January 15, 2015

Scanning the Marketing Macroenvironment - Philip Kotler's Book Chapter Summary

The marketing environment is constantly changing and providing new opportunities and decreasing the demand for some existing products. Marketers have to continuously monitor the environment identify the shifts in demand and make their organization adapt to the changing environment.

The chapter addresses two questions:

1. What are the key demographic, economic, natural, technological, political, and cultural developments worth noting?
2. What are the key methods for tracking and identifying opportunities in the macroenvironment?

The changes that are occurring in societies are termed as fads, trends and megatrends.

A fad is "short-lived change and it has no social, economic or political significance." Fads are unpredictable and hence only lucky organizations cash on it either because they have the product bought during the fad or they very quickly made the product and it was accepted.

Trends are changes which are more durable and hence predictable. It is observable across several market areas and consumer activities and is consistent with other significant indicators occurring or emerging at the same time.

John Naisbbit, a futurist, prefers to talk about megatrends, which are "large social, economic, political and technological changes that are slow to form, and once in place, they influence us for some time - between seven to ten years, or longer. Naisbitt identifies these trends by examining the news items in major newspapers and counting the number of times they are covered.

Marketers have to take notice of trends and megatrends as spotted by external consultants and publications and they also have to look for them. These trends and megatrends are noncontrollables in the hands of business organizations and they can only respond to them.

Kotler recommends that the firms monitor six major areas in the environment:

Demographic Environment
Economic Environment
Natural Environment
Technological Environment
Political/Legal Environment
Social/Cultural Environment

Demographic Environment

Population Growth

Population Age Mix

Ethnic Markets

In United States, there are different ethnic groups. Whites and African-Americans are the major groups.But Latinos are also a big group. Asian-Americans are now a significant group. Each ethnic group has certain specific wants for the basic needs.

Educational Groups

The population can be divided into five educational groups: Illiterates, high school dropouts, high school degrees, college degrees, and professional degrees. United States has one of the world's highest percentage of college educated people more than 35%.

Household Patterns

Geographical Shifts in Population

Shift from a Mass Market to Micromarkets

The demographic environment shows fragments of markets and hence micromarkets can be identified by monitoring demographic environment.

Economic Environment

Markets for consumer goods and capital goods require people to consume and also purchasing power with them. The total demand and demand for different categories of goods and services depend on current income, savings, credit availability, existing debt of households and firms and prices of items. Marketers have to observe trends in income and spending patterns.

Income Distribution in Societies

There are four types of industrial structures in countries: 1. Subsistence economies 2. Raw material exporting countries 3. Industrializing economies. 4. Industrial economies.

Also within a country, five different income distribution patters are identified. 1. Very low incomes for all people 2. Mostly low incomes for all people 3. Very low incomes, very high incomes   4. Low, medium and high incomes   5. Mostly medium incomes.

Savings, Debt, and Credit Availability: Countries with high savings ratios finance countries with low savings rates.

Natural Environment

There are four important trends in natural environment.

1.  Shortage of raw materials
2. Increased energy costs
3. Increased pollution levels
4. Changing role of Governments in environmental protection

Technological Environment

ACCELERATING Pace of Technological Change
Unlimited Opportunities for Innovation
Varying R & D Budgets:  Japan has increased its R&D in civilian products. United spends a lot on defence research.

Political/Legal Environment

Legislation Regulating Business

It has three main purposes: to protect companies from unfair competition, to protect consumers from unfair business practices, and to protect the interests of society from unbridled business behavior.

Growth of Special Interest Groups

Social/Cultural Environment

People's view of Themselves
People's view of  Others
People's view of  Society
People's view of Nature
People's view of the Universe

High Persistence of Core Cultural Values

Shifts of Secondary Cultural Values through Time

Existence of Subcultures: Each society contains subcultures. Various groups with shared values emerge based on their special life experiences or circumstances. To the extent that subcultural groups exhibit different wants and consumption behavior, marketers have to choose different subcultures for their target markets. The same product may not appeal to all subcultures.

Marketing Management, Philip Kotler 9th Edition

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