Chapter - 2

MARKETING ENVIRONMENT
AND STRATEGIC PLANNING
2.1 Analyzing the marketing environment
 The term ‘marketing environment’ is used to
describe the range of external and internal
factors that affect the way in which an
organization interacts with its markets.
 Analyzing the environment involves first of all
identifying and understanding what is
happening, and then assessing which
developments are most important to the
organization concerned
 Components of market environment
• The internal environment (conditions within the
organization) and the external environment
(conditions outside the organization).
• The external environment - macro-environment
and the market environment.
 1. The Macro-environment
• The macro-environment is concerned with broad
general trends in the economy and society that can
affect all organizations, whatever their line of
business.
• It is typically of much greater relevance when
considering the development of broad strategies
• Traditionally, the analysis of the macro-environment
was referred to as PEST or STEP analysis,
• PEST=Political, Economic, Social, Technological
 i. The Political Environment
• The term ‘political environment’ includes party
politics, the political character of the government
itself, and also the legal and regulatory system
• The risks, complexities and importance associated
with financial services also mean that it is one of
the most heavily regulated sectors of an economy.
• There is a wide range of government activities
that affect the financial sector, including sector-
specific policy formulation, legislation, decisions
on government spending, and partial privatization
• Two aspects of the political environment, –
namely, industry regulation and consumer
protection.
• Financial regulation is typically concerned with
licensing providers, guiding the conduct of
business, enforcing relevant laws, protecting
customers, and preventing fraud and misconduct.
• Consumer protection refers to a regulatory
system which focuses specifically on the rights
and interests of consumers in their interactions
with businesses and other entities.
 ii. The Economic Environment
• The economic environment covers all aspects of
economic behavior at an aggregate level, and includes
consideration of factors such as
– growth in income,
– interest rates,
– inflation,
– Unemployment
– investment and
– exchange rates.
 iii. The Social Environment
 The social environment is extremely broad and
covers all relevant aspects of a society, including
Demographics,
 culture,
 values
Attitudes
Life styles, etc.
 iv. The Technological Environment
• Technology essentially refers to our level of
knowledge about ‘how things are done’.
• In the financial services sector, the single most
important aspect of technology has been ICT –
information and communications technology.
• ICT has had a dramatic impact on the delivery
of financial services
• Financial services may now be delivered via
ATMs, by telephone and via the Internet (by
either PC or WAP phone).
 2. The Market Environment
• The market environment describes those factors that
are specific to the particular market in which the
organization operates.
• The market environment focuses on the immediate
features of the market in which the firm operates.
• Analyzing the five forces that determine
market/industry profitability – an approach that was
developed in the 1980s by Michael Porter.
• A market is considered favorable or attractive if the
forces working against an organization are relatively
weak.
1. The bargaining power of suppliers
• Powerful suppliers can force up the prices paid
by an organization for its inputs, and thus
reduce profitability
• Suppliers in financial services include the
suppliers of essential business goods and
services (computing equipment, training, etc.),
• ‘suppliers’ could also include customer
2. The bargaining power of consumers
• Powerful consumers can insist on lower prices
and/or more favorable terms, which may impact
negatively on profitability.
• Clearly, the bargaining power of buyers in
financial services varies considerably.
• In personal markets it seems that the bargaining
power of individual consumer is relatively weak
• In corporate markets the situation may be with
relatively large businesses being in a rather
more powerful position.
3. Threat of entry
• A profitable industry will generally attract new
entrants;
• If it appears relatively attractive for new
organizations to enter a market, profitability
will tend to be eroded
• In some cases, these are new entrants from
other sectors of the domestic economy.
4. Competition from substitutes
• The existence of products which are close
substitutes enhances customer choice and
provides an alternative way of meeting a
particular need.
• investment services, gold, jewellery, antiques
and other collectibles may be regarded as
substitutes for investments in mutual funds,
equities and other forms of saving.
5. Rivalry between firms
• The greater the degree of competition, industry
will be less profitable and therefore less
attractive
• Insurers no longer compete just with other
insurers – they also compete with banks,
savings institutions and investment companies
• The development of bancassurance (a term
used to describe a system in which banks
broaden their product offerings to include a
more extensive range of insurance)
 The Internal Environment
• The internal environment is the area in which
the firm can exercise greatest control
• Understanding the internal environment
requires analysis of an organization’s
resources and capabilities
1. Resources
 The term resources is used to describe any
inputs which are used by an organization in
order to produce its outputs.
 Resources are normally categorized as either
tangible or intangible.
 Tangible resources include the following
1. Human resources
• including issues such as the number and type of
staff, and their particular skills and qualities
2. Financial resources
• including a variety of factors such as cash
holdings, levels of debt and equity, access to
funds for future development, and relationships
with key financial stakeholders
3. Physical/operational resources
• encompassing premises, equipment, internal
systems (e.g. IT systems) and operating
procedures.
• Intangible resources typically do not have
any physical form, and some may not have
any obvious monetary value, but for many
organizations they can be one of the key
resources that help to create competitive
advantage
• Examples of intangible resources might
include specialist knowledge or experience,
brand names and brand equity, and the
internal culture within an organization.
2. Competences/capabilities
• refer to certain skills or attributes that are necessary in
order to be able to operate within a particular industry.
• Competences or capabilities would be present
amongst most organizations in an industry – without
those competences, the organization would not be able
to operate
• Operating in the banking industry requires
competences in relation to deposit-taking, lending,
service provision, financial management, treasury, etc
• Core competences provide an organization with a
genuine competitive edge in the marketplace
 Evaluating developments in the marketing
environment
• The process of SWOT analysis is one of the simplest
techniques for summarizing information about the
marketing environment and guiding the direction of
strategy
• The information collected in the environmental
analysis can be classified as
• external (i.e. it relates to the outside environment) or
• internal (i.e. it relates to the organization itself).
• Any evidence produced by the environmental
analysis will therefore belong to one of these groups
• Strength: Any particular resource or competence
that will help the organization to achieve its
objectives is classified as a strength.(strong brand image,
or an extensive branch or ATM network.
• Weakness: A weakness describes any aspect of the
organization that may hinder the achievement of
specific objectives
• Opportunity: Any feature of the external
environment that is advantageous to the
organization
• Threat : A threat is any environmental
development that will create problems for an
organization in achieving its specific objectives
2.2 Developing a strategic marketing plan

