2. Intl. Mkt. Environment

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2. Intl. Mkt. Environment

  1. 1. Global Marketing Environment Jan Surya Sharma
  2. 2. INTERNATIONAL MARKETING ENVIRONMENT
  3. 3. MACRO – MICRO & INTERNAL ENVIRONMENT <ul><li>THE MACRO-ENVIRONMENT </li></ul><ul><li>includes all factors influencing organization & out of its direct control. </li></ul><ul><li>Laws </li></ul><ul><li>competition and rivalry in a market </li></ul><ul><li>new entrants </li></ul><ul><li>ever changing needs </li></ul><ul><li>changes in culture, politics, economics &technology </li></ul><ul><li>THE MICRO-ENVIRONMENT </li></ul><ul><li>influences the organization directly. </li></ul><ul><li>includes suppliers, consumers & customers, and other local stakeholders. </li></ul><ul><li>THE INTERNAL ENVIRONMENT </li></ul><ul><li>internal factors or the 'internal environment‘ </li></ul><ul><li>include ‘5 Ms' </li></ul><ul><li>M en, M oney, M achinery, M aterials & M arkets. </li></ul>
  4. 4. INTERNATIONAL MARKETING ENVIRONMENT
  5. 5. Environmental Scanning <ul><li>Process of collecting information about the marketing environment in order to identify </li></ul><ul><li>and interpret potential trends. </li></ul><ul><li>Three Questions of Determining a Competitive Strategy: </li></ul><ul><ul><ul><li>-Should we compete? </li></ul></ul></ul><ul><ul><ul><li>-If so, in what markets? </li></ul></ul></ul><ul><ul><ul><li>-How should we compete? </li></ul></ul></ul>
  6. 6. MARKETING ENVIRONMENT & COMPETITOR ANALYSIS <ul><li>SWOT analysis </li></ul><ul><li>PEST analysis </li></ul><ul><li>Five forces analysis </li></ul>
  7. 7. SWOT analysis <ul><li>S trengths </li></ul><ul><li>W eaknesses </li></ul><ul><li>O pportunities </li></ul><ul><li>T hreats </li></ul>Internal External
  8. 8. SWOT ANALYSIS - Strengths & Weaknesses - Internal Factors <ul><li>Strength: </li></ul><ul><li>- Your competencies & expertise </li></ul><ul><li>- New, innovative product or service </li></ul><ul><li>- Location of your business </li></ul><ul><li>- Quality processes and procedures </li></ul><ul><li>- Other aspect that adds value </li></ul><ul><li>Technical Skills – Competent HR - Production process – Inputs & RM </li></ul><ul><li>Weakness: </li></ul><ul><li>- Lack of mkting expertise </li></ul><ul><li>- Undifferentiated products/services </li></ul><ul><li>- Location of your business </li></ul><ul><li>- Poor quality goods or services </li></ul><ul><li>- Damaged Image/ Reputation </li></ul><ul><li>No Prior Experience – Financial Contraints </li></ul>
  9. 9. SWOT ANALYSIS contd… Opportunities & Threats - External factors <ul><li>Opportunities: </li></ul><ul><li>- Developing market/High Growth Mkts. </li></ul><ul><li>Mergers, Jt. Vent. or str. Alliances </li></ul><ul><li>New profitable market segments </li></ul><ul><li>A new international market </li></ul><ul><li>Mkt vacated by ineffective competitor. </li></ul><ul><li>Threats: </li></ul><ul><li> ew competitor in home market </li></ul><ul><li>- Price wars with competitors </li></ul><ul><li>- Entry of new innovative product/service </li></ul><ul><li>- Superior access to channels of distribution </li></ul><ul><li>- New Trade barriers Tarrifs non-tariffs </li></ul>
  10. 10. PEST Analysis <ul><li>P olitical factors </li></ul><ul><li>E conomic factors </li></ul><ul><li>S ocio-cultural factors </li></ul><ul><li>T echnological factors </li></ul>
  11. 11. P olitical/legal - EST <ul><li>Monopolies legislation </li></ul><ul><li>Environmental protection laws </li></ul><ul><li>Taxation policy </li></ul><ul><li>Employment laws </li></ul><ul><li>Government policy </li></ul><ul><li>Legislation </li></ul><ul><li>Others? </li></ul>
  12. 12. P olitical/legal <ul><li>Laws, rules, and standards </li></ul><ul><li>The political environment </li></ul><ul><li>Ideology Nationalism Stability International relations </li></ul><ul><li>The legal environment </li></ul><ul><li>International law Terms of access: T ariff systems & Non-tariff barriers </li></ul><ul><li>M onetary controls & Exchange rate policies </li></ul><ul><li>Restrictive administrative and technical regulations </li></ul><ul><li>Other Issues: </li></ul><ul><li>1.&quot;Institutional environment&quot; - made up of political, social & legal ground rules. </li></ul><ul><li>2. Property rights - patents, trademarks. </li></ul><ul><li>3. Taxation & taxation schemes abroad? </li></ul><ul><li>4. Recourse - possibility & length of action for image damaging & arbitration. </li></ul><ul><li>5. Movement of equity & expropriation threats </li></ul><ul><li>The three basic principles are: </li></ul><ul><li>i) nondiscrimination </li></ul><ul><li>ii) open markets </li></ul><ul><li>iii) fair trade prohibiting subsidies etc. </li></ul>
