CHAPTER 3 THE MARKETING ENVIRONMENT

SECTION-E IBMR-Ahmdabad.

ENVIRONMENTS
Internal: various departments ´ Micro: suppliers, marketing intermediaries ´ Macro: competitive, demographic, economic, natural, technological, political, and cultural
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ENVIRONMENTAL SCANNING
Definition ² the process of constantly acquiring information on events outside the organization to identify trends which may impact its success. ´ Importance? ´ Major Forces: social, economic, technological, competitive, regulatory
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THE COMPANY¶S MICRO ENVIRONMENT
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The forces close to the company that affect its ability to serve its customers - the company, market channel firms, customer markets, competitors and publics, which combine to make up the firm·s value delivery system.

Micro environment

SUPPLIERS
Firms and individuals that provide the resources needed by the company and its competitors to produce goods and services. ´ Important link in the ´value delivery system.µ
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MARKETING INTERMEDIARIES
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Help the company to promote, sell, and distribute its goods to final buyers
² Resellers ² Physical

distribution firms ² Marketing services agencies ² Financial intermediaries

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Resellers: the individuals and organizations that buy goods and services to resell at a profit. Physical distribution firms: warehouse, transportation and other firms that help a company to stock and move goods from their point of origin to their destinations. Marketing-service agencies: marketing research firms, advertising agencies, marketing consulting firms and other service providers that help a company to target and promote its products to the right markets. Financial intermediaries: banks, credit companies and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.

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CUSTOMERS
The company must study its customer markets closely and keep up to date with changing customer requirements. ´ The company must communicate with its customers, and must listen to them closely.
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COMPETITORS
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The marketing concept states that, to be successful, a company must provide greater customer value and satisfaction than its competitors. Thus, marketers must do more than simply adapt to the needs of target consumers. They must also gain strategic advantage by positioning their offerings strongly against competitors· offerings in the minds of consumers. They must strive to anticipate competitor activity and strategy.

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PUBLICS
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Any group that has an actual or potential interest in or impact on an organization·s ability to achieve its objectives.

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Financial publics influence the company·s ability to obtain funds. Banks, investment houses and stockholders are the principal financial publics. Media publics are those that carry news, features and editorial opinion. They include newspapers, magazines and radio and television stations. Government publics Management must take government developments into account. Marketers must often consult the company·s lawyers on issues of product safety, truth in advertising and other matters.

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Citizen action publics A company·s marketing decisions may be questioned by consumer organizations, environmental groups, minority groups and other pressure groups. Local publics Every company has local publics, such as neighborhood residents and community organizations. General public A company needs to be concerned about the general public·s attitude towards its products and activities. The public image of the company affects its buying. Internal publics A company·s internal publics include its workers, managers, volunteers and the board of directors.

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MAJOR FORCES IN THE COMPANY¶S MACRO ENVIRONMENT

Demographic factor Technology factor Economic factor

General environment

Global factor Socio cultural factor

Political & legal factor

DEMOGRAPHIC ENVIRONMENT
What is demography? Study of population characteristics like, ´ Size. ´ Density. ´ Location. ´ Age structure. ´ Occupation.

DEMOGRAPHIC ENVIRONMENT
Age structure of the population. ´ Marital status of the population. ´ Geographic distribution of population. ´ Education level. ´ Occupation.
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POLITICAL & LEGAL ENVIRONMENT
Government policies, legislations, regulations and stability will directly affect the any business. 

FOUR CATEGORIES 

Monetary and fiscal policies
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Government spending, money supply, and tax legislation. 

Social legislation and regulation
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Environmental protection act. 

Government relationships with
Industries
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Government subsidies and change in tariff rate. 

legislation related to marketing
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Company act 1956. Consumer protection act. Minimum wages act. Environmental protection act. etc«

TECHNOLOGY ENVIRONMENT
Cost reduction. ´ Automation, faster work. i.e. Faster Bank transaction. ´ Increase efficiency.
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Example: TATA·s nanotechnology, cheaper and smaller cars.

ECONOMIC ENVIRONMENT
According to national survey 1. Monthly per capita consumption in rural is RS 625. 2. Monthly per capita consumption in urban is RS 1171. 3. Food expenditure in monthly per capita consumption:53%(Rural area). 4. Food expenditure in monthly per capita consumption:40%(Urban area).

ECONOMIC ENVIRONMENT   

Interest rate:- when interest rates are higher organization will less attracted towards loans and vice versa. Inflation :- Higher the inflation rate lesser will be the purchasing power and vice versa. Change in income :- the rise in the salaries of employees, people will more invest in stock market, higher the growth of the company.

FIVE FORCES ANALYSIS
Potential Entrants
Bargaining Power Threats Of entrants

Suppliers

COMPETITIVE RIVALRY

Buyers

Threat of substitutes

Bargaining Power

Substitutes

INTRODUCTION
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Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PEST analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products. For example, Dell would analyse the market for Business Computers i.e. one of its SBUs. Five forces analysis looks at five key areas namely the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry.

