Lecture 3 Market Environment

8/7/2019 Lecture 3 Market Environment

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Issues to be Considered in a

Situation Analysis

Issues to be Considered in a

Situation Analysis


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Internal, Customer, and External

Environments

Internal, Customer, and External

Environments


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Micro Environment


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Micro Environment Company: TheMarketing function must work closely with other company departments.

Finance is concern with funding and using funds to carry out marketing plan. The R& Ddepartment is concern with designing safe and attractive products. Purchasing worries about

getting supplies and materials whereas manufacturing is concerned with producing the

desired quality and quantity of products. Together all these dept has an impact on the

marketing dept plans

Suppliers: Important in the value delivery service -> rawmaterials component and parts

packaging etc. MMmust watch supply availability as supply shortages or delays, labourstrikes and other event can cause sales in the short run and damage customer satisfaction in

the long run

Distributors orMarket Intermediary: Firms that help the company distribute or sell the firms

product to final buyers. They include, Agents, retailers, wholesalers- physical distribution

firms

Customers: A company need to study its customer market closely. ConsumerMarket: Individual or household that buys g/s for personal consumption

BusinessMarkey: Businesses buys G/S for further processing or use in the production process

ResellerMarket: Buys goods and services for resale in business marker

GovernmentMarket:Made up of Government Agencies that buys g/s inorder to produce public services or transfer

the goods and services to others who need them

InternationalMarkets: Consist of buyers in other countries which includes customers, business, resellers and govt


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Competitors: Each firm must consider its own size and industry position compared to those of its

competitors. Each firm must select his own strategy that fits his/her competitive position for

instance a large firm who is the leader in market share might be the most dominant company and

may pursue dominant strategies, this might not be suitable for smaller firms who will have to select

niches to serve.

Publics:- Any group that has an actual or potential interest in or impact on the organization ability

to achieve its objective,

Financial

Govt

Media

Etc


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The Internal EnvironmentThe Internal Environment

Review of Current Objectives, Strategy andPerformance

An important input to later stages in the planningprocess

Poor or declining performance must be the result of:

Goals or objectives that are inconsistent with the customeror external environments

Flawed marketing strategy

Poor implementation

Changes in the customer or external environments that arebeyond the control of the firm


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The Internal EnvironmentThe Internal Environment

Availability of Resources

Includes a review of financial, human, andexperience resources, as well as resources from keyrelationships

Financial resources tend to get most attention

Organizational Culture and Structure

Problems can arise when marketing does not hold aprominent position in the organizational hierarchy

Culture and structure are relatively stable but can beaffected by mergers


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The Customer EnvironmentThe Customer Environment

Who are our Current and Potential

Customers?

What do 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?


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Discussion Question

Understanding the motivations of a firms noncustomers

is often just as important as understanding its

customers. Look again at the reasons why an individualwould not purchase a firms products. How can a firm

reach out to noncustomers and successfully convert

them to customers?


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The Competitive EnvironmentThe Competitive Environment

Brand Competitors Market products with similar features and benefits to the

same customers at similar prices

Product Competitors Compete in the same product class, but with products

that are different in features, benefits, and price

Generic Competitors Market very different products that solve the same

problem or satisfy the same basic customer need Total Budget Competitors

Compete for the limited financial resources of the samecustomers


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Major Types of CompetitionMajor Types of Competition


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Stages of Competitive AnalysisStages of Competitive Analysis

Identification Identify all current and potential competitors

Characteristics Assess key competitors size, strategy, profitability, markets, etc.

Assessment Assess key competitors strengths and weaknesses

Capabilities Focus the analysis on competitors marketing capabilities

Response Estimate competitors most likely strategies and responses under different

environmental situations


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The External EnvironmentThe External Environment

Economic Growth and Stability

Political Trends

Legal and Regulatory Issues

Technological Advancements

Sociocultural Trends

Demographic trends

Lifestyle trends

Trends in cultural values


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Trends in the U.S. Sociocultural

Environment

Trends in the U.S. Sociocultural

Environment Demographic Trends

Aging of the American population

Population growth in the Sun Belt states

Increasing population diversity

Lifestyle Trends Clothing becoming more casual, especially at work

Americans have less time for leisure activities

Increasing time spent using computers

Trends in Cultural Values

Shorter attention spans and less tolerance for waiting Less focus on me-oriented values

Increasing concerns about the natural environment


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The Growing Importance of

Corporate Affairs

The Growing Importance of

Corporate Affairs Many firms have corporate affairs specialists on

staff to track emerging trends and developstrategies for dealing with external concerns.

