CHAPTER 3

THE MARKETING ENVIRONMENT

SECTION-E
IBMR-Ahmdabad.
ENVIRONMENTS
 Internal: various departments
 Micro: suppliers, marketing intermediaries
 Macro: competitive, demographic, economic,
natural, technological, political, and cultural
ENVIRONMENTAL SCANNING
 Definition – the process of constantly acquiring
information on events outside the organization to
identify trends which may impact its success.
 Importance?
 Major Forces: social, economic, technological,
competitive, regulatory
THE COMPANY’S MICRO ENVIRONMENT

 The forces close to the company that affect its

ability to serve its customers - the company,
market channel firms, customer markets,
competitors and publics, which combine to make
up the firm’s value delivery system.
Micro environment
SUPPLIERS
 Firms and individuals that provide the resources
needed by the company and its competitors to
produce goods and services.
 Important link in the “value delivery system.”
MARKETING INTERMEDIARIES
 Help the company to promote, sell, and distribute
its goods to final buyers
 Resellers
 Physical distribution firms
 Marketing services agencies
 Financial intermediaries
 Resellers: the individuals and organizations that buy goods and services to
resell at a profit.

 Physical distribution firms: warehouse, transportation and other firms that

help a company to stock and move goods from their point of origin to their
destinations.

 Marketing-service agencies: marketing research firms, advertising

agencies, marketing consulting firms and other service providers that help
a company to target and promote its products to the right markets.

 Financial intermediaries: banks, credit companies and other businesses

that help finance transactions or insure against the risks associated with
the buying and selling of goods.
CUSTOMERS
 The company must study its customer markets
closely and keep up to date with changing
customer requirements.
 The company must communicate with its
customers, and must listen to them closely.
COMPETITORS
 The marketing concept states that, to be successful, a
company must provide greater customer value and
satisfaction than its competitors. Thus, marketers must do
more than simply adapt to the needs of target consumers.

 They must also gain strategic advantage by positioning their

offerings strongly against competitors’ offerings in the minds
of consumers. They must strive to anticipate competitor
activity and strategy.
PUBLICS
 Any group that has an actual or potential interest
in or impact on an organization’s ability to
achieve its objectives.
 Financial publics influence the company’s ability to obtain
funds. Banks, investment houses and stockholders are the
principal financial publics.

 Media publics are those that carry news, features and editorial
opinion. They include newspapers, magazines and radio and
television stations.

 Government publics Management must take government

developments into account. Marketers must often consult the
company’s lawyers on issues of product safety, truth in
advertising and other matters.
 Citizen action publics A company’s marketing decisions may
be questioned by consumer organizations, environmental
groups, minority groups and other pressure groups.

 Local publics Every company has local publics, such as

neighborhood residents and community organizations.

 General public A company needs to be concerned about the

general public’s attitude towards its products and activities.
The public image of the company affects its buying.

 Internal publics A company’s internal publics include its

workers, managers, volunteers and the board of directors.
MAJOR FORCES IN THE COMPANY’S MACRO
ENVIRONMENT
GENERAL ENVIRONMENT
 Demographic
factor

Technology
Economic
factor
factor

General
environment

Global Political & legal

factor factor

Socio cultural
factor
DEMOGRAPHIC ENVIRONMENT
 What is demography?

Study of population characteristics like,

 Size.

 Density.

 Location.

 Age structure.

 Occupation.
DEMOGRAPHIC ENVIRONMENT

 Age structure of the population.

 Marital status of the population.
 Geographic distribution of population.
 Education level.
 Occupation.
POLITICAL & LEGAL ENVIRONMENT

 Government policies, legislations,

regulations and stability will directly
affect the any business.
FOUR CATEGORIES

 Monetary and fiscal policies

 Government spending, money supply, and tax
legislation.

 Social legislation and regulation

 Environmental protection act.
 Government relationships with
Industries

 Government subsidies and change in tariff rate.

 legislation related to marketing

 Company act 1956.
 Consumer protection act.
 Minimum wages act.
 Environmental protection act. etc…
TECHNOLOGY ENVIRONMENT
 Cost reduction.
 Automation, faster work.
i.e. Faster Bank transaction.
 Increase efficiency.

