Chapter 3:

Environmental and Internal Analysis:

Market Information and Intelligence
 Where are we now?
Environmental and Internal Analysis
• What are the major Trends and probable
Changes in the marketing environment?

• Who are the main competitors, and how we can

Differentiate our offerings from competition?

• Who are the target

customers, and what are their
needs, wants and demands (NWDs) ?

• What Competitive Advantages and Core

Competences do the organization have? Can we
sustain it?
Marketing Environment:
The actors and factors inside and outside marketing that
affect marketing management’s ability/control to build and
maintain successful relationships with target customers.

2 components:
Micro Environment:
The actors close to the company that affect its ability to serve
its customers- the company, suppliers, customer markets,
competitors an publics.

Macro-Environment: The larger social forces that affect the

microenvironment- demographic, economic, natural,
technological, political and cultural forces
 Macro (remote) Environment: PESTLE Model

PESTLE:
A framework that assists in analyzing the external (remote)
environment and identifying the existing opportunities & threats
 Political-Legal Environment
• The Political and Legal Environment consists of laws, government
agencies, and pressure groups that influence various organizations
and individuals.
Factors: Political System: Democratic or Communist ?, Stability,
Pressure Group, Trade Union Power
• Growth of special interest groups such as NGOs, organized citizens,
and political action committees (PACs) lobby government officials and
pressure businesses to respect the rights of consumers.
 Political-Legal Environment
PL protects Company and the Industry from
1. Companies from unfair Competition :
example if company wants to do business
in India, they have to have some sort of
joint initiative with a local company.
Protects companies from being Dumpster
Diving Victim
2. Consumers from unfair Business
Practices by incorporating product quality
measures. product safety, truth in ads,
consumer privacy, packaging and labeling,
pricing.
• The Right to Safety, The Right to be Informed,
The Right to Choose, The Right to be Heard

3. The Environment from Industrial

Practices: Environmental Sustainability
 Economic Environment
• The Economic Environment consists of factors that affect consumer
purchasing power and spending patterns.
Factors: Business Cycle, Int Rates, Inflation Rates, Investment Levels, ,
Unemployment , GNP Trend, Pattern of Ownership.
• Income Distribution Patterns:
i. very low incomes
ii. mostly low incomes
iii. very low very high incomes
iv. low, medium, high incomes
v. mostly medium incomes.
• For a brand like Lamborghini which costs more than $150,000, markets where the
income distribution is type i and ii is not feasible. One of the largest markets for the
brand is Portugal (type iii) which has got enough wealthy families to afford the car
even though they have a lot of poor families.
• On the contrary, brands like Meril and Magic can be exported to countries like
India and Nepal because they fall under type iv and ii.
 Economic Environment

a w w h e n
En gl e ’s L
c r e a s es ,
inc o m e i n
i n o t h e r
sp e n d i n g c
th a n b a s i
r i e s
catego i n c re a s e s :
i n g s
and sav k is t a n ,
n d i a , P a
EG: I
g l a d e s h
B an
 Economic Environment
Types of Industrial Structures:
Subsistence Economies: non-monetary economy which relies on
natural resources to provide for basic needs, through hunting,
gathering, and agriculture. In such countries, there exists very little
opportunity for marketers. Example: Papua New Guinea, Africa.

Raw Material Exporting Economies: like Saudi Arabia where there

exists a good market for luxury goods.

Industrializing Economies: like India, Egypt, and the Philippines,

where there is a growing middle class and a new rich class who demand
quality goods sold just like in the industrial economies.

Industrial Economies: like countries in the western Europe, with

medium and rich markets demanding for all sorts of quality goods and
services to address their needs.
17
 Socio-Cultural Environment
• Culture strongly affects how people think and how they consume.
• Culture is a collection of shared values and beliefs that are reflected
as “acceptable” behaviour by a specific group of people.
Factors: Demographics, Lifestyle, Educations, Attitude, Consumerism
Culture
Culture Comprises of:
Core Beliefs andof:
Comprises Values which are passed on from parents to
Core Beliefs and Values which
children and are reinforced are passed
by schools, on from
religious parents toand
institutions,
children and are reinforced by schools, religious institutions, and
governments.
governments. For example: believing in marriage and religion is a
core belief. Beliefs and Values are more open to change. For
Secondary
Secondary
example: Beliefs and
believing thatValues
one’s are more
dress open
should to change.
reflect one’s For
religiosity.
example: believing that one’s dress should reflect one’s religiosity.