THREAT OF NEW ENTRANTS
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Economies of scale (minimum size requirements for profitableoperations), High initial investments and fixed costs, Cost advantages of existing players due to experience curve effects of operation with fully depreciated assets, Brand loyalty of customers Protected intellectual property like patents, licenses etc, Scarcity of important resources, e.g. qualified expert staff Access to raw materials is controlled by existing players, Distribution channels are controlled by existing players, Existing players have close customer relations. E.g.: from longterm service contracts..

BARGAINING POWER OF CUSTOMERS
Customers bargaining power is likely to be high when:´ They buy large volumes, there is concentration of buyers, ´ The supplying industry comprises a large number of small operators, ´ The supplying industry operates with high fixed costs.

BARGANING POWER OF SUPPLIERS
The market is dominated by a few large suppliers rather than a fragmented source of supply, ´ There are no substitutes for the particular input, ´ The suppliers customers are fragmented, so their bargaining power is low, ´ The switching costs from one supplier to another are high,
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COMPETITIVE RIVAL
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There are many players of about the same size, Players have similar strategies There is not much differentiation between players and their products, hence, there is much price competition Low market growth rates (growth of a particular company is possible only at the expense of a competitor), Barriers for exit are high (e.g. expensive and highly specialized equipment).

THREAT OF SUBSTITUTE
Brand loyalty of customers, ´ Close customer relationships, ´ Switching costs for customers, ´ The relative price for performance of substitutes, ´ Current trends
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BARGANING POWER OF SUPPLIERS
The market is dominated by a few large suppliers rather than a fragmented source of supply, ´ There are no substitutes for the particular input, ´ The suppliers customers are fragmented, so their bargaining power is low, ´ The switching costs from one supplier to another are high,
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COMPETITIVE RIVAL
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There are many players of about the same size, Players have similar strategies There is not much differentiation between players and their products, hence, there is much price competition Low market growth rates (growth of a particular company is possible only at the expense of a competitor), Barriers for exit are high (e.g. expensive and highly specialized equipment).

THREAT OF SUBSTITUTE
Brand loyalty of customers, ´ Close customer relationships, ´ Switching costs for customers, ´ The relative price for performance of substitutes, ´ Current trends
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BARGANING POWER OF SUPPLIERS
The market is dominated by a few large suppliers rather than a fragmented source of supply, ´ There are no substitutes for the particular input, ´ The suppliers customers are fragmented, so their bargaining power is low, ´ The switching costs from one supplier to another are high,
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COMPETITIVE RIVAL
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There are many players of about the same size, Players have similar strategies There is not much differentiation between players and their products, hence, there is much price competition Low market growth rates (growth of a particular company is possible only at the expense of a competitor), Barriers for exit are high (e.g. expensive and highly specialized equipment).

MEANING OF INTERNAL ENVIRONMENT
All factors that are internal to the organization are known as the 'internal environment. Generally audited by applying the 'Five Ms¶. Important for managing change as the external. As marketers we call the process of managing internal change 'internal marketing.'

RESOURCES:
3 Type Of Resources: 1:Finite Renewable Resources Material resources: Human Resources: Intangible resources: Energy Resources. 2:Finite Non-Renewable Resources 3:Infinite Resources

FINANCE
To Understand & Support Marketing Expenditure. ´ Tailor the Financial Packages. ´ Make Quick-Decisions. ´ Financial Accountability
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CORE-COMPETENCY
A core competence is the result of a specific unique set of skills or production techniques that deliver value to the customer. ´ Such competences give an organization access to a wide variety of markets. ´ Hamel and Prahalad (1990) refer to a number of organizations and their products to support their concept including NEC, Honda and Canon. ´ For example, Microsoft
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CORE-COMPETENCY
Three Characteristics of core competence. ´ Provides potential access to a wide variety of markets. ´ Should make a significant contribution to the perceived customer benefits of the end product. ´ Should be difficult for competitors to imitate.
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MARKETING CAPABILITIES
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´Competitive advantage also accrues to companies that possess Distinctive capabilities.µ ´Whereas ¶Core-competencies· refers to areas of special technical & Production expertiseµ ´Distinctive capabilities describes excellence in broader business Processes.µ Ex: Neftix«««

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PORTER¶S VALUE-CHAIN
The value chain is a systematic approach to examining the development of competitive advantage. ´ series of activities that create and build value. ´ The organization is split into Two activity. 1:'primary activities' 2:'support activities.'
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PORTER¶S VALUE-CHAIN
Primary Activities.
1:Inbound Logistics. 2: Operations 3: Outbound Logistics. 4: Marketing and Sales. 5: Services

Support Activity. 1:Procurement. 2:Technology Development. 3:Human Resource Management (HRM). 4:Firm Infrastructure

PORTER¶S VALUE-CHAIN

"Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".
In other words
* Where is the business trying to get to in the long-term (direction) * Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)
* How can the business perform better than the competition in those markets? (advantage)?

* What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?

