PRINCIPLES OF MARKETING

Session 2: Environmental analysis

1
 Chapter Outline

1. The Company’s Macro environment

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

2
 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
3
 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

4
 Macro environment – PEST

Political Economic

The
Organization

Technological Social-cultural

5
 Political and Legal factors

Laws and Regulations Protect:

 New technology
 Society
 Businesses
 Consumers

6
 Government Legislations

- Regulate competitive environment

- Regulate pricing practices
- Control false advertising

7
Economics factors

Distribution of
Consumer Income

Inflation

Recession
8
Social Factors

Attitudes

Values

Lifestyle

9
 Social Factors

Social Factors Influence:

Products purchased

Prices paid for products

Effectiveness of promotions

How, where, and when people purchase

10
 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

11
 Micro environment: Industries

Industry – a group of firms producing the same principal

product, e.g. mobile phones

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

12
Micro environment: The 5 Forces
Framework (Porter)

13
14
 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

15
Competitor Analysis
Sales and Processes
Costs and Corporate
Market and
Profits Culture
Share Capacity

Use of
Product Brand Customer
Marketing
Portfolio Attributes Loyalty etc
Mix

16
Internal environment: Internal audit

 Men & Women  Aspects of internal

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

17
 Internal audit

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

18
 Strategic Capability

Strategic capability is the adequacy and suitability of the

resources and competences of an organisation for it to
survive and 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”
20
 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
21
Sources of Competitive Advantages
What you How you use Values
have resources to customers

Standard Standard
Standard
requirements

Resources Competencies

Critical Core Competitive

Advantages

22
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
24