Marketing strategy

Chapter 3

Environmental Analysis

Taufique HossainMarketing StrategyMKT 460Learning ObjectivesTo define the marketing environment and discuss the relevant types of market information that are required for market scanning and analysis.

To review the analytical models and frameworks that can be used in the analysis stage.EnvironmentMacro-environmentSocial, political, economic, technological contexts

Competitive environmentCompany, immediate competitors, customers

Internal environmentResources, capabilities

3PEST Analysis of the Macro-EnvironmentPoliticalEconomicSocialLegalTechnologicalThe Economic and Political EnvironmentEconomic growth rates and the business cycleInterest rates, consumer and business confidenceEmployment and unemploymentTaxation and fiscal policyNational and supra-national governmentsRegional trade and trading areasInternationalisation and globalisation5The Social and Cultural EnvironmentDemographic ChangeThe Grey MarketThe Youth MarketMulti-ethnic societiesChanging life-styles and living patterns6Technological EnvironmentTechnological changes impact every industry

Shortening of commercialization times

Short product life cycles

Impact of internet7Legal EnvironmentLaws, regulations and codes of practice emanating from national governments, EU, local governments, statutory bodies, trade associations etc.8New Strategies for Changing EnvironmentsGlobal positioning

The master brand

The integrated enterprise and end user focus

Best in class processes

Mass customization

Breakthrough technology9The Shift in Strategy for Delivering Shareholder ValueFocus on core competenciesPortfolio approachesDomestic focusGlobal focusThe new strategic imperativeAnalysis of the Competitive EnvironmentPorters five forces model

Strategic groups

Industry evolution and forecasting

Environmental stability11Five Forces Driving CompetitionRivalry among existing firms in the industryThreat of new entrantsThreat of substitutesBargaining power of buyersBargaining power of suppliersSource: Adapted from Porter (1986, 1988)Rivalry Among Existing FirmsCompetitors are roughly evenly balanced

Low market growth

Exit barriers are high

Product differentiation is low

Fixed costs are relatively high13Threat of Market EntryCosts of entry are low

Existing or new distribution channels are open to use

Little competitive retaliation is anticipated

Differentiation is low

There are gaps in the market

14Threat of SubstitutesMaking existing technologies redundant

Incremental product improvement15Bargaining Power of SuppliersSuppliers are more concentrated than buyers

Costs of switching suppliers are high

Suppliers offerings are highly differentiatedBargaining Power of BuyersMore concentrated than sellers

Alternative supply sources are readily available

Buyer switching costs are lowStrategic GroupsFirms within an industry following similar strategies aimed at similar customers or customer groups

E.g. Coca cola and Pepsi18 Map of Strategic Groups in the US Automobile MarketDegree of SpecialisationBroad lineNarrow lineLocal ContentHighLowThe Big ThreeGM, Ford, ChryslerThe SamuraiToyota, Nissan, Honda, Mazda The Faded ChampionsVW Audi, Rover GroupLuxury carsMercedes, BMW,Volvo*, Saab*Jaguar*SpecialistsRolls-Royce*, Ferrari*, Aston Martin*, Lamborghini*, Lotus*,Morgan, McLaren(*brands now owned by large-scale American or European manufacturers)19Industry Evolution

ReadingHooley et al. Chapters 3 and 6.

Day and Schoemaker (2005), Scanning the Periphery, Harvard Business Review, 83, 11, pp. 135-148. Kangis and OReilly (2003), Strategies in a Dynamic Marketplace: A Case Study in the Airline Industry, Journal of Business Research, 56, pp. 105-111.