ch - 2 marketing env

8/7/2019 ch - 2 marketing env

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• Marketing Environment Analysis is theprocess of gathering, filtering and analyzing information relating to the

marketing environment.• It involves the process of tasks of

monitoring the changes taking place in the

environment & future position in respect of each of the factors.

• The analysis spots the opportunities &threats in the environment.



• To see which event & trends are favorable from thestandpoint of the firm & which are unfavorable; to figureout the opportunities & threats hidden in the environment

events & trends.

• To project how the environment will be at a future pointof time.

• To assess the scope of various opportunities & shortlistthose that can favorably impact the business.



AUDIT OF ENVIRONMENTAL INFLUENCES

ASSESSMENT OF THE NATURE OF THE ENVIRONMENT

IDENTIFICATION OF THE KEY ENVIRONMENT FORCES

IDENTIFICATION OF THE PRINCIPAL OPPORTUNITIES & THREATS

STRATEGIC POSITION



ECONOMICS FACTORSD E M

O G R A P H I C F A C T O

R S

L E GAL F ACT

ORS

TECH

NOLO

GICAL

FACT

ORS

P O LI T I C AL F AC T O R S

SOCIAL FACTOR

S

CULTURA

L FACTORS

SUPPLIERS

CONSUMER

COMPETITORS D

I S T R I B U T O R

MARKETER



• It creates an increased general awareness of environmental changes on the part of management.

• It guides with greater effectiveness in matters relatingthe government.

• It helps in marketing analysis.• It suggest improvements in diversification & resource

allocation.

• It helps firms to identify & capitalize upon

opportunities rather than losing out to competitors.• It provides qualitative information that can subsequently

be of value in designing the strategies.



• MACRO ENVIROMENT

1. DEMOGRAPHIC ENVIRONMENT

2. SOCIO – CULTURALENVIRONMENT

3. ECONOMIC ENVIRONMENT4. POLITICAL ENVIRONMENT

5. NATURAL ENVIRONMENT

6. TECHNOLOGICAL ENVIRONMENT

7. LEGAL ENVIRONMENT

8. GOVERNMENT ENVIRONMENT

• MICRO ENVIRONMENT

1. THE MARKET / DEMAND

2. THE CONSUMER

3. THE INDUSTRY4. GOVERNMENT POLICIES

5. THE COMPETITION

6. SUPPLIERS RELATEDFACTORS



The marketing environment surrounds

and impacts upon the organization.

There are three key perspectives on

the marketing environment:

• The micro-environment

• The macro-environment

• The internal environment.



The micro-environment

• This environment influences the organization directly.

• It includes :

1 suppliers who deal directly or indirectly

2 consumers and customers3 other local stakeholders

• Micro tends to suggest small, but this can bemisleading.

• Micro describes the relationship between firms andthe driving forces that control this relationship.

• It is a more local relationship, and the firm mayexercise a degree of influence.



The macro-environment

• This includes all factors that can influence anorganization, but that are out of their direct control.

• A company does not generally influence any laws .It iscontinuously changing, and the company needs to be

flexible to adapt.• There may be aggressive competition and rivalry in a

market.

• Globalization means that there is always the threat of

substitute products and new entrants.• The wider environment is also ever changing, and the

marketer needs to compensate for changes in culture,politics, economics and technology.



The internal environment.

• All factors that are internal to the organization

are known as the ‘internal environment’. They

are generally audited by applying the ‘Five Ms’

which are Men, Money, Machinery, Materialsand Markets. The internal environment is as

important for managing change as the external.

As marketers we call the process of managing

internal change ‘internal marketing.’• Essentially we use marketing approaches to aid

communication and change management.

http://www.marketingteacher.com/Lessons/lesson_internal_marketing.htm

http://www.marketingteacher.com/Lessons/lesson_internal_marketing.htm



• The external environment can be audited

in more detail using other approaches

such as SWOT Analysis, Michael Porter’s

Five Forces Analysis or PEST Analysis

http://www.marketingteacher.com/Lessons/lesson_swot.htm

http://www.marketingteacher.com/Lessons/lesson_fivefoces.htm

http://www.marketingteacher.com/Lessons/lesson_PEST.htm



http://www.marketingteacher.com/Lessons/lesson_swot.htm



External Macro environment

• The external macro environment consists

of all the outside institutions and forces

that have an actual or potential interest or

impact on the organization's ability toachieve its objectives: competitive,

economic, technological, political,

legal, demographic, cultural, and ecosystem.



