NEU6011MKT Marketing

Strategy concept and structure

External analysis

Lecture 1
 Marketing Strategy
Instructor: Dung Phuong Hoang, Ph.d
Senior lecturer in Marketing

Email: dungph@neu.edu.vn

Tel : 0913393860

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LEARNING OUTCOMES

On successful completion of this module students will be able to:

 1.Critically engage with contemporary strategic marketing theory.

 2. Critically evaluate the contribution of strategic marketing to the overall strategic

management of organisations and the pursuit of sustainable competitive advantage.

 3. Apply strategic marketing frameworks and concepts to solve marketing problems.

 4. Evaluate current strategic challenges facing organisations.

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What is
Marketing?

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 What is Marketing?
• Marketing is the management process which identifies,
anticipates and satisfies customer requirements
efficiently and profitably (CIM)
• Marketing is a social and managerial process by which
individuals and groups obtain what they need and want
through creating, offering and exchanging products of
value with others (Kotler 1999)
• Marketing is an organisational function and a set of
processes for creating, communicating and delivering
value to customers, and for managing customer
relationships in ways that benefit the organisation and its
stakeholders (AMA)

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What Is Marketing?
Marketing Defined
 Marketing is the process by which
companies create value for customers
and build strong customer
relationships to capture value from
customers in return.

1-7
 The Marketing Process
Understand the Create customer driven
marketplace and marketing strategy
customers’ needs/wants

Build profitable Construct a marketing

relationships & create program that delivers
customer delight superior value

Capture value from

customers to create profits &
customer equity
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What is
Strategy?

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What is a Strategy?
• A strategy is a business approach to a set of competitive moves (???)
that are designed to generate a successful outcome (???)

• A strategy is management’s game plan for strengthening the

organisation’s competitive position
* Satisfying customers
* Achieving performance targets

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Three big questions involved in a strategy

* Where are we now?

* Where do we want to go?

* How will we get there?

• Then reflection; how do we know if we got there?
Tasks Involved in Strategic Management
1. Defining the business and stating a mission

2. Setting measurable objectives

3. Crafting a strategy to achieve objectives

4. Implementing a strategy

5. Evaluating performance of the strategy, reviewing new developments and

taking corrective action

Q&A: The above tasks help answer which questions???

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What Does a Strategy Include?

• How to satisfy customers

• How to grow the business
• Acquisition
• How to respond to changing industry and market conditions
• How to best capitalise on new opportunities

• How to manage each functional piece of business

• How to achieve strategic and financial objectives
• Although it could be argued that all of these involve elements of marketing!

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The hierarchy of strategies
 Effective marketing requires sound strategic planning at a
number of levels in an organisation.
 The three major levels of strategy in most large,
multiproduct organisations are:
1. Corporate Strategy
2. Business-level strategy
3. Functional strategies (focus on a
particular product-
market entry)
Q&A: So where is marketing strategy???
The Role of Marketing in the Organisation

Corporate
Objectives
Corporate
Strategy
Marketing
Objectives
(+ other functions)
Marketing
Strategy
Sales
Objectives
(+ others)
Sales
Strategy
16
 Marketing
Strategy
The selection of a course of action from among
several alternatives that involves specific customer
groups, communication methods, distribution
channels, and pricing structures.

It is a combination of target markets and

marketing mixes.

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Structure of Marketing Strategy
 Title page
 Table of contents
 Executive summary
 Introduction
 Situational analysis
 Marketing objectives and goals
 Marketing strategies
 Marketing programmes
 Budgets
 Implementation and control
 Conclusion
Q&A: What is the logic of the above sequence?

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The Marketing Plan (Useful for your CW)
 Situation (Audit)
 Business Purpose
 External Analysis
 Internal Analysis
 Objectives (Objectives)
 What We Wish to Achieve
 Strategy (Strategy)
 How We Will Achieve Objectives (The Route We Will Take)
 Generally Segmentation, Targeting & Positioning
 Tactics/Marketing Programs/The Seven Ps of the Marketing Mix (Tactics)
 What People Do
 Details
 Short Term/Reactive Planning
 Actions (Implementations)
 Resources
 Timetable
 Control (Control)
 Measurement, Feedback, Corrective Actions
Learning Outcomes of external analysis session

 Understand the external analysis tools at your disposal.

