MBA semester 1

1. PRINCIPLES OF
MARKETING
The Marketing Environment

2. The External Environment

3. The External Environment
An organization operates within an external environment that it
generally cannot control.
There are two levels of external forces;
1.Macro influences
2.Micro influences

4. External Macro-Environment

5. External Macro-Environment
The following six interrelated external macro-
environment forces have significant impact on an
organization’s marketing system. These forces are
largely not controllable by management.
1.Demography
2.Economic condition
3.Competition
4.Social and cultural forces
5.Political and legal forces
6.Technology

6. External Macro-Environment
1. Demography
The statistical study of human population and its
distribution is called demography.
Pakistan's estimated population in 2011 is over 187 million (Growth rate:
1.573%)
During 1950–2011, Pakistan's urban population expanded over sevenfold
Age structure
 0-14 years: 35.4% (male 34,093,853/female 32,278,462)
 15-64 years: 60.4% (male 58,401,016/female 54,671,873)
 65 years and over: 4.2%
Urbanization
 urban population: 36% of total population (2010)
 rate of urbanization: 3.1% annual rate of change

7. External Macro-Environment
 Literacy: aged 10 and over and can read and write
 Total population: 60%
 Male: 69%
 Female: 45% (2009 est.)
 Gender ratios
 Gender ratio at birth: 1.05 male(s)/female
 under 15 years: 1.06 male(s)/female
 15–64 years: 1.09 male(s)/female
 65 years and over: 0.92 male(s)/female
 total population: 1.07 male(s)/female (2011 est.)
 Ethnic groups - Pujabi 44.68%, Pashtun (Pathan) 15.42%, Sindhi 14.1%,
Sariaki 8.38%, Muhajirs 7.57%, Balochi 3.57%, other 6.28%

8. External Macro-Environment
2. Economic Conditions
People alone do not make markets. They must have
money to spend it and willingness to spend it. The
following three considerations of economics affect the
marketing system of just about any organization.
1.Stage of the Business Cycle: The term business cycle (or economic
cycle) refers to economy-wide fluctuations in production or economic
activity over several months or years. There are 3 stages:
 Prosperity is a period of economic growth.
 Recession is a period of retrenchment for consumers and businesses.
• Recovery is the period when economy moves from recession to
prosperity.

9. External Macro-Environment
2. Inflation
A rise in the prices of goods and services is called inflation.
3. Interest Rates
Interest rates are another external economic factor that influence
marketing program.

10. External Macro-Environment
3. Competition
A company’s competition is an important external factor
which affects its marketing system. There are three main types
of competition for a firm.
1.Brand competition is from marketers of dire ctly sim ilar
pro ducts. For example PIA vs Qatar Airways, Nestle Milk
Pack vs Olpers, Sunsilk vs Pantene.
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11. External Macro-Environment
 Substitute competition is from products that are
diffe re nt in nature but satisfy the sam e ne e d and want.
Therefore a manufacturer of fresh juices will compete
with that of drinking water, portable DVD players may
compete with mp3 players.
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12. External Macro-Environment
3. Limited Buying Powerof Consumers
In this type of competition, we recognize that every
company is co m pe ting fo r the custo m e r’s lim ite d buying
po we r. So, the competition faced by a producer of tennis
racquets might be a new pair of jeans, a garden tool, or
may be a car repair bill.
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13. External Macro-Environment
4. Social & Cultural Forces
Social and cultural forces include factors namely lifestyles, values and
beliefs. Some of the major changes are;
1. Changing GenderRoles
Male-female roles are changing dramatically.
Many females are beginning to earn a living for themselves as well as
for their families.
It was common for men to make decisions regarding household items
but not anymore.
Females have become a profitable market for products which were
previously considered mainly for males such as cars, mobile phones,
bank accounts etc. The same is true for males (Skin care
products/services)
In many organizations, women have been able to break the glass-
ceiling effect.

14. External Macro-Environment
 Marketers need different tactics to approach stay at home mothers
versus the working full-time mothers.
 Working women demand products that can provide them work-
family balance.

15. External Macro-Environment
2. A Premium on Time
Many countries in the world has drastically changed from being
money constrained to being time constrained.
Pakistan being a third world country has a low average purchasing
power yet value of time has increased dramatically. Reasons being;
bad economic conditions, change in family structures, consumerism,
increased working hours in modern organizations etc.
People with more income and less time are willing to pay more for
convenience.
Rising trend in the use of services (baby-sitters, canned/frozen food).
By saving consumers’ time a company can gain advantage over
competitors..

