markets and increasing the awareness level
of the rural people towards urban produce. The rural market is on a rise because for people
from villages, any urban product is a status symbol. So they will like to posses products and
services that will make them more urban.

Political and legal environment

The political and legal macro environment comprises government policies, political stability, legal
regulations, and international relations that influence business operations. It shapes the economic
landscape, dictates compliance requirements, and impacts decision-making processes for
organisations. A thorough understanding of this environment helps businesses adapt strategies to
minimise risks and leverage opportunities.

Political Environment:

The political environment refers to the influence of government actions and policies on business
activities. Factors like political stability, government priorities, and trade regulations determine the
business climate. In stable political environments, such as the UK, businesses are more likely to invest
and expand, given predictable policies and regulatory frameworks. Conversely, volatile political
conditions, such as Brexit-related uncertainties, can disrupt supply chains and trade, requiring
businesses to reassess strategies. For example, car manufacturers like Jaguar Land Rover faced
increased costs and logistical challenges due to post-Brexit tariffs and regulations. Governments also
influence specific industries through incentives or restrictions. The UK’s focus on achieving net-zero

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emissions by 2050 has boosted investments in renewable energy and electric vehicles, benefiting
companies like Octopus Energy and Tesla.

Legal Environment:

The legal environment encompasses laws and regulations that govern business practices. These
include employment laws, consumer protection, advertising standards, and data protection
regulations. For example, the General Data Protection Regulation (GDPR) in the UK and EU has
compelled companies like Meta (Facebook) and Google to revise their data-handling practices,
ensuring transparency and customer consent. Employment laws impact workplace policies,
mandating fair treatment and compliance with health and safety standards. For instance, businesses
operating in the UK must adhere to minimum wage regulations and workplace safety requirements
under the Health and Safety at Work Act 1974.

Economic, monetary and natural environment

Economic Environment

The economic environment encompasses factors such as GDP growth, inflation, unemployment rates,
income levels, and market conditions that influence consumer purchasing power and business
performance. Understanding these factors is critical for businesses to align their strategies with
prevailing economic conditions. During periods of economic growth, consumers have higher
disposable incomes, driving demand for luxury goods and services. For example, car brands like BMW
and Tesla see increased sales during economic upturns. Conversely, during recessions, consumers
prioritise affordability, benefiting businesses like Aldi and Lidl, which focus on value-driven offerings.
Interest rates, set by central banks, significantly impact borrowing and spending. When interest rates
are low, businesses can access cheaper capital, and consumers are more inclined to spend, boosting
sectors like real estate and retail. In contrast, high interest rates reduce disposable income and curb
borrowing, as seen in the UK’s housing market during rate hikes. Globalisation also affects the
economic environment, influencing trade, labour costs, and market access. For instance, UK
businesses exporting to EU markets had to adapt to increased tariffs and trade barriers post-Brexit,
affecting industries like automotive and manufacturing.

The economic environment directly affects consumer behaviour, investment patterns, and business
performance. By monitoring economic trends, businesses can adapt strategies to sustain growth and
profitability.

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Monetary Environment

The monetary environment refers to financial policies, currency stability, inflation rates, and interest
rate decisions that shape the financial landscape of a country. It plays a critical role in influencing
consumer spending, business investments, and economic stability. Inflation rates affect purchasing
power. High inflation reduces the value of money, forcing consumers to cut discretionary spending.
For instance, during inflation spikes in the UK, budget-friendly brands like Primark and Aldi saw
increased demand as consumers sought affordable options. Conversely, low inflation provides price
stability, encouraging both consumer spending and business investments. Currency fluctuations
impact international trade and investments. A strong pound, for example, makes UK exports more
expensive, reducing competitiveness abroad, while a weak pound increases import costs, affecting
businesses reliant on foreign goods. Multinational companies like Unilever manage currency risks by
diversifying sourcing and hedging foreign exchange rates.