Competitive Environment

• It is impossible for an organization to develop strongcompetitive positioning strategies without a goodunderstanding of its competitors and the strengthsand weaknesses of the competitors.

• Three levels of competition exist.1. Direct competitors (ex. grocery stores).2. Competition exists between products (ex.margarine for butter).

3. Competition exists on the basis of the consumer'spurchasing power (ex. entertainment).

• Pure competition, Monopolistic competition,Oligopoly, Monopoly



Economic Environment

• The economic environment consists of factors that affectconsumer purchasing power and spending patterns.Economic factors include business cycles, inflation,unemployment, interest rates, and income. Changes in

major economic variables have a significant impact onthe marketplace.

• Why are superstars paid so much?

• Marketers can't control the problems that have croppedup, and that may continue to develop, at various hot

spots across the global economy. But they can -- andshould -- take proactive steps to shelter their organizations from unwanted consequences of aworldwide downturn.

http://www.tcb-indicators.org/

http://cpcug.org/user/invest/inflate.html

http://www.bls.gov/data/home.htm

http://www.federalreserve.gov/releases/h15/update/

http://www.census.gov/hhes/www/income.html

http://www.census.gov/econ/www/

http://ollie.dcccd.edu/mrkt2370/Chapters/ch2/2super.html

http://ollie.dcccd.edu/mrkt2370/Chapters/ch2/2super.html

http://www.census.gov/econ/www/

http://www.census.gov/hhes/www/income.html

http://www.federalreserve.gov/releases/h15/update/

http://www.bls.gov/data/home.htm

http://cpcug.org/user/invest/inflate.html

http://www.tcb-indicators.org/



Technological Environment

• The technological environment refers to

new technologies, which create new

product and market opportunities.

Technological developments are the mostmanageable uncontrollable force faced by

marketers. Organizations need to be

aware of new technologies in order to turnthese advances into opportunities and a

competitive edge.

http://www.infomartusa.com/

http://www.infomartusa.com/



Political and Legal Environment

• Organizations must operate within a framework of governmental regulation and legislation.Government relationships with organizationsencompass subsidies, tariffs, import quotas, andderegulation of industries

• The political environment includes governmentaland special interest groups that influence and limitvarious organizations and individuals in a givensociety. The major purposes of business legislation

include protection of companies from unfair competition, protection of consumers from unfair business practices and protection of the interests of society from unbridled business behavior.

http://ollie.dcccd.edu/mrkt2370/Chapters/ch2/2reg.html

http://nationaljournal.com/

http://ollie.dcccd.edu/mrkt2370/Chapters/ch2/2laws.html

http://ollie.dcccd.edu/mrkt2370/Chapters/ch2/2laws.html

http://nationaljournal.com/

http://ollie.dcccd.edu/mrkt2370/Chapters/ch2/2reg.html



Demographic Environment

• Demographics tell marketers who are

current and potential customers; where

they are; and how many are likely to buy

what the marketer is selling. Demographyis the study of human populations in terms

of size, density, location, age, sex, race,

occupation, and other statistics.

http://www.easidemographics.com/

http://www.easidemographics.com/



Cultural Environment

• Social/cultural forces are the most difficult

uncontrollable variables to predict. It is

important for marketers to understand and

appreciate the cultural values of theenvironment in which they operate. The

cultural environment is made up of forces

that affect society's basic values,perceptions, preferences, and behaviors.

http://www.yahoo.com/Society_and_Culture/

http://www.yahoo.com/Society_and_Culture/



Ecosystem Environment

• The ecosystem refers to natural systems

and its resources that are needed as

inputs by marketers or that are affected by

marketing activities. Green marketing (thegreening of America) or environmental

concern about the physical environment

has intensified in recent years.

http://www.csu.edu.au/ci/vol3/klomp/node2.html

http://www.greenmarketing.com/

http://www.greenmarketing.com/

http://www.csu.edu.au/ci/vol3/klomp/node2.html



External Microenvironment

• The external microenvironment consists of forces that are part of an organization'smarketing process but are external to the

organization. These micro environmentalforces include the organization's market,its producer-suppliers, and its marketingintermediaries. While these are external,

the organization is capable of exertingmore influence over these than forces inthe macro environment.



