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Marketing Environment

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Macro & Micro Marketing Environment

Macro & Micro Marketing Environment

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  • Fad – Hula Hoop; Trend – Diet/exercise; Megatrend – Electric automobilesFAD: Unpredictable, short-lived, and without social, economic, and political significance. Fads are measured in months, rather than years.Wham-0 sold 25 million Hula Hoops in its first 4 months. Pet rocks were launched in the mid-1970’s and sold 1 million units in a matter of months. Five month’s later sales were almost non-existent.TRENDS: Offer a view of the future due to their momentum and durability. The fitness/diet trend is an example, although there have been many fads within this trend, the overall movement toward healthier living has remained.MEGATRENDS: Changes that are slow to form but once established last for 7 – 10 years (or more). Megatrends influence all factors of life that impact business, culture, economics, society, and personal lives.
  • Where the microenvironment refers to those elements closest to the company, customers, competitors, suppliers, etc., the macroenvrionment refers to those elements that can impact a company, but cannot be controlled. These include things such as the economy, culture, demographics, politics, technology, and the natural environment.
  • Worldwide population growth6.8 billion in 2010; will grow to 9 billion in 2040Population age mixMexico young population; Italy oldBy 2011 in the US, those 65 and older will grow faster than the entire US population.Ethnic and other markets25 million people in the US were born in another countryHispanic’s accounted for 11 percent of the US population in the 2000 census. By 2020 Hispanics are expected to account for 18.9 percent of the population.Educational GroupsHousehold patterns - 20% of households “Married with Children”; 27% single live-alones; Single-parent families (8%); living with nonrelatives only (5%); and other family structures (8%)
  • Purchasing power: is the amount of goods/services one unit of currency will purchase. Purchasing power is determined by income, prices, savings, credit availability, and debt. The financial crisis in 2008-09 may have permanently changed consumer buying habits.The income distribution of a country can influence the decision to enter a specific market.
  • Sociocultural: The influence that both society and culture have on the views of individuals.A subculture is a group that shares a distinct culture different from the larger culture that they belong. Examples of subcultures include: Gothic, Metalhead, punk, Trekkies, biker, etc.
  • Opportunities can arise due to changes in the political-legal environment. But so too can threats.
  • Companies must be cognizant of the effects of their business on the environment and how regulations can influence its competitive position. Changes in regulations can also provide opportunities for companies, but these opportunities may only be recognized if the company includes this aspect into their strategic planning.
  • Transcript

    • 1. Basics of Marketing – MBA I MBA-I MIBM 1
    • 2. Why a product like radio declined and now once again emerging as an entertainment medium? 2 MBA-I MIBM
    • 3. What Were the Drivers of This Change ?   Government policy ?  3 Technology ? Other media substitutes ? MBA-I MIBM
    • 4. Why Market Leaders Suffered?   HLL vs. Nirma  Bajaj vs. Honda  Dot.com boom, then bust and now resurgence  4 HMT vs. Titan Market leadership today cannot be taken for granted. New and more efficient companies are able to upstage leaders in a much shorter period. MBA-I MIBM
    • 5. Marketing Environment The marketing environment consists of actors and forces outside the organization that affect management’s ability to build and maintain relationships with target customers.  Environment offers both opportunities and threats.  Marketing intelligence and research used to collect information about the environment.  MBA-I MIBM 5
    • 6. Needs and Trends Megatrend Fad Trend
    • 7. Marketing Environment  Includes:  Microenvironment: actors close to the company that affect its ability to serve its customers.  Macro environment: larger societal forces that affect the microenvironment. ○ Considered to be beyond the control of the organization. MBA-I MIBM 7
    • 8. Analyzing the Macroenvironment
    • 9. Marketing Environment  Analyzing the Macroenvironment  Needs and Trends ○ Fads – “unpredictable, short-lived, and without social, economic and political significance” ○ Trend – “direction or sequence of events that has some momentum & durability” ○ Megatrends – “ large social, economic, political and technological changes that are slow to form and once in place, they influence us for some time between 7-10 years or longer”  Identifying Major Forces ○ Suppliers, intermediaries, customers, competitors, and public – Is their behaviour controllable? ○ A steep decline of stock market affects savings, investment, retirement funds etc, increasing unemployment, corporate scandals, rise of terrorism. ○ Six major forces – Demographic, economic, social-cultural, natural, technological, political & legal. MBA-I MIBM 9