Interest rates are another key component. Low interest rates encourage borrowing, stimulating
economic activity. For example, the UK’s historically low rates in the 2010s boosted sectors like
housing and consumer goods. However, higher rates, such as those seen in 2023, have tightened
household budgets, reducing demand for non-essential products. The monetary environment also
influences capital markets. Businesses rely on stable monetary conditions for investments and
growth. Unpredictable changes, such as those during the 2008 financial crisis, disrupt planning and
liquidity.

The monetary environment has a direct and profound impact on economic stability and business
operations. Adapting to monetary policies and market conditions enables businesses to navigate risks
and seize growth opportunities effectively.

Natural Environment

The natural environment encompasses resources, climate, and ecological factors that affect business
operations and consumer behaviour. Increasing environmental awareness and the impact of climate
change have heightened the importance of sustainability in business strategies. Climate change poses
significant challenges. Businesses reliant on agriculture, such as Nestlé, face risks from unpredictable
weather patterns and declining crop yields. Similarly, rising sea levels and extreme weather events
impact supply chains, particularly for industries like logistics and manufacturing. Natural resource
availability also plays a vital role. Companies dependent on finite resources, such as fossil fuels or
rare minerals, face cost fluctuations and supply constraints. For instance, the growing demand for

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electric vehicles has increased competition for lithium, a key component of batteries, prompting
companies like Tesla to explore sustainable sourcing. Regulations aimed at protecting the
environment have shaped industries. Governments worldwide, including the UK, have implemented
stringent policies to reduce carbon emissions. This shift has spurred growth in renewable energy
businesses like Octopus Energy and led to the adoption of electric vehicles. Consumer preferences are
also evolving towards eco-friendly products. Brands like Patagonia and IKEA cater to
environmentally conscious customers by emphasising sustainable materials and practices.
Businesses that fail to address environmental concerns risk reputational damage and regulatory
penalties. Conversely, adopting sustainable practices enhances brand image and competitiveness. For
example, Unilever’s sustainable living plan has bolstered consumer trust and profitability.

The natural environment is a critical consideration in today’s business landscape. Companies that
integrate sustainability into their strategies not only mitigate risks but also align with consumer
values and regulatory expectations, ensuring long-term success.

Social and cultural environment

The social and cultural environment encompasses societal values, norms, lifestyles, demographics,
and cultural factors that influence consumer behaviour and shape marketing strategies. This
environment is dynamic, reflecting changes in societal attitudes, preferences, and expectations.
Businesses must adapt to these shifts to remain relevant and effectively engage with their target
audience.

Key Aspects of the Social and Cultural Environment

• Demographics: Demographic factors, such as age, gender, income, and education, impact
consumer needs and preferences. For example, the UK’s ageing population creates
opportunities for healthcare providers like Bupa, while younger generations drive demand for
technology and convenience-focused services like food delivery apps.
• Lifestyles and Preferences: Modern lifestyles influence buying behaviour. With busy schedules,
many consumers prefer convenience, leading to growth in ready-to-eat meals and e-commerce
platforms like Amazon Fresh. Similarly, increasing health consciousness has driven demand
for fitness products and wellness brands like Nike.
• Cultural Trends: Cultural values and traditions shape consumer expectations and preferences.
For example, during Christmas in the UK, brands like John Lewis create emotional advertising

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campaigns reflecting themes of family and togetherness. Globally, companies localise products
and marketing messages to align with regional cultures.
• Social Movements and Values: Growing awareness of environmental sustainability and social
responsibility influences purchasing decisions. For instance, brands like Patagonia emphasise
eco-friendly practices, resonating with consumers who prioritise ethical consumption.
Similarly, the rise of plant-based diets has driven companies like Greggs to introduce vegan
options.
• Digital and Social Media Impact: Social media has revolutionised how consumers interact with
brands. Platforms like Instagram and TikTok enable businesses to engage directly with
audiences, showcase values, and influence purchasing decisions through influencers and real-
time communication.

