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AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
AMCA Lecture Two  Environment And Industry Analysis
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AMCA Lecture Two Environment And Industry Analysis

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  • 1. MKTG 1265 Advanced Marketing Concepts and Applications Lecture Two Environment and Industry Analysis 2-1
  • 2. Agenda Understanding macro-environmental forces and its impact on marketing PEST and SWOT Analyses Industry Analysis Application of the Porter’s Five Forces Model in marketing Market Analysis and Market Segmentation 2-2 MKTG 1265 (AMCA)
  • 3. Reference for Lecture Two: Week 2 - Environment and Industry Analysis Porter, M.E. (2008). The Five Competitive Forces that Shape Strategy, Harvard Business Review, January, 78-93. Note: this is the 2008 update of the classic strategy article that appeared in the HBR written by Professor Michael Porter 2-3
  • 4. Areas of External Analysis: STP: covered in Covered in your your previous previous BB marketing course courses 2-4 : covered in this module MKTG 1265 (AMCA)
  • 5. Moving from macro to micro aspects…. INDUSTRY ANALYSIS Market and Customer Analysis 4-5 2-5
  • 6. PEST and SWOT Analyses 2-6 MKTG 1265 (AMCA)
  • 7. Micro and Macro Environmental Factors (Professor Philip Kotler) Micro Factors: Direct influence on the firm’s marketing operations and to some extent are controllable factors (notice that the first factor is “the company” (internal operations) Macro Factors: Indirect influence and are mostly uncontrollable. These factors make up the typical PEST forces 2-7
  • 8. Macro Factors: Political Factors / Legal Factors Economic Factors Social/ Cultural Factors Technological Factors It is important to always FOCUS your PEST factors to the specific industry that you are studying and not stray into vague and irrelevant or very broad macro factors that are not related to your business operations. The PEST factors that you list in your marketing report should be closely correlated to the nature of your market, products and business operations 2-8 MKTG 1265 (AMCA)
  • 9. © Strategy in Marketing (Pearson Asia 2009) PEST and Marketing (some examples) Political Factors Impact on Marketing Stability of government Determines market attractiveness- Policies should the form move into this country? (global marketing) Legal Factors Impact on Marketing Laws relating to conduct of Product standards business Product labelling Regulations on advertising and promotions Pricing Types of direct marketing allowed 2-9 MKTG 1265 (AMCA)
  • 10. © Strategy in Marketing (Pearson Asia 2009) PEST and Marketing (some examples) Economic Factors Impact on Marketing National Income/ Affordability levels GDP/Economic Growth Purchasing power and outlook Interest rates Price level Level of competition Social Factors Impact on Marketing Changing demographics Segmentation/Targeting Lifestyles Advertising and promotional Culture and subcultures appeals 2-10 MKTG 1265 (AMCA)
  • 11. © Strategy in Marketing (Pearson Asia 2009) PEST and Marketing (some examples) Technology Factors Impact on Marketing New breakthroughs/ innovations New product development (NPD) strategies Identifying innovators and early adopters Note that not all the PEST factors will be the same for all markets and industries. It is important to fit the product you are studying to specific types of PEST factors that have a direct connection to that product 2-11 MKTG 1265 (AMCA)
  • 12. Linking PEST and Marketing Strategy Make the PEST Industry specific Write the examples of PEST using only information related to the business and the product category Show trends and changes Identify which PEST factors will have significant impact on your marketing strategies Think of how these PEST factors will have linkages to marketing strategies in the future 2-12 MKTG 1265 (AMCA)
  • 13. (source: Kotler, Armstrong and da Silva 2006: Pearson Asia) 2-13
  • 14. Areas of Internal Analysis: 2-14 = will be covered in Lecture Five (Marketing Metrics) MKTG 1265 (AMCA)
  • 15. SWOT analysis After you have completed the External and Internal Analyses, you can bring all the factors together into a SWOT framework 2-15
  • 16. Conducting SWOT analysis involves identifying the key issues facing the company. These issues must be RELEVANT to the business and should avoid talking about generalities. A good SWOT analysis should throw up some IMPLICATIONS for future action….. 2-16
  • 17. Very often all we do is a mere SWOT Listing Strengths Weaknesses: •.. •.. •.. •.. •.. •.. •.. •.. •.. •.. Opportunities Threats •.. •.. •.. •.. •.. •.. •.. •.. •.. •.. 2-17 MKTG 1265 (AMCA)