STRATEGIC INTENT
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Vision points the way to the future and strategic intent provides clarity of what a company must get after immediately in order to realize the vision. In other words strategic intent of a company describes how a company is going to realize its vision. Strategic intent provides a particular point of view about the long term vision or aspiration of the company. Gary Hamel and C.K. Paroled in their book ³competing for the future´, say that since strategic intent provides a specific point of view of the future aspired, it conveys sense of direction. And since it provides an opportunity to explore new competitive possibilities, it conveys a sense of discovery and since it provides a goal for the company which people perceive as inherently worthwhile, it implies sense of destiny

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A mission describes the organization's basic function in society, in terms of the products and services it produces for its customers .

A clear business mission should have following mission     A purpose A Strategy and Strategic Scope Policies and Standard of behavior Value and Culture

Key Result Areas or KRAs refer to general areas of outcomes or outputs for which a role is responsible. A typical role targets three to five KRA. Erasure also known as key work outputs (KWOs).

Key result areas (KRAs) capture about 80% of a work role. The remainder of the role is usually devoted to areas of shared responsibility (e.g., helping team members, participating in activities for the good of the organization). For example, image of the organization is usually a very senior official s key result area, but hopefully all employees contribute to this outcome.

A goal or objective is a projected state of affairs that a person or a system plans or intends to achieve²a personal or organizational desired end-point in some sort of assumed development. Many peonplea endeavor to reach goals within a finite time by setting deadlines.

COMPETITORS ENVIRONMENT

COMPETITORS ENVIRONMENT
1. 2. 3. 4.

Future objectives Current strategies Assumptions Capabilities

FUTURE OBJECTIVES
1. 2. 3.

Competition among the company Consumer at profit Innovation

CURRENT STRATEGIES
1. 2. 3.

To overcome unwanted competition Expansion of business Unique services

ASSUMPTION
Example:1. AT&T: It estimates that it¶s U-Verse service will reach 17mn by 2008 and 30mn homes by 2010 2. Verizon: Too much dependence FIOS 3. Comcast: worries about verizon,stronge customer base of 1.6 mn, download speed as fast as verizon

CAPABILITIES
1. 2. 3.

Fast network capabilities Need to differentiate Development in optic fiber (verizon-dollar 20 billon project)

SWOT ANALYSIS
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What is SWOT««.. Other then ««.. Strength Weakness Opportunity Threats

IT IS A CONTINUOUS PROCESS TO IDENTIFY STRENGTH, WEAKNESS, OPPORTUNITY, AND THREATS. IT INVOLVES MONITORING THE EXTERNAL AND INTERNAL MARKETING ENVIRONMENT

Internal Strength
Capture

External Opportunity
Invest

Weakness
Short Up

Threats
Identify

EXTERNAL ENVIRONMENTS ?
Opportunity ´ Threats ´ This involves Macro environments and Micro environment. ´ These both environment effects the ability to make profit or earn profit. ´ Macro and Micro is already been explained by my friends.
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OPPORTUNITY
Opportunity is the way to grow«.and to reach or climb high. ´ In this we have to scan the market. ´ The basic idea to scan the market is to discern new opportunity. ´ A marketing opportunity is an area of buyer Need and Interest in which there is a high probability that the company can profitability that the company can profitably satisfy the need.
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THREE SOURCE OF MARKETING OPPORTUNITY
1.. To supply something that is short supply. Which requires little marketing talent too. ´ 2.. To supply an existing product or service ina new or superior way. This includes three things a. Problem detecting method b. Ideal method c. Consumption chain method
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3. Totally new product which one is the most risk bearing method Example: Segway a US based company bought a new product in the market«. Electric scoter costing around $5000, they has a high hope from it because it was non-polluting and alternative to walking. But it was failure their«because of its high cost

OTHER EXAMPLES IN OPPORTUNITY
Cell phone manufacturing releases phone with digital photo capability. ´ FedEx discovered a way to deliver mail and package much more quickly than the us post office. ´ Company can customize a product or service. Ex. P&G·s Reflect. com website«. Capable of producing a customized skin care or hair care products to meet customer·s need.
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THREATS
This is the challenge posed by an unfavorable trends or development that would lead in the absence of defensive marketing action, to lower the sales and profit. ´ They are classified two wats«. Seriousness Probability of occurrence
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INTERNAL ENVIRONMENT ?
Strength ´ Weaknesses ´ It is one thing to find attractive opportunity and another to be able to take advantage of them.
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THE BUSINESS DOES NOT HAVE TO CORRECT ALL ITS WEAKNESS, NOR SHOULD OR GLOAT ABOUT ALL ITS STRENGTH. THE BIG QUESTION IS WHETHER THE BUSINESS SHOULD LIMIT ITSELF TO THOSE OPPORTUNITY WHERE IT POSSESSES THE REQUIRED STRENGTH OR WHETHER IT SHOULD CONSIDER OPPORTUNITY THAT MEAN IT MIGHT HAVE TO ACQUIRE OR DEVELOP CERTAIN STRENGTH.

SWOT ANALYSIS IS DONE TO FIND OUT?
How to perform one for your Organization«.? ´ How to develop Competitive advantages««? ´ How to set SMART goals«.? ´ Choosing your Strategic objectives«? ´ How to write a mission statement to impress others«.?
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WHAT IS SYNTHESIS?
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The basic meaning of Synthesis is ´Combination of Partsµ

Implementation

Alternatives

Evaluation of Alternatives

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