Technological environment

The technological environment encompasses advancements and innovations that significantly impact
how businesses operate, interact with customers, and market their offerings. It drives competitive
advantage, efficiency, and customer engagement. Technological innovation enables the creation of
products that address evolving consumer needs. For instance, Tesla’s advancements in battery
technology have revolutionised electric vehicles, offering superior performance and sustainability.
Digital transformation has reshaped marketing, with platforms like Amazon leveraging algorithms to
personalise shopping experiences and social media channels enabling precise ad targeting.
Automation and artificial intelligence (AI) further enhance efficiency and customer engagement.
Netflix, for example, uses AI to recommend tailored content, improving satisfaction and retention.
Emerging technologies like augmented reality (AR) and virtual reality (VR) provide immersive
experiences, as seen with IKEA’s Place App, which allows customers to visualise furniture in their
homes before purchase. The rise of mobile and internet penetration has made seamless, anytime-
anywhere connectivity essential. Businesses optimise websites and apps for mobile users to provide
enhanced accessibility. Companies like Apple remain leaders by integrating cutting-edge technology
into their products, maintaining brand loyalty and differentiation. By adopting technological
advancements, businesses can innovate, streamline operations, and build stronger customer
relationships. The dynamic nature of the technological environment requires organisations to stay
ahead of trends to meet market demands, enhance customer experiences, and secure long-term
success.

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SELF-ASSESSMENT QUESTIONS – 3
Multiple Choice Questions:
6 U.S.A’s literacy level, population structure, etc. are a part of U.S.A’s environment.
a) Demographic
b) Political
c) Social
d) Economic
7 Influences beliefs, values, and norms of the consumers.
a) Education
b) Society
c) Culture
d) Economic condition
True or False Questions:
8 Due to technological advancements, role of governments in regulating the companies is
increasing. (True/False)
Fill in the blanks:
9 _________________________ environment has maximum direct effect on the consumers.
10 _________________________ environment has the highest influence on the marketers.

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5. DIFFERENCE BETWEEN MICRO AND MACRO

ENVIRONMENT
The microenvironment and macro environment are two crucial components of a business's external
environment, influencing its operations and decision-making. While the microenvironment includes
factors directly related to the company, the macro environment consists of broader societal forces.
The microenvironment refers to elements close to the organisation that directly impact its ability to
serve customers. These factors include customers, suppliers, competitors, intermediaries, and other
stakeholders. For instance, suppliers influence production costs and inventory, while competitors
drive the need for differentiation. Companies like Apple rely on strong supplier relationships to
maintain quality and innovation. Similarly, competitors such as Samsung influence Apple’s strategies
in the smartphone market. Customer needs and preferences in the microenvironment guide product
development and marketing decisions, such as Nike targeting fitness enthusiasts through tailored
campaigns. In contrast, the macro environment comprises external, larger-scale forces that shape the
entire business landscape but are beyond an organisation’s control. It includes Political, Economic,
Social, Technological, Environmental, and Legal (PESTEL) factors. For example, climate change
(environmental factor) influences industries like automotive, pushing brands like Tesla to develop
sustainable electric vehicles. Political stability and trade regulations, such as post-Brexit policies,
impact industries by altering supply chains and tariffs. Economic trends like inflation affect
purchasing power, guiding brands like Aldi to focus on affordability. The key difference lies in scope
and control. While the microenvironment is specific to the company and allows some influence, the
macro environment affects all businesses within a market and requires adaptation rather than control.
Both environments are interdependent; changes in the macro environment can influence the
microenvironment. For example, a recession (macro) may alter customer spending habits (micro),
prompting businesses to adjust their strategies. Thus, businesses must monitor and adapt to both
environments to remain competitive, effectively addressing immediate operational challenges and
broader external trends.

