Market

Environment
 Market Structures

• Monopoly
– one player controls the market
– ( product & supply )
– no close substitutes
– entry cost is high
• Oligopoly
– few player control
– entry barriers are high
– strategy of one effects the other
– sell branded pdts. ( airline industry)
• Monopolistic Competition
– many players operate
– differentiate pdts. / services
– majority of industries

• Pure Competition – many players

homogenous / similar pdts.
– Negligible Entry Barriers
 Micro Environment

Business Decisions External Environment

Internal Environment

Macro Environment
Analyze Starbucks foray in India
 Market Environment
• Internal SWOT
– Controllable
Analysis
– Changes can be made
– Eg. Infrastructure, marketing mix, personnel etc.

• External
– Beyond Mgt. control
– Eg. Socio cultural, geographic etc.
– Micro – Operating Environment
– Macro – General Environment
Environmental
Factors
 Internal Environment
1. Value System
– Values set by the founders = foundation
– Values shared by the organization
– Values- respect, trust, honesty

1. Business Mission & Vision

– Vision - picture of the company in the future
– ICICI : wanted to become the no. 1 player
– Mission - brief description of a company’s fundamental
purpose. A mission statement answers the question
“Why do we exist?”
3. Management Structure
– Degree of professionalism
– Composition of Board of Directors
– Share holding pattern
4. Human Resources
– Skill, quality, commitment, morale
– Employee participation

5. Company Image & Brand Equity

Brand equity: value of a brand
brand loyalty, name awareness, perceived quality and strong
product associations
6. Marketing Capability
– 7 P of marketing

7. Financial Capabilities
– Factors related to availability, usage, mgt.
of funds
8. Technical Capabilities

9. Physical Assets and Facilities

 External Environment

Micro Environment

factors in a company’s immediate environment

that affect the performance of the company
1. Customers
– B2B / B2C market
2. Competitors –
– st. vary depending on factors?
– market structure ( monopoly, oligopoly,
monopolist)
3. Intermediaries
– Firms that aid the company in promoting,
selling distributing goods to the final
customer

Marketing Service Agencies

– help in targeting the right customers
creativity, quality, service, price of service
provider

• Other intermediaries
– Accounting , auditing intermediaries, HR
consultancies
4.Public –group having actual / potential
interest in / achieving co. objectives
– Financial publics – influence Co. ability to
obtain funds
– Media , Govt.
– General – public at large
– Internal – members of the org.

5. Financiers
 Macro Environment
• Affect all players in the industry

• Enables co. to anticipate changes

• Complex interdependent factors

1. Demographic
– study of characteristics of human
population
– demography, educational levels, st. of
living
2. Political
– Uncontrollable by the company
– Influences level of investment
– Decision on liberalization of the
economy

3. Economic
– GDP, inflation, std of living
4. Social Cultural
– attitudes, beliefs , norms, values, life
styles

5. Technology
– Dependent on the relative ease of the
users
– Brick & mortar to Brick and Click to Click
only
6. Natural

7. Legal & Policy framework

 Environmental Scanning

Monitoring

Scanning Forecasting

Assessment
and
Control
 Environment may be

Stimulant Business Constraint

• Goals
– Understand current & potential envi. Changes
– Inputs to strategic decision making
– Facilitate and foster strategic decision making

• Benefits
– Development of strategies and long term
goals
– Plan of actions
– Determine impact of socio economic
– Analysis of competitors strategies
• Scanning – general survey
– Aim: alter org. before the change is crystallized
– Identify possible changes
– Identify changes that are already in progress
– Sources – scattered data
– Exploratory by nature
• Monitoring – focused systematic approach
– in-depth analysis of trends identified

– tracking & describing envi. trends

• Forecasting
– Plausible projection of the direction ,
scope and intensity of the environmental
change

• Assessment
– Determine the impact of the trends
 Approaches
1. Out side In approach
– Macro
– Long term perspective
– Scenario analysis

1. Inside Out approach

– Micro
– Short term perspective
– Impact of current scenario on co. industry
Porters Five Force Model
• Threat of new entrants
– Economies of scale
– The high or low cost of entry
– Ease of access to distribution channels
– Will competitors retaliate?
– Government action
– How important is differentiation?
• The power of buyers
• High where there a few, large players in a
market e.g. the large grocery chains.
• If there are a large number of undifferentiated,
small suppliers
• The cost of switching between suppliers is low
e.g. from one fleet supplier of trucks to another
• The power of suppliers
– The switching costs are high e.g. Switching from one
software supplier to another.
– Power is high where the brand is powerful e.g.
Cadillac, Pizza Hut, Microsoft.
– There is a possibility of the supplier integrating
forward
– Customers are fragmented (not in clusters)
• The threat of substitutes
– Where there is product-for-product substitution
– Where there is generic substitution (competing for the
currency in your pocket) e.g. Video suppliers compete
with travel companies.