Environmental Analysis Models

Syed Ferhat Anwar

Professor, IBA
University of Dhaka
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Environment Analysis
• Internal Environment
▫ Macro-environmental Factors
• External Environment
▫ Functional factors
▫ Corporate factors
▫ Brand assessment
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Environmental Analysis Techniques (1 of 7)

• SWOT Analysis
Web Employees Annual Sales Revenue Net Income Asset Liabilities Business Stock Value
Address Value

My Company

Competitor
One

Competitor
Two

Competitor
Three
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Environmental Analysis Techniques (2 of 7)

• SWOT (continued)
Strengths My Company Competitor 1 Competitor 2 Competitor 3

What are your business

advantages?

What are your core competencies?

Where are you making the most

money?

What are you doing well?

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Environmental Analysis Techniques (3 of 7)

• SWOT (continued)
Competitor 3
Weaknesses My Company Competitor 1 Competitor 2

What areas are you avoiding?

Where do you lack resources?

What are you doing poorly?

Where are you losing money?

What needs improvement?

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Environmental Analysis Techniques (4 of 7)

• SWOT (continued)
Opportunities My Company Competitor 1 Competitor 2
Competitor 3

Any beneficial trends?

Niches that competitors are

missing?

New technologies?

New needs of customers?

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Environmental Analysis Techniques (5 of 7)

• SWOT (continued)
Threats My Company Competitor 1 Competitor 2 Competitor 3

Obstacles to overcome?

Aggressive competitors?

Successful competitors?

Negative economic conditions?

Government regulation?

Changing business climate?

Vulnerabilities?
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Environmental Analysis Techniques (6 of 7)

• Prioritizing SWOTs: Once the SWOTs have been
identified, they need to be prioritized, based on
criteria such as:
▫ Realistic damage to brand relationships and brand
equity if a weakness or threat is not addressed.
▫ Realistic benefit if a strength or opportunity is leveraged.
▫ Cost of addressing or leveraging each SWOT.
▫ Time company has to address or leverage each SWOT.
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Environmental Analysis Techniques (7 of 7)

• Prioritizing SWOTs
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Environmental Analysis Techniques (1 of 4)

• Portfolio Analysis
• Category/Brand Positioning
A statement of the niche the category/brand can most
successfully fulfill
▫ How should we distinguish our category/brand from our
competitors?
▫ Example GE Analysis
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Environmental Analysis Techniques (2 of 4)

• GE Analysis (measuring market attractiveness)
Factors Weight Rating (1-5) Value
Overall market size 0.20 4 0.80
Annual market growth rate 0.20 5 1.00
Historical profit margin 0.15 4 0.60
Competitive intensity 0.15 2 0.30
Technological requirements 0.15 4 0.60
Inflationary vulnerability 0.05 3 0.15
Energy requirements 0.05 2 0.10
Environmental impact 0.05 3 0.15

TOTAL 1.00 3.70

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Environmental Analysis Techniques (3 of 4)

• GE Analysis (measuring business strength)
Factors Weight Rating (1-5) Value
Market share 0.15 4 0.60
Product quality 0.15 4 0.60
Brand reputation 0.10 5 0.50
Promotional effectiveness 0.10 3 0.30
Managerial personnel 0.15 2 0.30
Unit costs 0.15 3 0.45
Material supplies 0.10 5 0.50
R&D Performance 0.10 3 0.30

TOTAL 1.00 3.55

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Environmental Analysis Techniques (4 of 4)

Business Strength
Strong Medium Weak
5.00 PROTECT POSITION INVEST TO BUILD BUILD SELECTIVELY
Invest to grow at maximum Challenge for leadership Specialize around limited
digestible rate strength
Strong

Build selectively on strength

Concentrate effort on Reinforce vulnerable areas Seek ways to overcome
maintaining strength weakness
Market Attractiveness

Withdraw if indications of
sustainable growth are lacking
3.67 BUILD SELECTIVELY SELECTIVITY/MANAGE FOR LIMITED EXPANSION OR
Invest heavily in most attractive EARNINGS HARVEST
Medium

segment Protect existing programs Look for ways to expand

Build up ability to counter Concentrate investment in without high risk
competition segments where profitability is Minimize investment and
Emphasize profitability by raising good and risks relatively low rationalize operations
productivity
2.33
PROTECT AND REFOCUS MANAGE FOR EARNINGS DIVEST
Manage for current earnings Protect position in most Sell at time that will
Weak