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SELF-ASSESSMENT QUESTIONS – 4
True or False Questions:
11 Micro environment constitutes factors that a company cannot control. (True/False)
12 Innovations in the macro-environment influence employment decisions on the micro-level.
(True/False)

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6. TECHNIQUES OF ENVIRONMENT SCANNING

SWOT Analysis

SWOT Analysis is a strategic tool used to evaluate a company’s Strengths, Weaknesses, Opportunities,
and Threats. It provides a clear framework for identifying internal and external factors that influence
organisational success.

• Strengths and Weaknesses are internal factors. Strengths refer to attributes that give the
business a competitive advantage, such as brand reputation, technological expertise, or skilled
workforce. For example, Apple’s strong brand equity and innovative product design are key
strengths. Weaknesses, on the other hand, are internal shortcomings that may hinder
performance, such as a lack of digital presence or outdated infrastructure.
• Opportunities and Threats are external factors. Opportunities are favourable conditions or
trends in the external environment that a business can leverage for growth. For instance, the
growing demand for plant-based products presents an opportunity for food companies like
Nestlé to expand their vegan offerings. Threats, however, are external challenges, such as new
competitors, regulatory changes, or economic downturns. For example, post-Brexit tariffs
posed threats to UK exporters like Jaguar Land Rover.

Application of SWOT Analysis: By identifying strengths, companies can maximise their competitive
edge. Addressing weaknesses allows them to mitigate internal inefficiencies. Exploring opportunities
helps businesses align strategies with market trends while understanding threats enables proactive
risk management.SWOT is simple, versatile, and applicable across industries. It helps businesses gain
a holistic understanding of their position, guiding effective decision-making. SWOT Analysis is
invaluable for marketing environment scanning. It equips businesses with insights to refine strategies,
capitalise on opportunities, and safeguard against potential risks, ensuring sustainable growth.

Example:

A retail company might find its strength in established supply chains but identify weaknesses in its e-
commerce platform. Opportunities could include expanding into emerging markets, while threats
might involve increased competition from online retailers like Amazon.

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PESTEL Analysis

PESTEL Analysis examines Political, Economic, Social, Technological, Environmental, and Legal
factors, offering a comprehensive view of the external environment affecting businesses.

• Political Factors: Government policies, trade regulations, and political stability directly impact
operations. For example, the UK government’s net-zero targets have encouraged investments
in renewable energy sectors like Octopus Energy.
• Economic Factors: Inflation, GDP growth, and unemployment rates influence purchasing
power and demand. During economic recessions, budget brands like Lidl benefit as consumers
seek affordable options.
• Social Factors: Demographics, lifestyles, and cultural trends shape consumer preferences. For
instance, increasing health consciousness has driven the popularity of brands like Nike for
fitness products and Greggs for vegan options.
• Technological Factors: Advancements in technology transform industries. Companies like
Amazon leverage AI and data analytics for personalised customer experiences, while Tesla
uses technological innovation to lead in electric vehicles.
• Environmental Factors: Climate change and sustainability influence practices. Businesses like
Unilever focus on eco-friendly products to meet consumer expectations and regulatory
requirements.
• Legal Factors: Laws like GDPR in the EU mandate compliance with data protection regulations.
Companies like Meta (Facebook) revised their data practices to align with legal standards.

PESTEL provides a structured approach to analysing macro environment factors. It helps businesses
anticipate market changes, align strategies, and remain competitive. PESTEL Analysis is a critical tool
for scanning the marketing environment. By understanding external factors, businesses can navigate
uncertainties, identify growth opportunities, and ensure compliance with evolving market dynamics.
For example, A food company entering a new market might use PESTEL to evaluate local political
stability, economic conditions, cultural food preferences, and environmental regulations.

PORTER’S FIVE FORCE MODEL

Porter’s Five Forces framework analyses the competitive environment by evaluating five critical
factors: competitive rivalry, buyer power, supplier power, threat of substitutes, and threat of new
entrants.

