3. Marketing and Environmental Analysis
Marketing strategy is concerned with matching the capabilities of the organization with the demands
of the environment.
The strategists monitor the environment on an ongoing basis so that opportunities and threats are
identified and subsequently reflected in strategy.
In analyzing the environment a stepwise approach is needed. This begins with an initial audit of
general environmental influences, followed by a series of increasingly tightly-focused stages designed
to provide the strategist with a clear understanding of the organization’s strategic position.
Although a variety of approaches can be used for analyzing the environment, arguably the most
useful is the PEST framework. This involves the strategist focusing in turn upon the Political/legal,
Economic, Social/cultural and Technological elements of the environment..
The environmental conditions faced by an organization are capable of varying greatly in their
complexity, and need to be reflected both in the ways in which environmental analysis is conducted
and in the ways in which strategy is subsequently developed.
It is widely recognized that the pace of environmental change is increasing and that the need for
organizations to develop a structured approach to environmental analysis, with the results then
being fed into the strategic marketing planning process, is greater than ever.
Despite this, the evidence suggests that in many organizations environmental scanning systems are
only poorly developed. If this is to change, top management commitment both to the development of
a scanning system and to the incorporation of the results into the planning process is essential.
4. Learning Objectives
Why a regular and detailed analysis of the
organization’s environment is important
The key elements of the environment
How firms go about analyzing the environment
How environmental factors are changing
The dimensions of environmental scanning systems
5. Importance of Organization’s
Environment
An understanding of macro and micro marketing
environment forces is essential for planning.
Helps a business to compete more effectively against its
rivals.
Assists in the identification of opportunities and threats.
Enables an organization to take advantage of emerging
strategic opportunities.
6. THE MARKETING ENVIRONMENT
The forces that directly and indirectly influence an
organization’s capability to undertake its business.
The trading forces operating in a market place
over which a business has no direct control ,but
which shape the manner in which the business
function and is able to satisfy its customers.
7. COMPONENTS OF MARKETING ENVIRONMENT
Internal environment : Forces and actions inside the firm that
affect the marketing operation composed of internal stake
holders and the other functional areas within the business
organization.
External environment
Macro environment
Micro environment
8. COMPONENTS OF MARKETING ENVIRONMENT
MICRO ENVIRONMENT
The factors in the immediate environment .
MACRO ENVIRONMENT
Broad forces which shape the character of opportunities
and threats.
11. THE INTERNAL ENVIRONMENT
All factors that are internal to the organization are known
as the 'internal environment'. They are generally audited
by applying the 'Five Ms' which are Men, Money,
Machinery, Materials and Markets. The internal
environment is as important for managing change as the
external. As marketers we call the process of managing
internal change 'internal marketing.‘
12. THE INTERNAL ENVIRONMENT
It includes the following:
The human resource department.
The operations department.
The accounting and finance department.
The research and development department.
13. INTERNAL PROCESSES AND
PROCEDURES
•Allocation of responsibilities within the organization.
•Resources availability .
•The extent to which the major functional areas work
together supporting the marketing function to be
customer oriented .
•The culture of organization.
•The attitude of internal stakeholders.
14. Micro Environment
The forces close to the company that affects its
ability to serve.
It comprises all those organizations and
individuals who directly affect the activities of a
company.
All factors which impact directly on a firm and
its activities in relation to a particular market.
1. Suppliers
2. The market channel
3. Customers.
4. Competitors
5. Community
15. SUPPLIERS
Suppliers are either individuals or business houses.
They provide resources needed by the company .
The developments in the suppliers environment have a
substantial impact on the marketing operations of the
company .
Companies can lower their supply costs and increase
product quality to gain competitive advantage in the
market.
supply shortages have to be fully monitored and plans
should be made to avoid it.
16. Market Intermediates
They are either business houses or individuals .
They help the company in promoting, selling and
distributing the goods to customers.
They are middlemen, distributing agencies, market
service agencies and financial institutions.
17. Customers
The target market of the company is usually of five types:
1.Consumer market i.e. individual and householders
2.Industrial market i.e. organizations buying for producing
other and services.
3.Reseller market i.e. organizations buying goods and
services with a view to sell them to others.
4.Government and other non profit markets.i.e.those buying
goods and services in order to produce public services.
5.International market i.e. individuals and organizations of
nations other then home land who buy for either
consumption or industrial use.
18. Competitors
No company stands alone in serving and satisfying the
needs of a customer market. It faces competition.
This helps the company in facing a host of competitors
with confidence .
The company in order to come out successfully has to adopt
means which may help it to outmaneuver.
The competitive environment consists of certain basic
things which every marketing manager has to take note of.
Philip Kotler ‘the best way for a company to grasp the full
range of its competition is to take view point of a buyer.”
19. Community
Community is defined as ‘any group that has an
actual or potential interest in or impact on a
company’s ability to achieve it’s objective.