  13. 13. P E conomic Factors - ST <ul><li>Inflation </li></ul><ul><li>Employment </li></ul><ul><li>Disposable income </li></ul><ul><li>Business cycles </li></ul><ul><li>Energy availability and cost </li></ul><ul><li>Others? </li></ul>
  14. 14. E conomic Factors <ul><li>Major Changes in Global Economy </li></ul><ul><li>Capital movements than Trade is driving force : </li></ul><ul><li>World Trade - US$ 3 trillion; London Eurodollar market - US$ 75 tr.pa </li></ul><ul><li>FOREX Transactions - US$ 35 trillion p.a. </li></ul><ul><li>Production become &quot;uncoupled&quot; from employment: </li></ul><ul><li>Mfring share at 20-25% of GNP while employment is on decline </li></ul><ul><li>Primary products &quot;uncoupled&quot; from industrial economy: </li></ul><ul><li>Finished products prices gone down while basic is up or vice-versa </li></ul><ul><li>World economy is in control - individual nations are not , </li></ul><ul><li>- Developing countries export primary products & at the mercy of world supply and demand movements </li></ul><ul><li>- Rapid globalization let to global competition pushing up quality. Developed worlds on industrial & service products of high value addition while opportunities is left for developing countries to produce and export low value added items of basic necessity. </li></ul>
  15. 15. E conomic Factors <ul><li>World trade </li></ul><ul><li>Composition of world trade Patterns of trade </li></ul><ul><li>Comparative costs - comparative advantage </li></ul><ul><li>Balance of payments </li></ul><ul><li>Government policy </li></ul><ul><li>World Institutions </li></ul><ul><li>Regionalism </li></ul><ul><li>The international financial system </li></ul><ul><li>Individual economies </li></ul><ul><li>a) Population b) Income c)The nature of economy d)The nature of economic activity e) Infrastructure f) Urbanisation g) Size of market </li></ul><ul><li>Stages of market development </li></ul><ul><li>i) Preindustrial countries - incomes > US$ 400 GNP per capita </li></ul><ul><li>ii) Less developed countries - between US$ 401 and US$ 1,635 </li></ul><ul><li>iii) Developing countries - between US$ 1,636 and US $ 5,500 </li></ul><ul><li>iv) Industrialised countries - US$ 5,501 and US$ 10,000 </li></ul><ul><li>v) Advanced countries - + US$ 10,000 per capita income </li></ul><ul><li>CONTD… </li></ul>
  16. 16. E conomic Factors <ul><li>World Bank classification GNP per capita. </li></ul><ul><li>Low income economies: US$ 675 or less. 41 nations – China, India, Tanzania, Kenya etc. </li></ul><ul><li>Middle income: US$ 676 - US$ 2,695. 40 nations - Zimbabwe, Mexico, Thailand etc. </li></ul><ul><li>Upper middle: US$ 2,676 - US$ 8,355. 17 nations - Brazil, Portugal, Greece etc. </li></ul><ul><li>High income economies : US$ 8,356 or more 24 nations – USA, Germany, Japan, UK, France, and other OECD members </li></ul><ul><li>Other economies - communist bloc. </li></ul><ul><li>Rostow (1971) five stage model of economic takeoff: </li></ul><ul><li>Stage 1- Traditional society , little increase in productivity, no modern science application systematically, low level of literacy </li></ul><ul><li>Stage 2 - Preconditions of takeoff , modern techniques in agriculture and production, developments in infrastructure and social institutions </li></ul><ul><li>Stage 3 - Takeoff , normal growth patterns, rapid agricultural and industrial modernisation, good social environment. </li></ul><ul><li>Stage 4 - Drive to maturity , modern technology applied to all fronts, international involvement, can produce anything </li></ul><ul><li>Stage 5 - Age of high mass consumption, production of durable goods and services, large amounts of </li></ul>
  17. 17. PE S ocio-cultural Factors T <ul><li>Demographics </li></ul><ul><li>Distribution of income </li></ul><ul><li>Social mobility </li></ul><ul><li>Lifestyle changes </li></ul><ul><li>Consumerism </li></ul><ul><li>Levels of education </li></ul><ul><li>Others? </li></ul>
  18. 18. S ocio-Cultural factors <ul><li>Maslow approach </li></ul><ul><li>The self reference criterion (SRC) </li></ul><ul><li>Diffusion theory </li></ul><ul><li>High and low context cultures </li></ul><ul><li>The elements of culture : material culture language aesthetics </li></ul><ul><li>education religion attitudes & values social organization . </li></ul><ul><li>Hofstede's contribution Cultural Variables </li></ul><ul><li>&quot;Power distance&quot; - endorsement and its inverse for inequality. </li></ul><ul><li>&quot;Individualism&quot; </li></ul><ul><li>&quot;Masculinity&quot; - assertive or competitive orientation, sex role distribution and caring attitude towards others </li></ul><ul><li>&quot;Uncertainty Avoidance&quot; </li></ul><ul><li>&quot;Confucian Dynamism&quot; - legitimacy of hierarchy & valuing of perseverance and thrift. </li></ul><ul><li>&quot;Integration&quot; - Degree of tolerance, harmony & friendship at the expense of competitiveness </li></ul><ul><li>&quot;Human Heartedness&quot; - Open-hearted patience, courtesy & kindness. </li></ul><ul><li>&quot;Moral Discipline&quot; - Rigid distancing from affairs of the world . </li></ul>