The Market

• Organizations closely monitor their customer markets in order to adjust to changing tastes andpreferences. A market is people or organizations with wants to satisfy, money tospend, and the willingness to spend it.

• Consumer markets

• Business markets

• Reseller markets • Government markets

• .International markets



Suppliers

• Suppliers are organizations and

individuals that provide the resources

needed to produce goods and services



Marketing Intermediaries

• Like suppliers, marketing intermediaries

are an important part of the system used

to deliver value to customers. Marketing

intermediaries are independentorganizations that aid in the flow of

products from the marketing organization

to its markets.



Marketing Information

• External environmental sources provide

raw data for marketers to develop into

actionable, marketing information.

Environmental forces create challengesand opportunities for the organization.

Marketers must react and adapt to

changes in their external environment.Globalization is an example of an

opportunity for an organization.



Introduction

• The model of the Five Competitive Forces wasdeveloped by Michael E. Porter in his book „CompetitiveStrategy: Techniques for Analyzing Industries andCompetitors“ in 1980.

• Since that time it has become an important tool for analyzing an organizations industry structure instrategic processes.

• Porter has identified five competitive forces that shape

every industry and every market.

• These forces determine the intensity of competition andhence the profitability and attractiveness of an industry.



1.Bargaining Power of Suppliers

Supplier bargaining power is likely to be highwhen:

• The market is dominated by a few largesuppliers rather than a fragmented source of

supply

• There are no substitutes for the particular input

• The switching costs from one supplier toanother are high



There is the possibility of the supplier integratingforwards in order to obtain higher prices and

margins. This threat is especially high when• The buying industry has a higher profitability than

the supplying industry

• Forward integration provides economies of scalefor the supplier

• The buying industry hinders the supplyingindustry in their development (e.g. reluctance toaccept new releases of products)

• The buying industry has low barriers to entry.



2. Bargaining Power of

Customers

Customers bargaining power is likely to behigh when

• They buy large volumes, there is aconcentration of buyers,

• The supplying industry comprises a largenumber of small operators

• The supplying industry operates with high

fixed costs• The product is undifferentiated and can

be replaces by substitutes



• Switching to an alternative product is relatively simple andis not related to high costs

• Customers have low margins and are price-sensitive

• Customers could produce the product themselves

• The product is not of strategical importance for the

customer

• The customer knows about the production costs of theproduct

• There is the possibility for the customer integratingbackwards.



3.Threat of New Entrants

• The threat of new entries will depend on the extent towhich there are barriers to entry. These are typically

• Economies of scale (minimum size requirements for profitable operations)

• High initial investments and fixed costs

• Cost advantages of existing players due toexperience curve effects of operation with fully

depreciated assets

• Brand loyalty of customers



• Protected intellectual property like patents,licenses etc,

• Scarcity of important resources, e.g. qualifiedexpert staff

• Access to raw materials is controlled by existingplayers,

• Distribution channels are controlled by existingplayers,

• Existing players have close customer relations,e.g. from long-term service contracts,

• High switching costs for customers

• Legislation and government action



4. Threat of Substitutes

• Similarly to the threat of new entrants, thetreat of substitutes is determined by factorslike

• Brand loyalty of customers,• Close customer relationships,

• Switching costs for customers,

• The relative price for performance of substitutes

• Current trends.



5.Competitive Rivalry between

Existing Players Competition between existing players is likely to be high

when:

• There are many players of about the same size,

• Players have similar strategies

• There is not much differentiation between playersand their products, hence, there is much pricecompetition

• Low market growth rates (growth of a particular company is possible only at the expense of a

competitor),• Barriers for exit are high (e.g. expensive and highly

specialized equipment).



SWOT Analysis

• SWOT analysis is a tool for auditing an

organization and its environment. It is the

first stage of planning and helps marketers

to focus on key issues. SWOT stands for strengths, weaknesses, opportunities,

and threats. Strengths and weaknesses

are internal factors. Opportunities andthreats are external factors.



• In SWOT, strengths and weaknesses areinternal factors. For example: A strengthcould be:

• Your specialist marketing expertise.

• A new, innovative product or service.

• Location of your business.

• Quality processes and procedures.

• Any other aspect of your business that addsvalue to your product or service.



• A weakness could be:

• Lack of marketing expertise.

