Chapter 2 MARKETING ENVIROMENT

1.INTRODUCTION
 Not all organizations face similar environments, therefore different ways of thinking about
strategic & marketing management may make sense.
 Different contexts:
 Simple/Static conditions
 Dynamic conditions
 Complex situations
 As the environment on which the organizations are living is becoming more dynamic and
more complex, we must analyze which forces in an industry or market are the most
important.
 The business environment can be very difficult to analyze for several reasons:
 The environment encapsulates many different influences, so the difficulty is
making sense of the diversity.
 Speed of change.
 Complexity.
 Analyzing the environment demands a previous classification so as to better
understand the linkages between different influences and the differential impact
they have in the organization.

2.ENVIROMENT CLASIFFICATION
According to Evans (2003) we can classify the external Business environment distinguishing
between two levels of environment influence:
MACRO- (OR FAR) ENVIRONMENT: contains a number of factors that affect not only
the organization itself, but also all others in the industry, affects the whole industry in
which a business operates:
- Political factors
- Economic factors
- Socio-demographic factors
- Technological factors
The nature of these factors normally means that individual businesses are
unable to influence them – strategies must usually be formulated to cope with
changes in the macro-environment.
MICRO – (OR NEAR) ENVIRONMENT: comprises all those environmental factors that
immediately surround a business. For most purposes we will identify competitors,
suppliers and customers. The organization may be able to influence these factors. We
analyze the industry and markets.
2.1MICRO-ENVIROMENT
 There are many factors in the
environment which influence
competition in an industry or
sector: sources of competition
 Helps identify the sources of
competition in an industry.
 But there are certain
characteristics that we must
consider:
- It must be used at the level
of STRATEGIC
BUSSINESS UNIT
- It is important not just to describe these forces but also to understand how they can be
countered and overcome in the future
- These competitive forces will not only be subject to steady changes into the future but,
more importantly, to discontinuities caused by changes in the macro-environment. So
understanding the connection between competitive forces and these structural drivers is
essential
- The competitive forces are not independent of each other
- Competitive behaviour may be concerned with disrupting these forces and not simple
accommodating them

THE COMPANY
▪ Planification ▪ Organization ▪ Management ▪ Control
Under the marketing concept, all
managers, supervisors, and employees
must “THINK CONSUMER”!!!

COMPETITORS
In general a company should monitor three variables when analyzing each of its competitors:
▪ Share of market: competitor’s share of the target market
▪ Share of mind: % of customers who named the competitor in responding to the
statement “name the first company that comes to mind in this industry”
▪ Share of heart: % of customers who named the competitor in responding to the
statement “name the company from whom you would prefer to buy a product”.
Every company faces four levels of competitors:
 ▪ Product from competition: offer similar products and services to the same customers
at a similar price.
▪ Product category competition: making the same product or class of products.
▪ General competition: supplying the same service.
▪ Budget competition: competing for the same consumer money

The threat of substitute products

Substitution may take different forms:

 Product-to-Product substitution
 Substitution of need by a new product or service, rendering an existing product or
service redundant
 Generic substitution occurs where products or services compete for disposable income
 Abstinence The extent of the threat will depend upon:
1. The extent to which the price and performance of the substitute can match the
industry’s product.
2. The willingness of buyers to switch to the substitute.

SUPPLIERS
• Firms or individuals that provide the resources needed by the company to produce its goods
and services.
• Consequently, trends and developments can affect seriously the company’s marketing plan.
• On a macro-basis tourist destinations need suppliers: airline service, hotel restaurants, ground
operations, meeting facilities and entertainment.

MARKETING INTERMEDIARIES
▪ Business firms that help the company to promote, sell, and distribute its foods to the final
buyers:
▪ Marketing services agencies: suppliers that help the firm formulate and implement its
marketing strategy and tactic.
 ▪ Financial intermediaries

PUBLICS
▪ A public is any group that has an actual or potential interest in or impact on an organization’s
ability to achieve its objectives:

 Financial publics
 Media publics
 Government publics
 Citizen-action publics
 Local publics
 General public
 Internal public

2.MACRO-ENVIROMENT
Managers must be alert to actual and potential changes in the macro-environment so as to
anticipate the potential impacts on their industry and markets.

Problems dealing with such amount of information:

1. What should be included and what should be left out?
2. How should the information be organized in a rational and meaningful way?

Although analytical frameworks can be suggested, the key issues are likely to be highly
specific to each organization’s circumstances.
Ginter and Duncan (1990) listed the following activities as components of macroenvironmental
analysis:
1. Scanning ME for warning signs and possible changes that will effect the business.
2. Monitoring for specific trends and patterns.
3. Forecasting future directions and environmental changes
4. Assessing current and future trends in terms of the effects such changes would have
on the organization.
Potential benefits of ME analysis:
1. Increasing managerial awareness of environmental changes
2. Increasing understanding of the context
3. Increasing understanding of multinational settings
4. Improving resource allocation decisions
5. Facilitating risk management
6. Focussing attention in the primary influences on strategic change
7. Acting as an early warning system: anticipate opportunities and threats.
Managers that are concerned with macro environmental analysis must:
1. Be aware of the limitations and inaccuracies of ME analysis
2. Carry out the analysis continuously
3. Constantly seek to improve sources of information and techniques for its analysis
4. Use the information as one source of organizational learning
5. Use the information to inform future strategy
The Macro-environment Framework

 Is used to look at the future impacts of environmental factors, which may be different from
their past impact. Structural drivers of change.
 What environmental factors are affecting the organization?
 Which of these are the most important at the present time? In the next few years?
 This framework categories environmental influences into SEVEN main types:
 FUTURE COMPETITORS
 DEMOGRAPHIC ENVIRONMENT
 ECONOMIC ENVIRONMENT
 NATURAL ENVIRONMENT
 TECHNOLOGICAL ENVIRONMENT
 POLITICAL ENVIRONMENT
 CULTURAL ENVIRONMENT
 The combined effect of some of these separate
factors is what will be more important, rather than
the factors separately.