 Develop an understanding of why we do an external analysis.

 Develop an understanding of how this links with your course work.

 To be able to utilise the external analysis frameworks in a highly analytical manner.

Macro Environment Definition

“Factors that influence a company's or product's development but that are outside of the
company's control. For example, the macro environment could include competitors,
changes in interest rates, changes in cultural tastes, or government regulations.”
Businessdictionary.com

“External factors and forces that affect the company’s ability to develop and maintain
successful transactions and relationships with its target customers”
Kotler (1999)
The Marketing Environment

 Consists of the forces outside the marketing department: ‘Uncontrollable’

 Affect a company’s ability to...???
 Successful marketing managers watch the changing environment and adapt

accordingly (WHY ???)

 The marketing environment is made up of:

 Micro Environment – Forces close to the company
 Macro Environment – Larger societal forces
Forces of the Marketing
Environment
The Business Environment

The environment The organisation

forces responds
But how?-->
MARKETING
STRATEGY

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The Business Environment

 So environments change, and organisations and managers:

• Need to keep up
 Must establish potential threats / opportunities
 Need time to adapt
 Develop strategies

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Macro Environment
The marketing manager must also be aware of a variety of larger external factors:

PESTLE Analysis
POLITICAL
1. Political The current and potential influences from political
pressures
2. Economic ECONOMIC
The local, national and world economy impact
SOCIO-CULTURAL
3. Demographic The ways in which changes in society affect the
organisation
4. Cultural TECHNOLOGICAL
The effect of new and emerging technology
5. Technological LEGAL
The effects of national and world legislation
6. Natural ENVIRONMENTAL
PESTEL

 Allows for the analysis of the macro environment.

 Simple tool but regularly it is used poorly.

 Don’t just create a list, it has to be analytical with

clear implications (WHAT ARE THEY???).

 The external environment impacts all firm stakeholders.

 Integral to your coursework.

Pros and Cons of PESTEL
Pros Cons
 Feeds into SWOT analysis (opportunities and  Assumption/Opinion is dangerous.
threats).
 Lack of data.
 Helps inform decision making in a logical and
analytical manner.  Not working as a team to develop.

 Allows for reflection (about ???).  Factors identified are not relevant
(how should be considered as
 Enables management and team buy in.
“relevant???).
 Flexible.
 No clear implications.
 Can draw in a wide range of stakeholder
perspectives.
 External Environment Analysis (PESTEL)

Political Economic Social

 Political orientation  Business cycles  Demographics
 Political stability  Inflation rates  Lifestyles
 Environmental  Unemployment  Social mobility
protection  Disposable Income  Attitudes
 Pressure groups  Extent of consumerism
Technological Environmental Legal
 Developing  Consumer  Patents
technologies awareness
 Converging  Pressure  Legislation
technologies groups  Regulation
 Product life  Global  Monopoly restrictions
cycles warming
 Technology  Sustainabili
transfer ty
 CSR
Case study for McDonald’s
 In groups of 4-5, discuss case study:

The external environment and its effect on strategic marketing

planning: a case study for a fast food chain
1. Select relevant external factors affecting McDonald’s using
PESTLE analysis

2. Categorize the external factors based on their

implications (opportunies/threats) and explain
Political
 Examples of political influences
 Government funding for deprived areas
 Government funding for industries in difficulty
 Nationalisation/Privatisation
 Job creation schemes
 Taxation
 Protectionism/Free Trade
 National Security
 EU regulations
What Can The Government Do?

 barriers to foreign direct investment

 restricts entry by new competitors, and creates inflationary pressures.

 Deregulation has typically changed the structure of the affected

industries as well as lowered prices, creating rapid growth in some

markets as a result

 taxing products that lead to obesity

What Can The Government Do?