• Undifferentiated products or services (i.e.in relation to your competitors).

• Location of your business.

• Poor quality goods or services.• Damaged reputation.



• In SWOT , opportunities and threats are

external factors. For example: An opportunity

could be:• A developing market such as the Internet.

• Mergers, joint ventures or strategic alliances.

• Moving into new market segments that offer improved profits.

• A new international market.

• A market vacated by an ineffective competitor.



• A threat could be:

• A new competitor in your home market.• Price wars with competitors.

• A competitor has a new, innovative product

or service.• Competitors have superior access to

channels of distribution.

• Taxation is introduced on your product or service.



• A word of caution, SWOT analysis can be

very subjective. Do not rely on SWOT too

much. Two people rarely come-up with the

same final version of SWOT. TOWSanalysis is extremely similar. It simply

looks at the negative factors first in order

to turn them into positive factors. So useSWOT as guide and not a prescription.



• Simple rules for successful SWOT analysis.

• Be realistic about the strengths and weaknesses of your

organization when conducting SWOT analysis.• SWOT analysis should distinguish between where your

organization is today, and where it could be in the future.

• SWOT should always be specific. Avoid grey areas.

• Always apply SWOT in relation to your competition i.e.better than or worse than your competition.

• Keep your SWOT short and simple. Avoid complexityand over analysis

• SWOT is subjective.



• Once key issues have been identified with your SWOT analysis, they feed into marketingobjectives. SWOT can be used in conjunctionwith other tools for audit and analysis, such as

PEST analysis and Porter's Five-Forces analysis. So SWOT is a very popular tool with marketingstudents because it is quick and easy to learn.During the SWOT exercise, list factors in the

relevant boxes. It's that simple. Below are someFREE examples of SWOT analysis - click to gostraight to them







• Do you need a more

advanced SWOT Analysis?



• Example 1 - Wal-Mart SWOT Analysis. Strengths - Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store. Weaknesses - Wal-Mart is theWorld's largest grocery retailer and control of its empire,despite its IT advantages, could leave it weak in someareas due to the huge span of control. Opportunities - Totake over, merge with, or form strategic alliances withother global retailers, focusing on specific markets such

as Europe or the Greater China Region. Threats - Beingnumber one means that you are the target of competition, locally and globally.

http://www.marketingteacher.com/SWOT/walmart_swot.htm

http://www.marketingteacher.com/SWOT/walmart_swot.htm



• Example 3 - Nike SWOT Analysis. Strengths -

Nike is a very competitive organisation. Phil

Knight (Founder and CEO) is often quoted as

saying that 'Business is war withoutbullets.'Weaknesses - The organisation does

have a diversified range of sports products.

Opportunities - Product development offers Nike

many opportunities. Threats - Nike is exposed tothe international nature of trade.

http://www.marketingteacher.com/SWOT/nike_swot.htm

http://www.marketingteacher.com/SWOT/nike_swot.htm



PEST analysis

• Political factors

• Economic factors

•Social factors

• Technological factors



E i F t



Economic Factors.

• Marketers need to consider the state of a trading

economy in the short and long-terms. This is

especially true when planning for international

marketing. You need to look at:• 1. Interest rates.

• 2. The level of inflation Employment level per

capita.

• 3. Long-term prospects for the economy Gross

Domestic Product (GDP) per capita, and so on.

S i lt l F t



Sociocultural Factors.

• The social and cultural influences on business vary fromcountry to country. It is very important that such factorsare considered. Factors include:

• 1.What is the dominant religion?• 2.What are attitudes to foreign products and services?• 3.Does language impact upon the diffusion of products

onto markets?• 4.How much time do consumers have for leisure?• 5.What are the roles of men and women within society?

• 6.How long are the population living? Are the older generations wealthy?• 7.Do the population have a strong/weak opinion on

green issues?

T h l i l F t



Technological Factors.

• Technology is vital for competitive advantage, and is amajor driver of globalization. Consider the followingpoints:

• 1. Does technology allow for products and services to bemade more cheaply and to a better standard of quality?

• 2.Do the technologies offer consumers and businessesmore innovative products and services such as Internetbanking, new generation mobile telephones, etc?

• 3.How is distribution changed by new technologies e.g.books via the Internet, flight tickets, auctions, etc?

• 4.Does technology offer companies a new way tocommunicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

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