Environment Analysis & Research. BACKGROUND… Marketing does not operate in a vacuum Environment affects marketing Political, legal, competitive, etc Environment.

Environment Analysis & Research

BACKGROUND…

Marketing does not operate in a vacuum Environment affects marketing

Political, legal, competitive, etc Environment is dynamic…i.e, it is constantly

changing Situation analysis must be an ongoing process

The success of a marketing organization depends on its ability to adapt to its environment

Failure to exploit/adapt to change leads to marketing failure

Marketers must try and be proactive rather than reactive to the marketing environment

Conducting an environment (or) a situation analysis

Conducting a Situation Analysis is a Challenging Exercise One of the most difficult parts of the

marketing plan Should provide a complete picture of

three key environments: (1) Internal, (2) Customer, and (3) External

Layers in a situation analysis

Internal Environment

This macro level is not controllable and usually affects the entire industry

The Internal Environment (1 of 3)

Review of Current Objectives, Strategy and Performance An important input to later stages in the

planning process Poor or declining performance must be the

result of: (1) Goals or objectives that are inconsistent

with customer or external environments (2) Flawed marketing strategy (3) Poor implementation (4) Changes in the customer or external

environment beyond the control of the firm

Example

Nike Demand for high-end shoes decrease Saw demand & profits for retro- and

leisure- styled shoes increase Bought Converse and gained immediate

access to a growing market

The Internal Environment (2 of 3)

Availability of Resources Includes review of financial, human and

experience resources as well as resources from key relationships Financial resources tend to get most attention

Labor shortages are expected to be a major problem in the coming years Projected shortfall in human resources

U.S. Dept of Labor predicts 22 M new jobs by 2010 However, civilian labor force is expected to increase by only

17 M Fast food, services, nursing, retail, & computer support will

be hardest hit

The Internal Environment (3 of 3)

Organizational Culture and Structure Problems can arise when marketing does not hold

a prominent position in the political hierarchy Culture and structure are relatively stable but can

be affected by mergers Asynchronous corporate mergers Daimler- Chrysler Merger HP-COMPAQ

Example Sony’s core electronics business has been losing

money for the last 3 years Microsoft, Nokia, Apple, Dell, Canon Products not cutting edge

New CEO Sir Howard Stringer analyzed the internal environment Cost cutting; Aibo rested; Closed Qualia line of boutique

electronics (Camera $4K; 70in TV 14K) Eliminated 5700 jobs; closed 9 factories Sold $705M worth assets (incl. cosmetic salons); Retired

“advisors Realized “menus” have replaced “knobs”; Link between

content and hardware is software Needs a cultural revolution from product orientation to

market and customer orientations

Who are our Current and Potential Customers? What do our Customers do with our Products? Where do Customers Purchase our Products? When do Customers Purchase our Products? Why (and How) do Customers Select our

Products? Why do Potential Customers not Purchase our

Products?

The Customer Environment

Source: http://www.peanuts.com/wash/pcnpixel/archive/pcnpixel-20040114.html

The Customer Environment

If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself, but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.

Sun Tzu - The Art of War

Competition (1) Brand competitors (2) Product competitors (3) Generic competitors (4) Total budget competitors

The External Environment (1 of 4)

Levels of CompetitionTotal Budget: consumer dollar

Generic: fulfill general need

Product: brands in product class

Brand: Direct competitor

Levels of Competition

Diet DietCoke Pepsi

Brand:diet colas

Fruitflavored

colas

Regularcolas

Dietlemonlimes

Lemonlimes

Product category:

soft drinks

Genericcompetition:

beverages

Coffee

Bottledwater

Wine

Beer

Juices

Budgetcompetition:

food and entertainment

Baseballcards

Videorentals

Fastfood

Icecream

Source: Donald R. Lehmannand Russell S. Winer, ProductManagement, 1997

Example: “Cruising for a Bruising” The world’s largest cruise ship company operates 6

cruise lines, employs 37,000 people and has 43% global market share

Norwalk food-borne virus, SARs, environmental violations, and economic woes are plaguing the company

Standardizes its fleets and does not put in dazzling options, like rock-climbing walls and skating rinks

How can we develop the four levels of competition for Carnival Cruise Lines?