 Monetary Policy

 The Governments way of controlling the economy using:

 Money Supply
 Interest Rates – Currently 0% for US$ saving

 Fiscal Policy
 Taxation
 Government spending
 Money Supply
 To try and reduce the effect of the economic downturn, the UK Government

has been putting money in to the economy – Quantitative Easing

 How much?

 Since March 2009 the Bank of England has put over £275 billion in to the

economy!

 In Vietnam, 2016 financial system provide VND 1230000 Bil for the economy

 Why would marketers be interested in this?!

The Economic Environment
 When people’s incomes rise or fall, when interest rates rise or

fall, when the fiscal policy of governments results in

increased or decreased government spending, entire sectors
of economies are influenced deeply, and sometimes suddenly
Examples of Economic Influences

 Inflation

 Currency Exchange rates - £ to Euro exchange rate

 Stock Market

 Global commodity prices

 Unemployment levels
 The Business Cycle (Boom & Bust)

Income
Boom

Recession
Time
 A process of economic expansion and contraction that occurs repeatedly
 During the boom the economy grows, jobs are plentiful and the market brings high returns to investors
 In the subsequent bust the economy shrinks, people lose their jobs and investors lose money
 Boom-bust cycles last for varying lengths of time and can vary in severity
 Economic & Competitive Forces
 General economic conditions include:
 Prosperity, recession, depression, recovery

 Consumer demand and spending behaviour

 Buying power
 The strength of a person’s buying power depends on the size of the resources that
enable the individual to purchase, as well as on the state of the economy.
 Consumers’ willingness to spend
 People’s willingness to spend is, to some degree, related to their ability to buy – that
is, people are sometimes more willing to buy if they have the buying power.
 Consumer spending patterns
 Information indicating the relative proportions of annual family expenditures or the
actual amount of money spent on certain kinds of goods and services.
Levels of Unemployment

 As a society, high levels of employment are desirable

 Higher levels of employment mean more tax paid and less Government

spending on welfare

 As a business, there are pros and cons for various levels of employment
Low Levels of Unemployment

 Benefits to business:

1. Greater disposable income

2. Higher demand

3. Higher profits
High Levels of Unemployment

 Benefits to business

1. More people looking for work

2. Business has greater choice when recruiting

3. May be able to negotiate lower wages

Social-cultural

 Sociocultural trends are those that have to do with the

values, attitudes, and behavior of individuals in a given

society

 Two trends of particular relevance today are greater

interest in corporate social responsibility by businesses

and trends toward fitness and nutrition
Demographic

 Demography is destiny. All kinds of things are governed to a significant extent by

demographic changes.

 four major global demographic trends:

 the aging of the world’s population,
 the effect of the AIDS plague on demography,
 a rapidly growing middle class in emerging a countries, and
 increased levels of immigration
The Technological Environment
 New technologies has created new markets

 Technology can also change how businesses operate

 New developments in telecommunications and computing have led to the rapid

convergence of the telecommunications, computing, and entertainment industries.

 Digitization of manufacturing

 Technological developments are having a profound impact on all aspects of

marketing practice, including marketing communication, distribution, packaging

(use of new materials), and marketing research
 Examples of Technological Influences

 “State of the Art” – innovation

 Technophobia:

 Fear of or aversion to technology, especially computers and high te

chnology.
 Technophiles:

 One who has a love of or enthusiasm for technology

 Competitor activity

 Economies of scale
Vietnam: 70 mil internet users (70% population)

Vietnam is the country with the 12th highest number of Internet users
worldwide
and 6th out of 35 countries and territories in Asia.