Example: TATA’s nanotechnology, cheaper

and smaller cars.
ECONOMIC ENVIRONMENT

According to national survey

1. Monthly per capita consumption in rural is RS 625.
2. Monthly per capita consumption in urban is RS 1171.
3. Food expenditure in monthly per capita
consumption:53%(Rural area).
4. Food expenditure in monthly per capita
consumption:40%(Urban area).
ECONOMIC ENVIRONMENT
 Interest rate:- when interest rates are
higher organization will less attracted towards loans and
vice versa.
 Inflation :- Higher the inflation rate lesser will be the
purchasing power and vice versa.
 Change in income :- the rise in the salaries of
employees, people will more invest in stock market,
higher the growth of the company.
FIVE FORCES ANALYSIS

Potential Threats
Entrants Of
entrants
Bargaining
Power

Suppliers COMPETITIVE
RIVALRY Buyers

Bargaining
Threat of substitutes Power

Substitutes
INTRODUCTION
 Five Forces Analysis helps the marketer to contrast a competitive
environment. It has similarities with other tools for environmental
audit, such as PEST analysis, but tends to focus on the single,
stand alone, business or SBU (Strategic Business Unit) rather than
a single product or range of products. For example, Dell would
analyse the market for Business Computers i.e. one of its SBUs.
 Five forces analysis looks at five key areas namely the threat of
entry, the power of buyers, the power of suppliers, the threat of
substitutes, and competitive rivalry.
THREAT OF NEW ENTRANTS
 Economies of scale (minimum size requirements for profitable-
operations),
 High initial investments and fixed costs,
 Cost advantages of existing players due to experience curve effects
of operation with fully depreciated assets,
 Brand loyalty of customers
 Protected intellectual property like patents, licenses etc,
 Scarcity of important resources, e.g. qualified expert staff
 Access to raw materials is controlled by existing players,
 Distribution channels are controlled by existing players,
 Existing players have close customer relations. E.g.: from long-term
service contracts..
BARGAINING POWER OF CUSTOMERS
Customers bargaining power is likely to be
high when:-
 They buy large volumes, there is concentration
of buyers,
 The supplying industry comprises a large

number of small operators,

 The supplying industry operates with high

fixed costs.
BARGANING POWER OF SUPPLIERS
 The market is dominated by a few large suppliers
rather than a fragmented source of supply,
 There are no substitutes for the particular input,
 The suppliers customers are fragmented, so their
bargaining power is low,
 The switching costs from one supplier to another
are high,
COMPETITIVE RIVAL
 There are many players of about the same size,
 Players have similar strategies
 There is not much differentiation between players and
their products, hence, there is much price competition
 Low market growth rates (growth of a particular
company is possible only at the expense of a
competitor),
 Barriers for exit are high (e.g. expensive and highly
specialized equipment).
THREAT OF SUBSTITUTE
 Brand loyalty of customers,
 Close customer relationships,
 Switching costs for customers,
 The relative price for performance of
substitutes,
 Current trends
BARGANING POWER OF SUPPLIERS
 The market is dominated by a few large suppliers
rather than a fragmented source of supply,
 There are no substitutes for the particular input,
 The suppliers customers are fragmented, so their
bargaining power is low,
 The switching costs from one supplier to another
are high,
COMPETITIVE RIVAL
 There are many players of about the same size,
 Players have similar strategies
 There is not much differentiation between players and
their products, hence, there is much price competition
 Low market growth rates (growth of a particular
company is possible only at the expense of a
competitor),
 Barriers for exit are high (e.g. expensive and highly
specialized equipment).
THREAT OF SUBSTITUTE
 Brand loyalty of customers,
 Close customer relationships,
 Switching costs for customers,
 The relative price for performance of
substitutes,
 Current trends
BARGANING POWER OF SUPPLIERS
 The market is dominated by a few large suppliers
rather than a fragmented source of supply,
 There are no substitutes for the particular input,
 The suppliers customers are fragmented, so their
bargaining power is low,
 The switching costs from one supplier to another
are high,
COMPETITIVE RIVAL
 There are many players of about the same size,
 Players have similar strategies
 There is not much differentiation between players and
their products, hence, there is much price competition
 Low market growth rates (growth of a particular
company is possible only at the expense of a
competitor),
 Barriers for exit are high (e.g. expensive and highly
specialized equipment).
INTERNAL ENVIRONMENT
MEANING OF INTERNAL ENVIRONMENT

All factors that are internal to the organization are

known as the 'internal environment.
Generally audited by applying the 'Five Ms‘.
Important for managing change as the external.
As marketers we call the process of managing
internal change 'internal marketing.'
RESOURCES:
3 Type Of Resources:
1:Finite Renewable Resources
Material resources:
Human Resources:
Intangible resources:
Energy Resources.