Marketers can utilize the core and secondary beliefs in finding

opportunities to do business:
100% halal soap – Aromatic.
Islamic banking.
Ethnic Pakistani dresses - Churidar Kameez.
Ethnic music – Sufi rock and Punjabi Bhanga.
Culture
 Technological Environment
• Forecasting technological changes is a pre-requisite to success in
doing business.
• Companies should continuously pursue product development
strategy – innovate new products that address the same need.
Factors: RnD Orientations, Speed of Tech Transfer, PLC
 PESTEL Factors and Scenario Analysis
Certain
5

3
1 2 4 5

Not Important Important

2

Uncertain
1
Sour Description Implication C I
ce Variable details ( influence of the (1- (1-
situation/force/variable/factor/construct on your 5) 5)
business: +ve means favorable, -ve means unfavorable
Pol P1. stable pol P1. +ve because stable situation -> smooth operation-> 3 5
situation with few stable or growing sales
unorganized P2. +ve because easy export/Import means better and
unrests low priced raw material (if required) and more
P2. open economy customers (tourists) -> sales growth 5 5
Eco Ec1:GDP GR is Ec1: +ve because growing affordability= more sales 5 5
8.13% Ec2: as above 5 5
Ec2: PCI $ 1886 Ec3: -ve because price will go up= sales might decline 5, 5,
Ec3: Inflation Rate: 3 5
5.52% (current);
5.62% (projected)
Soc S1: around 60% S1: + because your brand sells relevant product/ - 5 5
youth: unit/single because your brand sell family products
family focused S2: + because your brand sells quality products/ - 4 5
S2: urban people because your brand sells generic products
are now more
hygiene conscious
Tech T1. Tech
Orientation
Legal TAX/ VAT/ Gvt
Policy
Env Climate, resourses
Quantitative Scale:
C= Certainty :1= lowest; 5= highest : situation (variables/ factors/
constructs) has already occurred= 5, might occur=3 to 4, might occur in
some future=1-2
I: Impact: 1= lowest; 5= highest : very important variable/s for your
business= 4 to 5, to some extent important variable/s= 3 to 4, not so
important variable= 1 to 2
 PESTEL Factors and Scenario Analysis
Scenario Analysis helps to
• Find unique solutions to complex and ongoing problems
• Develop decision making skills by making decision makers aware of
the situation.
3 Steps of any SA:
• Creation of Scenario
• Relating to existing and potential strategies
• Assessing the probable outcome
2 Types of SA:
Strategy Developing Scenario : to provide insights to future
competitive context and use those to asses business env. Useful to
develop contingency plans (unexpected events) and investment
strategies to capitalize on future opportunities.
Decision Driven Scenario: Alternative scenarios : product
development, market development, diversifications.
 Micro (competitive) Environment
• Industry can be defined as a group of firms producing
similar products or services
• Industry can also be defined as a group of
competitors producing products or services that
compete directly with each other.
• A fundamental stage in strategy development is the
anticipation and analysis of the major Structural
Elements: industry size, growth, competitive
structure, cost structure, channels, trends and key
success factors.
• The challenge is to define the industry: coke vs
mineral water.
Industry in terms of 4 Levels of Competition

• Based on Brand
Competition (Direct)
• Based on Product
Competition ( Indirect)
• Based on Form
Competition (Indirect)
• Based on Generic
Competition (Distant)
• New Possible Entrants
 Micro (competitive) Environment: 5 forces Model
Identify and analyse the key external forces that affect the organisation
ability in achieving its goals and objectives (firm’s profit potentials and
ability to earn ROI, industry's current profitability)

 Assess the power of each factor and the likely response .

 If the forces are intense: average return

 If the forces are benign : high level of return

 The goal of competitive strategy is to find a sweet spot: a

position in the industry where the company can best
defend itself against all odds and forces.