  • 18. There are several limitations: SWOT is historical- what happened before SWOT may tell us what is already happening; nothing new that we don’t know SWOT is descriptive-does not help the planner to identify issues and implications SWOT may be too broad-brush (overall company based rather than issue based) SWOT may be based on inaccurate information SWOT does not incorporate competitors perspective 2-18 MKTG 1265 (AMCA)
  • 19. The arising from SWOT analysis 2-19 MKTG 1265 (AMCA)
  • 20. Diagnosis and Prognosis…. 2-20 MKTG 1265 (AMCA)
  • 21. © Strategy in Marketing (Pearson Asia 2009) The implication for Strategic Marketing We can do as much investigation as we can in order to dig up information about the company and its marketing operations But once we gather this information we need to carry out recommendations as to what is the NEXT course of action This means that SWOT should not be just a historical or concurrent review (what is happening now) but should also be able to extrapolate what is “likely to happen” in future. 2-21 MKTG 1265 (AMCA)
  • 22. Making SWOT more effective: 1. Find out which factors carry more weight or impact (be discriminating; use judgment) Strengths Weaknesses: •.. •.. •.. •.. •.. •.. •.. •.. •.. •.. Opportunities Threats •.. •.. •.. •.. •.. •.. •.. •.. •.. •.. 2-22 MKTG 1265 (AMCA)
  • 23. Making SWOT more effective: 2. Try to determine how best to match or link the SWOT factors such that we are able to see possible action strategies emerging Strengths Weaknesses: •.. •.. •.. •.. •.. •.. •.. •.. •.. •.. Opportunities Threats •.. •.. •.. •.. •.. •.. •.. •.. •.. •.. 2-23 MKTG 1265 (AMCA)
  • 24. Strengths Weaknesses n le of a S1:Strong brand reputation W1: Limited mp ian S2:Substantial financial number of Exa As l te backing properties Ho (locations) S3:Service management expertise in hospitality business Opportunities Threats O1: Growth in air travel due T1:Competitor hotels to emergence of budget opening up in locations airlines where we are absent O2: Emergence of the T2: Growth in no-frills hotels frequent/repeat leisure traveler on intra-Asian destinations 2-24 © Strategy in Marketing (Pearson Asia 2009)
  • 25. Applying SWOT to Marketing Strategies… 2-25 (source: Kotler, Armstrong and da Silva 2006: Pearson Asia) MKTG 1265 (AMCA)
  • 26. Industry Analysis How to analyze the key competitive forces in a given industry 2-26
  • 27. Industry Group of firms that produce products and services that fall within a specific category/ categories Example the auto industry; the airline industry; the hospitality industry Within the industry there are many players Each fighting for a slice of the market share Within the industry, market and technological forces can shift market conditions 2-27 MKTG 1265 (AMCA)
  • 28. What factors determine an industry’s attractiveness? The growth prospects in the industry- what environmental factors will be impacting the industry (favorable/ unfavorable?) The size of market demand/ purchasing power Number and size of competitors Intensity of rivalry- what kinds of strategies are being used by competitors? Risk factors / unforeseen circumstances Government policies 4-28 2-28
  • 29. Most popular model used in industry analysis: Professor Michael Porter (Harvard Business School) 2-29
  • 30. Consider what this model means: Threats in an industry comes from all sides or corners 4-30 2-30
  • 31. Detailed version of the model: 2-31 2-31 MKTG 1265 (AMCA)
  • 32. Rivalry Among Existing Firms 2-32 Source: Thomson and Strickland (2006)
  • 33. Threat of New Entrants 2-33 Source: Thomson and Strickland (2006)
  • 34. Supplier Power 2-34 Source: Thomson and Strickland (2006)
  • 35. Buyer Power 2-35 Source: Thomson and Strickland (2006)
  • 36. Substitutes 2-36 Source: Thomson and Strickland (2006)
  • 37. © Strategy in Marketing (Pearson Asia 2009) Using the Porter Five Forces Model as a example: 1 2 3 Where are we Where are we How do we get now? going? there? Situation Strategy Marketing Mix Analysis Formulation Strategies 2-37 MKTG 1265 (AMCA)
  • 38. Where are we now ? 1 To assess what forces are impacting on our industry? Note: it is important to use those factors that are only specific to your industry What are the bigger or biggest threats? Is the market attractive overall? 2-38 MKTG 1265 (AMCA)
  • 39. Five Star versus Five Skull Industries “ all the industry forces appear to be attractive and support growth and profit opportunities” “ all the industry forces appear to be unattractive and pose great threats to 2-39 4-39 the company in all aspects” MKTG 1265 (AMCA)
  • 40. How to apply the model to an industry: Asian Airline Market Learning point: use only those factors that are 4-40 2-40 specific to the industry you are studying. Source: Kotler and da Silva (2006) Pearson Asia