Marketing strategies : the managerial process of developing and maintaining a viable

fit between the organization’s objectives and resources and its changing market
opportunities.it includes:-

1. Company mission and objectives

2. Situation analysis
3. Marketing objectives
4. Marketing strategy( segmentations, targeting
&positioning
5. Market-specific strategy(the marketing mix)
6. Implementation
 Tools for strategy development
• Introduce some of the techniques that
organizations can use in order to help develop
marketing strategies within the context of the
development of the marketing plan.
• These tools help managers to think about
what may be the best strategy to pursue.
• They can provide useful insights and
recommendations
 Growth strategies
• An organization that is looking at how best to
grow and expand can think about this problem
by considering whether to look at new
products or new markets.
• The available choices are represented in
Ansoff’s Product/Market matrix.
• This suggests four possible options,
1. Market penetration :
– Market penetration means trying to sell more of
the existing product in the existing market
– To do this, an organization may try to persuade
existing users to use more, or non-users to use, or
to attract consumers from competitors
2. Market development:
– Market development involves the organization
trying to identify new markets for its existing
products.
– Most commonly, this strategy is associated with
expansion into new markets geographically
3. Product development
– Growth through product development means
developing related products and modifying
existing products to appeal to current markets.
4. Diversification
• it involves an organization moving into new
products and new markets
Product
Market Existing new

Existing Market penetration Product development

New Market development Diversification

 Selecting the product portfolio
• Part of any marketing strategy involves
consideration of how to manage a range of
different products.
• This requires decisions about which products need
to be developed, which products need to be
maintained and which products should be dropped
• Two common approaches which are used to
determine product portfolios are the matrix-based
approaches of the Boston Consulting Group
(BCG) and the General Electric (GE) Business
Screen, and the concept of a product lifecycle
 Boston Consulting Group (BCG)

• The BCG matrix bases its classification

scheme purely on market share and market
growth,
• is the simplest way to portray a corporation’s
portfolio of investments.
• Each of the corporation’s product lines or
business units is plotted on the matrix
according to both the growth rate of the
industry in which it competes and its relative
market share.
1. Stars :
 The star has a high market share in a high
growth industry.
• market leaders that are able to generate enough
cash to maintain their high share of the market
and usually contribute to the company’s profits
2. Cash Cows:
 Cash cows are characterized by low growth
and high market share
 typically bring in far more money than is
needed to maintain their market share.
 In this declining stage of their life cycle, these
products are “milked” for cash that will be
invested in new question marks
3. The question mark (or problem child)
 has a small market share in a high-growth
industry.
 are new products with the potential for success,
but they need a lot of cash for development.
 If such a product is to gain enough market
share to become a market leader and thus a star,
money must be taken from more mature
products and spent on the question mark
4. Dog :
• the dog represents a product with a low market
share in a low-growth market.
• low market share and do not have the potential
(because they are in an unattractive industry) to
bring in much cash.
• According to the BCG Growth-Share Matrix, dogs
should be either sold off or managed carefully for
the small amount of cash they can generate.
 GE matrix
• Comparing market attractiveness and competitive
strength
• Companies evaluate their strengths and the
attractiveness of industries as high, medium, and low.
• These strategic options are classified as either offensive
or defensive
• Offensive strategies include: invest to grow, improve
position, and new market entry.
• Defensive strategies are classified as: protect position,
optimize position, monetize, and harvest/divest.
• GE approach can be compared to a traffic light.
• For example, if a company feels that it does not
have the business strengths to compete in an
industry and that the industry is not attractive, this
will result in a low rating, which is comparable to a
red light.
• In that case, the company should harvest the
business (slowly reduce the investments made in it),
divest the business (drop or sell it), or stop
investing
 The product lifecycle
• widely used as a tool for market planning,
• employed to guide an organization both in the
determination of the appropriate balance of
products and in the development of a suitable
strategy for the marketing of those products
• The product lifecycle pass through four basic
stages: introduction, growth, maturity and,
eventually, decline
1. Introduction
• A period of slow growth and possibly negative
profit
• Cash flows are typically negative
• the priority is to raise awareness and
appreciation of the product, with the result that
the marketing mix will place a high degree of
emphasis on promotion.
2. Growth
• Sales volumes increase steadily, and the
product begins to make a significant
contribution to profitability.
• Increases in sales can be maintained by
improvements in features, targeting more
segments, or increased price competitiveness.
• It is at this stage that the new service will
begin to attract significant competition
3. Maturity.
• Sales growth is relatively slow, and the
marketing campaign and product are well
established.
• Competition is probably at its most intense at
this stage, and
• it may be necessary to consider modification
to the service and the addition of new features
to prevent future decline.
4. Decline.
• Sales begin to drop away noticeably,
• leaving management with the option of
withdrawing the product entirely – or at least
withdrawing marketing support.
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