Concentrate on attractive profitable segment maximize cash value

segment Upgrade product line Cut fixed costs and avoid
Defend strength Minimize investment investment meanwhile
1.00
5.00 3.67 2.33 1.00
Strategies of GE Matrix 13
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Environmental Analysis Techniques (1 of 6)

• Brand Asset Valuator
 Measuring
Brand Value.
Explanation of
Brand Asset
Valuator of
Young &
Rubicam.
 Measures
brand value by
applying four
broad factors.
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Environmental Analysis Techniques (2 of 6)

• Brand Asset Valuator
▫ The Vitality factor of the brand may give birth to various
categories resulting in different Brand Personalities.
 Sincerity
 Excitement
 Competence
 Sophistication
 Ruggedness
 Social
 Etc.
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Environmental Analysis Techniques (3 of 6)

• Brand Asset Valuator
▫ BRAND VALUE = Brand Vitality by Brand Stature
 Brand Vitality = Differentiation (perception score out of 1.00 based on
factors – level of difference in category identification, level of difference
in USP as promise, level of delivery of promise) * Relevance (actual
market share)
 Brand Stature = Esteem (quality and popularity in terms of repeat
purchase in scale of 1 to 10)* Knowledge is the mind share in percentage
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Environmental Analysis Techniques (4 of 6)

• Brand Asset Valuator
BRANDS BRAND VITALITY Vitality Score
Level of Level of differentiation (B)
Relevance
(A)
Market Share of Category USP Delivery Differentiation Score
A * B/10
Brands Difference difference Difference

In percentage 1 to 10 scale Total differentiation

(out of 100) Score/30

Brand A 20 5 7 3 15/30 = 0.50 1.00

Brand B 35 8 8 8 24/30 = 0.80 2.80
Brand C 45 10 5 6 21/30 = 0.70 3.15
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Environmental Analysis Techniques (5 of 6)

• Brand Asset Valuator
BRANDS BRAND STATURE Stature Score
Level of Esteem (A) Level of
Knowledge (B)

Quality of Brand Repeat purchase Esteem Score Mind Share A * B/10

1 to 10 scale Total esteem In percentage
score/20 (out of 100)

Brand A 6 5 11/20 = 0.55 80 4.40

Brand B 8 8 16/20 = 0.80 100 8.00

Brand C 8 6 14/20 = 0.70 100 7.00

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Environmental Analysis Techniques (6 of 6)

• Brand Asset Valuator
1 Brand A
2
3 Brand B Brand C
(Unique Category Creation)

4
5
VITALITY

6
7
8
9
10
10 9 8 7 6 5 4 3 2 1
STATURE
(Utility Creation through Multi-Branding)
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Environmental Analysis Techniques (1 of 4)

• Macro Environment Analysis
 Political
 Economic

 Social

 Technological

 Legal

 Environmental
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Environmental Analysis Techniques (2 of 4)

• Macro Environment Analysis
▫ Industry Trends
 Market size and growth trends
 Sales by category type

▫ Competitive Environment
 Who are the leading companies?
 What is their share? Sales? Distribution?
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Environmental Analysis Techniques (3 of 4)

• Macro Environment Analysis
 Consumer Analysis Target Market/
Consumer facts
 Market Analysis

Target Audience Analysis

- General consumer trends
- The target’s relationship w/ product/brand
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Environmental Analysis Techniques (4 of 4)

• Macro Environment Analysis
▫ Indicatory
 Gross Domestic Product (GDP)
 Gross national Happiness (GNH)
 Human Development Indicator (HDI)
 Social Progress Index (SPI)
 Interest rates
 Inflation
 Employment
 Governance, etc
 A fact without a theory
Is like a ship without a sail,
Is like a boat without a rudder,
Is like a kite without a tail.
A fact without a figure
Is a tragic final act,
But one thing worse
In this universe
Is a theory without a fact.
George Schultz