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The Marketing Environment and Competitor Analysis

The Marketing Environment and Competitor Analysis. SWOT analysis PEST analysis Five forces analysis. SWOT analysis. Strengths (internal) Weaknesses (internal) Opportunities (external) Threats (external). SWOT ANALYSIS.

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The Marketing Environment and Competitor Analysis

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  1. The Marketing Environment and Competitor Analysis • SWOT analysis • PEST analysis • Five forces analysis

  2. SWOT analysis • Strengths (internal) • Weaknesses (internal) • Opportunities (external) • Threats (external)

  3. SWOT ANALYSIS • A SWOT analysis is an excellent tool to use if the organization wants to take a step back and assess the situation they are in. Issues raised from the analysis are then used to assist the organization in developing their marketing mix strategy. A SWOT analysis must form the part of any prudent marketing strategy.

  4. SWOT Analysis Based on assumption an effective strategy derives from a sound “fit” between a firm’s internal resources and its external situation Opportunities A major favorable situation in a firm’s environment Threats A major unfavorable situation in a firm’s environment Weaknesses A limitation or deficiency in one or more resources or competencies relative to competitors Strengths A resource advantage relative to competitors and the needs of markets firm serves

  5. Strength examples could include: • A strong brand name. • Market share. • Good reputation. • Expertise and skill. • Weaknesses could include: • Low or no market share. • No brand loyalty. • Lack of experience.

  6. Opportunities could include: • A growing market. • Increased consumer spending. • Selling internationally. • Changes in society beneficial to your company. • Threats could include: • Competitors • Government policy eg taxation, laws. • Changes in society not beneficial to your company.

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

  8. Political/legal • Monopolies legislation • Environmental protection laws • Taxation policy • Employment laws • Government policy • Legislation • Others?

  9. Economic Factors • Inflation • Employment • Disposable income • Business cycles • Energy availability and cost • Others?

  10. Socio-cultural factors • Demographics • Distribution of income • Social mobility • Lifestyle changes • Consumerism • Levels of education • Others?

  11. Technological • New discoveries and innovations • Speed of technology transfer • Rates of obsolescence • Internet • Information technology • Others?

  12. Porter’s Five Forces Model Potential Entrants Threat of New Entrants Industry Competitors Bargaining Power of Suppliers Bargaining Power of Buyers Suppliers Buyers Rivalry Among Existing Firms Threat of Substitute Products or Services Substitutes 13 These five forces determine the profit potential of a particular industry

  13. Five forces analysis • One assumption of Porter’s five forces model is that some industries are inherently more attractive than others; that is, the profit potential for companies in that industry is higher. As this figure indicates, the interaction and strength of five forces influences profit potential.

  14. The purpose of Five-Forces Analysis The five forces are environmental forces that impact on a company’s ability to compete in a given market. The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.

  15. Economies of Scale Product Differentiation Barriers to Entry Capital Requirements Switching Costs Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy Threat of New Entrants

  16. Supplier industry is dominated by a few firms Suppliers exert power in the industry by: Suppliers’ products have few substitutes * Threatening to raise prices or to reduce quality Buyer is not an important customer to supplier Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases Suppliers’ product is an important input to buyers’ product Suppliers’ products are differentiated Suppliers’ products have high switching costs Supplier poses credible threat of forward integration Bargaining Power of Suppliers Suppliers are likely to be powerful if:

  17. Buyers are concentrated or purchases are large relative to seller’s sales Buyers compete with the supplying industry by: Purchase accounts for a significant fraction of supplier’s sales Products are undifferentiated * Bargaining down prices * Forcing higher quality Buyers face few switching costs Buyers’ industry earns low profits Buyer presents a credible threat of backward integration Product unimportant to quality Buyer has full information Bargaining Power of Buyers Buyer groups are likely to be powerful if:

  18. Products with similar functionlimit the prices firms can charge Products with improving price/performance tradeoffs relative to present industry products Example: Electronic security systems in place of security guards Fax machines in place of overnight mail delivery Threat of Substitute Products Keys to evaluate substitute products:

  19. Intense rivalry often plays out in the following ways: Jockeying for strategic position Using price competition Staging advertising battles Increasing consumer warranties or service Making new product introductions Occurs when a firm is pressured or sees an opportunity Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors Rivalry Among Existing Competitors

  20. Numerous or equally balanced competitors Slow growth industry High fixed costs High storage costs Lack of differentiation or switching costs Capacity added in large increments Diverse competitors High strategic stakes High exit barriers Rivalry Among Existing Competitors Cut-throatcompetition is more likely to occur when:

  21. Strategic Management in Action Analyzing Current Situation Deciding on Strategies Putting Strategies in Action Evaluating and Changing Strategies Situation Analysis Strategy Formulation Strategy Implementation Strategy Evaluation Organizational Context Functional Competitive External Analysis Internal Analysis Corporate

  22. The directional policy matrix (GE matrix) INDUSTRY ATTRACTIVENESS High Medium Low High Medium Low Investmentand Growth SelectiveGrowth Selectivity BUSINESS STRENGTH SelectiveGrowth HarvestOr Divest Selectivity HarvestOr Divest HarvestOr Divest Selectivity

  23. Porter - the value chain FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT PROCUREMENT SUPPORT ACTIVITIES M A R G I N INBOUND OPERATIONS OUTBOUND MARKETING SERVICE LOGISTICS LOGISTICS & SALES M A R G I N PRIMARY ACTIVITIES (Source: M Porter)

  24. The strategic ‘gap’ Gap analysis - and what to do about it … Objective Forecast Sales/Profits (Rs.) Time

  25. Strategic Alternatives 1. Improve productivity • Reduce costs • Improve the sales mix • Increase prices • Reduce discounts • Increase productivity 2. Market penetration • Increase market share • Increase usage frequency • Increase purchase values 3. Market development • Geographical expansion • Find new customer segments 4. Product development • Develop new products • Reconfigure existing products 5. Diversification • New products to new markets

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