    • 10. Founded in 1998 by two Stanford university PhD students.  Corporate mission – To organize the world’s information and make it universally accessible and useful.  AdWords, Analytics, Maps, Finance, Local, Gmail, Google+, Youtube, Androids etc.  Then GOOGOL now GOOGLE MBA-I MIBM 10
    • 11. The Marketing Environment Demographic Company Economic Cultural Publics Suppliers Company Competitors Customers Natural Political Intermediaries Technological MBA-I MIBM 11
    • 12. Major Environmental Forces Economic Demographics Technological Natural Political-Legal Sociocultural
    • 13. The Company’s Macroenvironment MBA-I MIBM 13
    • 14. Demographic Environment Worldwide population growth Population age mix Ethnic and other markets Educational Groups Household patterns
    • 15. The World as a Village If the world were a village of 100 people: 61 – Asian (20 Chinese, 17 Indian) 18 – Unable to read (33 have cell phones) 18 – Under 10 years of age (11 over 60 years old) 18 – Cars in the village 63 – Inadequate sanitation 67 – Non-Christian 30 – Unemployed or underemployed 53 – Live on less than $2 a day 26 – Smoke 14 – Obese 01 – Have AIDS Source: David J. Smith and Shelagh Armstrong, If the World Were a Village: A Book About the World’s People, 2nd ed. (Tonawanda, NY: Kids Can Press, 2002)
    • 16. Rank Continent Population 1 Asia 4,140,000,000 2 Africa 1,033,000,000 3 Europe 739,000,000 Age group Total Rural Urban 4 North America 529,000,000 0-14 29.5 30.9 25.5 5 South America 62.5 61 66.6 6 Oceania (Australia) 7 Antarctica 8 8.1 7.9 386,000,000 15-59 36,000,000 60+ 4,000 MBA-I MIBM 16
    • 17. The Demographic Environment  Demography  The study of human population in terms of size, density, location, age, gender, race, occupation, and other statistics.  The World’s large & highly diverse population pose both opportunities & threats.  E.g. China’s policy to control population growth.  Keeping track of changing age, family structures, geographic population shifts, educational characteristics, & population density.  Population Growth  World wide population estimation 8.1 billion by 2030.  Less developed regions account for 76% of population.  More developed countries growing at 0.6%  Death rate is falling  India 16.7% of world population.  Population size & growth rate. MBA-I MIBM 17
    • 18.  The Demographic Environment Population Age Mix      Literacy Levels of Population   >6 yrs 12 25 2534 3454 < 54 yrs 15% 34% 24% 13% 14% 66% in India Increasing Population   Mexico – young population & rapid population growth. Japan – world’s oldest population. So milk, diapers, school supplies & toys will be more imp in Mexico than in Japan Median age India – 23.8, Pakistan – 22.2, Sri lanka – 29.5 etc. More population in urban areas, 29 to 37 % in 2025. 15-24 25-34 65+ 76% 64.5% 35.6 A growing middle class      Deprived households – Annual household income less than Rs. 90000, poorest economic class, unskilled or semi-skilled daily wage earners. Aspirers - Rs. 90000 to Rs. 200000., small farmers, small retailers, low skilled industrial workers. Seekers – Rs. 200000 to Rs. 500000, white collar employees, mid level govt. officials, newly employed young postgraduates, and medium scale traders & businesspeople. Strivers - Rs. 500000 to Rs. 1000000, established professionals like lawyers, doctors, CAs, MBAs, senior govt. officials, medium scale industrialists, rich farmers. Global Indians – In excess of Rs. 1000000, Senior corporate executives, large business owners, topmost professionals, politicians, film actors, big farmers, graduates from leading institutes. MBA-I MIBM Middle class Seekers & strivers 7 million households 87 million by 2025 18
    • 19. Nandan Nilekani on Demography India – China (2009) MBA-I MIBM 19
    • 20. The Demographic Environment Growth in rural population   By 2015 rural population will increase by 906 million.  Some problems like, purchasing power, lack of proper infrastructure, reliable supply of electricity etc.  A Changing Family System  Joint family system – able bodied men will be bread earners, women looks after kitchen, elderly look for cultural norms & preach value to kids.  Dual income single kid (DISK)  The changing role of women  Education, more ambitious, earning more, more active member of family.  A better educated, more white-collared, more professional population  More educated people will demand more quality product, books, magazines, travel, personal computers, & internet services.  Increasing Diversity  Inner state diversities are increasing MBA-I MIBM 20
    • 21. Economic Environment Consumer Psychology Income Distribution