  • 41. 2 Where are we going? How do we see the industry forces shifting over time? Will there be new players coming into the market? Will more power move into the hands of the buyer? Will technological improvements introduce new substitutes? Will existing players exit the market? And will existing competitors grow or decline? Will suppliers pose greater or lesser threats in the longer term? 2-41 MKTG 1265 (AMCA)
  • 42. © Strategy in Marketing (Pearson Asia 2009) The industry analysis model can be used to track changes in forces over time (where is our industry heading?) Threat of New Threat of New Entrants: Entrants: •…………. •…………. •…………. •…………. •…………. •…………. Bargaining Power of Rivalry in the Industry: Bargaining Power of Bargaining Power of Rivalry in the Industry: Bargaining Power of Suppliers: Buyers: Suppliers: Buyers: •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. Threat of Threat of Substitutes: Substitutes: •…………. •…………. •…………. •…………. •…………. •…………. Time Period t (present) Time Period (t+1) (future) 2-42 MKTG 1265 (AMCA)
  • 43. The industry analysis model can be used to estimate which set of forces will become greater or lesser threats… Threat of New Less threat Entrants: •…………. •…………. Greater threat •…………. Bargaining Power of Rivalry in the Industry: Bargaining Power of Suppliers: Buyers: •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. •…………. Threat of Note: The size of the Substitutes: boxes and arrows indicate •…………. which forces become •…………. bigger or lesser threats 2-43 •…………. © Strategy in Marketing (Pearson Asia 2009)
  • 44. How do we get there? Marketing Strategy Implications: 3 The Five Forces model must also be analyzed from a marketing point of view Think of some of the areas of the marketing mix that could impact the five forces 1. Product differentiation is one of the key strategies 2. Changes in consumer buying behavior 3. The distribution channel and the supply chain 2-44 MKTG 1265 (AMCA)
  • 45. © Strategy in Marketing (Pearson Asia 2009) Examples of marketing strategies linked to the five forces Industry Force Marketing Strategies Impacting Threat of new entrants What kinds of marketing strategies could we use to block competitors or discourage them from entering a market? Price? Product differentiation? Rivalry within the industry What kinds of marketing strategies are used among firms already in the industry to compete with each other? How intense is the rivalry? Gentlemen or cut- throat? Buyer Power What factors are changing customer preferences? Do consumers have more options or better information through the Web? (more power). Do consumers buy directly from the supplier? (Amazon.com/ Dell) 2-45 MKTG 1265 (AMCA)
  • 46. © Strategy in Marketing (Pearson Asia 2009) Examples of marketing strategies linked to the five forces Industry Force Marketing Strategies Impacting Supplier Power Depends on the costs of the product/components supplied- significant (fuel) or insignificant (basic commodities)? Substitutes Watch for indirect competition- the future threats In most cases, substitution is inevitable due to the product life cycle/ technological improvements. 2-46 MKTG 1265 (AMCA)
  • 47. © Strategy in Marketing (Pearson Asia 2009) Using the model to determine intervening strategies (what must be done?) To reduce the threats of new 1 entrants we will ensure scale Threat of economies and build strong New brands as barriers to entry Entrants 2 5 Rivalry in the Bargaining Bargaining Industry Power of Power of Suppliers (existing Buyers players) 3 4 To reduce the threats of buyers Threat of To reduce the threat of supplier Substitutes (trade) we will develop power we will integrate alternative channels of downstream and source for distribution including e- more qualified suppliers commerce channels (See later lecture on generic strategies) 2-47 MKTG 1265 (AMCA)
  • 48. Customer and Market Analysis After completing the Industry Analysis 2-48
  • 49. Customer Analysis Who are main customer segments? What are the changes in consumer trends in terms of communication, transacting and interacting with the marketing firm? How do we use Consumer Behavior information and trend tracking to guide marketing strategies? Can consumer behavior be influenced or changed by the marketing strategies of the firm? 2-49 MKTG 1265 (AMCA)
  • 50. What is a market? Consumers with NEEDS + Purchasing Power Markets need not be physically constrained Think of the Markets are often artificially bounded but in real life they are constantly shifting boundaries 2-50 MKTG 1265 (AMCA)
  • 51. Understanding markets always starts with the question: “what needs are we trying to meet/satisfy?” Source: Kotler and da Silva (2006) Pearson Asia 2-51 MKTG 1265 (AMCA)
  • 52. Studying markets Secondary data: demographics Primary data: psychographics (life-styles) Need to track changes New emerging trends Forecasts and trending (“time series”) © Strategy in Marketing (Pearson Asia 2009) 2-52 MKTG 1265 (AMCA)