 Each force is rated as high, medium, or low in strength

http://www.whatmakesag
oodleader.com/Porter- http://www.business-
five-forces.html fundas.com/2011/michael
-porters-5-forces-model/
 Rivalry among Existing Companies
The Rivalry between companies in the market increases when:

• The competitors in the market are Evenly Balanced

in terms of market share. For example, in the UK chocolate
market, Cadbury, Nestle, and Mars, all command roughly equal
market shares and resource strengths. Competition between them
for extra market share is intense, leading to high levels of advertising
spend, strong price competition and continuous launch of new
products.
• During periods of Low Market Growth Rate: this
happens when market is reaching saturation. As a result, market is
not growing (mature and decline stages of PLC). Hence, competitors
will try to grab market share from the competitors. Example of
Parachute.
• Where Exit Barriers are High: this happens when the
companies have invested heavily. Hence, they are more likely to
compete hard for success. For example mobile operators in
Bangladesh like Robi and Airtel.
 Rivalry among Existing Companies
• Where product/service Differentiation is Low: In
markets for instance banking services and telecommunication
services, consumers see little variation. As a result there exists more
rivalry amongst competitors. This is because, customer switching
cost (financial, inconvenience etc) is low.
• Where Fixed Costs are Relatively High: high fixed costs
relative to variable costs require greater sales volume to cover them.
Until that volume is achieved, rivalry can be intense. For example
power supply industries in the UK.
 Practical Example: Pure coconut oil Market in
Bangladesh
Pure Coconut Oil market share

20%
Parachute
Swan Market growth rate % 
Tibet
12% Jui Category 2%
Other local Parachute 12%
66%
1%
Swan -23%
2%
Tibet -30%
Jui -10%
Other local -11%
 Threat of New Entrants
Entry barrier can be low when:
• Cost of New Entry are Low: The internet for
example has meant that many industries which once required
substantial capital and investment for market entry are now
more vulnerable to entry by lower –resourced competitors. For
example clothing companies / make up companies open their
businesses on Facebook.

• Existing Distribution are Open to Use: There

exists third party marketing intermediaries through which a new
company can sell their products. For example: FMCG
companies, and bKash which is utilizing the existing distribution
network for expanding its service.

• Little Competitive Retaliation is Anticipated:

when existing companies are weak or lack the ability to defend
their markets. For example, in the 1990s, the business model of
large airline carriers could not counter low cost entrants.
 Threat of New Entrants
Entry barrier can be low when:
• Differentiation is Low: When differentiation between
the offerings of existing companies is low there is likely to be
more scope for new entrants to offer something unique and
value in the market.
• There are Gaps in the Market: In markets where
the existing companies are not adequately serving the needs of
customers there is opportunity for new entrants to establish
themselves in these segments.
41
 The Threat of Substitutes
• Existing or new companies can launch new innovative products
/services which can satisfy the same needs of the consumers.
• This can sometimes result in the existing products becoming
redundant.

42
 Bargaining Power of Suppliers
Suppliers tend to have more bargaining power when:
• Cost of Switching the Supplier is High: if the supplier
provides a key ingredient for the purchaser that is difficult or costly to
source elsewhere, their bargaining power will increase. For example:
the cost of switching suppliers from China was high for Spring Air
Freshener cans as no one supplied these air freshener cans in
Bangladesh.
• Suppliers’ offerings are Highly Differentiated:
when suppliers products are different, either through tangible
differences in standards, features, or design, or through less tangible
differences such as branding and reputation, they are likely to hold
more power.
– Example 1: air freshener raw material having the ability to absorb
foul air.
– Example 2: Intel inside.
 Bargaining Power of Buyers
Buyers tend to be more powerful where the following is true:
• There are readily available Alternative
Sources of products from other
companies: In other words, there are many other
companies selling the same type of product.
• Buyer Switching Cost is Low: where the
inconvenience or cost of switching is low, greater power
resides with the buyer who can shop around more to get
better deals. Example: internet service providers giving
free installations.
 Cafe Industry, Bangladesh
Forces High Medium Low

Entry barrier

BP of suppliers

BP of buyers

Substitution threat

Intensity of rivalry

The stronger the force the greater the restrictions on companies

to raise prices and earn greater profits. In other words, a strong
force may be regarded as a threat because it is likely o reduce
profits whereas a weak force may be viewed as an opportunity
because it may allow the company to earn higher profits.
Quantitative Scale: -3 to+3

Favorable situation such as achieved brand identity/

economies of scale/ limited number of rivals or substitutes/
low differentiated suppliers or middlemen= +ve
Unfavorable situation such as low switching cost/
availability of substitutes/ differentiated supplier or
middlemen/ low brand identity= -ve
3= high
2: moderate
1: low
 Micro (competitive) Environment: Strategic Group
Strategic Group: A group of firms pursuing the same /similar
strategies with similar resources.

