CHAPTER 3

Analyzing the marketing environment

PESTEL model analysis
 PESTEL stands for:
 P – Political
 E – Economic
 S – Social
 T – Technological
 E – Environmental
 L – Legal
PESTEL model analysis
Pros and cons of PESTEL Model
 Advantages:
• Provides a simple and easy to use framework for your
analysis
 Involves cross- functional skill and expertise
 Encourages the development of strategic thinking.
 Helps reduce the impact and effect of future potential
business threats
 Provide mechanism enabling your business to identify and
exploit new opportunities .
 Enables you to assess implication of entering new market
both nationally and internationally
Pros and cons of PESTEL Model
Disadvantages
 allows users to over-simplify the data that is used. It is
easily possible to miss important data.
 needs to be updated regularly to be effective.
 most effective when users come from different
perspectives and departments.
 requires users to have access to data sources which
could be time consuming and expensive.
 Much of the data used by the tool is on an assumption
basis.
Competitive market structures
Pure competition// perfect Monopolistic market
Many sellers: there are enough so that a A lot of firms: each has a small
single seller’s decision has no impact on percentage of the total market.
market price.
Homogenous or standardized products: Differentiated products: variety of the
each seller’s product is identical to its product makes this model different from
competitors’. pure competition model. Product
differentiated in style, brand name,
location, advertisement, packaging,
pricing strategies, etc
Firms are price takers: individual firms Easy entry or exit
must accept the market price and can
exert no influence on price
Free entry and exit: no significant barriers
prevent firms from entering or leaving the
industry
Competitive market structures
Monopoly
A single seller: the firm and industry are
synonymous
Unique product: no close substitutes for
the firm’s product
The firm is the price maker: the firm has
considerable control over the price
because it can control the quantity
supplied
Entry or exit is blocked
Olipogoly
Few large firms: each must consider its
rivals’ reactions in response to its
decisions about prices, output, and
advertising
Standardized or differentiated products
Entry is hard: economies of scale, huge
capital investment may be the barriers to
enter
4 types of competitors
 Brand Competitors: Market products with similar features
and benefits to the same customers at similar prices.

 Products competitors: compete in the same product but

market products with different features, benefit and
prices.

 Generic competitors: provide very different product that

solve the same problem or satisfy the same basic needs of
the customer.

 Total budgets competitors: compete for the limited

finance resources of the same customer