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PART 1: Defining Marketing and the Marketing Process (Chapters 1–2)
PART 2: Understanding the Marketplace and Customer Value (Chapters 3–6)
PART 3: Designing a Customer Value-Driven Strategy and Mix (Chapters 7–17)
PART 4: Extending Marketing (Chapters 18–20)

3 Analyzing the Marketing Environment

Chapter Preview So far, you’ve learned about engage customers and build customer relationships. To develop
the basic concepts of mar- effective marketing strategies, a company must first understand
keting and the steps in the marketing process for engaging and the environment in which marketing operates.
building profitable relationships with targeted consumers. Next,
we’ll begin digging deeper into the first step of the marketing To start, let’s look at Microsoft, the technology giant that
process—understanding the marketplace and customer needs dominated the computer software world throughout the 1990s
and wants. In this chapter, you’ll see that marketing operates and much of the 2000s. With the recent decline in standalone
in a complex and changing environment. Other actors in this personal computers and the surge in digitally connected
environment—suppliers, intermediaries, customers, competi- devices—everything from smartphones and tablets to Internet-
tors, publics, and others—may work with or against the com- connected TVs—mighty Microsoft has struggled a bit recently
pany. Major environmental forces—demographic, economic, to find its place in a fast-changing digital marketing environ-
natural, technological, political, and cultural—shape marketing ment. Now, however, the tech giant is making fresh moves to
opportunities, pose threats, and affect the company’s ability to reestablish itself as a relevant brand that consumers can’t live
without in the post-PC world.

MICROSOFT: Adapting to the Fast-Changing Digital Marketing Environment
L ittle more than a dozen years ago, talking high tech meant
talking about the almighty personal computer. Intel are connected and mobile, not stationary standalones like the
provided the PC microprocessors, and manufacturers old PCs. They link users to an ever-on, head-spinning new world
of information, entertainment, and socialization options. And,

such as Dell and HP built and marketed the machines. for the most part, these new devices don’t use the old Micro-

But it was Microsoft that really drove the PC industry—it made soft products. Increasingly, even the trusty old PC has become a

the operating systems that made most PCs go. As the dominant digital-connection device—a gateway to the Web, social media,

software developer, Microsoft put its Windows operating system and cloud computing. And these days, much of that can be done

and Office productivity suite on almost every computer sold. without once-indispensable Microsoft software.

The huge success of Windows drove Microsoft’s reve- In this new digitally connected world, Microsoft found it-

nues, profits, and stock price to dizzying heights. By the start self lagging behind more-glamorous competitors such as Google,

of 2000, the total value of Microsoft’s stock had hit a record Apple, Samsung, and even Amazon and Facebook, which seemed

$618.9 billion, making it the most valuable company in his- to provide all things digital—the smart devices, the connecting tech-

tory. In those heady days, no company was more relevant than nologies, and even the digital destinations. Over the past decade,

Microsoft. although still financially strong and still the world’s dominant PC

But moving into the new millennium, the software provider with 1.3 billion Windows users around the world,

high-tech marketing environment took a turn.

PC sales growth flattened as the world fell in Microsoft is undergoing a dramatic transformation to better align itself
love with a rush of alluring new digital devices with the new digital world order in the post-PC era. More than just making
and technologies. It started with iPods and

smartphones, and evolved rapidly into a full the software that makes PCs run, Microsoft wants to be a full digital

complement of digital devices—from e-readers, devices and services company that connects people to communication,

tablets, and sleek new laptops to Internet-con- productivity, entertainment, and one another.
nected TVs and game consoles. These devices