    • 22. Economic Environment    Factors that affect consumer purchasing power & spending patterns. Industrial economy, Developing economy, Subsistence economy, The Global Financial Crisis    Changing Income distribution & Consumer spending pattern        Ernst Engel law – As family income rises, % spent on food declines, % spent on housing remains constant, % spent on other categories increases, % spent on savings also increases. Growing urban middle class. Purchase of consumer items increasing. Current income, prices, savings, debt & credit availability. India GDP – 4.4 % FQ 2013 Per capita income (Rs. 5,729 per month for FY 2012-13), healthy foreign exchange reserves (US$ 275 billion), Inflation (CPI / WPI-9.64%) Income Distribution –        Subprime housing loans issued in US, most stock markets in world crashed, severe lending crunch, inflation, less exports, less FDI, less GDP growth. In India demand for housing, construction, consumer durables & IT sector were affected most. Lower income households declining continuously. Destitute – annual income of Rs. 16000 Aspirants – 16000 – 22000 Climbers – 22000 – 45000 Consuming class – 45000 – 215000 Rich – more than 1000000 lakhs annual income Demand is likely to increase, additional opportunities for new products & services, Business expansion etc. MBA-I MIBM 22
    • 23. Walt Disney markets two distinct Pooh bears to match its two-tiered market. MBA-I MIBM 23
    • 24. Ourselves Nature Others Sociocultural Environment Society Universe Organizations
    • 25. Social-Cultural Environment & norms that largely define consumer Society shapes the beliefs, values,  tastes & preferences.  Ethnic Diversity – one fifth of the world  Major religions – Hinduism, Islam, Sikhism, Christianity, Buddhism & Jainism  Different languages & thousands of dialects. Customs, social systems, Values, habits, Religions & Caste Systems.  E.g. Dress codes, food habits, local advertising, regional biases for brand preferences,  Progression from traditionalism & self sacrifice to westernization & individualism.  Increased Emphasis on Ethics & Socially Responsible Actions   Socially responsible behaviour – business scandals, environment issues, online privacy issues, transfer of digital data etc.  Cause-related marketing – linking to a worthwhile cause, selling strategy than giving strategy. But may give company good image.  E.g. CRY greeting cards. MBA-I MIBM 25
    • 26. Cultural Environment Made up of institutions & other forces that affect society’s basic values, perceptions, preferences, & behaviors.  Persistence of Cultural Values   Most Asians believe in working, getting married & giving to charity and have strong faith in religion.  Core beliefs & values passed on from parents to children & are reinforced by schools, religious institutions, business, & government.  Secondary beliefs are more open to change. E.g. Getting married is core belief but getting married early in life is secondary belief. MBA-I MIBM 26
    • 27. Cultural Environment  Shifts in Secondary Cultural Values   British left India but leaved imprints on a variety of areas like dress codes, leisure activities, & job preferences etc. People’s views of themselves ○ ○ ○  People’s views of others ○ ○  Patriotism theme used for promoting ideas & products on Independence day. People’s views of Nature ○ ○  Changing Attitudes towards corporations, government agencies, trade unions, universities & other organizations. People’s views of Society ○  People like to stay at home to enjoy the comforts of home & connect with others through advanced technology. Less demand for theater going & more demand for home improvement, home office, & home entertainment products. People’s views of Organizations ○  Some seek personal pleasure, wanting fun, change etc. Others seek self realization through religion, recreation, or pursuit of career or other life goals. Selects products those match their views of themselves. Nature is finite & fragile that can be destroyed or spoiled by human activities. Organic food products People’s views of Universe ○ ○ ○ Moving away from materialism to spirituality. Heightened sensitivity presents unique marketing opportunity. E.g. Aastha TV channel, Ayurvedic treatment. MBA-I MIBM 27
    • 28. Political Environment Includes Laws, Government Agencies, and Pressure Groups that Influence or Limit Various Organizations and Individuals In a Given Society.  Changes in tariff & quota regimes may have direct impact on the profitability, survival of business.  Legislation Regulating Business – to encourage competition and ensure fair market for goods & services. A good public policy is needed.   Increasing Legislation ○ India – laws covering competition, fair trade practices, environmental protection, product safety, advertising, consumer privacy packaging & labeling, pricing & other important areas. ○ To protect companies from each other, MRTP in India, to protect consumers, to protect interest of society.  Changing Government Agency Enforcement ○ US – Federal Trade Commission, Food & Drug Administration, Federal Energy Regulatory Commission, Environment Protection Agency etc. ○ Companies should understand laws at local, state, national & international level.  New Forms of Nontariff Barriers in Trade ○ WTO want to reduce tariff & nontariff barriers in international trade but pressures from civil society groups created various social compliance regulations. ○ Use of child labour is not allowed for export companies. MBA-I MIBM 28