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• Competitive rivalry examines the intensity of competition among existing players. For instance,
in the saturated smartphone market, brands like Apple and Samsung face fierce competition,
driving innovation and marketing efforts.
• Buyer power refers to the influence customers have on pricing and quality; in the retail sector,
large buyers like supermarkets demand lower prices from suppliers.
• Supplier power highlights the control suppliers have over pricing and supply quality.
Companies like Starbucks carefully manage supplier relationships to ensure consistent
product quality and ethical sourcing.
• The threat of substitutes evaluates the impact of alternatives on demand. Streaming services
like Netflix face competition from newer platforms like Disney+ and free options such as
YouTube.
• Threat of new entrants assesses how easily new competitors can enter the market, with
industries like airlines having high entry barriers that protect companies such as British
Airways. A practical example of this model is Deliveroo, a food delivery platform that uses it to
evaluate competition, customer bargaining power, and emerging substitutes like cloud
kitchens.

Porter’s Five Forces offers businesses valuable insights into market dynamics, helping them identify
opportunities and threats. By understanding these forces, companies can position themselves
strategically, develop competitive advantages, and maintain resilience in challenging markets. This
framework is essential for navigating competitive pressures effectively and achieving long-term
success.

Scenario Analysis

Scenario Analysis is a forecasting method that helps businesses anticipate and prepare for potential
changes in the environment by imagining different plausible future scenarios. The process involves
identifying key uncertainties and developing various outcomes based on factors such as economic
conditions, political developments, and technological advancements. Each scenario provides a
detailed exploration of how these variables might unfold and impact business operations. For
instance, a logistics company might anticipate fluctuating fuel prices and create scenarios where costs
rise significantly due to global shortages. In response, the company could explore solutions like
adopting energy-efficient vehicles or optimising delivery routes to manage expenses.

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The primary benefit of Scenario Analysis lies in its ability to help organisations navigate uncertainties
by enabling them to develop flexible strategies. For example, during the COVID-19 pandemic,
companies that had planned for potential supply chain disruptions could adapt more quickly and
maintain operational stability. By considering multiple possibilities, businesses can identify risks,
seize opportunities, and make informed decisions that align with their long-term goals. Scenario
Analysis is particularly valuable in dynamic industries with unpredictable external factors, providing
a structured approach to risk management and strategic planning. It Facilitates the identification of
risks and opportunities for informed decision-making. It equips organisations with the foresight to
remain resilient and competitive in ever-changing environments.

Delphi Technique

The Delphi Technique is a structured forecasting method used to gather expert opinions on complex
topics or problems. It is widely employed in strategic planning, market research, and decision-making,
especially in scenarios involving high uncertainty or limited historical data. The technique is designed
to achieve consensus through iterative surveys while maintaining the anonymity of participants to
minimise biases and groupthink.

Process:

The Delphi Technique is a structured forecasting method that relies on a panel of experts to achieve
consensus on complex issues or future predictions. It is widely used in strategic planning, policy-
making, and market research to generate insights in areas with high uncertainty. The process
typically involves the following steps:

Problem Definition:Clearly define the objective or question to be addressed. This ensures all
participants focus on the same issue.

Selection of Experts: Assemble a diverse panel of knowledgeable individuals from relevant fields to
provide expert opinions.

Initial Questionnaire: Distribute an open-ended questionnaire to gather initial insights, ideas, or

predictions from the experts.

Feedback and Iterative Rounds:

• Compile and summarise responses anonymously.

• Share the summarised feedback with the group and issue a second, more structured
questionnaire.

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• Experts review the collective feedback and refine their responses. This process continues
through several rounds until a consensus is reached or the responses stabilise.

Analysis and Final Report:

• Analyse the final round of responses to identify common themes, agreements, and actionable
insights.
• Present the findings in a detailed report for decision-making.

The Delphi Technique’s iterative process fosters unbiased, well-rounded insights while maintaining
anonymity, encouraging honest opinions and reducing the influence of dominant individuals.

