Marketing emphasises the need for an organisation to match its capabilities with customer wants and needs and then offer an exchange that simultaneously adds value for the customer and the organisation. However, what this understanding explicitly incorporated was that for an organisation to maximise its success it must: demonstrate a customer focus., define products via customer needs., integrate marketing across the organisation., capture, share and value marketing intelligence.

What we refer to as the micro environment is made up of the immediate forces of the particular industries and market(s) in which the organisation operates. Its key components
typically include:
- the organisation itself, existing and potential environment
- value chain partners and market intermediaries (wholesalers, retailers, agents, brokers)
- customers
- competitors
- publics—the range of other interested parties and key stakeholders.

One of the most popular techniques for analysing the micro environment was developed by
Michael Porter and is known as Porter's Five Forces. We will explore this model in more
detail in Topic 3, but in summary it involves understanding the impact and balance of
effects from the:

1. threat of new entrants
2. bargaining power of buyers
3. bargaining power of suppliers
4. threat of substitute products
5. rivalry among competing sellers.

The assessment of the capabilities, competencies and resources of the organisation provides the S (strengths) and W (weaknesses) categories. The same for the external environment determine the O (opportunities) and T (threats).

In many markets there is a range of other independent actors—firms or individuals not employed by the organisation—that operate in the space between the organisation and its customers. These are called intermediaries and they play an important role as potential allies or enabler (or inhibitors) of the creation, communication, delivery and sustaining of
value in what is often referred to as the 'value chain'. Typical examples of intermediaries
are wholesalers, retailers, agents and brokers.

Marketers need to consider intermediaries as important value chain partners or contributors and treat them with as much importance as final end-user customers. The organisation should seek to develop marketing strategies that create and sustain unique value for not just the organisation and the end-user customers but the intermediaries as well.

[In other words, form an oligopology of vertical integration!]

Typical five subgroups of marketing:

- domestic customers purchasing for personal or household consumption
- domestic businesses or organisations who purchase goods and services to use in making
a product of their own
- domestic business customers who purchase goods and services in order to resell them
- the provision of government services
- international markets.

The value one organisation offers to its customers is made within the context of all the competing and substitute offers made by competitors. The value created by one organisation needs to be different and ideally superior in the minds of a sufficient number of customers to any value proposition or offering available from the competitors and substitutes. This different and superior value is called 'competitive advantage'. [No it's not. This is one part of competitive advantage, or the quest towards monopoly]

Competitive marketing strategies

There are an almost infinite number of strategic alternatives available to any organisation.
This is due to the vast array of different market and competitive conditions existing at any
point in time. However Michael Porter (cited in Thompson, Strickland and Gamble, 2008)
identified the following five generic strategies on which all other strategies are to some
extent based:

- Broad or focussed differentiation strategies—offering a product or range of products that are recognised by a range of customers as being different and superior to any other offer.
- Cost leadership strategies—involves the organisation achieving the lowest overall costs of production and distribution.
- Best-cost provider strategy—this is where the best possible balance is sought between lower costs and creating superior value through better products or promotion or distribution/place.

The macro environment is a term used to describe the wider national, regional and international context within which markets operate. It is meant to help marketers recognise that the primary participants in a market (company, competitors, customers, value-chain partners, publics, etc) are affected by forces in the wider world. Due to their broad scope, the forces of the macro environment are often neglected and ignored. This can be particularly perilous to management as these things impact significantly on the market.

PESTEL analysis is a well-known method of summarising the thinking and research regarding these critical forces in the macro environment. It involves developing a list of forces (both positive and negative) that marketing strategists must consider from the Political-legal, Economic, Socio-cultural, Technological, natural Environmental issues and Legal forces in the macro environment.