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Three Market Environments

Disciplines > Marketing > Understanding Markets > Three Market Environments

The collaborative environment | The hostile environment | The neutral environment | See also

There are three environments that must be considered when analyzing markets and doing market planning. These may be shown in a nested diagram, as each envelops the next.

The collaborative environment

In the collaborative environment, everyone is working to a common goal of satisfying customer needs. This gives a purpose for working together and a clear metric of success.

This environment typically includes three types of stakeholder: the company, its partners and, of course, the customer. Each may have other goals, but the common requirement of meeting customer needs gives reason for them to collaborate.

An important attribute of the collaborative environment is trust. When everyone trusts one another, transaction costs fall and the chance of success goes up.

An assessment of this environment should check that everyone has the same understanding of target customer needs and that there is sufficient trust to be able to work well together.

The hostile environment

Around the collaborative environment is the competitive hostile environment. Here, companies compete against one another to get the attention and business of customers.

When each has a 'fair share' of the market, this can be a polite and ordered affair. However equitable balance is unusual and many competitive environments are rife with deceptive and aggressive approaches that cost everyone dearly (but at least keep marketing people busy!).

Sometimes competitors collaborate, for example to set standards that will help expand the market. At best, they respect one another. At worst they are bitter enemies.

At the boundary with the collaborative environment are companies such as suppliers which service both you and your competitors, and who may have divided loyalties.

A competitive assessment considers not just individual companies but the whole set of current and possible competitors, and how they interact as a dynamic system.

The neutral environment

The collaborative and hostile environments both float in a neutral sea of factors with which they each have to cope. These include government regulations, standards bodies, economic fluctuations, changes in technology, social shifts and so on.

While everyone has to cope with such pressures, some are better at it than others. As a part of market analysis, these forces should be identified and understood, as well as the company's ability to handle them. It can be a competitive advantage to be certified early to new standards or to achieve excellence in areas of social concern such as energy usage.

See also

Trust