463 33 powerpoint-slides_baines2e_ch02_1

Marketing: Asian Edition © Oxford University Press 2013. All rights reserved
The New Generation Marketing Text!
Learning Outcomes
Identify and define the three key areas of the marketing
environment.
Describe the key characteristics associated with the
marketing environment.
Explain PESTLE analysis and show how it is used to
understand the external environment.
Explain the environmental scanning process.
Analyse the performance environment using an
appropriate model.
Understand the importance of analysing an organisation’s
internal environment and identify the key resources and
capabilities.

Case Insight – Crompton Greaves Limited
Crompton Greaves Limited is in the business of design,
manufacture, and supply of all kinds of T&D (transmission
and distribution) equipment, including complete solution
services, to its large base of customers in India and
abroad.
Due to cut-throat competition, domestic industry for
T&D products is losing market share to foreign players.
What measures should a company like Crompton Greaves
take in order to thrive on the changes in its business
environment?

The Three Marketing Environments

The External Marketing Environment

The Political Environment: Business-Government
Relations
Several ways marketers conduct business–government relations in various countries
include:
Lobbyist firms, with key industry knowledge, are engaged either permanently or as
needed.
Using public relations consultancies, e.g. Public Relations Consultants Association of
India, can be commissioned for their political services.
A politician can be paid a fee to give political advice on matters of importance to an
organization, where this is legal within that particular jurisdiction, and that politician is
not serving directly within the government in question on the same portfolio as that
on which they are advising.
An in-house public relations manager might handle government relations directly.
An industry association can be contacted to lobby on behalf of members (e.g. the
International Marine Contractors Association (IMCA) is the international trade
association representing offshore, marine, and underwater engineering companies).
A politician may be invited directly to join the board of directors, board of trustees, or
board of advisers of an organization.

The Economic Environment
Wage inflation – annual wage increases in a particular sector will depend on the
supply of labour in that sector. Where there is scarcity of supply, wages usually
increases (e.g. doctors).
Price inflation – how much consumers pay for goods and services is dependent
on the rate of supply of those goods and services.
Gross domestic product per capita – combined output of goods and services in
a particular nation determines relative wealth between countries when
comparisons are calculated per member of the population.
Income, sales and corporation taxes – typically operating in all countries around
the world usually at different levels, substantially affecting how we market goods
and services.
Exchange rates – the relative value of a currency vis-à-vis another currency
impacts on businesses operating in foreign markets or holding financial reserves
in other currencies.
Export quota controls and duties – there are often restrictions placed on the
amounts (quotas) of goods (and services) that any particular firm or industry can
import into a country, depending on to which trading bloc or country a company
or firm is exporting.

The Socio-Cultural Environment: Demographics
and Lifestyles
Notably, some countries’ populations are set to fall (e.g. Japan and Russia).
The relatively large proportion of people in the 65-year-old-plus.
In Europe, the trend is towards marrying later and a greater tendency to
divorce than in previous generations.
There are also changes taking place within society that affect the way that
consumers now interact with an organization’s marketing activity (e.g. crowd-
sourcing, co-creation).

The Technological Environment
New technology changes the way companies go to market through moves
towards more email- and web-based marketing and greater efficiency in direct
and database marketing techniques (Sclater, 2005).
Changes in technology particularly affect high-technology industries, where
firms must decide whether they wish to dominate that market by pushing their
own particular technology standards, and especially where new technology
renders existing standards obsolete.
Firms’ actions are shaped by technological opportunity within the
technological environment (Wilson, 1997). For example, in the pharmaceutical
and chemical industries, companies have for a long time developed new
compounds based on modifications of compounds registered for patents by
their competitors in a process known as ‘reverse engineering’.
Innovation becomes a necessary condition in the strategic marketing decision-
making of high-technology firms. For less technology-intensive firms,
innovation of some form, whether it is process- or product/service-focused, or
at least rapid adoption of new product/service variants based on competitors’
offerings, is still usually necessary to stay ahead of the competition.