  19. 19. PES T echnological <ul><li>New discoveries and innovations </li></ul><ul><li>Speed of technology transfer </li></ul><ul><li>Rates of obsolescence </li></ul><ul><li>Internet </li></ul><ul><li>Information technology </li></ul><ul><li>Others? </li></ul>
  20. 20. Source: Adapted from M. E. Porter, Competitive Strategy, Free Press, 1980, p. 4. Threat of substitutes POTENTIAL entrants Threat of entrants SUPPLIERS Bargaining power SUBSTITUTES BUYERS Bargaining power COMPETITIVE RIVALRY FIVE FORCES ANALYSIS
  21. 21. Five Forces Analysis: Key Questions and Implications <ul><li>What are the key forces at work in the competitive environment? </li></ul><ul><li>Are there underlying forces driving competitive forces? </li></ul><ul><li>Will competitive forces change? </li></ul><ul><li>What are the strengths and weaknesses of competitors in relation to the competitive forces? </li></ul><ul><li>Can competitive strategy influence competitive forces (e.g. by building barriers to entry or reducing competitive rivalry)? </li></ul>
  22. 22. ANALYZING COMPETITION Porter’s 5force Model SUPPLIER POWER Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration Cost relative to total purchases in industry BARRIERS TO ENTRY Absolute cost advantages Proprietary learning curve Access to inputs Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution Expected retaliation Proprietary products THREAT OF SUBSTITUTES - Switching costs -Buyer inclination to  substitute -Price-performance  trade-off of substitutes BUYER POWER Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity Threat of backward integration Product differentiation Buyer concentration vs. industry Substitutes available Buyers' incentives DEGREE OF RIVALRY -Exit barriers -Industry concentration -Fixed costs/Value added -Industry growth -Intermittent overcapacity -Product differences -Switching costs -Brand identity -Diversity of rivals -Corporate stakes RIVALRY
  23. 23. POTENTIAL ENTRANTS <ul><li>BARRIERS TO ENTRY </li></ul><ul><li>Absolute cost advantages </li></ul><ul><li>Proprietary learning curve </li></ul><ul><li>Access to inputs </li></ul><ul><li>Government policy </li></ul><ul><li>Economies of scale </li></ul><ul><li>Capital requirements </li></ul><ul><li>Brand identity </li></ul><ul><li>Switching costs </li></ul><ul><li>Access to distribution </li></ul><ul><li>Expected retaliation </li></ul><ul><li>Proprietary products </li></ul>
  24. 24. SUBSTITUTES <ul><li>THREAT OF SUBSTITUTES </li></ul><ul><li>Switching costs </li></ul><ul><li>Buyer inclination to substitute </li></ul><ul><li>Price-performance </li></ul><ul><li>Trade-off of substitutes </li></ul>
  25. 25. SUPPLIERS POWER <ul><li>SUPPLIER BARGAINING POWER </li></ul><ul><li>Supplier concentration </li></ul><ul><li>Importance of volume to supplier </li></ul><ul><li>Differentiation of inputs </li></ul><ul><li>Impact of inputs on cost or differentiation </li></ul><ul><li>Switching costs of firms in the industry </li></ul><ul><li>Presence of substitute inputs </li></ul><ul><li>Threat of forward integration </li></ul><ul><li>Cost relative to total purchases in industry </li></ul>
  26. 26. BUYERS POWER <ul><li>BUYER POWER </li></ul><ul><li>Bargaining leverage </li></ul><ul><li>Buyer volume </li></ul><ul><li>Buyer information </li></ul><ul><li>Brand identity </li></ul><ul><li>Price sensitivity </li></ul><ul><li>Threat of backward integration </li></ul><ul><li>Product differentiation </li></ul><ul><li>Buyer concentration vs. industry </li></ul><ul><li>Substitutes available </li></ul><ul><li>Buyers' incentives </li></ul>
  27. 27. COMPETITIVE RIVALRY <ul><li>DEGREE OF RIVALRY </li></ul><ul><li>-Exit barriers </li></ul><ul><li>-Industry concentration </li></ul><ul><li>-Fixed costs/Value added </li></ul><ul><li>-Industry growth </li></ul><ul><li>-Intermittent overcapacity </li></ul><ul><li>-Product differences </li></ul><ul><li>-Switching costs </li></ul><ul><li>-Brand identity </li></ul><ul><li>-Diversity of rivals </li></ul><ul><li>-Corporate stakes </li></ul>
  28. 28. Porter’s Diamond of National Advantage: As Applied to India
  29. 29. Thanks!

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