    • 29. Technological Environment Accelerated pace of change Unlimited opportunities R&D Spending
    • 30.      Technological Environment surgery, birth control pills Best - Penicillin, open heart Dangerous - Hydrogen Bomb, nerve gas, machine guns Mixed blessings – automobiles, television, credit cards, Cell phones, & video games. Creative destruction New technology affects the economy’s growth, creates new markets & opportunities & replace old technology.  Transistors hurt vacuum-tube industry, CDs hurt cassettes etc.  Four trends  Accelerating pace of change  Unlimited Opportunities for innovation  Varying R & D budgets  Increased regulation of technological change. MBA-I MIBM 30
    • 31. Political-Legal Environment Government Agencies Laws Special Interest Groups
    • 32. Political-Legal Environment  Laws, government agencies, & pressure groups.  Increase in Business Legislation  To protect companies & consumers from unfair competition, to protect society from unfair activities, to charge business with social costs.  Legal review procedures & guide business according to ethical standards  The growth of special interest groups  Consumerist movement  Consumer protection act – Safety, Information, Choice, Representation, Redressal & consumer education. MBA-I MIBM 32
    • 33. Natural Environment Environmental Regulations
    • 34. Natural Environment            Involves the natural resources that are needed inputs by marketers or that are affected by marketing activities. Concentration of industries in one area threatening to natural environment. Deterioration of natural environment – shortage of raw materials. Increased pollution – disposal of chemical & nuclear waste, dangerous mercury levels in sea, quantity of chemicals in soil & food, plastic & other packaging materials. Conserving natural resources Greenhouse gases Global warming Shortage of drinking water Increased Govt. Interventions - New regulations, environment protection agency, NGOs etc. Environment Sustainability – an effort to create a world economy that planet can support indefinitely. Companies are developing recyclable & biodegradable packaging, recycled materials & components, better pollution controls, & more energy efficient operations. MBA-I MIBM 34
    • 35. Vodafone  Political:- Governmental and legal issues affecting how the company operates.      Regulation – Tax implication Infrastructure Banning of phone use in certain circumstances Health issues Economic:- Factors influencing the purchasing power of customers and the company's cost of capital.     Cost of 3G licenses (Spectrum auction process) Cost of calls being driven down Worldwide recession Third world countries MBA-I MIBM 35
    • 36.  Social:- Demographic and cultural aspects of the environment which influence customer needs and market size.        Health Issues Demographics Social Trends Picture phones, Smartphone Mobile Etiquette Saturation Point Technological:    3G, 4G, 5G etc. GPRS/WAP SMS / MMS Mobile Apps. MBA-I MIBM 36
    • 37. The Company’s Microenvironment  Company’s Internal Environment:  Areas inside a company.  Affects the marketing department’s planning strategies.  All departments must “think consumer” and work together to provide superior customer value and satisfaction. MBA-I MIBM 37
    • 38. Actors in the Microenvironment MBA-I MIBM 38
    • 39.  The Company – top management, finance, R & D, purchasing, operations, & accounting.  Suppliers –     Provide resources needed to produce goods and services. Important link in the “value delivery system.” Most marketers treat suppliers like partners Marketing Intermediaries  Help the company to promote, sell, and distribute its goods to final buyers ○ Resellers – wholesalers, retailers ○ Physical distribution firms – to stock & move goods from their point of origin to destination ○ Marketing services agencies – marketing research firms, advertising agencies, media firms, & marketing consultancy firms. ○ Financial intermediaries – banks, credit companies, insurance companies. ○ E.g. Coca cola signs on as exclusive beverage provider for fast food chains. MBA-I MIBM 39
    • 40.  Competitors  Those who serve a target market with products and services that are viewed by consumers as being reasonable substitutes  Company must gain strategic advantage against these organizations  Publics  Group that has an interest in or impact on an organization's ability to achieve its objectives  Customers  Five types of consumers – consumer markets, business markets, reseller markets, government markets, international markets MBA-I MIBM 40
