Marketing environment
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  • 1.      Porter’s 5 Forces. (The ideas discussed here are attributable to the work of Professor Michael Porter of Harvard Business School)   In any segment there is a limited total amount of profit that can be shared among the various players. Hence, given normal business drivers, they can all be expected to fight for the bulk of the profit. This means that competitor analysis must be extended beyond conventional rivals to include all of these forces. Specifically, firms need to understand structural rivals’ needs, power, capabilities and motivations and to develop strategies to achieve their own profit and performance objectives given the constraints the five forces impose.           Customers: in consumer markets, end customers and powerful retailers apply pressures for lower prices and better benefits. In industrial and other organisational markets, customers and/or channel members apply this same profit pressure. They demand the best levels of benefits at the lowest attainable prices by playing off the various suppliers against each other. Their ability to do this is strong when: products are not well differentiated: they have monopoly power: and can buy in bulk. Defensive options for suppliers include: building differential advantage; fixing long-term contracts; forward integration; and targeting the less powerful customers.           Conventional Competitors: Rivalry here is usually most intense in oligopoly markets (where only a few firms supply all or most of the market). This typifies most markets. Company growth is only possible at the expense of rivals so that fighting for market share is common and fierce and, of course, encouraged by customers. The outcome is usually downward-spiralling profits for all competitors that are unable to protect themselves.           New Entrants: These are competitors entering markets they haven’t played in before because they believe they have differential advantage. Further, as they are not known or understood as well as existing rivals, their actions are less predictable, they raise market uncertainty and frequently cause existing firms to panic, thus increasing competitive pressure. Examples include: creation of differential advantage; patents; captive channels and/or suppliers and threats of massive retaliation by attacking entrants own markets or market spoiling tactics.           Substitutes: These take the form of new technologies or benefits that satisfy buyer needs more effectively than they were satisfied before. For instance: railways damaged the canal business; electricity replaced steam; calculators killed off the slide rule; television eroded cinema attendance; Encarta CD Rom replaced Encyclopaedia Britannica.           Suppliers: Competition with suppliers is similar to that with buyers. Firms and their conventional rivals seek maximum benefits and minimum prices from suppliers, who are seeking the opposite. Supplier power is enhanced when suppliers are few, have a strong differential advantage, cannot be played off against each other, provide essential inputs, or can integrate forward, and when users face high switching costs. Options for defence include: accepting lower margins; shifting the costs to customers; finding new suppliers or substitutes; integrating backwards; fixing long-term deals and/or targeting particular suppliers with which to form close strategic partnerships.
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Transcript

  • 1. LECTURE 3 ANALYZING MARKETING ENVIRONMENT
  • 2. The Marketing Environment Adapted from D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Company Microenvironment Macroenvironment Legal Political Technological Social Economic Suppliers Customers Distributors Competitors VMV S W O T
  • 3. 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
  • 4. Model 1 - Using PEST/PESTEL analysis to scan the “MACRO” environment ORGANISATION Legal Political Social Ecological Technological Economic
  • 5. Some possible PEST factors
    • Political / Legal
      • EU monopolies commission
      • Deregulated markets
      • Taxation policy
      • International trade policy
      • Joint Ventures legislation
    • Social / Ecological
      • Population demographics (household size, no of cars)
      • Income distribution
      • Level of environmental concern
      • Attitudes to work & leisure
      • Education levels
    • Economic
      • Business cycle
      • Interest rates / inflation
      • Unemployment level
      • Raw materials availability
      • Disposable income
    • Technological
      • Govt spending on research
      • Speed of take-up of new technology
      • Barriers to entry
      • Impact of Internet
      • Merging of “ unrelated” sectors e.g. banks & telecomms
    Note: EXAMPLES ONLY!
  • 6. Model 2 – Using 5 Forces analysis to scan the “MICRO” environment Industry Competitors Intensity of Rivalry Buyers Suppliers New Entrants Substitutes Threat of New Entrants Threat of Substitutes Bargaining Power of Suppliers Bargaining Power of Buyers
  • 7. 5 Forces example: BT Cellnet MM02(phones) Strong Vodaphone Orange One-to-one Weak Cost of licence High barrier to entry Huge cost to 3G New functions? Strong Customers have many competing offers, some including airtime, some not. Cheap deals through Internet Weak Nokia Motorola Ericsson Competing strongly For share of Mature market Medium Customers returning to land lines Convergence with PDAs Location technology
  • 8. 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
  • 9. Internal analysis
    • What are we doing right?
    • What are we doing wrong?
    • What are our internal strengths?
    • What are our internal weaknesses?
  • 10.
    • 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
  • 11. 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
  • 12. Effective use of SWOT STRENGTHS WEAKNESSES OPPORTUNITIES THREATS Matching Strategies Conversion Strategies Conversion Strategies
  • 13. Model 4 - The Marketing Plan Corporate objectives Marketing audit SWOT Marketing objectives/strategies Alternative plans/ mix Programmes Measure/review Assumptions Estimate results FEEDBACK
  • 14. 10 benefits for you from Marketing Planning
    • Hitting the best customer targets
    • Winning new customers
    • Expanding markets
    • Beating the competition
    • Keeping abreast of market developments
    • Using resources to best advantage
    • Improving internal communications
    • Minimising threats to Reduce risk and surprise
    • Identifying company strengths and weaknesses
    • Achieving consistency
    It looks like hard work – why bother?
  • 15. 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