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MARKETING

ENVIRONMENT

1

Examining and Responding to the

Marketing Environment

Environmental Scanning

◦ The process of collecting information about

forces in the marketing environment

Observation

Secondary sources

Market research

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Environmental Scanning

3

Environmental Scanning

4

Internal External

Micro Micro Macro

•Suppliers

•Competitors

•Customers

•Intermediaries

•Socio-culture

•Politics

•Economy

•Technology

• Structure

• Culture

• Resources

Ex.:

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INTERNAL

ENVIRONMENT AUDIT

STEP.1..

5

Internal Environment Audit

Involvement in performing an

internal strategic-management

audit provides a way for

understanding the nature and effect

of decisions in other functional

business areas of the firm

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Micro internal environment

◦ Marketers must consider other

parts of the organization

including Management,

marketing, finance, R&D,

operations and accounting

◦ Marketing decisions must be

related to the company

goals and strategies

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Actors

1. The company

Management Audit Checklist

Does the firm use strategic

management concepts?

Are objectives/goals measurable? Well

communicated?

Do managers at all levels plan

effectively?

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Management Audit Checklist

Do managers delegate well?

Is the organization’s structure

appropriate?

Are job descriptions clear?

Are job specifications clear?

Is employee morale high?

Management Audit Checklist

Is employee absenteeism low?

Is employee turnover low?

Are the reward mechanisms effective?

Are the organization’s control

mechanisms effective?

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Marketing Audit Checklist

1. Are markets segmented effectively?

2. Is the organization positioned well among

competitors?

3. Has the firm’s market share been

increasing?

4. Are the distribution channels reliable & cost

effective?

5. Is the sales force effective?

6. Does the firm conduct market research?

Marketing Audit Checklist

6. Are product quality & customer service good?

7. Are the firm’s products and services priced

appropriately?

8. Does the firm have effective promotion,

advertising, and publicity strategies?

10. Are the marketing, planning, and budgeting

effective?

11. Do the firm’s marketing managers have adequate

experience and training?

12. Is the firm’s Internet presence excellent as

compared to rivals?

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Finance/Accounting Audit

1. Where is the firm financially strong/weak as indicated by financial ratio analysis?

2. Can the firm raise needed short-term capital?

3. Can the firm raise needed long-term capital through debt and/or equity?

4. Does the firm have sufficient working capital?

5. Are capital budgeting procedures effective?

Finance/Accounting Audit

6. Are dividend payout policies reasonable?

7. Does the firm have good relations with

its investors and stockholders?

8. Are the firm’s financial managers

experienced and well trained?

9. Is the firm’s debt situation excellent?

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Production/Operations Audit

1. Are suppliers of materials, parts, etc. reliable

and reasonable?

2. Are facilities, equipment, machinery, and

offices in good condition?

3. Are inventory-control policies and procedures

effective?

4. Are quality-control policies & procedures

effective?

5. Are facilities, resources, and markets

strategically located?

6. Does the firm have technological

competencies?

Research & Development Audit

1. Are the R&D facilities adequate?

2. If R&D is outsourced, is it cost-effective?

3. Are the R&D personnel well qualified?

4. Are R&D resources allocated effectively?

5. Are MIS and computer systems adequate?

6. Is communication between R&D and other

organizational units effective?

7. Are present products technologically

competitive?

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Management Information Systems Audit

Do all managers use the information system to make decisions?

Is there a Director of Information Systems position in the firm?

Are data updated regularly?

Do managers from all functional areas contribute input to the information system?

Are there effective passwords for entry into the firm’s information system?

Management Information Systems Audit

Are strategists of the firm familiar with

the information systems of rival firms?

Is the information system user-friendly?

Do all users understand the competitive

advantages that information can provide?

Are computer training workshops

provided for users?

Is the firm’s system being improved?

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Internal Factor Evaluation (IFE) Matrix

1. List key internal factors

2. Assign a weight ranging from 0.0 to 1.0 ◦ The weight range from 0.0 means not important and 1.0 means important, sum of all assigned weight to factors must be

equal to 1.0

3. Assign 1 to 4 rating to each factor ◦ Major weakness is represented by 1.0

◦ Minor weakness is represented by 2.0

◦ Minor strength represented by 3.0

◦ Major Strength represented by 4.0

4. Multiply the weight times the rating

5. Sum the weighted scores

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IFE Matrix conclusion

final value of total weighted score should

be between range 1.0 (low) to 4.0(high).

The average weighted score for IFE

matrix is 2.5 any company total weighted

score fall below 2.5 consider as weak.

The company total weighted score higher

then 2.5 is consider as strong in position.

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INTERNAL AUDIT IS ESSENTIAL IN ..

VALUE CREATION PROCESS

Value creation steps:

◦ Choose A value

◦ Create that value

◦ Communicate & Deliver that value

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If you fail to plan, then you plan to fail

Be proactive about the future

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Value Chain Analysis

The process whereby a firm

determines the costs associated with:

◦ Purchasing raw materials

◦ Manufacturing products

◦ Marketing products

And compares them to the value chain

of competitor firms

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Figure 3.5 The value chain Source: Reprinted with permission of the Free Press, a division of Macmillan, Inc., from Michael E. Porter, Competitive Advantage: Creating and sustaining superior performance, p. 6

Copyright © 1985 by Michael E. Porter

Value Chain Analysis

Core competencies

Distinctive competencies

Benchmarking

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Transforming Value Chain Activities into Sustained

Competitive Advantage

Value

Chain

Activities

Are

Identified

and

Assessed

Core

Competencies

Arise in Some

Activities

Some Core

Competencies

Evolve into

Distinctive

Competencies

Some

Distinctive

Competencie

s Yield

Sustained

Competitive

Advantages

EXTERNAL ENVIRONMENT AUDIT

Step.2..