    • 41. Responding to the Marketing Environment  Environmental Management Perspective ○ Taking a proactive approach to managing the environment by taking aggressive (rather than reactive) actions to affect the publics and forces in the marketing environment. ○ This can be done by:  Hiring lobbyists  Running “advertorials” (ads expressing editorial point of views)  Pressing lawsuits  Filing complaints  Forming agreements to control channels MBA-I MIBM 41
    • 42. Marketing & Other business Functions  Finance & Marketing  Financial Dimensions – Cost & Profit history of     business, financial statements, budgets, ROI, ROE, ROS etc., Marketing decisions as investment decisions. Financial tools & criteria to evaluate investment. Capital allocation based on expected returns. Evaluation of M&A – both marketing & financial view  MBA-I MIBM 42
    • 43. MBA-I MIBM 43
    • 44. Accounting & Marketing Firms' cost allocation procedure  Use fully allocated costs rather than variable costs depicts distorted picture of product profitability.  Responsibility accounting.  Evaluation of marketing performance – selling or advertising costs as a % of sales.  Forecast data.  MBA-I MIBM 44
    • 45. Production & Marketing Production capabilities determine no & types of products which can be marketed.  Marketing – accurate sales forecast.  Change in production capacities.  Size of new plants depends on market research based estimation of demand.  Conflicts.  MBA-I MIBM 45
    • 46. Customer Service & Marketing Customer complaints – solved or not.  No of complaints  Type of complaints  Regular line of communication between customer service & marketing  MBA-I MIBM 46
    • 47. Procurement & Marketing Many firms modifying products to substitute scarce raw material with more available, cheaper or legally available ones.  Shortage of coffee – increase in price of coffee beans – changes in the brand’s strategies.  MBA-I MIBM 47
    • 48. R & D - Marketing R & D – New product Development  Product design – market research  Marketing research may provide important insights into customer’s unsolved problem & needs.  Realistic Expectations.  R&D may decide the future of new products.  MBA-I MIBM 48
    • 49. HRM & Marketing HRM – hiring, training & management  Develop job description, screen candidates, design training programs & incentives.  Value of human capital  MBA-I MIBM 49
    • 50. Legal & Marketing Government interventions  Advertising claims  Legal function of firm, brand name requires legal clearance, new product approvals, pricing policies etc.  Legal dept – risk avoidance  Marketing – Risk taking  MBA-I MIBM 50
    • 51. Top Management & Marketing  Provide guidance, inspiration, encouragement & control of firms marketing & non marketing efforts. MBA-I MIBM 51
    • 52. Market Potential Consists of the set of consumers who profess a sufficient level of interest in a market offer.  Total amount of possible sales in the market.  Total Market potential – The maximum amount of sales that might be available to all the firms in an industry during given period, under a given level of industry marketing effort & environmental conditions.  Total Market potential = potential no of buyers * Average quantity purchased by buyer * The price.  MBA-I MIBM 52
    • 53. Market Potential Well defined geographic area  Entry / Exit decisions  Resource Allocation decisions.  Forecast  MBA-I MIBM 53
    • 54. Estimation of market potential  Estimation by analogy  Comparing data from similar countries  Problems: geography, culture, tradition and Historical reasons  Income elasticity of demand  Market’s level of development  Regression Analysis  Demand for any product = f(income, price, competition, etc.)  Input-output tables  provides a summary of the structure of an economy by showing the impact of changes in the demand for one industry’s product on other industries product  Relationship between economic sectors  Published by UN CTAD/GATT/WTO MBA-I MIBM 54
    • 55.  Gap Analysis  Difference between total market potential and total     sales The difference could be due to Product usage gap - increase promotion, advertising, price etc. Product line gap - lack of product variation; latent demand Distribution gap - lack of appropriate coverage MBA-I MIBM 55
    • 56. Market Share Market share is the percentage of total sales that a company can expect to get from the total market.  Eg. there are 100 gadgets sold in a country and company A sells 43 of them, then company A has a 43% market share  you sold Gadgets for a total cost of $860 and the people in the country spend a total of $2,000 on the same widgets, then the market share is $860/$2,000 or 43%  MBA-I MIBM 56
    • 57. Market Share To calculate market share divide your sales forecast by the total market potential.  Increasing market share is the main objective of the business.  Unit market share = 100*unit sales/Total market share  Measurement – No of buyers, % of sales,  MBA-I MIBM 57
    • 58. MBA-I MIBM 58
    • 59. Home Assignment Find out the market potential for Wooden toys in India.  Demonstrate the market share for Internet Service providers in India.  MBA-I MIBM 59
    • 60. MBA-I MIBM 60