Julia Boorstin, Fortune, June 9, 2003

Brand competitors: Offer comparable cruises

Product competitors: Offer luxury & specialty cruises

Generic competitors: Travel/Holiday

Total budget competitors: Vie for customer $ Car? Home improvement? Investment?

Carnival Cruise Lines

Identify all current and potential competitors Brand, product, generic, and total budget.

Assess each key competitor Size, growth, profitability, objectives, strategies, and target markets.

Assess each key competitor’s strengths andweaknesses. Capabilities and vulnerabilities in different functional areas

Focus the analysis on each key competitor’smarketing capabilities. In terms of product, price, place, and promotion

Estimate each key competitor’s most likelystrategies and responses under differentenvironmental situations.

Stages of Competitive Analysis

Economic Growth and Stability In U.S the size of upper-income class has increased,

middle income remained mostly stable, lower-income declined Discretionary income has supported growth of bottled water,

Godiva chocolates Average savings have declined: (43% wont have enough for

retirement. Link) Retailer strategy: Banana Republic, Gap, Old Navy

Political Trends Elected political officials influence taxes, Tobacco

industry, Recycling, antitrust cases

The External Environment (2 of 4)

Legal and Regulatory Issues Emphasis on natural environment has forced companies to become

more “green” Increased rigor in corporate accounting and reporting (Sarbanes-

Oxley Act) to limit corporate and accounting scandals involving prominent companies in the United States. Has resulted in a surge of hiring of auditors and increased business for

consulting firms NAFTA (North American Free Trade Agreement) prompted

diversification into Canadian and Mexican markets; I-35 high priority Technological Advancements

Influence of the Internet on all aspects of marketing including product/production, communication, pricing, promotion, channels

Trends in biological research have led to better drugs and medicines, disease resistant crops, genetically modified foods

RFID (Radio Frequency Identification)

The External Environment (3 of 4)

Sociocultural Trends Demographic Trends Lifestyle Trends Trends in Cultural Values

The External Environment (4 of 4)

Demographic Trends Aging of the American population

Fighting aging: skin care, adventure vacations, health foods Increasing demand for health care, hospitals, senior lifestyle providers

Increasing population diversity Bi-lingual signs, salespeople; Support community programs Cosmetics firms need to cater to different audiences

Population growth in the Sun Belt states Demand for homes, support services, appliances like ACs

Lifestyle Trends Clothing has become more casual, especially at work Growing focus on health and nutrition; Organic produce;

vegetarianism Time spent watching television has declined

Trends in Cultural Values Less focus on “me-oriented” values Increasing importance of family and children

Examples of Trends in theSociocultural Environment

Generational Cohorts*

Woodstock, Kennedy Assassination, Vietnam

Divorce, AIDSThe MTV generation; more cynical; honesty and irreverence in advertising

The Internet, 9/11Relate well to causes; teen markets

* Events occurring when people first became economic adults (usually ages 17 – 21) and its affect on their lifelong attitudes and values.

Baby Boomers(82 million people born 1946-1964)

Generation X(45 million peopleborn 1965-1976)

Generation Y (Echo Boomers)(72 million people born 1977-1994

Age Distribution in U.S.

Supporting Marketing Decisions

Establishing a marketing information center

Motivating channel members to share info

Collectingcompetitive intelligence

Buying info from commercial data sources

Developing a customer advisory panel

Improving Improving the quality of the quality of

marketing marketing intelligenceintelligence

Training and motivating the sales force

Supporting Marketing Decisions

The Marketing Research Process

Secondary Information Sources Internal Data Sources Government Sources Periodicals/Book Sources Commercial (Fee-Based) Sources

Collecting Environmental Dataand Information (1 of 2)

Primary Data Collection Direct Observation Focus Groups Surveys Experiments

Collecting Environmental Dataand Information (2 of 2)