PRINCIPLES OF MARKETING

Session 2: Environmental analysis

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 Chapter Outline

1. The Company’s Macro environment

2. The Company’s Micro environment
3. The Company’s Internal environment

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 Marketing environment

 Marketing environment: are actors and forces outside

marketing that affect marketing management’s ability to
build and maintain successful relationships with target
customers
 Microenvironment are actors close to the company that
affect its ability to serve its customers-the company,
suppliers, marketing intermediaries, customer markets,
competitors, and publics
 Macroenvironment are the larger societal forces that affect
the microenvironment – demographic, economic, natural,
technological, political and cultural forces
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 The organisation’s marketing
environment
MACRO
Economic

Cultural Demographic
Suppliers MICRO

Mkt
The intermediaries
public The
Social organisation
Natural
INTERNAL Customers
Competitors

Legal
Political
Technological

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 Macro environment – PEST

Political Economic

The
Organization

Technological Social-cultural

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 Political and Legal factors

Laws and Regulations Protect:

 New technology
 Society
 Businesses
 Consumers

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 Government Legislations

- Regulate competitive environment

- Regulate pricing practices
- Control false advertising

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Economics factors

Distribution of
Consumer Income

Inflation

Recession
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Social Factors

Attitudes
Attitudes

Values
Values

Lifestyle
Lifestyle

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 Social Factors

Social
Social Factors
Factors Influence:
Influence:

Products
Productspurchased
purchased

Prices
Pricespaid
paidfor
forproducts
products

Effectiveness
Effectivenessof
ofpromotions
promotions

How,
How,where,
where,and
andwhen
whenpeople
peoplepurchase
purchase
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 Key Aspects of PEST Analysis

 Not just a list of influences

 Need to understand key drivers of change
 Drivers of change have differential impact on
industries, markets, and organisations
 Focus is on future impact of environmental factors
 Combined effect of some of the factors likely to be
most important

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 Micro environment: Industries

Industry
Industry––aagroup
groupof
offirms
firmsproducing
producingthe
thesame
sameprincipal
principal
product,
product,e.g.
e.g.mobile
mobilephones
phones

Industry analysis:
 Determine attractiveness of industry
 Affect the way individual companies compete
 Influence decisions on product/market strategy

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Micro environment: The 5 Forces
Framework (Porter)

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 Key Aspects of 5-Forces Analysis

 Use at level of strategic business units (SBU)

 Define the industry/market/sector
 Don’t just list the forces: derive implications for
industry/organisation
 Note connections between competitive forces and key
drivers in macroenvironment
 Establish interconnections between the five forces

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Competitor Analysis
Sales
Salesand
and Processes
Processes
Costs
Costsand
and Corporate
Corporate
Market
Market and
and
Profits
Profits Culture
Culture
Share
Share Capacity
Capacity

Use
Useofof Product
Product Brand
Brand Customer
Customer
Marketing
Marketing Portfolio
Portfolio Attributes
Attributes Loyalty
Loyaltyetc
etc
Mix
Mix

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Internal environment: Internal audit

 Men & Women  Aspects of internal

 Money appraisal
- Past accounts
 Materials
- Product position & product
 Machines mix
- Cash & financial structure
 Markets
- Cost structure
- Managerial ability

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 Internal audit

 Marketing
 Products
 Distribution
 Research & Development
 Finance
 Plant
 Management & staff
 Organization
 Raw material

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 Strategic Capability

Strategic
Strategiccapability
capabilityisisthe
theadequacy
adequacyand
andsuitability
suitabilityof
ofthe
the
resources
resourcesand
andcompetences
competencesof ofan
anorganisation
organisationfor
forititto
to
survive
surviveand
andprosper
prosper
 Resources
- Tangible resources – physical assets of an organisation
- Intangible resources – non-physical assets of an organisation

 Competences
- The activities and processes through which an organisation
deploys its resources effectively 19
 Resources

 Physical resources
- Machines, buildings, production capacity
 Financial resources
- Capital, cash, debtors/creditors, suppliers of money
(shareholders, bankers etc)
 Human resources
- Number and mix of people, skills and knowledge
 Intellectual capital
- Patents, brands, business systems, customer databases,
“goodwill”
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 Core Competencies

 Apple
- Creative, state-of-the-art products
 Honda
- High power/size engine
 Intel
- Ability to design and manufacture
ever more powerful microprocessors
for PCs
 Motorola
- Defect-free manufacture (six-sigma
quality) of cell phones
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Sources of Competitive Advantages
What you How you use Values
have resources to customers

Standard Standard
Standard
requirements

Resources Competencies

Critical Core Competitive

Advantages

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Critical Resources and Core Competencies

Is the Resource and Competency:

 Valuable? (create value to customers)
 Rare? (only few firms have it)
 Difficult for competitors to copy or substitute?
- History
- Numerous small decisions
- Socially complex resources
- Legal protection
 “Exploited” by the organization? 23
 SWOT

Strengths

Weaknesses

Opportunities

Threats
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