The actions of the company do affect the interest
of other groups i.e., those who form general public
for the company who must be satisfied along with
the consumers of the company.
According to Kotler ‘companies must put their
primary energy into effectively managing their
relationships with their customers.
20. Macro Environment
Macro environment refers to those
factors which are external to company’s
activities and do not concern the
immediate environment.
It comprises general forces that affect all business
activities in market .
21. Factors Affecting Macro Environment
1. POLITICAL AND LEGAL FORCES
2. ECONOMIC FORCES
3. SOCIAL AND CULTURAL FORCES
4.NATURAL FORCES
5. TECHNOLOGICAL FORCES
6.DEMOGRAPHIC FORCES
22. Political and Legal forces
Includes laws, government agencies and pressure
groups that influence or limit various organizations
and individuals in a given society.
Increasing legislation.
Changing government agency enforcement.
More emphasis on ethics and socially responsible
actions.
23. Economic Environment
The economic environment consists of factors that affect
consumers purchasing and spending power.
Under economic environment manager generally studies
1.trends of gross national product
2.patterns of real growth in income
3.variations in geographical income distribution.
4.borrowing pattern ,trends and governmental and legal
restrictions.
5.major economic variables
24. Social and Cultural Forces
Social responsibility has crept into the marketing
literature as an alternative to the market concept.
Socially responsible marketing is that business firms
should take the lead in eliminating socially harmful
products
25. DEMOGRAPHIC FORCES
Demographic data helps in preparing geographical
marketing plans, household marketing plans, age and
sex wise plans.
It influences behavior of consumers which in turn will
have direct impact on market place.
A marketer must communicate with consumers
anticipate problems ,respond to complaints and make
sure that the firm operates properly.
26. Technological Environment
Most dramatic force now shaping our destiny.
Changes rapidly.
Creates new markets and opportunities
Challenge is to make practical, affordable
products.
Safety regulations result in higher research costs
and longer time between conceptualization and
introduction of product.
27. Natural Forces
Involves the natural resources that are needed as
inputs by marketers or that are affected by marketing
activities.
28. Natural Environment Trends
Shortage of raw materials.
Limited quantities of non-renewable resources.
Increased pollution.
Waste disposal, air/water pollutants.
Increased government intervention.
Kyoto and other initiatives.
Environmentally sustainable strategies.
G.R.E.E.N. movement.
29. Pest Analysis
A scan of the external macro environment in which the
firm operates can be expressed as a PEST Analysis.
The acronym PEST (or sometimes rearranged as “STEP”)
is used to describe a framework for the analysis of these
macro environmental factors.
A PEST Analysis fits into an overall environmental scan,
which includes Political, Economical, Social, and
Technological environment.
30. PURPOSE OF ANALYSING THE MARKET
To know where the environment is heading
To discern which events and trends are favorable
To assess the scope of various opportunities
To help secure the right fit between the environment
and the business unit
31. CONTROLLABILITY
The organization has no control over the macro
environment. It can only respond to the changes taking
place.
The organization has some degree of influence over the
micro environment but by no means complete control.
The organization controls its own internal environment
although this does not mean the marketing department
or marketing manager has control.
32. The changing business
environment
The stagnation of many markets
Market fragmentation
Product proliferation
Growing product parity
Shorter product life cycles
Increasingly frequent niche attacks by competitors
Greater customer sophistication and increased customer demands
Downward price pressures
Rising promotional costs and lower promotional returns
Increasing sales force costs
Changing patterns of distribution and shifts in the balance of power as
intermediaries become more dominant
The erosion of many of the traditional bases of competitive advantage
An increased emphasis upon environmental and ‘green’ issues
The increasingly global nature of many markets
33. An Environmental Scanning process is
influenced by a variety of factors
The management expectations.
The size of the organization
The managerial perceptions of the complexity of its
environment.
Top management involvement and commitment.
A detailed understanding of the dimensions and
parameters of the scanning model that it is intended
should operate.
An established strategic planning culture.
34. Specific benefits of environmental
scanning
An increased general awareness by management of
environmental changes
Better planning and strategic decision-making
Greater effectiveness in government matters
Better industry and market analysis
Better results in foreign business
Improvements in diversification and resource
allocations
Better energy planning.
35. The Difficulties in Environmental
Analysis
The interpretation of results and the assessment of their specific
impact upon the organization is rarely clear-cut
The output of environmental analysis may be too inaccurate, general
or uncertain to be taken seriously
A preoccupation with the short term pre-empts attention being paid to
longer-term environmental issues
Long-term environmental analyses are often treated sceptically
In diversified businesses the amount of analysis needed is likely to be
both consider- able and complex, particularly when interrelationships
are considered
Perceptions and interpretations of scenarios identified may differ
significantly between one manager and another.