2:Finite Non-Renewable Resources

3:Infinite Resources
FINANCE

 To Understand & Support Marketing

Expenditure.
 Tailor the Financial Packages.
 Make Quick-Decisions.
 Financial Accountability
CORE-COMPETENCY
 A core competence is the result of a specific unique
set of skills or production techniques that deliver
value to the customer.
 Such competences give an organization access to a
wide variety of markets.
 Hamel and Prahalad (1990) refer to a number of
organizations and their products to support their
concept including NEC, Honda and Canon.
 For example, Microsoft
CORE-COMPETENCY
 Three Characteristics of core competence.
 Provides potential access to a wide variety of
markets.
 Should make a significant contribution to the
perceived customer benefits of the end product.
 Should be difficult for competitors to imitate.
MARKETING CAPABILITIES
 “Competitive advantage also accrues to companies that
possess Distinctive capabilities.”

 “Whereas ‘Core-competencies’ refers to areas of special

technical & Production expertise”

 “Distinctive capabilities describes excellence in broader

business Processes.”

 Ex: Neftix………
PORTER’S VALUE-CHAIN
 The value chain is a systematic approach to
examining the development of competitive
advantage.
 series of activities that create and build value.
 The organization is split into Two activity.
1:'primary activities'
2:'support activities.'
PORTER’S VALUE-CHAIN
Primary Activities.
1:Inbound Logistics.
2: Operations
3: Outbound Logistics.
4: Marketing and Sales.
5: Services

Support Activity.
1:Procurement.
2:Technology Development.
3:Human Resource Management (HRM).
4:Firm Infrastructure
PORTER’S VALUE-CHAIN
 Strategy
"Strategy is the direction and scope of an organization over the
long-term: which achieves advantage for the organization
through its configuration of resources within a challenging
environment, to meet the needs of markets and to fulfill
stakeholder expectations".

In other words

* Where is the business trying to get to in the long-term (direction)

* Which markets should a business compete in and what kind of activities are involved in such
markets? (markets; scope)

* How can the business perform better than the competition in those markets? (advantage)?

* What resources (skills, assets, finance, relationships, technical competence, facilities) are
required in order to be able to compete? (resources)?
STRATEGIC INTENT

 Vision points the way to the future and strategic intent provides clarity of what a
company must get after immediately in order to realize the vision.

 In other words strategic intent of a company describes how a company is going

to realize its vision. Strategic intent provides a particular point of view about the
long term vision or aspiration of the company.

 Gary Hamel and C.K. Paroled in their book “competing for the future”, say that
since strategic intent provides a specific point of view of the future aspired, it
conveys sense of direction. And since it provides an opportunity to explore new
competitive possibilities, it conveys a sense of discovery and since it provides a
goal for the company which people perceive as inherently worthwhile, it implies
sense of destiny
 Strategic Mission
“A mission describes the organization's basic function in society, in
terms of the products and services it produces for its customers”.

A clear business mission should have following mission

 A purpose

 A Strategy and Strategic Scope

 Policies and Standard of behavior

 Value and Culture

 Key Results Area

“Key Result Areas” or KRAs refer to general areas of outcomes or

outputs for which a role is responsible. A typical role targets three
to five KRA. Erasure also known as key work outputs (KWOs).