The Legal Environment
Laws and regulation are enacted in most countries ranging from the transparency
of pricing, the prevention of restrictive trade practices, product safety, good
practice in packaging and labelling, and the abuse of a dominant market position,
to codes of practice in advertising, to take just a small selection.
Product Safety, Packaging, and Labelling - Generally, in the EU, product
labelling regulation tends to relate to recycling of packaging and waste to
ensure it complies with environmental regulations, whereas in the USA, for
example, packaging and labelling regulations are more concerned with fair
practice and ensuring that packaging does not contain misleading advertising
statements. In India, the FPO mark is mandatory for all processed food
products.
Codes of Practice in Advertising - Advertising standards differ around the
world. In some countries, for example, the UK, advertising is self-regulated, i.e.
by the advertising industry itself. In other countries, advertising is restricted by
government legislation.

The Ecological Environment
In the 1990s, companies became concerned with the concept of
‘green’ marketing, and later in the 2000s with the concept of
marketing sustainability. Increasingly, consumers are worried about
the impact of companies on their ecological environments. They
are demanding more ‘organic’ food, incorporating principles of
better welfare for the animals they consume as food products and
less interference with the natural processes of growing fruit and
vegetables (e.g. the use of pesticides and chemical fertilizers).

The Ecological Environment: Green Marketing
Strategies
Orsato (2006) suggests that a company can adopt one of the following four
different green marketing strategies:
Eco-efficiency—developing lower costs through organizational processes such as
the promotion of resource productivity (e.g. energy efficiency) and better utilization
of by-products.
Beyond compliance leadership—the adoption of a differentiation strategy through
organizational processes such as certified schemes to demonstrate their ecological
credentials, their environmental excellence, for example, the adoption of the UN
Global Compact principles or other Environmental Management System (EMS)
schemes and codes such as ISO14001.
Eco-branding—the differentiation of a firm’s products or services to promote
environmental responsibility. Examples include Duchy Originals, the British Prince of
Wales’ food brand, the Thai King Bhumipol’s Golden Place brand, or the Toyota Prius
labelled as ‘mean but green’.
Environmental cost leadership—the offering of products and services that give
greater environmental benefits at a lower price.

Source: CIA World Factbook
World Demographics 2009

Definitions of Environmental Scanning
According to Aguilar (1967), environmental scanning is the process of
gathering information about a company’s external events and relationships,
in order to assist top management in its decision-making, and so develop its
future course of action.
It can be regarded as the internal communication of external information
about issues that may potentially influence an organisation’s decision-
making process, focusing on the identification of emerging issues, situations
and potential threats in the external environment (Albright, 2004).

Information Requirements for Environmental
Scanning
Customer and competitor information – including competitors’ prices,
competitors’ new product introductions, competitors’ advertising/promotional
programmes, competitors’ entry into new markets and new product
technologies, customers’ buying habits, customers’ product preferences,
customers’ demands and desires.
Company resources and capabilities – including company’s R & D capabilities
and resources, company’s advertising and promotions resources, company’s
sales capabilities/resources, company’s financial capabilities/resources,
company’s management capabilities/resources.
Suppliers of labour and funds – including availability of external financing,
availability of labour and new manufacturing technologies (Beal, 2000).

The Environmental Scanning Process

Understanding the Performance Environment
The performance environment consists of those organizations that either directly
or indirectly influence an organization’s operational performance. There are
three main types:
1) Those companies that compete against the organization in the pursuit of its
objectives.
2) Those companies that supply raw materials, goods, and services and those
that add value as distributors, dealers, and retailers, further down the
marketing channel.
3) Those companies that have the potential to indirectly influence the
performance of the organization in the pursuit of its objectives. These
organizations often supply services such as consultancy, financial services, or
marketing research or communication agencies.

1. Threat that new competitors will enter the market
2. Threat posed by substitute products
3. Bargaining power of buyers
4. Bargaining power of suppliers
5. Intensity of rivalry between the current competitors
Industry Analysis: Porter’s Five Forces

Industry Analysis: Porter’s Five Forces

Analysing the Internal Environment:
The Boston Box
Present Position
Future Position

Portfolio Issues
How fast will the market grow?
What will be our market share?
What investment will be required?
How can a balanced portfolio be created from this point?

Dimensions of a Marketing Audit

Summary
Identified and defined the three key areas of the marketing
environment.
Described the key characteristics associated with the marketing
environment.
Explained PESTLE analysis and showed how it is used to understand
the external environment.
Explained the environmental scanning process.
Analysed the performance environment using an appropriate model.
Understood the importance of analysing an organisation’s internal
environment and identified the key resources and capabilities.

463 33 powerpoint-slides_baines2e_ch02_1

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