Example:
An automotive company exploring the future of electric vehicles might use the Delphi Technique. It
gathers insights from industry experts, economists, and environmentalists about trends in adoption,
regulatory impacts, and technological advancements. Through multiple rounds of discussion, the
company refines its strategic approach to align with anticipated market conditions.

The Delphi Technique leverages diverse expertise, ensuring robust and well-rounded outcomes.
Maintaining participant anonymity eliminates dominance effects and encourages honest feedback.
Additionally, it provides a structured framework for addressing complex, multi-faceted issues.The
Delphi Technique is a valuable tool for making informed, collaborative decisions. Its ability to
synthesise expert opinions makes it particularly effective in uncertain or rapidly evolving
environments.

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7. SUMMARY

• Environmental Scanning: Environmental scanning involves monitoring internal and external

factors to identify opportunities and threats affecting marketing strategies.
• Purpose: It helps marketers decide where to compete, how to compete, and on what to
compete, ensuring timely strategic responses.
• Micro Environment: The microenvironment includes factors directly impacting a business,
such as the company, suppliers, intermediaries, competitors, customers, and public.
• Company Factors: Organisational culture, mission, objectives, structure, and human resources
influence marketing decisions and priorities.
• Intermediaries: Wholesalers, retailers, and brokers carry products to customers and are
influenced by profitability and trade promotions.
• Public Opinion: The public, including investors, government, media, and pressure groups,
significantly impacts marketing success and company reputation.
• Competitors: Competitive strategies, such as differentiation and market positioning,
determine success against rivals in attracting customer attention and loyalty.
• Suppliers: The cost, quality, and reliability of suppliers affect product pricing, quality, and
availability.
• Customers: Meeting customer needs and expectations is crucial for business survival and
growth.
• Macro Environment: The macro environment encompasses larger societal forces, such as
demographic, political, economic, socio-cultural, technological, and natural factors.
• Demographic Factors: Population characteristics like age, gender, education, and household
patterns influence consumer demand and business strategies.
• Political and Legal Factors: Government policies, regulations, and political stability shape
business operations and compliance requirements.
• Economic Factors: GDP growth, inflation, and disposable income levels affect consumer
purchasing power and business performance.
• Monetary Factors: Interest rates, inflation, and currency stability impact spending,
investments, and international trade.

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• Natural Factors: Climate change, resource availability, and environmental regulations drive
sustainability and resource management strategies.
• Socio-Cultural Factors: Social values, lifestyles, cultural trends, and digital interactions
influence consumer behaviour and marketing strategies.
• Technological Factors: Advancements like AI, automation, and digital platforms enable
innovation, efficiency, and enhanced customer experiences.
• SWOT Analysis: SWOT evaluates strengths, weaknesses, opportunities, and threats, guiding
businesses in refining strategies and mitigating risks.
• PESTEL Analysis: PESTEL analyses macro-environmental factors, helping organisations adapt
strategies to external changes.
• Techniques: Methods like Delphi Technique, scenario analysis, and Porter’s Five Forces help
businesses anticipate uncertainties, assess competition, and prepare flexible strategies.

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8. GLOSSARY

Environmental The process of monitoring internal and external factors to identify

-
Scanning opportunities and threats impacting a business's strategies.

Micro The immediate factors that directly influence an organisation, such as

-
Environment suppliers, customers, competitors, and intermediaries.

External societal forces, including political, economic, social,

Macro
- technological, environmental, and legal factors, that impact a business on
Environment
a larger scale.

Organisational The shared values, beliefs, and norms within a company that influence
-
Culture decision-making and employee behaviour.

Independent business entities, like retailers and wholesalers, that

Intermediaries -
distribute a company’s products to customers.

The perception and views of the general public, including stakeholders

Public Opinion -
like government and media, that influence a company’s success.

Other businesses offering similar products or services that challenge a

Competitors -
company’s market position and strategies.