  • 53. © Strategy in Marketing (Pearson Asia 2009) Delineating Markets Geographically defined Technology-specific Product-based Traditional view: markets are clearly “bounded” Industry category New view: Markets are becoming “amorphous” 2-53 MKTG 1265 (AMCA)
  • 54. The problem with defining industries and markets… markets… Many markets are in a dynamic state They are constantly evolving as technology and customer needs change Just what is your phone today? Market boundaries Music? are becoming Computing? blurred GPS? 2-54 MKTG 1265 (AMCA)
  • 55. © Strategy in Marketing (Pearson Asia 2009) morphing… Markets are morphing…(convergence) MP3 Notebook Mobile Phone Digital Camera GPS Sat Nav 2-55 MKTG 1265 (AMCA)
  • 56. Brands that show crossover effect Porsche Cayenne Sony PS3 Chopard Ladies Watch 2-56 4-56 MKTG 1265 (AMCA)
  • 57. © Strategy in Marketing (Pearson Asia 2009) Market Segmentation: Breaking down the total market into segments… … and then deciding which one /s you want to target at 2-57 4-57 MKTG 1265 (AMCA)
  • 58. Importance of Market Segmentation More precise More accurate Market definition of marketing segmentation customers needs objectives and wants Improved resource allocation Better marketing results 2-58 MKTG 1265 (AMCA)
  • 59. 2-59 4-59 MKTG 1265 (AMCA)
  • 60. 2-60 4-60 MKTG 1265 (AMCA)
  • 61. © Strategy in Marketing (Pearson Asia 2009) Important issue in Segmentation: You must be able to pick the right set of segmentation variables that best describes the way in which the market for that product should be segmented. Otherwise your segmentation is invalid. ?? Psychographic ?? ?? Usage Demographic Occasion ?? Geographic Benefit ?? ?? 2-61 4-61 MKTG 1265 (AMCA)
  • 62. Do you think INCOME is the best way to segment the market for these two brands? 2-62 4-62 MKTG 1265 (AMCA)
  • 63. How to choose the “right bases” for segmentation Figure 6.2 2-63 Source: Kotler and da Silva (2006) Pearson Asia
  • 64. Application of Multi-Stage Segmentation (Banyan Tree Example) 2-64 Source: Kotler and da Silva (2006) Pearson Asia
  • 65. Coffee drinkers across Asian cities share common needs and gravitate towards a global brand- Starbucks STRATEGICALLY EQUIVALENT SEGMENTS Starbucks Bangkok Starbucks KL Starbucks Singapore 2-65 © Strategy in Marketing (Pearson Asia 2009)
  • 66. well… Business markets can be segmented as well… 2-66 MKTG 1265 (AMCA)
  • 67. 2-67 MKTG 1265 (AMCA)
  • 68. Segmentation in airline industry- B2B marketing: The Airbus range of aircraft Seats Range 2-68 MKTG 1265 (AMCA)
  • 69. Therefore different aircraft models will suit different airlines… The kind of aircraft bought by different airlines will depend on the routes they fly (place strategy) and how the airline is 2-69 © Strategy in Marketing (Pearson Asia 2009) positioned (full service or budget airline)
  • 70. Past Year Exam Questions Environment and Industry Analysis These are samples of questions that test different aspects of the topics covered in this lecture. The actual exam question will of course be linked to the case study assigned. 70 MKTG 1265 (AMCA)
  • 71. Specimen Question # 1: What is the purpose of a Porter's Five Forces analysis? Using the factors outlined by Porter, evaluate the strength of the threat of potential entrants in a given industry, clearly stating any assumptions you may need to make. Briefly state what action(s) a manger might take to attempt to reduce the strength of that force. 2-71 MKTG 1265 (AMCA)
  • 72. Specimen Question # 2: What is the purpose of the Porter's Five Forces Model? Briefly describe the Five Forces that should be analysed. 2-72 MKTG 1265 (AMCA)
  • 73. Specimen Question # 3: In undertaking a Porter’s Five Forces analysis for a given industry, what are five industry factors that you would evaluate to assess the strength of the rivalry of existing competitors for the industry? Explain how each factor impacts on the intensity of rivalry for that industry. Clearly state any assumptions you may need to make. 2-73 MKTG 1265 (AMCA)
  • 74. Specimen Question # 4: In undertaking a Porter’s Five Forces analysis for a given industry, what are five factors that you would evaluate to assess the strength of the threat of potential entrants for the industry? Explain how each factor impacts on the likelihood that a potential entrant will enter that industry. (state any assumptions you make) 2-74 MKTG 1265 (AMCA)
  • 75. Specimen Question # 5: What is the purpose of a Porter’s Five Forces analysis? Using the factors outlined by Porter, evaluate the strength of the rivalry amongst existing competitors in the (case study) industry, stating any assumptions you may need to make. Briefly state what action(s) the (case study) company has taken in the past, or could undertake in the future, to attempt to reduce the strength of that force. MKTG 1265 (AMCA)

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