Key result areas (KRAs) capture about 80% of a work role. The remainder of the role is
usually devoted to areas of shared responsibility (e.g., helping team members,
participating in activities for the good of the organization). For example, “image of the
organization” is usually a very senior official’s key result area, but hopefully all employees
contribute to this outcome.
 Objective

A goal or objective is a projected state of affairs that a person or a 

system plans or intends to achieve—a personal or organizational desired
end-point in some sort of assumed development. Many peon-
plea endeavor to reach goals within a finite time by setting deadlines.
COMPETITORS ENVIRONMENT
COMPETITORS ENVIRONMENT

1. Future objectives
2. Current strategies
3. Assumptions
4. Capabilities
FUTURE OBJECTIVES

1. Competition among the company

2. Consumer at profit
3. Innovation
CURRENT STRATEGIES

1. To overcome unwanted competition

2. Expansion of business
3. Unique services
 ASSUMPTION
Example:-
1. AT&T: It estimates that it’s U-Verse service will
reach 17mn by 2008 and 30mn homes by 2010
2. Verizon: Too much dependence FIOS
3. Comcast: worries about verizon,stronge
customer base of 1.6 mn, download speed as
fast as verizon
 CAPABILITIES

1. Fast network capabilities

2. Need to differentiate
3. Development in optic fiber (verizon-dollar 20
billon project)
SWOT ANALYSIS
SWOT ANALYSIS
 What is SWOT……..
Other then ……..
Strength
Weakness
Opportunity
Threats
IT IS A CONTINUOUS PROCESS TO IDENTIFY STRENGTH, WEAKNESS, OPPORTUNITY, AND THREATS.

IT INVOLVES MONITORING THE EXTERNAL AND INTERNAL MARKETING ENVIRONMENT

Internal External
Strength Opportunity
Capture Invest

Weakness Threats
Short Up Identify
EXTERNAL ENVIRONMENTS ?
 Opportunity
 Threats
 This involves Macro environments and Micro
environment.
 These both environment effects the ability to
make profit or earn profit.
 Macro and Micro is already been explained by
my friends.
OPPORTUNITY
 Opportunity is the way to grow….and to reach or
climb high.
 In this we have to scan the market.
 The basic idea to scan the market is to discern new
opportunity.
 A marketing opportunity is an area of buyer Need
and Interest in which there is a high probability that
the company can profitability that the company can
profitably satisfy the need.
THREE SOURCE OF MARKETING OPPORTUNITY

 1.. To supply something that is short supply.

Which requires little marketing talent too.
 2.. To supply an existing product or service ina
new or superior way.
This includes three things
a. Problem detecting method
b. Ideal method
c. Consumption chain method
3. Totally new product
which one is the most risk bearing method
Example:
Segway a US based company bought a new product
in the market…. Electric scoter costing around
$5000, they has a high hope from it because it was
non-polluting and alternative to walking.
But it was failure their…because of its high cost
OTHER EXAMPLES IN OPPORTUNITY
 Cell phone manufacturing releases phone with
digital photo capability.
 FedEx discovered a way to deliver mail and
package much more quickly than the us post
office.
 Company can customize a product or service.

Ex. P&G’s Reflect. com website….

Capable of producing a customized skin care or
hair care products to meet customer’s need.
THREATS
 This is the challenge posed by an unfavorable
trends or development that would lead in the
absence of defensive marketing action, to lower
the sales and profit.
 They are classified two wats….
Seriousness
Probability of occurrence
INTERNAL ENVIRONMENT ?
 Strength
 Weaknesses
 It is one thing to find attractive opportunity and
another to be able to take advantage of them.
THE BUSINESS DOES NOT HAVE TO CORRECT
ALL ITS WEAKNESS, NOR SHOULD OR GLOAT
ABOUT ALL ITS STRENGTH.
THE BIG QUESTION IS WHETHER THE
BUSINESS SHOULD LIMIT ITSELF TO THOSE
OPPORTUNITY WHERE IT POSSESSES THE
REQUIRED STRENGTH OR WHETHER IT
SHOULD CONSIDER OPPORTUNITY THAT
MEAN IT MIGHT HAVE TO ACQUIRE OR
DEVELOP CERTAIN STRENGTH.
SWOT ANALYSIS IS DONE TO FIND OUT?
 How to perform one for your Organization….?
 How to develop Competitive advantages……?
 How to set SMART goals….?
 Choosing your Strategic objectives…?
 How to write a mission statement to impress
others….?
SYNTHESIS
WHAT IS SYNTHESIS?
 The basic meaning of Synthesis is “Combination
of Parts”
THANK YOU