A strategic framework to evaluate a company’s internal strengths and

SWOT Analysis -
weaknesses and external opportunities and threats.

A tool to analyse external macro-environmental factors: Political,

PESTEL Analysis -
Economic, Social, Technological, Environmental, and Legal.

A forecasting method that examines different future scenarios based on

Scenario Analysis -
uncertainties to guide decision-making.

A structured method of gathering expert opinions through iterative

Delphi Technique -
surveys to achieve consensus on complex issues.

The statistical study of population characteristics, such as age, gender, and

Demographics -
income, that influence consumer demand.

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Economic Factors like inflation, GDP, and disposable income that affect consumer
-
Environment purchasing power and business performance.

Monetary Financial factors, including interest rates and currency stability, that
-
Environment shape consumer spending and business investments.

Natural Ecological and resource-related factors like climate change and natural
-
Environment resource availability impacting business operations.

Socio-Cultural Social and cultural trends, values, and norms influencing consumer
-
Environment behaviour and marketing strategies.

Technological Innovations and advancements like AI and digital platforms that drive
-
Environment business efficiency and customer engagement.

Entities providing raw materials or components needed for production,

Suppliers -
affecting costs and quality.

Competitive The intensity of competition among existing market players that shapes
-
Rivalry innovation and marketing strategies.

The purchasing patterns and preferences of customers, influenced by

Customer
- social, cultural, and economic factors, guiding product development and
Behaviour
marketing.

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9. TERMINAL QUESTIONS
1. What do you mean by marketing environment? Why do managers need to scan the
environment?
2. Describe the components of the micro environment of marketing.
3. How important is public opinion in marketing of a product?
4. What factors would affect the marketing strategy of a fashion product?
5. Suppose you are the marketing manager of a banking firm. Your bank has opened its first
branch overseas. What factor do you think will affect the choice of marketing the most and
why?
6. Differentiate between micro and macro environment of marketing.
7. Describe the scenario building approach of environmental scanning with the help of an
example.

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10. ANSWERS
Self-Assessment Questions
1. False
2. Environment scanning
3. (b) Value
4. Structure
5. Intermediaries
6. (a) Demographic
7. (c) Culture
8. True
9. Social
10. Economic
11. False
12. True

Terminal Questions Answers

Answer 1: Marketing environment refers to the factors that a company must consider when it is
marketing its products. For more details, refer section 3.2.

Answer 2: A company, its competitors, intermediaries, suppliers, customers, and public constitute
the micro environment. For more details, refer section 3.3.

Answer 3: Positive feedback from public is very important for the success of a product or service. For
more details, refer sub section 3.3.3

Answer 4: Apart from other factors, demographics would affect the marketing strategy of a fashion
product the most. For more details, refer section 3.4.

Answer 5: Besides other factors, it is important to consider the demographics, socio-cultural

environment, political and legal environment of the country. For more details, refer section 3.4.

Answer 6: A company can control the micro factors to an extent but it usually cannot control the
macro factors. For more details, refer section 3.5.

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Answer 7: Scenario building approach consists of five stages, (1) analysis of decisions, (2)
identification of key decision factors, (3) identifying socio- cultural factors, (4) Analysis of each of the
key variables separately, and(5) selection of scenario logics. For more details, refer section 3.6.

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11. REFERENCES
• Kotler, P., Keller, K. L., Goodman, M., & Brady, M. (2019). Marketing management (4th European
ed.). Pearson Education.
• Lamb, C. W., Hair, J. F., & McDaniel, C. (2020). MKTG 13: Principles of marketing. Cengage
Learning.
• Palmer, A. (2012). Introduction to marketing: Theory and practice (3rd ed.). Oxford University
Press.
• Jobber, D., & Ellis-Chadwick, F. (2019). Principles and practice of marketing (9th ed.). McGraw-
Hill Education.
• Blythe, J., & Martin, J. (2019). Essentials of marketing (6th ed.). Pearson Education.

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