16. External Macro-Environment
3. Physical Fitness and Health
There is an increased interest in physical fitness and personal health
especially in the upper-middle class and upper class segments.
Many people are joining fitness clubs, swimming clubs, and shifting to
dietary food for better health.
Increasing number of small firms selling dietary food for weight loss
are prove of growing number of health-conscious group of customers.
Public is constantly made aware of negative effects of high-calorie
food.
Many fitness and exercise centers have benefited from this trend.
Many ready-to-cook products have been introduced to cater to these
changing needs of the public – Knorr soups, Kellogg's wheat cereals,
Wheat biscuits etc.

17. External Macro-Environment
5. Political & Legal Forces
Every company’s operations as well as demand for products in
markets are affected by political and legal forces. They can be
grouped into four categories;
1. Monetary & Fiscal Policies
Marketing efforts are affected by the level of government spending, the
money supply, and tax legislation.
2. Social Legislation
Laws that seek to promote the common good, generally by protecting
and assisting the weaker members of society. Such legislation
includes;
laws assisting the unemployed, the infirm, the disabled, and the
elderly.
laws against child-labor
anti-pollution laws

18. External Macro-Environment
3. Government Relationship with Industries
Government’s relationship with industries depends mainly on the
industry’s economic importance for a country.
Many industries receive subsidies (agriculture, textile, cooking oil,
machinery) while others are forced to pay higher taxes (automobile).
Governments also reduce taxes for industries which are strongly
affected by natural disasters.
Privatization of Banks and public utilities along with other
macroeconomic factors (customer empowerment, industry
convergence, disintermediation etc) also affect the marketing activities
in the relevant industries

19. External Macro-Environment
4. Legislation Related Specifically
to Marketing
Marketers must be aware about
laws affecting the marketing
practices of firms. Such laws
include;
Laws regulating competition and
public interest (Competition Act
2010)
Trademarking laws (Trademark
Ordinance 2001)

20. External Macro-Environment
6. Technology
Technology has brought forth a revolutionary transformation in the way
we live, communicate, travel, and even spend our leisure time. Just
consider how airplanes have reduced the time in which we travel
thousands of miles and how mobile phones and the internet has
brought physically distant people close to each other or how new
gadgets and video game consoles help us kill our time and even how
countries furiously wage wars against each other.
Technological breakthroughs can affect markets in mainly two ways.
1.Entirely new industries – computers, lasers, robots etc.
2.Altering or destroying existing industries – TV vs Radio, CD/DVD vs
cassettes, digital photography vs Instant photography.

21. External Micro-Environment

22. External Micro-Environment
There are three additional environmental forces that are
external to an organization and affect its marketing
activities.
1.The Market
2.Suppliers
3.Marketing Intermediaries
The term external micro-environment denotes those elements that are
external and which it can partially influe nce to better help it in its
marketing operations and will make it more competitive.
Marketing
Intermediary
Company’s
Marketing
System
The
Market
Suppliers
Marketing
Intermediary

23. External Micro-Environment
1. The Market
De finitio n…
Aplace whe re buye rs and se lle rs m e e t, g o o ds o r se rvice s
are o ffe re d fo r sale , transfe r o f o wne rship o ccur.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
De m and m ade by a ce rtain g ro up o f po te ntialbuye rs fo r
g o o ds and se rvice s
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
As peopleororganizations withneeds & wants to satisfy,
moneytospend, andwillingness tospendit.

24. External Micro-Environment
There are three main variables to consider while looking at
a market of any good or service.
1. People and organizations
withneeds andwants – Need is
something which is essential
for you irrespective of the
financial situation/conditions.
Wants are things which you
wish & desire
2. Their Purchasing
Power
Extent to which a
person, firm, or
group has available
money and credit to
make purchases.
3. Theirbuyingbehavior
Buying behavior deals with
the influences that cause a
consumer to purchase a
product or services.
Questions asked are Who
buys? How do they buy?
When do they buy? Where do
they buy? Why do they buy?

25. External Micro-Environment
2. Suppliers
Suppliers are individuals or businesses that provide goods
or services as an input to other businesses in return for an
agreed upon compensation.

26. External Micro-Environment
3. Marketing Intermediaries
Marketing intermediaries are independent business
organizations that directly aid in the flow of goods and
services between…..
a marketing organization and its suppliers &.
a marketing organization and its markets.
There are two types of intermediaries;
1.Middlemen are the wholesalers and retailers.
2.Facilitating Organizations include services as
transportation, & warehousing.

27. Organization’s Internal Environment

28. Organization’s Internal Environment
An organization’s marketing effort is also shaped by
internal forces that are controlled by the management.
Financial
Resources
Production
Facilities
Location
R&D
Company
Image
Human
Resources