Take Out vs MadChef

Take Out vs Burger King
Take Out vs Pizza Inn
Take Out vs Juice Bar

Approaches

Two Dimensional
Multidimensional
Competitor Analysis: Assessing Competitors
:
a) Determining competitors’ objectives for various
segments. EG: Differentiation: Starbucks vs Costa,
Westin VS Radisson in Dhaka, etc for Low cost:
boomers vs Shawrma House.
Some Performance based Objectives at Corp/SBU Level
• Cash flow
• Market Share Growth
• Tech Leadership
• Market leadership
Competitor Analysis: Assessing Competitors
b) Identifying competitors’ strategies (marketing mix related): firms
aiming for same strategies are close competitors and reactions
are more strong.
c) Assessing competitors’ strengths and weaknesses through
secondary data, experiences, WOM, market research, etc.
• Benchmarking: is important to improve performance.
d) Estimating competitors’ reactions: the level, timing and intensity
varies
 Competitor Analysis: Assessing Competitors
Types of Competitors in terms of Responses:

• The Laid Back Competitor : hardly react

• The Selective Competitor: might react to certain, leave certain
• The Tiger Competitor: quick and strong
• The Stochastic Competitor: unpredictable
 Home Assignment

• Research and select a latest Bangladeshi news.

– For e.g.: Uber launches in Bangladesh to continue its emerging
market push (Courtesy: Techcrunch)
• Identify a total of 5 elements from the macro and micro
environment and analyze the situation.
– Economic: value conscious Bangladeshis looking for a cheaper
option to travel
– Technological: adoption of cell phones and proliferation of 3G
catalyzed the process
– Legal: Uber was announced illegal for a while
– Suppliers: are the plenty of car owners
– Customers: mostly middle income, tech savvy consumers
embraced the service
 Analysis of Internal Environment
The Purpose:

• Appraise/audit the organization Resources and Capabilities

• Assess the organization Competitive Advantages
• Identify the organization’s major Strengths and Weakness
 Analysis of Internal Environment:4 Approaches:

1. Resource Based Approach: Strengths, Capabilities,

Sustainable Competitive Advantages, Strategy for the best
Strategic Fit.
2. Value Chain Approach :examining all activities a firm
performs and how they interact to differentiate a firm’s value
chain from a competitor’s value chain

3. Performance Analysis Approach: which strategy variables

(fin measures, non fin measures: development, product value, etc)
under which condition produces what results in terms of ROI and
CF. Balanced Scorecard Appraisal

4. Functional Analysis –A firm’s resources include not only the

financial and physical resources in each functional area but
also the ability of people to formulate and implement the
necessary functional objectives, strategies and policies.
https://www.intrafocus.com/2016/06/balanced-scorecard-example/
 Analysis of Internal Environment

Tools, raw
materials , supplies End products
and equipment

transport, transport,
storage and storage and
delivery delivery

Activities that are performed to design, produce, promote,

deliver and support its products : identify areas that can be
optimized for maximum efficiency and profitability
 Strategic Fit
‘Strategic Fit’ is the effective match and management of the
environmental opportunities and threats while taking into
account the organisation strengths and weaknesses

Set a vision and implement market targeting and positioning

accordingly by developing Environment Impact Matrix
(external: opportunities and threats) and Strategic Capability
Profile (internal: strengths and weaknesses) to find the
strategic fit between what the env wants and what the org has
to offer by deploying strengths and overcoming weaknesses.
Strengths: brand equity, HR, deployment experience curve,
SCAs, Resonance with stakeholders, stable GR/sales/market
share, efficient supply chain etc
Weaknesses: limited brand awareness, low market share,
unstable sales,
 SWOT for North End Coffee

• strong brand equity Strength

• Bangladeshi consumers are increasingly Opportunity

preferring coffee over tea
• Import duty on coffee beans have fallen Opportunity

• Import duty on instant coffee has gone up Opportunity

• limited distribution channel outside of its coffee Weakness

shops
• New locations,Dessert and savory lines of Tabaq
Threat
SWOT (TOWS) matrix
 Assignment for Class Discussion

• Pick a company of your choice

• List the SWOTs
• Formulate strategies for each of the
quadrants – prepare an one-slide
presentation
• You’ll be (randomly) called for an
impromptu presentation