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LECTURE 3

ANALYZING MARKETING ENVIRONMENT

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Adapted from D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill

The Marketing Environment

Company

Microenvironment

Macroenvironment

Legal

Political

Technological

Social

Economic

Suppliers Customers

Distributors

Competitors

VMV

S W

O T

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WHY scan the environment?

• “Assessing the potential impact of likely changes in the environment offers organisations an advantage over their competitors by enabling decision-makers to narrow their range of options.

• It is clear that, in a dynamic & complex business environment, attempting to forecast sometimes discontinuous trends is fraught with difficulty…..

• However, to do nothing is even more dangerous for an organisation, as is over-reliance on internal sources of information, rather than external channels”

Scanning the environment

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Model 1 - Using PEST/PESTEL analysis to scan the

“MACRO” environment

ORGANISATIONORGANISATION

Legal

Political

Social

Ecological

Technological

Economic

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Some possible PEST factors• Political / Legal

1. EU monopolies commission2. Deregulated markets3. Taxation policy4. International trade policy5. Joint Ventures legislation

• Social / Ecological1. Population demographics

(household size, no of cars)2. Income distribution3. Level of environmental concern4. Attitudes to work & leisure5. Education levels

• Economic 1. Business cycle2. Interest rates / inflation3. Unemployment level4. Raw materials availability5. Disposable income

• Technological1. Govt spending on research2. Speed of take-up of new

technology3. Barriers to entry 4. Impact of Internet5. Merging of “ unrelated” sectors

e.g. banks & telecomms

Note: EXAMPLES ONLY!

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Model 2 – Using 5 Forces analysis to scan the “MICRO” environment

IndustryIndustryCompetitorsCompetitors

Intensity ofIntensity ofRivalryRivalry

BuyersSuppliers

NewEntrants

Substitutes

Threat ofThreat ofNew EntrantsNew Entrants

Threat ofThreat ofSubstitutesSubstitutes

BargainingBargainingPower ofPower ofSuppliersSuppliers

BargainingBargainingPower ofPower ofBuyersBuyers

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5 Forces example: BT Cellnet MM02(phones)

StrongVodaphone

OrangeOne-to-one

WeakCost of licence

High barrier to entryHuge cost to 3G New functions?

StrongCustomers have many competing offers, some

including airtime, some not.

Cheap deals throughInternet

WeakNokia

MotorolaEricsson

Competing stronglyFor share of

Mature market

MediumCustomers returning to

land linesConvergence with PDAs

Location technology

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Basic information we need

• Who are they?• Who could they/should they

be? • How are their

needs/expectations met?• How loyal are they?• How do they rate the company

– product/price/service• How do they rate the company

in relation to the competition?• What relevant broad macro

changes are taking place?

• Who are they and what are their objectives?

• Are they likely to change?• What is happening to market

share?• Can we compare our

profitability with their profitability?

• What are their strengths and weaknesses?

• How do customers rate the competition in relation to our company?

• What will provoke the biggest retaliation from the competition?

CUSTOMERS COMPETITORS

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Internal analysis

• What are we doing right?• What are we doing wrong?• What are our internal strengths?• What are our internal weaknesses?

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• Use the preceding steps to help complete the SWOT.• SWOT should come at end of Marketing Audit and summarize it.• Highlight the key issues from the SWOT, - summary of the issues

and implications for the company.• Should provide a succinct, interesting and readable summary

of the state of the business and the external factors and trends impacting on it.

• Beware! Inherent simplicity of the technique is often its undoing• Can become vague, confused, irrelevant, lacking in direction• A strength is only a truly a strength if you are stronger than your

competitors on that attribute

Bringing Macro/Micro/Internal information together - Marketing Audit

Summary – Model 3 - SWOT

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An example of a SWOT

• Strengths• Strong market research teams• Distribution network• Strong financial resources• Service Reputation

• Opportunities• Deregulated markets for

utilities • Competitors prices rising due

to currency fluctuation• Strategic alliance possibilities

• Weaknesses • Admin costs 20% higher

in UK than elsewhere• Major competitors more

innovative• Little synergy between

divisions

• Threats• EC widening may bring in

low cost competitors• Business activity in world

economy starting to slow

Effective use of SWOT

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

MatchingStrategies

ConversionStrategies

ConversionStrategies

Model 4 - The Marketing Plan

Corporate objectives

Marketing audit

SWOT

Marketing objectives/strategies

Alternative plans/mix

Programmes

Measure/review

Assumptions

Estimate results

FEEDBACK

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10 benefits for you from Marketing Planning

1. Hitting the best customer targets2. Winning new customers3. Expanding markets4. Beating the competition5. Keeping abreast of market developments6. Using resources to best advantage7. Improving internal communications8. Minimising threats to Reduce risk and surprise9. Identifying company strengths

and weaknesses10. Achieving consistency

It looks like hard work – why bother?

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So where have we reached?

• Marketing – anticipating, satisfying customer requirements at a profit

• Customer focus – at the centre of a company’s universe• Market driven will be + profitable than product driven• Company values dictate orientation• Companies exist within an environment• We can influence the micro but not the macro• We must take great care with our competition• Internal resources must match strategies• The marketing plan – bringing it together• Marketing planning keeps us ahead