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 Outline
M Introduction
M The Companyƞs Microenvironment
M The Companyƞs Macroenvironment
M The Competitors
M Porter's Five Forces Model
 ntroduction
efinition:
The Companyƞs 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
 ntroduction (cont¶d)
M Companies must evaluate both micro and macro- macro-
environment to identify
M any trends that may affect their marketing strategies,
and
M opportunities that can be developed into competitive
advantages
M Porter's Five Forces model analyses market
structures to determine market attractiveness
taking into consideration the micro and macro
environments in its construction
ëompany¶s Microenvironment
Relates to the internal forces or forces close to the
company over which some control is possible
M Top management
M Other functions e.g. finance and accounting, R

manufacturing and purchasing
M Suppliers
M Marketing intermediaries (channel partners)
M Customers
M Competitors
M Public
 ëompany¶s Macro-
Macro-environment
M Relates to the larger forces having an
impact on society as a whole
M 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-
macro-
environment
M emographic
M Economic
M Natural
M Technological
M Cultural
M Political/legal
emographic Environment
emographic trends:
M Changing age structure
M Changing family structure
M Geographic shifts in population
M Higher education level more white
collar job holders
M Increasing globalization of cities such as
Singapore
 Economic Environment
Economic trends affecting consumers
buying power and spending pattern
M Change in per capital real income
M isposable
M iscretionary
M Income distribution
M Savings debt
M Consumer expenditures
M Change in interest rates and cost of living
 uatural environment
Natural trends include those natural
resources used in production or those
affected by marketing activities
M Raw material shortages
M Increase in energy cost
M Increase pollution levels
M Increase in Governmental intervention in
natural resource management
©echnological Environment
Consists of forces that affect new
technology
new product development
and market opportunities
M Faster pace of technological change
M Shorter PLC
M Higher R  budgets
M Concentration on minor improvements
M Increased regulations
 ëultural Environment
Affect society's basic values
perceptions

preferences and behaviors
M Core cultural values and beliefs
M Secondary cultural values
M Sub cultures
èegal and Political Environment
Trends in the legal and political environment
include
M Increased legislation regulating business
M Singaporeƞs Fair Trading Act (impending)
M Changing government agency enforcement
M Growth of public interest groups
M Regional groupings
M ASEAN FTZ
 ëompetitive Analysis
M ho are your competitors?
M o you know about your close competitorsƞ
strengths and weaknesses?
M How detail should we analyze the
competition?
M Use a systematic approach
M Analysis competition at various levels (next
slide)
èevels of ëompetition
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èevels of ëompetition (cont¶d)
M Generic competitionƜ
competitionƜe.g. Honda against Silver
Sea Cruise for the same consumer dollars
M Form competitionƜ
competitionƜe.g. Toyota against
manufacturers of other vehicles that provide the
same service such as Yamaha (motorcycle)
M Industry competitionƜ
competitionƜe.g. Honda against
Mercedes
Lexus etc who make the same
products or class of products (different prices)
M Brand competitionƜ
competitionƜe.g. Honda against Toyota

Nissan etc. who offer similar products and service
to the same customers at similar prices
 ndustry ëompetition
M ifferent industries can sustain different
levels of profitability; partly due to the
difference in industry structure
M Porterƞs Model of Industry Competition

commonly know as Porterƞs Five Forces
provides a framework for analyzing the
influence of the forces on the industry to
determine the industryƞs profitability and
competitiveness
Porter¶s Model of ndustry
ëompetition
Barriers to Entry

ndustry degree
Suppliers Buyers
of rivalry

Substitutes

(Source: Aakers pp.8487)

 Porter¶s 5 Forces²
Forces²
Barriers to Entry
M Absolute cost M Capital requirements
advantages M Brand identity
M Proprietary learning M Switching costs
curve M Access to distribution
M Access to inputs M Expected retaliation
M Government policy M Proprietary products
M Economies of scale
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©hreats of Substitutes
M Switching costs
M Buyer propensity to substitute
M Relative price performance of
substitutes

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 Buyer Power
M Bargaining leverage M Threat of backward
M Buyer volume integration
M Buyer information M Product differentiation
M Brand identity M Buyer concentration vs.
M Price sensitivity industry
M Substitutes available
M Buyers' incentives
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 Supplier Power
M Supplier concentration M Switching costs of
M Importance of volume firms in the industry
to supplier M Presence of substitute
M ifferentiation of inputs
inputs M Threat of forward
M Impact of inputs on integration
cost or differentiation
M Cost relative to total
purchases in industry

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 egree of Rivalry
M Exit barriers
M Industry growth
M Industry concentration ratio
M Fixed costs/Value added
M Product differentiation
M Buyers' incentives
ë