FUTURE COMPETITORS
The threat of new entrants to the industry
Will depend on the extent to which there are Barriers to Entry: factors that need to be overcome
by new entrants if they are to compete successfully:

 The capital requirement of entry

 Differentiation: Brand loyalty and customer switching costs
 Economies of scale or scope available to existing competitors
 Access to input and distribution channels
 Resistance offered by existing businesses.
 Experience
 Legislation or government action
DEMOGRAPPHIC ENVIROMENT
• Changing age structure of the population
• The baby boomers
• Generation X
 • Millennials
• Generational marketing
• Increasing diversity
• The changing family
• Geographic shifts in population
• A better educated, more white-collar, more professional population.
ECONOMIC ENVIROMENT
• Changes in income
• The global economy
POLITICAL ENVIROMENT
• Increase in business legislation
• Lobbies
•Changing government agency enforcement
•Increased emphasis on socially responsible actions and ethics.
NATURAL ENVIROMENT
•Shortage of raw materials
•Increased energy cost
•Anti-pollution pressures

TECHNOLOGICAL ENVIROMENT
•Accelerating pace of change
•Unlimited opportunities for innovation
•Varying R&D budgets
SMART PHONES. "One day, 2 or 3 billion people will have cell phones, and they are all not
going to have PCs," says Jeff Hawkins, inventor of the Palm Pilot and chief technology officer
for PalmOne. "The mobile phone will become their digital life," Hawkins predicts. After a slow
start, mobile phones have become more ubiquitous—there are 1.5 billion in the world today—
and smarter. Today's most sophisticated phones already have the processing power of a mid-
1990s PC while consuming 100 times less electricity. The phones are used to send e-mail,
browse the Web, take pictures, and play video games. Hawkins predicts that within the next few
decades all phones will be mobile phones, capable of receiving voice and Internet signals at
broadband speeds, and that mobile-phone bills will shrink to a few dollars a month as phone
companies pay off their investment in new networks. New smart phones in the works include
Palm's pocket-size Treo600, with a tiny keyboard, a built-in digital camera, and slots for added
memory; and Motorola's MPx, which features a "dualhinge" design. The handset opens in one
direction and appears to be a regular phone, but it also flips open on another axis to look like an
e-mail device, with the expanded phone keypad serving as a small, convents tional qwerty
keypad.

CULTURAL ENVIROMENT
 •Persistence of cultural values
•Subcultures
▪ The people living in a particular society hold many core beliefs and values that tend to
persist. Most Americans still believe in work, in getting married, in giving to charity,
and in being honest. Core beliefs and values are passed on from parents to children and
are reinforced by major social institutions— schools, churches, businesses, and
governments.
▪ Secondary beliefs and values are more open to change. Believing in the institution of
marriage is a core belief; believing that people ought to get married early is a secondary
belief.
▪ Marketers have some chance of changing secondary values but little chance of
changing core values. For instance, the nonprofit organization Mothers Against Drunk
Drivers (MADD) does not try to stop the sale of alcohol, but it does promote the idea of
appointing a designated driver who will not drink that evening. The group also lobbies
to raise the legal drinking age.
EXISTENCE OF SUBCULTURES
▪ Each society contains subcultures, groups with shared values emerging from
their special life experiences or circumstances. Members of subcultures share
common beliefs, preferences, and behaviors. To the extent that subcultural
groups exhibit different wants and consumption behavior, marketers can choose
particular subcultures as target markets.
SHIFTS OF SECONDARY CULTURAL VALUES THROUGH TIME
Although core values are fairly persistent, cultural swings do take place. In the
1960s, hippies, the Beatles, Elvis Presley, and other cultural phenomena had a
major impact on young people's hairstyles, clothing, sexual norms, and life
goals. Today's young people are influenced by new heroes and new activities.

3.SWOT ANALYSIS

OPPORTUNITIES

 New markets and segments

Enlarge number of products
  Rapid growth of the market
 Diversification of related products
 Decrease of commercial barriers to
external markets
 Others?

THREATS
 Entrance of new competitors with low costs
 Sales increase in substitute products
 Slow growth of the market
 Change in client’s necessities and tastes
 Power of buyers and suppliers
 Correlation with economic crisis
 Negative changes in exchange rates and commercial politics
 Increase of commercial barriers
 Negative demographic changes
 Others?
STRENGTHS

 Core capacities in core activities

 Financial Resources
 High Technical Development
 Cost Advantages
 Access to Economies of Scale
 Experience
 High Innovative processes
 Known label
 Differentiation of products
 Market leader
 Advertisement
 Strategic Management
 No competitive pressures
 Management Capacity
 Flexibility
 Others?
WEAKNESSES

 No clear Strategic Management

 No Financial Resources
 No threshold resources.
 Low Technical Development
 Costs Disadvantages
 Bad Distribution Chain
 Bad image in the market
 Management Inefficiency
 Obsolescence
 Lack of experience
 No management capacity
 Others?