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Managers and Environment


The Companys Micro environment

The Companys Macro environment
The Competitors
Porter's Five Forces Model
Companys 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
Marketing intermediaries (channel partners)
Companys 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-
Demographic Environment
Demographic trends:
Changing age structure
Changing family structure
Geographic shifts in population
Higher education level & more white
collar job holders
Increasing globalization
Economic Environment
Economic trends affecting consumers
buying power and spending pattern
Change in per capital real income
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
Increased legislation regulating business
Competition Act, MRTP Act, FEMA etc.
Changing government agency enforcement
Growth of public interest groups
Regional groupings
Competitive Analysis
Who are your competitors?
Do you know about your close competitors
strengths and weaknesses?
How detail should we analyze the
Use a systematic approach
Analysis competition at various levels (next
Levels of Competition
Generic Competition

Form Competition

Industry Competition

Brand Competition
Levels of Competition (contd)
Generic competitione.g. Honda against Silver
Sea Cruise for the same consumer
Form competitione.g. Toyota against
manufacturers of other vehicles that provide the
same service such as Yamaha (motorcycle)
Industry competitione.g. Honda against
Mercedes, Lexus etc who make the same
products or class of products (different prices)
Brand competitione.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
Porters Model of Industry Competition,
commonly know as Porters Five Forces
provides a framework for analyzing the
influence of the forces on the industry to
determine the industrys profitability and
Porters Model of Industry
Barriers to Entry

Industry degree
Suppliers Buyers
of rivalry


(Source: Aakers pp.8487)

Porters 5 Forces
Barriers to Entry
Absolute cost Capital requirements
advantages Brand identity
Proprietary learning Switching costs
curve Access to distribution
Access to inputs Expected retaliation
Government policy Proprietary products
Economies of scale
(Source: Michael Porter, On Competition)
Threats of Substitutes
Switching costs
Buyer propensity to substitute
Relative price performance of

(Source: Michael Porter, On Competition)

Buyer Power
Bargaining leverage Threat of backward
Buyer volume integration
Buyer information Product differentiation
Brand identity Buyer concentration vs.
Price sensitivity industry
Substitutes available
Buyers' incentives
(Source: Michael Porter, On Competition)
Supplier Power
Supplier concentration Switching costs of
Importance of volume firms in the industry
to supplier Presence of
Differentiation of substitute inputs
inputs Threat of forward
Impact of inputs on integration
cost or differentiation
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)
Challenges before Managers
Corporate Restructuring
Changing job profiles
Changing workforce profiles
Increasing role of woman
Knowledge Management