Key Corporate Affairs Activities Corporate communication

Government relations

Investor relations

Corporate philanthropy Corporate sustainability

Policy analysis


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External Environment: PEST/ STEEPLE-

MACRO

Externalenvironment

Social andCultural

Technological

Economic andMarket

competition

Education,training andemployment

Political

Legal

Environmentalprotection


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The STEEPLE Analysis

Social and Cultural :- looks at human issues that affect behaviour. Institutionsand other forces that affect society basic values, perceptions, preferences and behaviour.

languages spoken

religions, beliefs, taboos

type of lifestyles

roles and status of females in society attitudes and opinions

population demographics

Technological Perhaps the most dramatic force that now shaping our destiny

It refers to forces that create new technologies, creating new product and market

opportunity

the pace of technology

new innovations

ability to compete/supply


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Educational environment: levels of education within population

standards of education

continuous learning

employment requirements

Economic environmentthe economic environment affect both customers and suppliers.

interest rates

unemployment levels

exchange rates

income levels

taxation policies inflation rates

gross domestic product

Political environment GovtGovt has responsibility for revenue, trade safety and security of investment

political stability

foreign policy

manifesto promises/policy

trading blocs

competition policies

trading agreements/alliances


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Legal environment statutory requirements

codes of practice trading laws

health and safety aspects

employment legislation

union issues/legislation

Environmental issues packaging

pollution and waste disposal

manufacturing methods and restrictions

presence of pressure groups


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ETHICS INMARKETING


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Ethics and Social Responsibility

inMarketing


inMarketing Grown in importance recently due to firms

having problems in these areas: coke

Have become necessities due to:

Stakeholder demands (especially customers)

Rapid communication and 24/7 news

Improve marketing performance and profitsNIKE

Are important to the development of

marketing strategy


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Dimensions of Social

Responsibility

Dimensions of Social

Responsibility Social Responsibility

A broad concept that relates to an organizations

obligation to maximize its positive impact onsociety while minimizing its negative impact

Marketing Ethics

Principles and standards that define acceptablemarketing conduct as determined by the public,

government regulators, private interest groups,

competitors, and the firm itself


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The Pyramid of Corporate Social

Responsibility

The Pyramid of Corporate Social

Responsibility


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Social ResponsibilitySocial Responsibility

Economic responsibility of making a profit

Legal responsibility of obeying laws and

regulations

Ethical responsibility to uphold principals and

standards

Philanthropic responsibility to increase thefirms positive impact on society


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Marketing Ethics and StrategyMarketing Ethics and Strategy

Require that organizations and individuals acceptresponsibility

Can lead to violations of public trust

Involve complex and detailed decisions in gray areas

Deal with experiences and decisions made at work

Come into play anytime individuals feel manipulatedor cheated

Are intertwined with respect to a firms reputation


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Potential Ethical Issues in

Marketing

Potential Ethical Issues in

Marketing Overall Issues

Misrepresentation, manipulation, exploitation

Product Issues

Failure to disclose defects, counterfeit products Pricing Issues

Deception, price fixing, price discrimination

Distribution Issues

Opportunism, exclusive arrangements, tying contracts

Promotion Issues Bait-and-switch, misleading communication, high-pressure sales


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Challenges of Being Ethical and

Socially Responsible

Challenges of Being Ethical and

Socially Responsible Business decisions involve complex decisions

in which correctness may not be apparent

Internet privacy, copyright, intellectual property,advertising claims

Ethical conflict may emerge from aninconsistency between personal values and

the values held by members of the workgroup

Ethical issues can develop into legal problems


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Types ofMisconduct Observed

in Organizations

Types ofMisconduct Observed

in Organizations


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Deceptive Practices in

Marketing

Deceptive Practices in

Marketing

Deceptive Communication and Promotion Fraud or any false communication

Exaggerated claims or statements

Ambiguous statements

Product labeling issues

Selling abuses

Regulating DeceptiveMarketing Practices Typically regulated by:

The firms themselves

Industry and trade associations (such as the BBB)


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Organizational Determinants of


Organizational Determinants of

Ethics and Social Responsibility Ethical DecisionMaking

Determined by an individuals background and

business colleagues Affected by personal values, opportunity for

unethical behavior, and exposure to others

Intricately tied to the firms culture and ethical

climate Can only be improved by planning and structure

Likely to occur when modeled by a strong leader


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Ethical ClimateEthical Climate

Part of a corporate culture that relates to an

organizations expectations about

appropriate conduct The character component of an organization

Sets the tone for ethical decisions

Determines whether an individual perceives anissue to be an ethical issue


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Codes of ConductCodes of Conduct

Code of Conduct (Code of Ethics)

Formal statement that describes what an

organization expects of its employees Not an effective means of controlling ethical

behavior unless integrated into daily decision making

Not effective unless the code has support of top

management Code must reflect managements desire for

compliance with values, rules, and policies


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Codes of Conduct (continued)Codes of Conduct (continued)

Code should have six core values Trustworthiness Respect

Responsibility Fairness Caring Citizenship

Code will not resolve every issue encountered indaily operations

Code can help managers deal with ethicaldilemmas


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Considerations in Developing a

Code of Conduct

Considerations in Developing a

Code of Conduct


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Texas Instruments

Ethics Quick Test

Texas Instruments

Ethics Quick Test Is the action legal?

