This document discusses understanding industries through environmental analysis at both the micro and macro levels. At the micro level, the key elements of the microenvironment that can directly impact businesses are the company itself, suppliers, marketing intermediaries, customers, competitors, and the public. At the macro level, PESTEL analysis is used to analyze the political, economic, sociocultural, technological, environmental, and legal external factors in the broader environment that can indirectly influence organizations. Understanding both the micro and macro environments is important for strategic decision making and developing effective marketing strategies.

1. Understanding Industries
• Environmental Analysis
– To provide useful information for the strategy
process
– To provide information on emerging issues and
trends
• -To develop networks and partnerships
among the scanners and their organization
• -To educate participants about the scanning
function and about specific issue and trend

2. Environmental Analysis
• Microenvironment
• Macroenvironment

3. Linking of Macro and Micro Environmental
Forces

4. Linkage between Environmental
Analysis and Marketing

5. Impact of the Micro and Macro Environment Forces
on the Firm’s Marketing Mix

6. Microenvironment
• Company
• Supplier
• Marketing
Intermediaries
• Customer
• Competitor
• Public

7. Microenvironment
• Unique to industry and that have directly
affect how company does business
– Company : Internal factors (Strengths
and Weaknesses)
– Suppliers : Company that provide
material ,human ,financial, information
to other companies

8. Microenvironment
• Marketing Intermediaries
– Between company to customer
– Between company to employee
• Customer : should monitoring
customers changing want / need is
critical to business success.

9. Microenvironment
• Competitor : Company in the same
industry that sell similar product to
customers.
– In order to do Competitive Analysis
• Deciding who your competitors are, anticipating
competitors’ move, and determining competitors’
strengths and weaknesses.

10. Microenvironment
• Public
– Group of concerned citizens who band
together to try to influence the business
practices of specific industries.

11. Analysis the Macroenvironment
• What are the forces at work outside the
organization which must be
considered?
– All events outside a company that have
potential to influence or affect it (Have
indirectly affect all organizations)

12. Layers of the business environment

13. PESTEL Analysis
• A systematic way of looking at the
external factors which potentially impact
the organization
– Political
– Economic
– Socio-Cultural
– Technology
– Environmental
– Legal

14. Figure 3.1 PEST analysis of the macro-environment

15. PESTEL
• Political : Global , Regional, National
– Tax Politics
– Labor Market Politics
– Development in trade and industry
– Agricultural Politics
– Public Interference
– Trade Political Conditions
– Foreign Trade Regulations
– Social Welfare Policies

16. PESTEL
• Economic
– Business cycles
– Gross national product (GNP) and GNP / CAPITAL
– Interest rates
– Money supply
– Inflation rates
– Unemployment
– Disposable income
– Private consumption and available income
– Other costs
– Development of the rate of exchange

17. Figure 3.2 The economic and political environment

18. Economic and political
pressures on organization
- Competition policy
- Public-private funding initiatives
- Reduce waste

19. PESTEL
• Socio-Cultural
– Demographic conditions
– Change in values / attitudes
– Change in lifestyle
– Attitudes toward work / spare time
– Education conditions
– Work environment conditions
– Health conditions
– Change in income distribution
– Social mobility
– Consumerism
– Levels of education

20. Figure 3.3 The social and cultural environment

21. Social and cultural impact on
organizations
- Customers are becoming increasingly
demanding of products and services they
buy.
- Customers are less prepared to pay a
substantial premium for products or
services that do not offer demonstrably
greater value.
- A further social/cultural change has been
in attitudes to the physical environment

22. PESTEL
• Technological
– Spreading of and breakthrough in new technology
– Public supported R&D projects
– Development in R&D
– New patents and products
– Knowledge tool and technique used to transform input
(Raw Material, Information) into output (Product and
Service)
– Speed of technology transfer
– Government spending on research
– New discoveries and development
– Rates of obsolescence

23. Technological pressures on
organizations
• Technology continues to develop at a
bewildering pace
• - affecting not just the “High Tech”
industries
• - also other industries that make use of
new technologies

