External Environment in the Asia Pacific

Region

Asia-Pacific Marketing Federation

Certified Professional Marketer
Copyright
Marketing Institute of Singapore
 Outline

• Introduction
• The Company’s Microenvironment
• The Company’s Macroenvironment
• The Competitors
• Porter's Five Forces Model
 Introduction
Definition:
The Company’s environment consists of "the actors
and forces outside marketing that affect marketing
management's ability to develop and maintain
successful transactions with its target customers"

Kotler et al, 1994

 Introduction (cont’d)
• Companies must evaluate both micro and macro-
environment to identify
–any trends that may affect their marketing strategies, and
–opportunities that can be developed into competitive
advantages
• Porter's Five Forces model analyses market structures to
determine market attractiveness taking into consideration
the micro and macro environments in its construction
 Company’s Microenvironment

Relates to the internal forces or forces close to the company

over which some control is possible
• Top management
• Other functions e.g. finance and accounting, R& D,
manufacturing and purchasing
• Suppliers
• Marketing intermediaries (channel partners)
• Customers
• Competitors
• Public
 Company’s Macro-environment

• Relates to the larger forces having an impact on

society as a whole
• A company has little influence on these forces
and therefore can only adapt its marketing mix
to account for the resulting opportunities and
threats
Major forces of the macro-environment

• Demographic
• Economic
• Natural
• Technological
• Cultural
• Political/legal
 Demographic Environment

Demographic trends:
• Changing age structure
• Changing family structure
• Geographic shifts in population
• Higher education level & more white collar
job holders
• Increasing globalization of cities such as
Singapore
 Economic Environment

Economic trends affecting consumers buying

power and spending pattern
• Change in per capital real income
– Disposable
– Discretionary
– Income distribution
• Savings & debt
• Consumer expenditures
• Change in interest rates and cost of living
 Natural environment

Natural trends include those natural resources

used in production or those affected by
marketing activities
• Raw material shortages
• Increase in energy cost
• Increase pollution levels
• Increase in Governmental intervention in
natural resource management
 Technological Environment

Consists of forces that affect new technology,

new product development and market
opportunities
• Faster pace of technological change
– Shorter PLC
• Higher R&D budgets
• Concentration on minor improvements
• Increased regulations
 Cultural Environment

Affect society's basic values, perceptions,

preferences and behaviors
• Core cultural values and beliefs
• Secondary cultural values
• Sub cultures
 Legal and Political Environment
Trends in the legal and political environment include
• Increased legislation regulating business
– Singapore’s Fair Trading Act (impending)
• Changing government agency enforcement
• Growth of public interest groups
• Regional groupings
– ASEAN FTZ
 Competitive Analysis
• Who are your competitors?
• Do you know about your close competitors’
strengths and weaknesses?
• How detail should we analyze the competition?
– Use a systematic approach
– Analysis competition at various levels (next slide)
Levels of Competition
Generic Competition

Form Competition

Industry Competition

Brand Competition
 Levels of Competition (cont’d)
• Generic competition—e.g. Honda against Silver Sea
Cruise for the same consumer dollars
• Form competition—e.g. Toyota against manufacturers
of other vehicles that provide the same service such as
Yamaha (motorcycle)
• Industry competition—e.g. Honda against Mercedes,
Lexus etc who make the same products or class of
products (different prices)
• Brand competition—e.g. Honda against Toyota, Nissan
etc. who offer similar products and service to the
same customers at similar prices
 Industry Competition

• Different industries can sustain different levels

of profitability; partly due to the difference in
industry structure
• Porter’s Model of Industry Competition,
commonly know as Porter’s Five Forces
provides a framework for analyzing the
influence of the forces on the industry to
determine the industry’s profitability and
competitiveness
 Porter’s Model of Industry
Competition
Barriers to Entry

Industry degree
Suppliers Buyers
of rivalry

Substitutes

(Source: Aakers pp.8487)

 Porter’s 5 Forces—
Barriers to Entry
• Absolute cost advantages
• Proprietary learning curve
• Access to inputs
• Government policy
• Economies of scale
(Source: Michael Porter, “On Competition”)
• Capital requirements
• Brand identity
• Switching costs
• Access to distribution
• Expected retaliation
• Proprietary products
 Threats of Substitutes

• Switching costs
• Buyer propensity to substitute
• Relative price performance of
substitutes

(Source: Michael Porter, “On Competition”)

 Buyer Power

• Bargaining leverage • Threat of backward

• Buyer volume
• Buyer information
• Brand identity
• Price sensitivity
integration
• Product differentiation
• Buyer concentration vs.
industry
• Substitutes available
• Buyers' incentives

(Source: Michael Porter, “On Competition”)

 Supplier Power

• Supplier concentration • Switching costs of firms

• Importance of volume to in the industry
supplier • Presence of substitute
• Differentiation of inputs inputs
• Impact of inputs on cost • Threat of forward
or differentiation integration
• Cost relative to total
purchases in industry

(Source: Michael Porter, “On Competition”)

 Degree of Rivalry

• Exit barriers
• Industry growth
• Industry concentration ratio

• Fixed costs/Value added

• Product differentiation
• Buyers' incentives
(Source: Michael Porter, “On Competition”)