Does it comply with our values?

If you do it, will you feel bad?

How will it look in the newspaper?

If you know its wrong, dont do it!

If youre not sure, ask.

Keep asking until you get an answer.


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Marketing Ethics and LeadershipMarketing Ethics and Leadership

Ethical cultures emerge from strong leadership.

Employees look to the leader as a model of

acceptable behavior. Great ethical leaders:

Create a common goal or vision for the company

Obtain buy-in or support from significant partners

Motivate others to be ethical

Use the resources that are available to them

Enjoy their jobs and approach them with an almostcontagious tenacity, passion, and commitment


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Market OrientationMarket Orientation

Market Orientation

The development of an organizational culture

that effectively and efficiently promotes thenecessary behaviors for the creation of superior

value for buyers and, thus, continuous superior

performance of the firm

Strongly tied to ethics and social responsibility

Means fostering a sense of cooperation and

information exchange


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Stakeholder OrientationStakeholder Orientation

Stakeholder Orientation

The degree to which a firm understands andaddresses stakeholder demands

Strongly tied to ethics and social responsibility

Comprised of three activities

Organization-wide generation of data about stakeholdergroups and the assessment of the firms effects on these

groups Distribution of this information throughout the firm

The organizations responsiveness as a whole to thisintelligence


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Connecting Ethics and Social

Responsibility to Performance

Connecting Ethics and Social

Responsibility to Performance Strong ethics and social responsibility leads

employees to be:

Motivated to serve customers

Committed to the firm

Committed to high quality standards

Satisfied with their job

Can lead to trust among firms stakeholders

Often leads to higher customer loyalty

Is so important that firms can experience majornegative effects if they dont uphold ethical standards


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GreenMarketing Philosophy

Firms too have become more green in their

business methods, particularly production and

other operational methods. They have also

become more green in terms of the

packaging used on their products, and of

course in terms of the products and services

themselves.


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A firm that practices green marketing may go

on the extreme of environmentally friendly,

not tested on animals, ethically, non

exploitatively produced cosmetic and related

products.


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Many firms are now adopting a proactive

rather than reactive green marketing

strategy in an attempt to gain a competitive

business environment.

If the market wants, and is prepared to pay

for, green products and services then

marketing-orientated firms are duty bound tofind ways of offering such goods and services

to their customers


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Marketing Audit

Definition: pg 39

The role of the external auditor

5 Components to be included in the market audit pg 39 Environmental audit

Strategy Audit

Organizational audit

Systems audit

Productivity audit

Function audit


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Challenges of audit

Funding

Defining purpose and objective

Support Time


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SWOT AnalysisSWOT Analysis

A widely used framework for organizing and

utilizing the pieces of data and information

gained from the situation analysis Encompasses both internal and external

environments

One of the most effective tools in the analysisof environmental data and information


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SWOT is an analytical tool used by an organisation to evaluate various

aspects of its internal operations and to evaluate different aspect of theexternal environment.

S = strengths (internal and could be such as strong brands, experienced

management

W = Weaknesses (internal) such as aging production facilities, small marketshare

O = Opportunities (external) emerging markets, new technology

T = Threats (external) new competitors, changing markets


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Major Benefits and Criticisms of

SWOT Analysis

Major Benefits and Criticisms of

SWOT Analysis Benefits of SWOT Analysis

Simplicity

Lower costs

Flexibility Integration and synthesis

Collaboration

Common Criticisms of SWOT Analysis Allows firms to create lists without serious

consideration of the issues

Often becomes a sterile academic exercise ofclassifying data and information


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Breaking DownManagerial

Clichs

Breaking DownManagerial

Clichs


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Potential Issues to Consider in a

SWOT Analysis (Exhibit 5.4)

Potential Issues to Consider in a

SWOT Analysis (Exhibit 5.4) Strengths and Weaknesses

Presence or absence of scale and cost economies

Presence or absence of financial or human resources

Presence or absence of functional skills

Presence or absence of intellectual, legal or reputational resources

Opportunities and Threats

Conditions or changes in the customer environment

Conditions or changes in the competitive environment

Conditions or changes in the external environment


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Strength and weakness

Human resource development Employee age/education

Turnover, satisfaction,absenteeism

Production Location

Machinery obsolesce

Purchase system

Quality control

Production efficiency

Management and Organization Management Quality

Staff Quality

Degree of centralization

Planning, Information andcontrol

Research and Development Lab capabilities

Research programs

Tech. innov

Marketing Distribution

Market share

Advertising

Customer satisfaction

Product quality

Reputation

Sales force turnover

Finance Profit margin

Credit rating


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The SWOTMatrix (Exhibit 5.5)The SWOTMatrix (Exhibit 5.5)


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Quantitative Assessment of

the SWOTMatrix

Quantitative Assessment of

the SWOTMatrix

Lecture 3 Market Environment

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