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December 20, 2009

Business Environment refers to all the internal and external factors


which impact the functioning & performance of a firm and/or its
decision making.
Internal Factors: Factors External Factors: Factors
within the firm and in its affecting a firm that are
control. beyond its control.

1. Company’s Vision, 1. Near Environment Factors


Mission, and Objectives. 1. Suppliers
2. Customers
2. Management & Structure
3. Competitors
3. Company Image & Brand
Equity
1. Far environment Factors
4. Marketing Resources
1. Political
5. Physical Assets & 2. Economic
Facilities
3. Social
4. Technological
Michael Porter’s Five Forces Analysis is a helpful tool to analyze the
competitive structure of the industry. One can understand the influence of
‘micro’ environmental factors through this analysis.

The five forces are:


Competition from existing players
Threat of new Entrants
Threat of substitutes
Bargaining Power of Buyers
Bargaining Power of Suppliers
• Ad Promotion Company is an Iranian business organization, that performs
activities like designing advertisements and building advertisement
structures.

• It’s main focus is marketing, apart from that it rents advertisement boards
to post advertisements

• Ad Promotion is ranked 1 for many years in “Iran’s ministry of culture and


Islamic Guidance” ranking of environmental media companies.

• Its media work can be divided into


1. Signboards
2. Bridges
3. Airports
4. Super buses
5. Scrolling
Competition exists whenever 2 or more companies organizations offer similar
products or services for the same group of individuals or customers.

Competition depends on

•Firm concentration & their relative market share : More the number of
companies, greater is the competition for resources & market share.
•Product pricing: When one company reduces its prices, other companies
are forced to follow the suit.
•Product differentiation: Improving features, and making innovative
changes. If products are more or less the same, competition is intense.
•Low switching costs: When a customer can freely switch over from one
company to another, the rivalry intensifies.
 Ad Promotion company faces high competition as firm
concentration is high.
 There are about 980 registered companies in Tehran, all
vying for the same market share.
 Price reduction by one company will force Ad Promotion
too to do so to retain its customers. This sharply
reduces its profit margins.
 Since customer loyalty is difficult to retain in this
industry, one should look at new innovative ways to
attract new customers and retain existing ones.
 It refers to the power of the customers, and how
much pressure they can put on margins.
 The measure of customer power is by the answer
to the question “How much of company’s income
is from customers’ purchase?”
 Strong customers can force a decrease in costs or
increase in quality.
 Iranian foreign policies have lead to decrease in
number of companies that want to advertise.
 Since Ad Promotion’s main source of income is
from customer purchases, it intends to win
maximum customer satisfaction.
 Suppliers exercise control over the company by
increasing prices or reduction of quality.
 If there are few suppliers/contractors and
many companies dependent on them, then they
have a lot a power.
 However, in the environmental media-owners
industry, there are many contractors, so they
have less bargaining power.
 Since the contractors’ work is very limited such
as printing & maintaining flaxy faces, they
exercise less control over Ad Promotion.
 New entrants could change major determinants of
market environment like market share, prices,
customer loyalty.
 In the environmental media industry, high initial
investment is required, which acts a substantial
barrier to entry.
 The Tehran municipality has issued enormous number
of legal grounds for environmental media
construction without realizing its potential, leading
to reduced demand for it.
 Exists if alternate products are available with
lower prices, for the same purpose and better
performance parameters.
 It will help attracting a significant proportion of
the market volume & hence reduce the potential
sales volumes of existing players. Buyer
inclination towards substitute will increase.
 If Switching Costs are less, customers will easily
shift to substitute product.
 Strategic Partners- companies that supply
their services to the company
 They are associated with profitability and
success
 The less the number of strategic partners-
more the bargaining power
 Strategic partners in environmental media are
called advertising agencies.
 Advertising Agencies: Agencies responsible for designing
and implementing a company’s advertising campaign

1) When a company decides the product or services estimated


budgets, it authorizes an agency to prepare plan for company’s
advertising
2) Then the agency prepares a company’s plan within the budget
3) These advertising agencies determine type and plan of
advertising considering company's objective.

In Iran there is a rule that if a media owner hires a media for customer from
another media owner, the leaseholder is projected as “Agency” and the lesser
company should pay a % of the contract’s price as the agency right.

According to this rule, if a company assigns Ad Promotion as its media


provider custodian, its role as collecting agency is one of the most important
income gain.