In Average, each Vietnamese spent 7 hours a day to participate in

Internet-related activities.
The percentage of daily Internet users in Vietnam is up to 94%.
Online shopping in Vietnam
 Vietnam: 2015 The average consumer spends online : US$ 55
(entrepreneur) or US$ 175 (cafeF); 2022: 6.6 mil VND or USD 285

 92% internet users in Hanoi and HCM: onlineshoping

 Young: age 21-34 use onlineshoping most

 50% smart phone user in urban do online shoping by smartphone

 In next 5 year: 30% population Vietnam will do onlineshoping and

ecommerse will achieve USA 20 Bil in 2020.
 http://cafef.vn/30-dan-so-viet-nam-se-mua-sam-truc-tuyen-20170202073327223.chn
Examples of Legal Influences

 Age restrictions on purchasers

 Health & Safety

 Banned substances

 Licensing

 Copyright

 Patents

 Advertising Standards
 After 50 years, Honda kills off the Z50 “monkey
bike”

 Power came from a 49cc, air-cooled,

four-stroke single, rated at a new-rider-
friendly 4.5 horsepower
 Due to ever-tightening emissions
regulation
The Natural Environment
 Changes in the earth’s resources and climate can have significant and far-reaching

effects.

 Trends in the natural environment: global warming, save the planet

(green products)

 Other natural trends: such as the depletion of natural resources and

fresh groundwater
Assessing the Current Situation

 The marketing department/business needs to plan for the future

 Many large companies did not see the changing environment until it is was

too late

 For example; M&S, Woolworths, Blockbusters

 Any others??
Verizon spent US$ 4.83 to buy internet business of
Yahoo
 Micro Environment Definition

“Factors or elements in an organisation's immediate area of operations that

affect its performance and decision making freedom. These factors include
competitors, customers, distribution channels, suppliers, and the general
public (HOW???).”

Needham and Coles

(1995)

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 The Micro Environment

Customers Suppliers

The
Organisation

Distributors Competitors

These Stakeholders
impact upon Interest Groups
decisions made by
the organisation 55
Exhibit 4.7 - The Major Forces that Determine
Industry
Attractiveness (WHY???) (Michael E. Porter, 1980)

4-56
Porter’s Five Forces

 Determines how profitable an

industry is.
 The weaker the forces the
more profitable.
 https://www.youtube.com/watc
h?v=MJCHtcJStak
Rivalry
Rivalry is greater under the following conditions:

 There is low/high investment intensity

 There are little/many small firms in an industry or no dominant firms exist

 There is little/much product differentiation

 It’s easy/difficult for customers to switch from one seller’s products to those of

others
Rivalry
Rivalry is greater under the following conditions:

 There is high investment intensity

 There are many small firms in an industry or no dominant firms exist

 There is little product differentiation

 It’s easy for customers to switch from one seller’s products to those
of
others
Threat of New Entrants
Entry is more difficult under the following conditions:

 When weak/strong economies of scale and learning effects are

present

 If the industry has weak/strong capital requirements at the outset.

 When weak/strong product differentiation exists among current

players.

 If gaining distribution is particularly easy/difficult.

Threat of New Entrants
Entry is more difficult under the following conditions:

 When strong economies of scale and learning effects are present

 If the industry has strong capital requirements at the outset.

 When strong product differentiation exists among current players.

 If gaining distribution is particularly difficult.

Bargaining Power of Suppliers

 Their power is increased under the

following conditions:
 If the cost of switching suppliers is
low/high.
 If prices of substitutes are low/high.
 If suppliers can realistically threaten forward
integration/backward integration.
 When the supplier’s product is a small/large
part of the buyer’s value added
 https://www.youtube.com/watch?v=DItsWcA5oug
Bargaining Power of Suppliers

 Their power is increased under the

following conditions:
 If the cost of switching suppliers is high.
 If prices of substitutes are high.
 If suppliers can realistically threaten forward
integration.
 When the supplier’s product is a large part of
the
buyer’s value added (WHICH
INDUSTRY???)
 https://www.youtube.com/watch?v=DItsWcA5oug
Bargaining Power of Buyers
 The extent of buyer concentration, as when a few large buyers that account for a large
portion of industry sales can gain concessions. Higher buyer concentration goes with
lower/higher barganing power of buyers.

 Switching costs that increase/reduce the buyer’s bargaining power.

