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Analyzing Marketing Environment

Analyzing Marketing Environment. ENVIRONMENT. Macro Environment. Micro Environment. Internal Environment. Financiers Suppliers Customers Competitors Public Mktg Intermediaries. Mission / Objectives Management Structure Internal Power Relationship Physical Assets & facilities.

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Analyzing Marketing Environment

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  1. Analyzing Marketing Environment

  2. ENVIRONMENT Macro Environment Micro Environment Internal Environment Financiers Suppliers Customers Competitors Public Mktg Intermediaries Mission / Objectives Management Structure Internal Power Relationship Physical Assets & facilities Economic Technological Global Demographic Socio-Cultural Political Business Decision Company image Human resources Financial Capabilities Technological Capabilities Marketing Capabilities

  3. Importance of Marketing Environment • Identification of Opportunities • Identification of Threats • Deal with the Internal Environment • Better Understanding of the Market • Image Building • Better Performance

  4. Process of Environmental Analysis: The analysis consists of four steps: • Scanning : Detect early signals of possible environmental change and detect environmental change already underway. • Monitoring : Purpose of monitoring is to assemble sufficient data to discern whether certain trends are emerging, identification of the trends and identification of areas for further scanning. • Forecasting : It is concerned with developing projections of the direction, scope and intensity of environmental change. • Assessment : To determine implications for the organisation’s current and potential strategy.

  5. Analysis of Environment • SWOT analysis • PEST analysis • Five forces analysis etc.

  6. SWOT ANALYSIS • Strengths: unit’s resources and capabilities that can be used as a basis for developing a competitive advantage Examples: good reputation among customers, resources, assets, people, : experience, knowledge, data, capabilities • Weaknesses: internal force that could serve as a barrier to maintain or achieve a competitive advantage; a limitation, fault or defect of the unit. Example: gaps in capabilities, financial, deadlines, morale, lack of competitive

  7. Cont.. • Opportunities: any favorable situation present now or in the future in the external environment. Examples: unfulfilled customer need, arrival of new technologies, loosening of regulations, global influences, economic boom, demographic shift • Threats: External force that could inhibit the maintenance or attainment of a advantage; any unfavorable situation in the external environment that is potentially damaging now or in the future. Examples: shifts in consumer tastes, new regulations, political or legislative effects, environmental effects, new technology, loss of key staff, economic downturn, demographic shifts, competitor intent; market demands; sustaining internal capability; insurmountable weaknesses; financial backing

  8. PEST analysis • Political factors • Economic factors • Socio-cultural factors • Technological factors

  9. Cont.. • Political/legal: • Monopolies legislation • Environmental protection laws • Taxation policy • Employment laws • Government policy • Legislation • Others? • Economic Factors: • Inflation • Employment • Disposable income • Business cycles • Energy availability and cost • Others?

  10. Cont.. • Socio-cultural factors: • Demographics • Distribution of income • Social mobility • Lifestyle changes • Consumerism • Levels of education • Others? • Technological: • New discoveries and innovations • Speed of technology transfer • Rates of obsolescence • Internet • Information technology • Others?

  11. Porter five forces analysis • It is a framework for industry analysis and business strategy development • formed by Michael E. Porter of Harvard Business in 1979. • Three of Porter's five forces refer to competition from external sources. The remainder are internal threats

  12. Cont.. • Threat of new entrants: Profitable markets that yield high returns will attract new firms. Factors are:- • Government policy • Capital requirements • Absolute cost • Cost disadvantages independent of size • Economies of scale • Economies of product differences • Product differentiation • Brand equity • Switching costs or sunk costs • Expected retaliation • Access to distribution • Customer loyalty to established brands • Industry profitability (the more profitable the industry the more attractive it will be to new competitors)

  13. Cont.. • Threat of substitute products or services: The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. Potential factors:- • Buyer propensity to substitute • Relative price performance of substitute • Buyer switching costs • Perceived level of product differentiation • Number of substitute products available in the market • Ease of substitution. Information-based products are more prone to substitution, as online product can easily replace material product. • Substandard product • Quality depreciation

  14. Cont.. • Bargaining power of customers (buyers); the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. Potential factors: • Buyer concentration to firm concentration ratio • Degree of dependency upon existing channels of distribution • Bargaining leverage, particularly in industries with high fixed costs • Buyer switching costs relative to firm switching costs • Buyer information availability • Force down prices • Availability of existing substitute products • Buyer price sensitivity • Differential advantage (uniqueness) of industry products • RFM (customer value) Analysis

  15. Cont.. • Bargaining power of suppliers: Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm when there are few substitutes. Potential factors: • Supplier switching costs relative to firm switching costs • Degree of differentiation of inputs • Impact of inputs on cost or differentiation • Presence of substitute inputs • Strength of distribution channel • Supplier concentration to firm concentration ratio • Employee solidarity (e.g. labor unions) • Supplier competition: the ability to forward vertically integrate and cut out the buyer.

  16. Intensity of competitive rivalry: the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. Potential factors: • Sustainable competitive advantage through innovation • Competition between online and offline companies • Level of advertising expense • Powerful competitive strategy • Firm concentration ratio • Degree of transparency

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