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Micro external environment

◦ The five types of

customer markets

Consumer

Business

Reseller

Government

International

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Actors

1. Suppliers

2. Marketing intermediaries

3. Customers

4. Competitors

5. Publics

Micro external environment

◦ Conducting competitor

analysis is critical for success

of the firm

◦ A marketer must monitor

the competitors’

offerings to create strategic

advantage

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Actors

1. Suppliers

2. Marketing intermediaries

3. Customers

4. Competitors

5. Publics

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Key Questions Concerning

Competitors

Their strengths

Their weaknesses

Their objectives and strategies

Their responses to external variables

Their vulnerability to our alternative

strategies

Our vulnerability to strategic counterattack

Key Questions Concerning

Competitors

Product/service positioning

Entry and exit of firms in the industry

Key factors for current position in industry

Sales/profit ranking of competitors over time

Nature of supplier and distributor relationships

The threat of substitute products/services

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Sources of Competitive Intelligence

Internet

Employees

Managers

Suppliers

Distributors

Customers

Creditors

Consultants

Trade journals

Want ads

Newspaper articles

Government filings

Competitors

Objectives of Competitive Intelligence

Provide a general understanding of industry

and competitors

Identify areas where competitors are

vulnerable and assess impact of actions on

competitors

Identify potential moves that a competitor

might make

Copyright © 2011 Pearson Education

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Publics

The company's marketing environment

also includes various publics. A public is

any group that has an actual or potential

interest in or impact on an organization's

ability to achieve its objectives.

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Macro external environment

Socio-Cultural

Technological

Economic

Ecological

Political

Legal

Educational / Ethical

Demographical

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Macro environmental Forces are :

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Economic Forces

Business Cycle

◦ A pattern of economic fluctuations

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Prosperity

Recession

Depression

Recovery

Po

sit

ive

Ec

on

om

ic In

dic

ato

rs

Time

Economic Forces

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Stages in the Business Cycle

Prosperity Low unemployment and high total income create

high buying power

Recession Rising unemployment reduces total buying

power; consumer and business spending decline

Depression Unemployment extremely high, wages and total

disposable income are very low, and there is a

lack of consumer confidence

Recovery Economy is moving out of recession or

depression towards prosperity

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Economic Forces

Willingness to Spend ◦ the tendency to buy because of expected

satisfaction from a product, influenced by the ability to buy and numerous psychological and social forces

◦ Expectations influencing the willingness to spend: Future employment

Income levels

Prices

Family size

General economic conditions (e.g., rising prices)

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Sociocultural Forces

Sociocultural Forces ◦ The influences in a society and its culture(s)

that change people’s attitudes, beliefs, norms, customs, and lifestyles

Demographic Diversity and Characteristics ◦ Increasing proportion of older

consumers

◦ Rising number of single adults

◦ Increasingly multicultural societies.

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Sociocultural Forces (cont’d)

Cultural Values

◦ Primary source of values is the family

◦ Values influence

Eating habits

Alternative health and medical treatment choices

Attitudes toward marriage

Concern for the natural environment

Consumerism

◦ Organized efforts by individuals, groups, and organizations to protect consumers’ rights

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Demographical Forces

Demographic Diversity and Characteristics

◦ Increasing proportion of older consumers

◦ Rising number of single adults

◦ Increasingly multicultural societies.

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Technological Forces

Adoption and Use of Technology

◦ Failing to adopt new technology can cause a

loss of market leadership

◦ Protecting the firm’s inventions

is critical

◦ Using a technology assessment

allows the firm to anticipate the

effects of new products and

processes on the firm

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Percent of Kids Who Have

Technology in Their Bedrooms

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Technology 2000 2003

Radio 83% 83%

TV 59 61

VCR 35 42

Video Game 34 35

Telephone 38 31

PC 14 17

DVD Player 3 14

Own cell phone 7 13

PC Online 9 9

Source: Knowledge Networks/SRI as reported in American Demographics, February 2004, p. 13.

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Industry Analysis: The External

Factor Evaluation (EFE) Matrix

Economic

Social

Cultural

Demographic

Environmental

Political

Governmental

Technological

Competitive

Legal

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EFE Matrix Steps

1. List key external factors

2. Weight from 0 to 1 ◦ The weight range from 0.0 means not important and 1.0 means important, sum of all

assigned weight to factors must be equal to 1.0

3. Rate effectiveness of current strategies ◦ The response is poor represented by 1.0

◦ The response is average is represented by 2.0

◦ The response is above average represented by 3.0

◦ The response is superior represented by 4.0

4. Multiply weight * rating

5. Sum weighted scores

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Total weighted score of 4.0 Organization response is outstanding to threats and

weaknesses

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Copyright © 2011 Pearson

Education

Industry Analysis EFE

Total weighted score of 1.0

Firm’s strategies not capitalizing on opportunities

or avoiding threats

Industry Analysis: Competitive

Profile Matrix (CPM)

Identifies firm’s major competitors and

their strengths & weaknesses in

relation to a sample firm’s strategic

positions

Critical success factors include

internal and external issues

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