 The threat of backward integration (which forces???), thereby alleviating/enhancing the

need for the supplier.
 The product’s importance to the performance of the buyer’s product —the greater the
importance, the lower/higher the buyer’s bargaining power.
 Buyer profitability ——if buyers earn low profits and the product involved is an
important part of their costs, then bargaining will be more easy/aggressive.
Bargaining Power of Buyers
 The extent of buyer concentration, as when a few large buyers that account for a
large portion of industry sales can gain concessions. Higher buyer concentration
goes with higher barganing power of buyers.
 Switching costs that reduce the buyer’s bargaining power.

 The threat of backward integration, thereby alleviating the need for the supplier.
 The product’s importance to the performance of the buyer’s product —the greater
the importance, the lower the buyer’s bargaining power.
 Buyer profitability ——if buyers earn low profits and the product involved is
an important part of their costs, then bargaining will be more aggressive.
Threat of Substitute Products
 Substitutes are alternative product types (not brands) produced by other

industries that perform essentially the same functions

 Threat of subsitute products are always increasing/decreasing due to...???

 Read example of five force analysis in page 102 of textbook

 Exibit 4.10 Five Forces Analysis of the European Cell Phone Service Industry

in 2012, page 102

Competitor Analysis
 Who are your competitors?

 What are their objectives

 What is their current strategy?

 What are their strengths and weaknesses?

 What are their reaction patterns?

 How do you match up against them?

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 Stages of Competitive Analysis

 (1) Identify all current and potential competitors.

 (2) Assess each key competitor.
 (3) Assess each key competitor’s strengths and
weaknesses.
 (4) Focus the analysis on each key competitor’s
marketing capabilities.
 (5) Estimate each key competitor’s most likely
strategies and responses under different
environmental situations.

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Quick Think!

 In small groups; think about organisations that you know very well
 Identify their key competitors and analyse them

 Think of some examples and be prepared to share your

discussions!

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The marketing environment and strategic opportunities
• Opening strategic windows
– When changes occur in the marketing environment they can trigger
major developments. If large enough, such changes are called strategic
windows or paradigm shift.
– There are six broad causes of strategic windows opening:
• New technology
• New markets
• New distribution channels
• Market redefinition
• New legislation and regulation
• Financial and political ‘shocks’
--> STRATEGIC OPPORTUNITES
Three important questions to pursuit of attractive
opportunities
 Does the opportunity fit what we want to do?

 Do we have the people who can execute on whatever it takes to be

successful in this particular industry?

 Do we have the right connections? As the saying goes, “It’s not what
you
know, it’s who you know.”
Opportunities are attractive when...
 There is an identified source of customer pain that
can be resolved by the product offered
 Target customers are clearly identified
 The offering provides customer benefits that other
solutions do not
 The target segment is likely to grow
 There are other segments for which the currently
targeted segment may provide a springboard for
subsequent entry

4-66
Opportunities are attractive when...
The company itself:
 Possesses something proprietary that other
companies cannot easily duplicate or imitate
 Can develop superior organizational processes,
capabilities, or resources that:
 Others would find it difficult to imitate or
duplicate
 Business model is economically viable

4-68
DO YOU SEE ANY STRATEGIC OPPORTUNITIES OUT THERE???
 Strategic Analysis of the EXTERNAL ENVIRONMENT
 CHANGE – dynamic, turbulent, subtle, sudden
 PESTLE model - A framework that assists in analyzing the
external (remote) environment and identifying the existing
opportunities & threats
 A useful starting point for novices but overly simplistic
 Some authors enhance the model using additional categories, e.g.
impact, importance, certainty, potential opportunity vs threat

 External Factor Analysis is a more comprehensive

framework
External Environmental
Analysis

PESTLE Analysis

Key Emerging
Industry
Themes

External
Factor
Analysis
 Example of External Factor Analysis
Factor Impact Certainty Immediacy Positive or Weighted
Negative Score

A - Recession in 5 4 3 -2
UK market

B – Competitors -2

C– 0
Etc

ALL points MUST be supported with CREDIBLE evidence

Good luck – work hard.