24. PESTEL
• Environmental
– Ecology
– Pollution conditions
– “Green Energy”
– Energy conservation
– Waste handling
– Environmental protection laws

25. PESTEL
• Legal
– Development in price and competitive
legislation
– Labor market legislation
– Product safety and approvals
– Competition laws
– Employment laws
– Product safety

26. Changes in marketing
infrastructure and practices
• The marketing function has a major
role to play in keeping the company up to
date with changes in its broader
environment and the competitive
environment

27. New strategies for changing
environments
• Global positioning
• -globalization and focus on core competencies
• The master brand
• -brand identity that links all part of business
• The integrated enterprise and end-user
focus
• -the challenge of managing people, processes
and infrastructure to deliver value to an end-user

28. New strategies for changing
environments
• Best in class processes
• -meet world class standards
• Mass customization
• -imperative to achieve scale economies
• Breakthrough technology
• -new technology will underpin every
aspect of the marketing process

29. Figure 3.4 The shift in strategy for delivering shareholder value
Source: Adapted from Sheth (1994)

30. Market based strategy
• Markets shape business strategy
• -the dominant force shaping how business
• Networks of interlinked product markets
• -traditional boundaries based on conventional product
markets will blur and become irrelevant
• The move from functions to processes
• -increasingly focus on the process of going to market
• Strategic alliance
• -will be one of collaboration and partnership
• The balance scorecard
• -keeping score involves evaluating the benefits we
deliver to all the stakeholders in the organization

31. Key Aspects of PESTEL
Analysis
• Not just a list of influences
• Need to understand key drivers of change
• Drivers of change have differential impact
on industries, markets, and organisations
• Focus is on future impact of environmental
factors
• Combined effect of some of the factors
likely to be most important

32. Making Sense of changing
Environments
• Environmental Scanning
– Searching environment that might affect
organization
• Interpreting Environmental Factors
– As either threats or opportunities
• As Threats : take steps to protect company from
further harm
• As Opportunities: consider strategic alternatives for
taking advantage of these events
• Acting on Threats and Opportunities
– Decide how to response to these
environmental factors

33. Strategy-Formulation Analytical Framework
External Factor Evaluation
Matrix (EFE)
Internal Factor Evaluation
Matrix (IFE)
Competitive Profile Matrix
(CPM)
The Input Stage

34. External Strategic Marketing
Management Audit
•
-- Environmental Scanning
• -- Industry Analysis

35. •
Purpose of External Audit
– Identify
• Opportunities
• Threats
External Strategic Marketing
Management Audit

36. •
Gather competitive
intelligence
• Social
• Cultural
• Demographic
• Environmental
• Governmental
• Legal
• Technological
External Audit

37. Basic Tenet of Strategic
Marketing Management
Opportunities & Threats
Strategy Formulation
Take advantage of
External Opportunities
Avoid/minimize impact of
External Threats

38. Key External Forces (PESTEL)
•Political, governmental &
•Economic forces
•Social, cultural, demographic &
environmental forces
•Technological forces
• Legal forces
• Competitive forces

39. External Audit – Sources of
Information
•Internet
•Libraries
•Suppliers
•Distributors
•Customers
•Competition

40. Performing External Audit --
Variables
•Market share
•Breadth of competing products
•World economies
•Foreign affiliates
•Proprietary account advantages

41. Industry Analysis: The External
Factor Evaluation (EFE) Matrix
Competitive
Political
Cultural
Technological
Environmental
Social
Governmental
Demographic
Economic
Summarize & Evaluate

42. Industry Analysis EFE
•
Understanding the factors used in the
EFE Matrix is more important than the
actual weights and ratings assigned.
Important --

43. •
Total weighted score of 4.0
• Organization response is outstanding to
threats and weaknesses
Industry Analysis EFE
•
Total weighted score of 1.0
• Firm’s strategies not capitalizing on
opportunities or avoiding threats

44. Example:

45. Example: