[marketing knowledge] cim revision card marketing(book4me.org)(2)

CIM REVISION CARDS

Marketing EnvironmentMike Oldroyd of Marketing Knowledge

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TABLE OF CONTENTS

Preface .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv1. The nature of the organization .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. The microenvironment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183. Analysis of the competitive environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304. The macroenvironment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445. The demographic social and cultural environment . . . . . . . . . . . . . . . . . . . . . . . . . . . 556. The economic and international environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 687. The political and legislative environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 828. The technical and information environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 949. Environmental information systems .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

PREFACEWelcome to the CIM Revision Cards from Elsevier/Butterworth–Heinemann. We hope you will find these usefulwhen coming to revise for your CIM exam. The cards are designed to be used in conjunction with the CIMCoursebooks from Elsevier/Butterworth–Heinemann, and have been written specifically with revision in mind.They also serve as invaluable reviews of the complete modules, perfect for those studying via the assignmentroute.

n Learning outcomes at the start of each chapter identify the main points

n Key topics are summarised, helping you commit the information to memory quickly and easily

n Examination and revision tips are provided to give extra guidance when preparing for the exam

n Key diagrams are featured to aid the learning process

n The compact size ensures the cards are easily transportable, so you can revise any time, anywhere

To get the most of your revision cards, try to look over them as frequently as you can when taking your CIMcourse. When read alongside the Coursebook they serve as the ideal companion to the main text. Good luck– we wish you every success with your CIM qualification!

THE NATURE OF THEORGANIZATIONLEARN ING OUTCOMES

� Appreciation of the marketing environment� Classification and comparison of organizations� Understanding mission statements and the

significance of objectives� Recognition of business as an open system� Identification of drivers for change

Syllabus reference: 1.1–1.9

�

Study past questions on each main area and planout brief key word answers

�

Plan/answer time-frame is 30–35 minutes

KEY REV IS ION PO INTS

� The interrelated and ever-changing nature of adynamic environment

� Strengths and weaknesses of various forms oforganization

� Differing missions and objectives and the forcesthat influence them

� Organizations as systems within the widerenvironment

� Flexible response to contingencies withmarketing orientation as a success factor

Unit 1

MARKETING ENVIRONMENT 1

Marketing Environment (1.1)

CIM defines marketing as:

} The management process which identifies,anticipates and supplies customerrequirements efficiently and profitably. ~

n Marketer must understand external environment

n Recognize implications of changes

n Must take into account changing tastes,preferences and spending power, as well ascompetitor offerings

n Identify impact of broader environment on markets

�

A main aim of the syllabus is: To explain thenature of the marketing environment and itsrelevance for organizations and marketingpractice

} The firm is a creature of its environment.Its resources, its income, its problems, itsopportunities and its very survival aregenerated and conditioned by theenvironment. ~ (Ansoff)

– Organizations operate in an environment ofconstraints, threats and opportunties

– Need to monitor for and understand significantchanges

– Organizations must adapt to survive

– The environment as the source of key inputs,revenues, pressures, competitors, allies:relationships are critical

– Organizations possess differing strengths/weaknesses

– Survival demands marketing strategy andplanning

THE NATURE OF THE ORGANIZATION 2

Types of Organization (1.2)

Public sector organizations

n State-provided goods or servicesn Driven by government objectivesn Socially desirable goals, e.g. equityn Supply public goods to all, e.g. defencen Ensure supply of merit goods, e.g. education/

healthn Funded by taxation, fees or government

borrowingn Recent privatizations/deregulation (encourage

marketing orientation)n Shift from direct providers to service facilitatorsn Public/private partnerships – marry strengths

of each

Private sector organizations

n Marketable output and exportsn Privately owned and controlledn Businesses compete to satisfy consumer wantsn Profit drives effective and efficient use of

scarce resourcesn Includes global multinationalsn Shareholder concerns may override social

concerns

Voluntary sector organizations

• Normally non-profit-making

• Rely on voluntary contributions and dedicated staff

• Compete for funds/public attention for causes


Business Classifications (1.2)

Sole Trader – characteristics

n Simple to formn Individual owns and controlsn Unincorporatedn No separate legal existencen Self-employedn Individual is the business

Advantages Disadvantages

– Maximum privacy – Unlimited liability for

– Minimum formalities debts

– Favourable taxes – Specialized and high

– Least cost to form risk

– Focused/motivated – Jack of all trades/

– Close to customers narrow view

– Close to employees – Burden plus lack of

– Flexible/responsive continuity

– Hard work and longhours

– A lot of competition

– Lack of managementskills


Partnerships – characteristics

n Unincorporatedn Two or more partnersn By agreement/lawn Legal maximum, e.g. 20n Jointly liable for debtn Share profits/lossesn ‘Limited partnership’ but one is liable


– Raise more funds – Unlimited liability

– Pool expertise – No legal identity

– Can specialize more – Potential disagreements

– Suits professions – Frozen investment

– No company tax – Dissolve on partner’s

– Privacy high death

– Vulnerable ifmalpractice


Registered Companies – characteristics

n Dominant formn Public (plc) and private limitedn Incorporated by lawn Shareholders contribute capitaln Regulated by Memorandum (external scope)

and Articles (internal administration) ofAssociation

n Submit independent audited accounts/directors’ report

Issues

• Short-termism, take-over threat

• ‘Fat cat’ remuneration levels


– Separate legal form – Complex/costly to

– Limited liability form

– Finance raising – Disclosure

– Easy share transfer requirements

– Fund development – Government

– Customer confidence regulations

– Operational inflexibility

– Size may breedimpersonality

– Ownership/management divide


The case for privatizing

This involves transferring ownership of 51% or more ofshares in a public sector organization to private hands

Political considerationsl Poor record of efficiencyl Susceptible to pressure groups like unions and

political interferencel Limited by government fundingl Privatization reduced state rolel Led to deregulation/cut red tapel Encouraged wider share ownership – notably

customers and workforcel Greater freedom to market servicesl Sale cuts government borrowingl Regulators appointed with powers to enforce

change, e.g. Oftell Examples: water; gas; electricity; telecoms;

lotteries

Economic considerations

l Limited competitve pressure when nationalized

l Significant efficiency improvements

l Increased competition and consumer choice

l Pressure to become marketing orientated

l Improved industrial relations

l Freedom to exploit diverse opportunities

l Lower prices and steep rise in productivity

�

Questions set on organizations often call forcomparison of types or sectors

�

To focus on such questions use a grid for pointby point comparison/to earn format marks


Strengths of SMEs (1.3)

l Cater closely for local customersl Sensitive to buying habits/tastesl Able to focus on a niche marketl Owns business/attention to detaill Flexible/adaptable organizationl Attract ‘quality’ staff unwilling to work in large

firml Finger on pulse as needs changel Tend to be inventive/innovative

Relative weaknesses

– See disadvantages of sole traders and partnerships

– Reverse of large/global strengths*

Strengths of large/global firms

l Economies of scale, e.g. discountsl Risk spread across various marketsl Justify use of specialized skills, etc.l Secure cheaper financel Exploit best practicel Transfer technology and ideasl Vast bargaining power re suppliersl Ability to centralize strategyl Advantage from brand leadership

Relative weaknesses

– See registered company drawbacks– Reverse of small firm strengths*


REMEMBER -

Vision is the ability to imagine or foresee the futureprospects/potential for an organization.Mission is the statement of the organization’soverall purpose that expresses what it stands forand seeks to accomplish in the wider environment

– Vision is the responsibility of top management

– Anticipates how markets, tastes, technologiesevolve

– Critical importance in formulating marketingstrategy

– Triggers the mobilization of resources to achieve it

– Drives organizational behavior

– Key to securing a competitive edge

Example of vision: a PC with Windows software onevery desk (Microsoft)

Example of mission: To organize the world’sinformation (Google)

Mission statements (1.4)

Meaning: Describes core activities

l Fundamental reason for organization’s existence

l Establishes what business it should be in

l Distinguishes uniqueness from other organizations

l Identifies competences, customers, relationships

Importance: Shapes corporate culture

l Enables sense of direction, unity, common purpose

l Provides a set of corporate values and priorities

l Clear statement for external stakeholders

l Provides a benchmark for assessing performance


Organizational Objectives (1.4)

Specific ends or achievements to be realized at afuture time to fulfil the mission of the organisation

NATURE

l Strategic objectives are long-term goals set bysenior management, e.g. achieve marketleadership

l Tactical objectives are set by middle managersand are more measurable, e.g. open 10 new outlets

l Operational objectives are short-term and set byfirst line managers, e.g. cut customer complaintsby 5%

l Objectives should be SMART¼ specific,measurable, achievable, relevant and time-limited

l Objectives vary by sector:

– Charity: Alleviate suffering/raise contributions

– Public: Public service/equity/cost effectiveness

– Private: Maximize profit/growth/maket share

SIGNIFICANCE

l Reason why organizations existl Drive organizational behaviorl Supply motivation/sense of purposel Time-limited targets provide controll Survival/profit stimulate competitionl Profit maximizing (revenue – cost) ensures that

firms supply what consumers are prepared topay for, using methods that minimize cost

l Rapid response to changing tastes/innovation ofmore efficient method

l Marketing may pursue market share/sales max.þ profit constraint

l Growth provides opportunities


Internal influences on aims

l Memorandum of Association limits business scope

l Personal values/goals of directors/senior managers

l Aversion to risk and future expectations

l Resource limitations

l Inertia and past success may prevent review

External influences on aims

l Must match internal strengths/weaknesses withexternal opportunites and threats

l Present/future expectations of shareholders

l Interests of connected and external stakeholders

l Competitive forces

l Changes in government policy and legislation

l Pressure groups

Drivers for Change (1.5)

Organizations must periodically review their aims:– renew objectives once achieved– reality of a dynamic environment– control process shows variances– respond to forces pushing it off-course– anticipate change in wants– meet emerging technical change– proactive to threats/opportunities– change in top management– as part of a formal corporate planning system


Organizations as Systems (1.6)

l View organizations as part of a wider systeml Inputs are drawn from environment and

converted into outputsl Positive (goods, services) and negative (wastes)

outputs are returnedl Organizations made up of subsystems

(e.g. marketing, production)l Boundary between systems represents

interfacel Feedback corrects deviations in outcomes

vs. aimsl Interdependent with environmentl Scan/adapt to threats/opportunities

Marketing Interface (1.6/7)

n Organizations often split into various functions soefficient conversion needs effective coordination

n Departments must ‘optimize’ not ‘maximize’ bypursuing the best ‘organizational’ outcome

n Marketing critical: bridges the boundary betweenthe wider environment and internal departments

n Must establish/maintain relationships across andwithin the organizational boundary, e.g. production

n Demands a marketing orientation: focus onsatisfying the needs of the buyer via the product/things associated with creating, delivering andfinally consuming it. (T. Levitt)


Dynamic Environment (1.8)

Marketing environments are in constant changeMany environments are turbulent and subject tounpredictable and often uncontrollable forces:n Increasingly competitive markets are in flux,

e.g. stock, currency, ICT and energy markets

n Technological forces, political discontent, variableprosperity, fundamentalism also disturb stability

n Even the natural environment appears unstablewith freak weather conditions

Dynamic conditions suggest powerful forces aredriving change, e.g. IT developments or a catalyst,e.g. new entrant or deregulation

Importance to marketing

l Creates ambiguity over future patterns

l Can create opportunities if managed well

l The environment must be monitored and analysedto identify threats and potential impacts

l Prioritize on most significant developments

l A proactive response is demanded

l Reduce resistance in favor of a ‘culture of change’

l Requires flexible, decentralized, organic structures

l Associated costs may be transferred to customers(higher price); workers (redundancy); competitors(lower sales); government (subsidies), etc.

l Complex markets involve many interdependentcausual factors producing non-routine problems


Managing the Environment (1.8)

A contingency approach:

Appropriate marketing action depends on theparticular circumstances of the situation ratherthan predetermined rules or policies

Marketers must recognize there are no certainties ina global economy-tailor response to an evolvingsituation

Even McDonalds must modify its universal formulato match competitive/cultural realities – India’ssacred cow

Logical development of the systems perspective todetermine appropriate responses in the face ofmulti-faceted change

Organizations of the future

l Flexible dynamic structures

l Organic and fluid

l Focused but adaptable

l Lateral networked relationships

l Task, skill and relationship focused

l Flexitime for effective task completion

l Customer orientated

l Employee involvement/participation

l Shared benefits

l Wider share ownership

l Marketing secures collaboration and integration ofkey functions


Emerging Challenges (1.9)

E-commerce

Implies radical restructuring/culture shifts for organi-zations and will demand a systems-driven response

Globalization

Rise of multinationals treating the world as anintegrated market place for resources and productsand developing relatively standardized products tomeet customer needs

Increasing competition

Product of improved access to information;deregulation; more discerning customers

Digitalization

Allows seamless integration of IT (text/sound/vision)into all aspects of life, e.g. mobiles and broadband TV

Significance for marketing

n Rising on-line sales challenge traditional retailers

n Source of competitive advantage for supply chain

n Large reduction in transactions cost

n Need to monitor the global market-place

n Threat of competition in domestic market

n Small firms must exploit niches

n Price must be comparable even whendifferentiating

n Action on monopoly abuse – MicrosoftE497m fine

n Broadband allows tailored promotion andinteraction

n Mobiles becoming a critical marketing resource


Hints and Tips

l Read through Unit 1 of the MarketingEnvironment Coursebook

l Seldom the main focus of a mini case or even casequestions

l Normally at least one full optional question perpaper but may overlap with other sections

l Many optional questions are set in a specificorganizational context

l Focus to ensure you answer the question

l Breakdown different components of the questionsto ensure you address all of the issues

l Make outline plans of all the exam questions

l Go to www.cimvirtualinstitute.com andwww.marketingonline.co.uk for additional supportand guidance

�

Identify ‘organizational’ questions – Q2 or Q3

�

*Note the potential overlap of points from differentparts of this syllabus section

�

Have a vision of e-commerce, e.g. based on PCs,digital TV or 3G mobile phones

�

Fix academic ideas by relating them to your ownsituation: Do you review your own goals, howhave they changed, by what forces?

�Your revision provides an example of an opensystem – you draw knowledge from lectures/readings; convert it into understanding to yieldoutput as coursework and get feedback


THE MICROENVIRONMENT

LEARN ING OUTCOMES

� Appreciation of interconnected environments� Importance of stakeholders and their

interaction� Significance and impact of pressure groups� Role of marketing in managing these groups

Syllabus reference: 2.1, 2.2, 2.5


� Complex nature of the environment� Internal, connected and external stakeholder

groups – their importance to the organization� Pressure groups and their influence on

decision-making� Management of stakeholders and pressure

groups

Unit 2

Microenvironment Context (2.1)

Includes the groups and organizations close to thebusiness that affect its ability to satisfy customers.

They have a two-way operational relationship withthe business and may be influenced by it to somedegree.

n Refer back to systems theory

n All organizations aim to make resourcesproductive

n Resources are scarce and diverse

n They must be attracted from the environment

n Inputs are transformed in time, place or form tocreate utility, value and satisfaction for thecustomer

n Ineffectiveness or inefficiency threatens survival

n Resource providers are stakeholders

Classifying the environment

n Organizations face a confusion of environmentfactors

n They need to sort and classify these factorsn They may or may not represent threats/

opportunities for marketersn Represent jigsaw pieces for grasping the

bigger picturen Include all factors/forces with significant

impact on organization


The Microenvironment

THE MICROENVIRONMENT 20

Stakeholders defined

Any group or individual, other thanshareholders, who can affect or are affected bythe achievement of organizational goals.

Primary stakeholders make a direct and oftencontinuous contribution to core activities.

The impact on or by secondary stakeholdersis more intermittent and normally of lesssignificance.

n Organizations are coalitions of stakeholders

n Management needs a workable balance betweenthe claims and interests of these groups

n Shareholders are owners of the business

Microenvironment stakeholders

Suppliers

n Key to availability, delivery times and inputquality

n Wield bargaining power to drive up cost ofmaterials

n Relationships affect supply chain effectivenessn Dependence on 1 or 2 suppliers carries risksn Preferred suppliers may provide total quality,

just-in-time delivery and R/D support


Competitors

n Potential threat to survival and profitability

n Must monitor actions and reactions of rivals

n Price wars may erupt from time to time

n Marketing mix may be deployed to influence them

n May have common interest in collaboration

Customers

l Often sole source of revenuel Free to withdraw/transfer customl Dissatisfied customers tell othersl Preferences may change quicklyl Influence through marketing mixl Retaining customers more cost effective due to

potential lifetime revenue flow

Intermediaries/distributors

l Critical role/channel effectivenessl Partnership offers advantages: transport, stock

management, merchandising, after-sales, etc.l High leverage, e.g. own brandsl E-commerce disintermediation?l Tying in outlets may provide competitive edge

Employees

n Retention of skilled preferred to new recruitment

n Critical factor in productivity and customer interface

n Central to coordination and achievement of goals

n Potentially costly, e.g. salaries/disruption/poormorale

n Evolution of flexible working patterns/virtual orgs.


Microenvironment importance

Operational context for day-to-day tacticalresponses

Marketer at critical interface between primarystakeholders: organization

Successful value chains are ‘clusters’ ofcollaboration

Marketing mix deployed to influence actual andpotential stakeholders

Stakeholders can damage/advantage so choiceof competing or cooperating

Stakeholder Pressures (2.2)

l Organization can’t operate in isolation

l Must satisfy legitimate expectations ofstakeholders if these are to contribute value inreturn

l Contributions may be withdrawn, e.g. shopelsewhere

l Stakeholders can change organizational goalsunless effectively managed

l Conflicts of interest possible, i.e. higher wages ¼lower profits or higher prices


Stakeholder Typology


Stakeholder pressure and expectations

Customers

Pressure via reduced purchases, boycott andcomplaint

Expect value for money, quality products and service

Employees

Pressure via absenteeism, low morale and work rate

Expect fair wage, skill development, job satisfaction

Suppliers

Pressure via low priority service, supplying rivals

Expect prompt payment, clear supply schedules

Distributors

Pressure via stocking rival/own brands, delay payment

Expect just-in-time supplies, promotional support, etc.

Managing Stakeholders (2.2)

l Recognize the behavior of organizations hasbecome everybody’s business

l Know who the critical stakeholders are

l Map stakeholders by level of interest in theorganization and their power to influence outcomes

l Use internal and external marketing to resolve orbalance stakeholder conflicts

l Keep key stakeholders well informed and on-side


Pressure Groups (2.4)

Are sub-sections of society organized on the basisof specific common interests, goals or attitudes

Distinguish

l Sectional or interest groups who exert pressureon people, organizations and government for theirown special purposes, e.g. unions

l Cause or promotional groups with commonvalues and a specific ‘issue’, e.g. Friends of theEarth, World Wildlife Fund, CND

l Both seek influence over government decisions

l Both may promote or resist particular decisions

l Means for like-minded to make themselves heard

l Increasing to influence all business/society aspects

Means of achieving their aims

Complain, e.g. to the media/regulators

Inform and persuade affected parties

Debate at local meetings

Lobby elected representatives/officials

Canvass and opinion form re stakeholders

Boycott company products or services

March and demonstrate outside business

Legal action and test cases

Demand negotiations for concessions


Example: Consumerists

Those groups and organizations who exert legal,moral and economic pressure on business toaccount for the interests of consumers over profit

Impact on marketing

3 Customers no longer suffer in silence

3 Encouraged proactive businesses to adopta customer orientation

3 Consumer rights enshrined in fair trading laws

Right of Safety Issues: tobacco, GM foods, additives

Right to be informed: Fraud, small print, misleadingpromotion, unsolicited junk mail

Right to choice: deregulation, reduce entry barriers

Right to a hearing: Poor service/substandardproducts

Example: Environmentalists

Groups and organizations who seek to applypolitical, economic and moral pressures onbusiness to adopt sustainable operations.

Significance for marketer

Wide-ranging causes: conservation, recycling,emissions, animal rights and endangered species

Rising concerns imply extra costs and higher prices:

l Corporate image damaged

l Customers may opt for less harmful alternatives

l Shareholders may switch funds to ethically sound

l Recruitment of high calibre staff affected

l May prompt over-strict legislation if fail to act

l Loss of community/local government support

l Cost penalties – legal claims, product recalls


Formal channels for pressure

Pressure via government

l Government departments consult widely

l Sound out recognized/responsible pressure groups

l Able to influence new legislation and policies

Pressure via legislature

l Pressure group lobby support from legislators

l Susceptible to issues affecting their constituencies

Pressure via public campaign

l Influence opinions through educational campaigns

l In short term, mobilize public/stakeholder supportthrough meetings, demonstrations, internetpetitions

Managing Pressure Groups (2.5)

3 Prioritize resources that are scarce

3 Clarify corporate values/goals

3 Listen to their views

3 Communicate with them

3 Consult with them

3 Monitor their pressure on govt.

3 Liaise with them over developments/use theirexpertise

3 Respond positively to their ideas

3 Work with them for mutual benefit

3 Build trust

3 Support them to work with you

3 Oppose if necessary


Hints and Tips

n Read through Unit 2 of the MarketingEnvironment Coursebook

n Some mini case topics, e.g. McDonalds (D03) andCruise market (J03), but less frequent than macro

n Key case terms are highlighted in bold

n Questions normally in context of a selectedindustry

n Normally 2 or 3 part questions

n Normally at least one full optional questionper paper but may overlap with others

n Make outline plans of all the exam questions

n Go to www.cimvirtualinstitute.com andwww.marketingonline.co.uk for additional supportand guidance

�

The mini case counts for 40% of the marks andnormally has 4 parts. 40% of your 3-hour examtime is 72 minutes so spend no more than18 minutes per part (including reading)

�

Re-read question and underline ‘key’ words

�

Make trigger word plan. Use marks as a guide

�

Get feedback on your understanding

�

Differentiate your examination script to theExaminer by making it stand out as a premiumproduct

�

You can relate this syllabus area directly to yourown experience as customer, employee andmarketer

�

Generate more examples as you work throughthis passbook to use in your exam answers


ANALYSIS OF THECOMPETITIVE ENVIRONMENTLEARN ING OUTCOMES

� Importance of monitoring competitors� Explanation of strategic implications� Understand impact of competition policies� Awareness of internal/external information

sources

Syllabus reference: 2.3, 2.6, 2.7 (10%)


� Characteristics of fragmented and concentratedindustries

� Description of five-force analysis and itsstrategic implications

� Review of competition law and practice� Key sources of information on the

microenvironment

Unit 3

Monitoring Competitors (2.6)

Competitive behavior involves actions andreactions of businesses to improve theirprofitability and market position at the expenseof rivals.

Importance

l Competition impacts directly and continuously

l Forms a two-way interaction

l Marketers must understand the dynamics ofdifferent markets and the realities of competition

l Marketing strategy, tactics and responses must beset in the context of a changing marketenvironment

Intense competition: Characteristics

Large number of small buyers/sellers

High degree of market knowledge

Rational consumers and businesses with highdegree of market knowledge

Ease of market entry or exit

Price takers – set by market forces

Examples: materials/foodstuffs; ‘commodities’ inmaturity (PLC); e-commerce creates pricetransparency


Industry types: Fragmented industries

Large number of small competitors

Rational to monitor closest rivals

Easy entry to and exit from the market

Adaptability to market diversity yields competitiveadvantage via innovation or successfuldifferentiation

Firms stress USPs but high profits are soonreduced by imitation/new entry

Supply of me-too goods ¼ low margins

Marketing implications

Strategic actions

3 Monitor close rivals and new entrants

3 Invest in relationship marketing

3 Build long-term mutual benefit

3 Create barriers to protect the market

3 Niche marketing of a habitual good

3 Buy out competitors

3 Cut costs to offer keen prices

3 Innovate continuously ¼ a moving target

3 Product differentiation and branding

ANALYSIS OF THE COMPETITIVE ENVIRONMENT 32

Concentrated industries

Small number of very large firms

Economies of scale

High barriers to entry and exit

Interdependence – large market shares

Outcomes depend on rival reactions

Dominant market leaders may emerge

Multiple competitive options

Marketing Implications

3 Understand kinked demand curve and tendency toprice stability in oligopoly

3 If cut price others follow suit to protect marketshare

3 If raise price others don’t follow, so they gainshare

3 New product development and differentiation used

3 Tendency for occasional price wars, e.g. airlines

3 Collusion raises profits but is illegal

3 Price leadership overcomes kink if rivals follow


Porter Five Force Analysis


Strategic and marketing implications

n Long run profitability rest on five forces thatgovern distribution of value added created by thefirm

n The analysis exposes what is driving competition

n A competitive strategy is required to achievegoals, identify a defendable market position andsecure a competitive advantage

The intensity of inter-rivalry

n Ranges from zero (powerful monopoly) tocut-throat rivalry

n Intense rivalry expands growth markets, e.g.mobiles, but may undermine a mature market

n Degree depends on switching/exit costs,overheads, objectives, growth rate, productdifferentiation

Threat of substitutes

An industry is a group of firms producinggoods and services which are close substitutes— all goods compete for limited purchasingpower, i.e. package holidays with hot tubs

n May involve substitute material, alternativetechnology, new distribution channel(e-business)

n Intense future rivalry if substitute price/performance ratio is high

n Switching costs are very lown Buyers are informed and willing to search


Threat of new entry

n Entry causes supply capacity to rise tendingto reduce prices and increase input costs

n High profitability attracts entry but barriers maydelay it

n Entry is less likely where:l Existing profitability lowl Barriers to entry are very highl Economies of scale fully exploitedl Set-up capital requirements highl Brand loyalty is highl Switching costs are highl Potential entrant expects fierce retaliation

Bargaining power of suppliers

Can squeeze profit and redistribute value added

Supplier power in future depends on:

l The degree of supplier concentration

l Substitutability between suppliers

l Switching costs involved

l Threat of forward integration

Bargaining power of buyers

This depends on:

Price sensitivity: some cherry-pick for best value

Buyer leverage: depends on market knowledge;availability of good substitutes; switching costs;importance of purchases to seller; buyer size, etc.


Strategic Implications (2.6)

} Companies succeed as long as they havematched their products and services totoday’s marketing environment. ~ (Kotler)

Strategy matches strengths/weaknesses of one’sresources to risks/opportunities of externalenvironment

Three generic strategies provide the means ofachieving a sustainable advantage and above averageprofitability:

Broad cost leadership – emphasis on efficient scale,tight cost control, entry barriers and proximity inproduct

Broad differentiation – proximity in cost but focuson unique and highly promoted product

Cost or differentiation focus – on least vulnerableniche

All these strategies are competitive options

Market reality suggests collaboration as an alternativeor complementary strategy

The ultimate in collaboration involves cartels. If thesecontrol industry supply, then output may be controlledand prices/profitability raised, e.g. OPEC

Cartels tend to weaken due to internal dissension, atendency for substitutes to be offered outside thecartel, and the difficulty of internal policing to preventcheating

Collaboration short of cartels can be achieved via:

– relationship marketing

– partnerships

– alliances


Competition Policies (2.7)

Rationale

n Market forces insufficient to prevent monopoly

n Desire a level playing field

n To promote efficient use of resources

n Natural monopolies must be regulated

n Prevent abuse of market power

Policy Aims

3 To deregulate markets

3 Encourage SME

3 Act against anti-competitive behavior

3 Protect the interests of consumers

3 Keep entry barriers low

3 Prevent excessive concentration

Relevant legislation

l Restraint of trade: most agreements must nothave terms that restrict/prevent a person doingbusiness

l Restrictive practices: bans agreement betweenthe majority of firms affecting their freedom ofaction

l Fair Trading Act: agreement must be registeredwith Director General and are presumed againstthe public interest unless justified

l Competition Commission: considers cases ofreferable monopolies and mergers (25% marketshare/if creates a monopoly)

l EU legislation: overrides national laws to coverthe Single Market


Impact of policies

On the organization

l Fines of up to 10% of turnover

l High profile E497m EU fines on Microsoft forabusing its market power in ‘bundling’ up functionslike Media Player

l Adverse impact on company image

l Surveys suggest that majority of mergers do notadd value and many destroy it

l Limit ability of organizations to dominate marketsor collaborate to control output and prices

On the marketing environment

l Only a small proportion of qualifying monopoliesreferred but ‘demonstration effect’ applies

l Ratchet effect of EU directives, e.g. endingexclusive car dealerships is transformingcompetition

l Regulators impact on privatized naturalmonopolies through a range of powers includingprice cuts

l Complaints can be made to the Director Generalwho may institute an investigation, e.g. parallelpricing in electrical goods


Information Sources (2.3)

(Cross-refer to 3.2 and Unit 4)

Collecting Information and its Interpretation andPresentation are key marketing skills

Awareness of information on the marketingenvironment provides:

3 A basis for segmenting customers

3 Identifying emerging market trends and patterns

3 Forming/deepening customer or other relationships

3 Understanding of industry sales patterns,production capacities, stock levels and futureplans

3 Understanding competitors, potential entrants,suppliers/distributors via analysis of balancesheets, pricing structures, market shares,marketing mix, etc.

Competitor analysis

Involves the gathering and interpretation ofintelligence from diverse sources on key rivals withthe aim of achieving a competitive edge by:

l Identifying strengths and weaknesses

l Understanding rival response patterns

l Avoiding surprises, e.g. product development

l Focus on quality information


Information needs

Financial Information

3 Balance sheet: cash flow

3 Turnover and profit

3 Financial state: assets, debt

3 Rate of growth

3 Export performance

Sources

l Company annual accounts

l Company Registration Office website

l Commercial databases, e.g. Datastream

Organizational information

3 Current problems and opportunities

3 Key decision-makers

3 New posts and recruitment patterns

3 Investments, new ventures, closures

3 Take-overs and acquisition

Sources

l Trade and quality press

l On-line, e.g. www.companiesonline.com

l Common stakeholders


Production and product information

3 Number of employees

3 Product range and quality

3 Production cost and specification

3 Location and scale of operations

3 New product development

Sources

l Trade Associations

l Chambers of Commerce

l Patents Office

Marketing information

3 Price terms and discount structure

3 Market share

3 Packaging and delivery

3 Advertising and promotion

3 Marketing policy and plans

Sources

l Field sales force

l Marketing surveys, e.g. Mintel

l Networks

l Trade press


Hints and Tips


n Occasional mini case topic

n Up to a full optional question per paper

n Make outline plans of all the exam questions


Exam success results from:

3 Preparation

3 Understand the question

3 Focus precisely on requirement

3 Use of format and context

3 Effective time management

�

Practise interpreting past mini cases andrelating them to the syllabus

�

In the exam quickly read the case throughonce then carefully read all the questions

�

Underline key points and examples

�

Stick closely to the question


THE MACROENVIRONMENT

LEARN ING OUTCOMES

� Appreciate the macroenvironment’s importance� Recognition of key sources of information� Understanding of the natural environment� Marketing implications of the natural

environment� Assessment of environmental challenges

Syllabus reference: 3.1, 3.2, 3.6, 3.8


� Uncontrollable threats and opportunities� Relevant sources for the various environments� Business and marketing impacts on the natural

environment� Understanding of the macroenvironment

context

Unit 4

Macroenvironment Overview (3.1)

Importance

l Organizations operate in this societal context

l PEST SLEPT STEEPLE environments

l Source of successive threats and opportunties

l Largely uncontrollable

l External half of SWOT analysis

Social environment

Embraces changes in the nature, attitudes,behavior and values of society that affectemployment and buying patterns

Political environment

Activities of the state in setting nationalobjectives, legislating, policy-making andimplementation

Economic environment

Determines key aggregates of income, output,employment and price levels

Technical environment

Embraces changes to products, processes andmethods that impact on organizations

Natural environment

Life resources including air, water, land, wildlifeand the amenity they confer


Challenges of Change (3.8)

Macroenvironment seldom impacts on day-to-dayoperations but shapes future actions andperceptions

} But tomorrow always arrives, it is differentand then even the mightiest company is introuble if it has not worked on itsfuture. ~ (Drucker)

Examples: EuroTunnel, Coca Cola (Dasani),McDonalds, Enron

On a moving conveyor of changing tastes,technology and competitive forces,organizations must move fast to stand still!

Change is characteristic of information societies butpace is accelerating, compounding uncertainties

Examples: War on terrorism, oil price fluctuations,trrade disputes, enlarged EU, viruses, migrations

Marketers can’t rely on patterns of the past andmust:

l Scan their environmentl Recognize challenges/forces driving changel Respond strategically to threats and

opportunitiesl Monitor strategic outcomesl Continue to scan

} Standing still is still the fastest way of goingbackwards in a rapidly changing world. ~(Roddick)

THE MACROENVIRONMENT 46

Information Sources (3.2)

(Cross-refer to Element 4 and 2.3)

Research methods

1. Internal data: generated by operational activities

2. Secondary data: from published external sources

3. Primary data: from original sources, e.g. survey�

Examiners credit candidates who cite sources

�

Link sources to syllabus elements

�

Scan a broadsheet daily for news analysis: onlyinclude items of current/future concern

Secondary sources

• Quality and trade press• Company reports• Government statistics• Directories of companies• Academic journals• Business periodicals


Trade sources


Summary of sources

Social – Cultural

l Guide to Official Statisticsl Social Trendsl Office of National Statistics (ONS) Censusl ACORNl Market Research Bureau

Political – Legislative

l JUSTIS online legal databasel EU Commissionl News databases www.news.bbc.co.ukl www.statistics.gov.uk


Summary of sources

Economic – International

l Blue Book on national income/expenditurel Economic Trends www.statistics.gov.ukl News Media www.ft.com,

www.theeconomist.coml CBI Quarterly Surveyl Regional Trendsl International organizations, e.g. WTO, UN, OECDl Professional bodies, e.g. Institute of Exportersl DTI and Bank Reviews

Technical – Environmental

l Technical abstracts and research papersl Professional associations/industry networksl Pressure group websitesl www.earthtrends.wri.org is an environment

portal


Information Requirements

Example: Society

– Demographic trends

– Work and leisure patterns

– Changing cultural norms

– Ownership ratios, e.g. mobiles

Example: International

– Stage of the global economic cycle

– Movements in interest rates

– Relative change in exchange rates

– Activities of IMF and IBRD

– Regional growth and inflation rates

Example: The Economy

– Main economic indicators, e.g. interest rates

– Business confidence indicators, e.g. investment

– Labour market changes

– Government tax and spending plans

– Income, output and expenditure patterns


The Natural Environment (3.6)

Embraces natural resources including land,vegetation, wildlife, air and water and the amenitythat they confer.

n Life-supporting systems

n Many are non-renewable assets

n Businesses discharge wastes into this

n Progressive loss of critical rainforest

n Negative feedback effects, e.g. greenhouse gases

n Challenge of achieving sustainable growth

Pollution arises when waste is in excess of thenatural assimilative powers of the environment

Environmental consequences

Arise from the interdependence of:

l Population growth in poorer countriesl Industrializationl Mass affluence in developed countriesl Material expectations in developing countriesResult

– progressive resource depletion– emissions, effluents, solid wastes– extreme weather conditions– ozone depletion


Sustainability as a Goal

Meeting the needs of the present generationwithout compromising the needs and requirementsof future generations, i.e. continued growth in GDPbut without the negative environmentalconsequences

n International agreements to reduce greenhousegases and ban ozone-producing chemicals

n Development of environmentally friendly products

n Renewable energy sources replace non-renewable

n Redesign, recycling, reuse of materials

Nature vs. Technology

l Technology may achieve sustainability butcould equally destroy the world

l GM crops could eliminate food shortages butcould unleash virus infections

l Massive potential to transform Third Worldfarming but threat to wildlife


Implications for marketers

3 Business central to the problem and solution

3 Rise in ‘green consciousness’

3 Stakeholders require reassurance and customersprefer commitment to environmental standards

3 Involve and educate key stakeholders

3 Ethically sound practices may provide an ‘edge’

3 Strategy based on sustainable principles, audit,impact assessment and benchmarking

Hints and Tips


n The mini case often concerns themacroenvironment and information sources

n A part question on the natural environment mayarise or one linked to pressure groups

n Always be prepared for general questions on thesignificance of the macroenvironment

n Know relevant information sources for each majormacroenvironment

n Make trigger word plans for the past examquestions at the end of unit 5



THE DEMOGRAPHIC SOCIALAND CULTURALENVIRONMENTLEARN ING OUTCOMES

� Understanding of the social environment� Recognition of social and cultural influences� Assessment of the implications for marketing

arising from social, demographic and culturalchange

Syllabus reference: 3.3


� The structure and composition of thepopulation – implications for segmentation

� Cultural influences on stakeholder attitudes andbuyer behavior

� Key social trends and their significance formarketers

� The significance of social influences such aslifestyle, class and reference groups

� Challenges such as the changing role ofwomen and ageism

Unit 5


Population Size and Structure

Explanation of trends

World population

– Exponential growth to over 6 billion in 2000

– Pace slowing by demographic transition to lowerbirth and death rates with economic development

– Ageing offset by AIDS and changed attitudes

– Dismal outcomes of Malthus avoided bar Africa

Aggregate population

– Growth ¼ birth – death rate þ net migration

– UK growth slowing to 60mþ– EU growth to 415m but birth rate now below

replacement level, i.e. 1.5 vs. necessary 2.1

Dependency ratios

– Ratio: dependants (non-working) to workpopulation

– Rising sharply with lower births, retirement andrising longevity in mature economies

Immigration

– Uncertainty and continuing poverty stimulates

– A means of support for rapidly ageing populations

– Remittances important to developing countries

– Third World loses its skilled and dynamic workers

Demographic structure

– Trends in age, gender, marital status, ethnicity,region and occupation

THE DEMOGRAPHIC SOCIAL AND CULTURAL ENVIRONMENT 56

Challenge of Ageing

} An increase in the average age of thepopulation. ~

n Post-war baby boom generation approachretirement

n EU median age rising from 38 to 49 by 2050

n Better off, better educated and better informed

n Shift in centre of gravity of spending power to0ver-55s

n Healthy and fit old versus the poor old segments

Negatives

l Worsening dependency ratio

l Higher taxes, pension contributions, loanrepayments for workers

l Labour and skill shortages

l Falling savings ratios as elderly spend

Significance

l Increase in empty nest and single households

l High discretionary income – no mortgage

l Cultural and political influence grows

l Favours travel, health-related, security, durablefinancial service and nostalgia products

l Incentives to keep working beyond retirement

l Responsibility for ageing relatives


Marital status

l Later marriage but 40% divorce ratesl 570,000 marry and 300,000 divorce p.al 1 in 4 children raised by single parent

Household structure

l Big rise in single households (elderly/young/divorcees)

l Composite families from remarriagel Rich source of segmentation

Regional distribution

l Drift from rural to urban/suburban livingl Ribbon developmentl Retirement hot spots, e.g. South

Ethnicity

l Black and Asian rose 40% 1991 onl Younger age profile ¼ differ in public/private

needsl Asian food market worth £2bnþOccupation

l Core workforce shifts agriculture tomanufacture to services to information

l Emphasis on consumer interface,i.e. customers, elderly, stakeholders


Employment Trends

Decline of full-time employment

Rise in part-time employment

Longer hours

Rise in self-employment

Rise in contractual employment

Flexible work lives

Rise of knowledge workers

Causes

l Rise of flexible/customer-focused organizations

l 24-hour, 7-day week, 52-week year business

l Need flexible workforce for peaks and troughs

l Entry of women into workforce

l Changing culture for permanent workers

l Demand for a dedicated workforce

l Attractions of affluent lifestyle/house price rises

l Opportunities created by IT – teleworking

l Organizations prefer to outsource non-core tospecialists or contract-in skills as required

l Employees prefer flexitime and staggered hours

l Move to flexible shifts and work years, workingfrom home and phased withdrawal to retirement

l 50% produce, process, use, distribute information


Role of Women in Work

n Strongly influenced by culture and religion

n Tend to work in different sectors, occupations andlevels

n With household duties work harder but paid less

n Dominate in interpersonal service sectors – health

n Men dominate top positions in all sectors

n Account for nearly half the workforce

n An underutilized resource to relieve shortages

Policy responses

l Positive discrimination in career development

l Women-friendly recruitment

l Enable a flexible work/life balance

l Common pay and conditions

l Motivational training

l Financial support for child care

l Retraining after career breaks


Demographic influence felt on:

l Aggregate demand for goods and services

l The size of different market segments

l The availability of labour

l The mix and composition of social services

l The scale of support infrastructure

l The tax burden of the dependent population

l The regional distribution of demand

Implications for marketing

Important demand condition in forecasting sales

Family life cycle to match product offerings to needs

Organizations must market themselves to targetgroups

Structural changes drive changing demand patterns

Marketers must respond to demographicconsequences, e.g. flexible mortgages and pensionplans, time-saving and convenient solutions for coreworkers

Above-average income in populated South East –magnet for luxury producers


Cultural Environment (3.3)

Influences that affect society’s basic values,attitudes, perceptions and behavior.

Explanation

Moulds and regulates daily behavior via constantconditioning and positive/negative reinforcement

Appropriate behavior and ideas in different socialsituations are learnt from:

n Family

n Education

n Experience

n Community

n Religion

Culture influences individuals/group in predictableways

Cultural influences

l What we eat, drink, our lifestyles and buyingpreferences

l Internal marketing to cross-cultural workforces

l Regional and international marketing – when inRome do as the Romans do is apt

l Observe cultural mores/customs to avoid offence

l On language translation and hidden meaning

l UK government decision not to ban ritual Halal andShechita butchery methods


Cultural trends

Position of women

– Rise of work and career

– Decline of maternal and domestic roles

– Smaller families – more use of childcare

– Educational opportunity with rising aspirations

Implications

– Control over discretionary spending power

– Changing stereotypes in adverts

– Premium on time/convenience ¼ time-savingmeals, appliances and family eating habits

– One-stop, home and internet shopping

Healthy living and fitness

– Changing attitudes to desirability of smoking

– Rising concern over heart disease and stress

– Convenience lifestyle leading to obesity

– Dual society of the super-fit and over-weight

Implications

– Expanding market for organic food

– Price premiums

– Image consciousness and designer fitness wear

– Negative aspects to figure consciousness

– Mounting public concerns over fat, sugar and saltcontent of fast and convenience foods


Social Environment (3.3)

} Social Class comprises individuals with adefined status and who share commoncharacteristics, including wealth, occupation,income level, educational background andvarious aspects of lifestyle. ~

– Open educational access allows class movement

– JICNAR classifies individuals and groups

– An upper class is superimposed (1% own 25%)

Social Class category Occupation

– A (upper middle) Professional, topmanagement

– B (middle) Intermediate managers

– C1 (lower middle) Supervisory, clerical

– C2 (skilled working) Skilled manual

– D (working class) Semi and unskilled manual

– E Pensioners, long-termunemployed

Implications

l Marketer more interested in the class aspired to

l Shared values/attitudes reflected in preferences

l Status symbols proxies for class membership

l Need to be mobilized in targeted promotions

Other social segmentation bases

3 Geographic, e.g. region or climate

3 Lifestyle and sub-cultures, e.g. Welsh

3 Demographic, e.g. age, ethnicity, gender

3 Geodemographic: neighbourhood


Reference groups

} A point of reference (of knowledge andinfluence) for consumers in makingdecisions. ~

– Actions and behavior of the family; peer groupsand work colleagues influence individual attitudesand behavior

– The ‘wish to belong’ to preferred groupsencourages conformity to norms, dress codes

– Opinion formers influence the norms

– US cultural values mediated via global mediacontrol

Implications

l if marketers persuade opinion leaders, followers buy

l Nike seek endorsements from top players

l Premium prices when conspicuous consumption

The family

Is a close and influential reference group.

Continuously influences values and buying decisions:

Family life cycle:

n Young unmarried – high disposable income

n Newly married/no children – home/durables

n Young married – family expenditure

n Middle aged/teens – high income/replacement

n Empty nest – peak income/luxuries/financial

n Older retired/single – conservative/one-offs


Lifestyle

} Patterns in which people live, spend time andmoney. ~

n A function of personality, class, prior learning, etc.

n Measured by using Attitudes, Interests andOpinion scales combined with demographicclusters

n Allows segmentation and tailored promotion/marketing mixes to appeal to the cluster, e.g. Next

n Generic catagories include strivers, aspirers,achievers and succeeders

Implications for marketer

l Must monitor and understand demographicchanges

l Recognize impacts on both supply and demand

l Social, demographic and cultural change allinfluence tastes and preferences

l Care with segmentation as assumptions change

l Forecasts more difficult when aspirations orperceptions drive buying behavior

l Family structures/decisions are now more complex


Hints and Tips


n Will form mini case from time to time

n Scope for optional question when three differentenvironments are involved

n Will tend to be set in context

n Prepare brief answer plans to past exam questionsat the end of the unit


�

Demographic questions are relatively popular sobe aware of key characteristics and implications

�

Questions sometimes link two different parts ofthe syllabus

�

Pay particular attention to ‘directions’ in aquestion, e.g. describe, compare, summarize

�

The term ‘outline’ demands a brief and probablya bullet point answer

Examination success factors:

You don’t have to answer the mini case first

Answering a good optional question first may build upyour confidence

First impressions are important


THE ECONOMIC ANDINTERNATIONALENVIRONMENTLEARN ING OUTCOMES

� Understand the workings of the economy andthe role and objectives of government ininfluencing it

� Explain the business cycle� Impact of trade and the challenge of

globalization� Assess international implications for the

marketer



� Measurement of economic activity and livingstandards

� Understanding the current and short-termfuture economic environment

� Use and meaning of economic indicators� The effects of key economic and trade policies� Policy impacts and implications for marketers

Unit 6

Government Economic Objectives

n A high rate of sustainable growth

n Employment growth – low unemployment

n Control inflation at low target level

n Favourable balance of payments – averagedover a period

Subsidiary targets

l Concern for the ‘green’ environment

l Maintain a competitive exchange rate

l Equitable distribution of income

l Maintain total tax ‘burden’ below 40% of income

n Economic growth is the primary goal: it underpinsrising living standards and provides the resourcesfor social goals

n Growth derives from either unemployed resourcesor more fundamentally from rising productivity viainvestment in infrastructure, skills, capital goodsand new technology

n Developing countries seek structuraltransformation into an economy based onmanufacturing, services and information

n Negatives: growth absorbs scarce resources andcreates a variety of externalities, e.g. emissions/greenhouse effects; congestion; pollution andozone depletion (air travel)


Workings of the economy – circular flow

Marketers must understand the flows of income andexpenditure circulating round the economic system

Basically firms pay out incomes to households(as wages, dividends, rents) who in turn spend thembuying the output of the firms. This flow of revenuefinances the next round of production

This flow of spending power will fall if householdssave (leakage) but may be offset by investment(injection)

Other leakages are tax payments and import spending

Aggregate demand comprises consumption þinvestment þ government þ exports � imports andrepresents the pressure of demand on domesticbusinesses

Other injections ¼ exports þ government spending

The economy is stable where injections ¼ leakages

If injections exceed leakages and there areunemployed resources, then the flow expands

Higher aggregate demand tends to cause firms toproduce more and employ extra staff

Lower aggregate demand means lower sales revenue,forcing cutbacks in costs, e.g. redundancy

THE ECONOMIC AND INTERNATIONAL ENVIRONMENT 70

The multiplier–accelerator effect

n Injections of government spending or newinvestment actually increases aggregate demandby more than the initial amount

n Incomes created by the injections are spent ongeneral goods and services in subsequent ‘rounds’of the circular flow

n The multiplier effect is reduced by leakages fromthe flow

n E.g. if leakages are taxes 0.3, imports 0.1 andsavings 0.1, the multiplier is 1/leakages ¼ 2

n The accelerator reinforces the multiplier and arisesbecause the capital investment needed to producea given output is 4–5 times as much

REMEMBER -

It is important for the purpose of theexamination to demonstrate a generalappreciation of the economic environmentand its implications for the marketer. Youshould also seek to apply economic conceptslike the efficient allocation of scarceresources – in this case ‘time’, whether it beto revision or between different questions


Measurement of Living Standards

• Major factor in determining the volume andcomposition of consumer spending

• Measured by Office for National Statistics usingGross Domestic Product (GDP) per capita

• GDP is the sum of the market values of all finalgoods and services produced per annum in acountry by domestic and foreign-owned firms

• Can measure percentage change and makeinternational comparisons

• International marketer must also take into accountculture, tastes and proportions spent on publicgoods

Limitations

l Quality of statistical services varies

l Inflation may erode the real value of GDP

l No direct benefit if extra GDP reflects more exports,military output or extra investment

l A rise might reflect reduced leisure/longer hours

l Ignores the informal economy, e.g. DIY

l No account of externalities or ‘consumption’ ofnon-renewable resources, e.g. rain forest

l Broader measures may be called for


The Business Cycle

The regular fluctuations of economic activity andincome through boom, downturn,recession and upturn. It is the averageof a multitude of individual industry cycles.

Interdependent open economies in a globaleconomy are particularly sensitive to fluctuationselsewhere

Turning points represent a sea-change ineconomic conditions, e.g. boom into downturn

The marketer must respond to each phase andpredict its severity and duration

The multiplier reinforces cumulative changeup/down


The Stages of the Business Cycle


Economic Indicators

Used by government, business and otherstakeholders to monitor economic conditions andidentify or predict the need for policy changes

n Leading indicators provide advance warningof change

n Industry trends survey (CBI) measuresbusiness confidence changes – optimism/pessimism

n Feel-good factor – positive expectationsprovide positive feedback and vice versa

n State of the economy

n Unemployment ratesFall in boom to feedback into higher spending.High and rising among the over-50s.

n Inflation ratesMeasured by Retail Price Index reflecting anaverage, e.g. house prices above, durablesbelow

n Driven by demand pull or cost push butcurrently under control

n Balance of PaymentsMeasured by figures on visible (goods) andinvisible (services). Continuing deficit drivesinterest rates up or exchange rates down


Economic Policies

Fiscal and budgetary

l Monitor through Blue Book and Budget statementl Government taxation/spending accounts for 40%

of GDPl Can inject to or withdraw from circular flowl Significant impact in general and on specific

sectors, e.g. health and education spendingl Taxes will impact on different groups/segments

Monetary and credit

l Control by Central Bank to realize inflation targetsl Controls spending financed by borrowingl Relies on interest rates to govern demand for credit

and supply of savings (up or down)l Enforces via a variety of controls over moneyl Impact of changes take time/reactions can be

unpredictable

Supply side

l Aim to improve productivity and aggregate supplyl Involves removing distortions, improving incen-

tives, increasing competition, enhancing skills,reducing barriers and encouraging contribution

l Work through privatization, deregulation and reforml Have transformed organizations in public sector

Prices and incomes

l Price controls and incomes policies used to controlrapid inflation

l Limited effectiveness due to eventual pay explosion

Trade and exchange

l Deficits can be financed (foreign borrowing) orreduced by import controls/exchange rate changes

l Important due to marketer’s potential currencyrisks

l Flexible exchange rates often slow to correct


The Case for Trade

3 Diversity of choice

3 Exploits cost and price differences

3 Scope for specialization and scale economies

3 Rapid diffusion of new products and technologies

3 Develops networks, contact and understanding

3 Global e-commerce scope through the internet

3 Extend PLC and escape saturated home market

EU enlargement

n 2004 sees 10 East European andMediterranean nations joining EU

n 75m additional consumersn Mutual trade advantages as well as movement

of skillsn Legislative compliance a condition for Single

Market


The Challenge of Globalization

A process whereby multinational companies treatthe world as an integrated market-place anddevelop relatively standardised products to meetits needs.

n Driven by multinationals, lower trade barriers andICT (e.g. e-commerce and world media)

n Account for nearly three-quarters of world trade

n Converging consumption patterns despite diversecultures

n Companies adopt a global marketing perspective

n International institutions (IMF, WTO, World Bank)support its development

Concerns

l Culture clash with global products, e.g. Big Macs

l Reaction to domination of US cultural norms

l Risk of dependence on foreign multinationals

l Governments being ‘played off’ against each other

l Ability to avoid taxation through transfer pricing

l Widening gap between rich and poor nations

l Trade distortion of the EU subsidising exports


Trade Frictions

l Tension between the advantages of free trade andthe self-interest of protectionist behavior

l Trade wars like price wars tend to damage all theparties concerned

l Tension between industrial and developing nations

l Both the US and EU seek anti-dumping duties,i.e. goods sold in their markets below cost ofproduction

l ‘Beggar my neighbour’ policies can trigger globalrecession if countries impose tariffs or cutexchange rates to protect domestic interests,causing others to retaliate, leading to a viciousdownward spiral

World Trade Organization

Promotes free trade þ enforce world tradeagreements of members accounting for over 90%of world trade

Problem of EU þ US farmers dumping subsidisedsurpluses on world markets

Poorer countries may decide that trade groups arebetter route to development, e.g. SADC, SAARC,Andean pact


Implications for marketers

n Need to monitor global environment for impendingthreats and trading opportunities

n Be prepared for a far from level playing field

n Recognize that failure to agree to future tradeliberalization might lead to protectionism

n Take into account ‘fair trade’ initiatives sponsoredby charities to give preference to poorer producers

KEY POINTS ON THE ECONOMICAND INTERNAT IONAL ENV IRONMENT

� View economies as open systems in a highlycompetitive global environment

� Recognize that feedback effects on the circularflow can cause cumulative change

� Multinationals and free-moving resourcesmean that governments are limited in policyterms by the need to maintain a healthyeconomy free from instability or inflation


Hints and Tips


n The economy is an important part of the marketingenvironment, so make sure you know the currentsituation

n Use information sources to revise the maineconomic indicators for your economy, e.g.growth, inflation and unemployment rates

n Appreciate what economic policies your govern-ment currently uses to achieve its objectives

n Understand the various phases of the businesscycle and marketing implications

n Mini cases often concern multinationals or theglobal economy since it is common to allnationalities studying for CIM certificate

n Questions on multinationals, trade and theeconomy therefore arise with frequency

n Prepare outline answers for all the exam questionsat the end of the unit



THE POLITICAL ANDLEGISLATIVE ENVIRONMENTLEARN ING OUTCOMES

� Understand the significance of politics andpolicy making for marketers

� Identify key points of political influence andpressure

� Appreciate the framework of regulation and theimpact and implications of legislation



� Alternative political frameworks and theirinfluence on marketing

� The significance of a change in government� The role of legislation and assessment of

advantages/disadvantages of tight regulation� Implications of the changing nature of the legal

environment

Unit 7

The Political Environment

n Embraces the activities of the state in settingnational objectives, legislating, policy-making andimplementation

n Political change implies different policy outcomesfor different interest groups

n Political stability is vital in improving welfare

Role of a government: in market economies

l Significant overall impact in terms of jobs,spending and transfer payments between socialgroups

l Influence over key decisions: to work, save, invest

l Responsible for regulating social/business activity

l Legislate to shape standards of conduct/behavior

l Produce a positive and predictable businessclimate

Limits to democratic political power

n Elections provide authority for policy-making

n Periodic re-election opens government toaccountability and external forces

n Day-to-day government relies on feedback andcooperation of interest groups, so is susceptible toinfluence

n Operate in an open global system with rules andinstitutions limiting freedom of action

n Pressure to conform: keep national performance inline with other countries

n Recognize the power of multinationals and theinternet to circumvent political authority


Why monitor the political environment?

l Alert the business to possible legislation

l Assess the impact of policy and implementation

l Recognize the influence of various public bodies

l Anticipate impacts of alternative political futures

l Trigger lobbying to represent business interests

Government exerts control over the macroeconomicframework, so impacts on marketers through itsdistribution of the tax burden as well as the size andcomposition of its spending

Shifting political philosophies have transformedthe public sector over the last two decades andimpacted on the marketing environment:

3 Many industries have been privatized

3 Many services contracted out to tender

3 Private sector partnership encouraged

3 Markets liberalized through deregulation

3 Targets underline a shift to customer focus

3 Regulators have promoted a marketing orientation

THE POLITICAL AND LEGISLATIVE ENVIRONMENT 84

Alternative Political Systems

n Spectrum from popular democracy to autocracy

n Democracy is characterized by universal right tovote in regular and free elections. The majorityrule but minorities are protected

n Autocracy puts power in the hands of a singleruling party and no real choice in elections. Anyopposition is repressed/minorities persecuted

n Democracy spreads power throughout society withfree speech and unbridled media

n Autocracy centralizes political power and control

Why Politics?

Society must resolve conflicts over objectives topursue and resource allocation priorities

Parties wish to differentiate their USP but mustcommand a wide constituency to gain power

Exercise of political power and compromise reflectsthe reality of competing interests to achieve bothstability and necessary change

�

Remember exam questions may require politicaland economic understanding, e.g. Capitalismversus Communism


Influencing the Political Process

See the section on Pressure Groups in Unit 2

• Parliament is the supreme legislative body

• Business can press for new laws or aim toinfluence proposals (bills) at an early stage

• Lobbying is influencing members of a relevantlegislature and soliciting their votes

• Important but controversial means of exertingpressure when and where the key decisionsare being made

• Two-way process as government looks for supportin implementation and positive ‘spin’

The value of the lobbyist

l Early warning of proposed legislation

l Interpretation of implications arising

l Identification of likely political supporters

l Informing political decision-makers about yourindustry problems and developments

l Co-ordinating pressure on decision-makers

l Advising the business on its strategy and tactics

l Helping to secure laws the industry can work with


Supranational Political Institutions

The European Union (EU) is the most powerfuleconomic block in the world

It is expanding as East European nations join to forma market approaching 450 million

Membership demands, obligations and loss of adegree of national sovereignity to be reinforced by adraft Constitution, extending majority voting into manynew areas of economic policy and foreign affairs

The European Commission drafts regulations anddirectives to ensure a single market prevails and thesemust be incorporated into national legislation

The European Court becomes that of final appeal

The challenge of the single currency

Implications of entry:

3 Reduced currency uncertainty

3 Reduced transactions costs

3 Share of inward investment rises

3 Increased marketing opportunities

3 Some winners but many losers

5 Doubts over common monetarypolicy and adjustment processes

5 Unresolved structural problems

5 Inflationary impulse at entry

5 Doubts over convergence

5 Conversion costs hit small firms

5 Possible volatility of E vs. $


The Legal Environment

Made up of an existing framework of laws

An independent judiciary interprets and appliescommon law based on natural justice/common sense

Government statutes (new law) to implement itspolitical manifesto and respond to public pressures

Enabling legislation delegates authority to governmentagencies to set standards, interpret rules, conductinspections and enforce laws using sanctions,e.g. fines

Legal provisions of Economic Unions may supersedenational law, e.g. EU competition policy requires finesup to 10% of turnover

If an exam question asks you to assess theeffectiveness of your own country’s legalframework, then consider these criteria:

l Does it ensure a level playing field?

l Does it resolve disputes and at low cost?

l Does it balance rights of the business, theindividual and wider society?

l Is fairness achieved without excessive red tape?

l Does it reflect current concerns and expectations?


Negative impacts of legislation

• The cost of compliance: retraining, newequipment, monitoring and control

• Competitive disadvantage if costs don’t apply toforeign rivals

• Increased risks may deter innovation, e.g. drugs

• Drive firms to locate in less regulated economies

• Disproportionate burden on smaller firms

• Cost of legal actions, fines, adverse publicity

Positive impacts of legislation

3 May form a barrier to entry

3 Differentiates the product internationally

3 Compliance to higher standards gains competitiveadvantage when later introduced in other markets

3 Multinationals may apply common approach in alllocations to avoid double standards

�Be sure to understand the ‘rules’ applying to yourexamination, e.g. allowable equipment, timeallowed, number of questions to answer


Fair Trading and the Consumer

The supply of a good or service without restrictionof competition or consumer choice and inaccordance with prevailing legislation

Relevant legislation

n Contractual relationshipn Fair Trading Acts provides for:

– product safety assurance– product labelling assurance– quality assurance– fair payment terms– honest promotion

Influence on the marketer

3 Clarifies rights

3 Establishes obligations

3 Recourse for damages

3 Discourages rogue traders

3 Fair competition basis

3 Minimum standard required

3 Fit for purpose

3 Duty of care

3 Voluntary codes for more flexible regulation

3 Customer is king


Implications for the marketer

l Comply with minimum legal requirement

l Recognize consequences of failure to meet:

3 expensive legal actions

3 damaged public image

3 stakeholder discontent

l Implement rigorous control/compliance systems

l Invest in staff training, especially direct sales

l Monitor competitors’ ‘conditions of sale’ and anyproposed legislation – be proactive

Alternatives to legal recourse

n Contracts include dispute resolution clausesn Voluntary codes set industry standards and

enforcementn Smaller companies exemptn Quangos or tribunalsn Regulators seek assurances


Accounting Future Legislation

n Need to monitor the legal and regulatoryenvironment for potential threats/opportunities

n Lobby to apply pressure to legislate where importssuggest an unlevel playing field

n Ethical business demands standards in excess ofcurrent legal requirements

n Office of Fair Trading will act on unfair practices

n Adverse public reaction can lead to ‘bad’ lawsbeing rushed in as over-reaction

n Current issues over miss-selling pensions,mortgages and other assets; junk mail

KEY PO INTS ON THE POL IT ICAL ANDLEGAL ENV IRONMENT

� A source of potential uncertainty and instability,especially before elections

� National and supranational bodies must bemonitored

� There are many forms of regulation, rangingfrom custom and practice, through codes andstandards, to full statutes

� Legal proceedings are normally a last resort,especially for small firms


Hints and Tips

l Read through Unit 7 of the MarketingEnvironment Coursebook

l The legal framework is an important part of themarketing environment, so make sure youappreciate its significance

l Full mini cases unlikely due to the country-specificnature of these environments but part questionsquite possible

l The focus of questions more likely to be onimplications and impacts than specifics

l Questions may provide choice between discussionof alternative environments

l Refer to Unit 3 for competition polices

l Consider the political implications of a change ofgovernment in your country

l Prepare trigger word plans for all the examquestions at the end of the unit

l Go to www.cimvirtualinstitute.com andwww.marketingonline.co.uk for additional supportand guidance


THE TECHNICAL ANDINFORMATION ENVIRONMENTLEARN ING OUTCOMES

� Understand the nature and importance oftechnical change

� Explain the role and impact of informationcommunication technologies

� Recognition of constraints on the drivers ofchange

� Appreciate the significance of the informationrevolution



� Role of business in driving technology and thenature of the diffusion process

� The importance of technological forecasting� Information technology and its marketing

applications� Future applications of ICT� Marketing implications including resistance to

change

Unit 8

The Influence of Technology

l Impacts on all aspects of life

l Fundamental to improvement in productivity

l Interdependent with skills/skill acquisition

l Shifts production possibilities outward

l Underpins advances in marketing

l Central to new product development

l Source of new processes and techniques

l Critical to the effective use of information

Stages in development of new technology:

n Research þ Accumulation of Knowledgen Invention þ Development of new ideas/

applicationsn Innovation – commercial exploitation of an

idean Diffusion – rate of adoption through target

marketn Refinement – to fully exploit the new

technology


The Information Society

Technological progression from agricultural throughindustrial revolution to service economy, acceleratingin most recent phase of post-industrial informationand communication society

n Technological change is ubiquitous

n Convergence of computer-telecommunications-media technologies: ownership widespread

n Extension of human capabilities via mobile, etc.

n Electronic funds displace cash base

n Technological dependence, e.g. air traffic/banks

n ICT has transformed closed systems into openones, e.g. China through the internet

n Role of women transformed by convenient,labour-saving technologies in the home

n Potential global vulnerability to viruses

n Potential for socio-economic disruption if systemfailure

THE TECHNICAL AND INFORMATION ENVIRONMENT 96

Business Drivers of Technology

Business is the main driving force due to thecompetitive threat posed by a technological edge

n Global competition – powerful incentive toinnovate products/more efficient processes

n Changing consumer tastesn Stage of the product life cyclen Size of the firm

l Fifty-year innovation cycleEconomic development progresses in cyclesbased on clusters of innovations

As a cluster reaches maturity in its life cycle andsales falter it forces business to invest in radicalnew technologies

l Creative destructionTechnological innovation as the dynamic ofcapitalism – provides an incentive fordevelopment of substitutes to challenge currentmarket dominance


Technological Diffusion

} The rate at which firms adopt innovationsappropriate to their industry andmarket. ~

Determinants of rapid adoption:

n Profitability – the more profitable the technologyrelative to the existing technology

n Deterrence – the more significant the costconsequences of not adopting the technology

n Investment – development cost outlays aremanageable

n Structure of market – large firms with bigresources in concentrated industries

n Marketable characteristics and applications

n Environmental credentials are positive

n Change Agent – requires a risk-taker andentrepreneur to lead development

Technological Transfer

n One firm to another via licensingn From military to industrial usagen From developed to developing countries via

multinationalsn Enhances global productivityn Key part of development processn Spin-off skills to second-generation domestic

businesses


Technological Forecasting

} Involves the extrapolation of existing trends oridentification of feasible technologies within agiven timeframe. ~

n Must monitor own industry rivals and potentialcompetitors

n Underpins long-term planningn Audit current technology and extrapolate trendsn Screen to remove ‘improbables’

Morphological analysis

– Systematic analysis of feasible alternativecombinations of product characteristics

Scenarios

– Views of the technological future

Delphi techniques

– To distil the expertise of practitioners

Imitate first mover

– Only feasible if timely/well resourced


The Power of the Internet

} Global computer network providing computeraccess for computer users to innumerableinternational, public, and privatenetworks. ~

It enables e-mail communication, informationexchange and commercial transactions for users

n It meets corporate information needs: Access todatabases on markets and competitors

n It meets consumer information needs: Websitesfor convenience, versatility and transparency inproduct and price comparison

n Is a powerful communication/promotional tool

n Allows low-cost entry to a global market

n Provides a channel for e-commerce: 24/7connectivity, speed of response, interactive

n Vehicle for flexible business solutions:Facilitates development of digital super-highwaysdelivering text/sound/vision, teleworking, etc.

n Undermines traditional channels: Imminentthreat to music and publishing industries

n A major engine for economic development andjob creation


ICT Applications to Marketing

�

A common question format involves an industrycontext and explanation of 3–4 developmentswith applications to marketing

Product

l Computer analysis of market research findings

l Computer-aided design and manufacture

l Flexible manufacturing systems

Price

l Point of sale analysis of buying patterns

l Computer analysis of price changes

l Customer databases for purchase history

l Electronic funds transfer

Promotion

l Database marketing for segmentation

l Targeted promotional messages

l Building long-term customer relationships

l Promotional websites

Place

l Just-in-time delivery to optimize floor space

l EPOS stock control/automatic replenishment

l Transportation models to optimize delivery

l Customized on-line ‘home’ deliveries


E-business to Business

n Rapid growth of business to business transactionsusing the internet as a global trading exchange forprocurement

n Potential to transform the productivity andprofitability of supply chains

n Horizontal exchanges using electronic auctionsand tenders cater for supplies common to all

n Electronic data interchange (EDI) evolving throughuse of intranets – private networks usinginternet standards but with access controlled orlimited to designated organizations and/orpersonnel

The challenge to business

l Requires a cultural change

l Risk of displacing established supply relationships

l Need for assurance on quality and service

l High deterrence factor if global potential for costsavings is ignored

l Need to develop competence in global electroniccollaboration if to secure operational efficiencies

l Price transparency shifts bargaining power fromseller to buyer – lower margins as strategic drivingforce for exploiting opportunities


Mass Customization

} Mass marketing solution tailored to the needsof the specific customer. ~

n Enabled by computer-integratedmanufacturing, e.g. vehicles

n Robotic production line – each unit individuallyspecified

n Buyers specify design elementsn ICT provides the link

Customer databases

l Complements mass customizationl Computers mine, capture, store, process and

analyse individual buyer behaviorl Opportunity to fine-tune marketing mix for each

customer/target groupl Past purchase history used to anticipate future

wantsl Mail-order/on-line retail applications


Organizational Impacts

Teleworking

Working from home but linked to theorganization by ICT

l Facilitates work–life balancel Scope for productivity gainsl Reduces unproductive timel Employee empowermentl Savings in overheadsl Global location possibilitiesBUT

– Quality control issues– Losing touch with organization– Social isolation

Teleconferencing

n Digital broadband allows networked text, videoand graphics

n Economizes use of ‘scarce’ executive timen Travel reduced to global clients and

stakeholdersn Improves communication and contribution in

meetings

Virtual (networked) organizations

n ‘A small core organization that outsourcesmajor business functions’.

n Few overheads, computers integratecontribution, highly flexible but big premium oncontrol and coordination


Resistance to Change

Technical change has always been resisted:

– Double-edged by its nature: has goods and bads

– Process innovations ¼ short-term unemployment

– Product innovations ¼ long-term growth

– Internal resistance from managers/employees

– External resistance of customers, suppliers, etc

Causes of resistance include:

l Force of habit

l Social and economic needs threatened

l Culture of complacency

l Legislation, custom and practice

l Pressure from interest groups

l Negative experience of past change

MARKET ING CHANGE

� Identifying and anticipating the likely impacts ofthe proposed change

� Timely communication with affectedstakeholders

� Consultation over proposed change� Securing the participation of those affected in

driving the change process� Promoting ‘change’ as the norm


Hints and Tips


n Be aware of the ICT used by your own organization(or college)

n Prepare examples that link new technology tostakeholders and to improving marketing mixeffectiveness

n CIM views using information communicationtechnologies and the internet as one of the‘key skills’ of the complete marketer

n Be as up-to-date as possible

n Candidates from developing economies sufferweakness in this area so must work harder tomake it a strength

n Has been the subject of a full mini case but partquestion more likely

n Questions might be linked with Unit 9

n Prepare plans or outline answers for each of thespecimen exam questions and get it checked bya tutor or past student



ENVIRONMENTALINFORMATION SYSTEMSLEARN ING OUTCOMES

� Understand the importance of information andthe concept of a marketing information system

� Appreciate the role of market research� Explain the techniques for forecasting future

demand� Assess the importance of information systems

in meeting the challenge of change

Syllabus reference: 4.1, 4.2, 4.3, 4.6, 4.7


� The distinction between marketing data andmarketing information

� The contribution of market research to thedevelopment of strategy and planning

� The role and importance of informationsystems to marketing decision-making

� Information technologies that enhancemarketing effectiveness

� Methods of analysing environmentalinformation

Unit 9


n Lifeblood of the organization

n Control over information provides power overcompetitors and the environment

n Informed and effective decisions need information

n Information is data that is collected, ordered,processed and analysed in time for relevantdecisions to be taken

n An input in SWOT analysis for strategy purposes

n Fundamental to control by comparing actual toplanned achievement of objectives

What is ‘quality’ information?

– right sources– sufficent for purpose– timely– cross-referenced– communicated clearly– available to appropriate decision-makers– cost-effective– concise, avoiding overload

ENVIRONMENTAL INFORMATION SYSTEMS 108

Smart Marketers

l Recognize the importance of information

l Realize that knowledge is power

l Understand the need to manage information

l Develop the necessary information skills such asnetworking and the effective use of ICT

l Build a network of business environment contacts

l Use quality information to make better decisions

l Form strategies to cope with information explosion

A personal information system

– Daily scanning of news media– Review of trade press– Network of organizational and stakeholder

contacts– Personal database– Online to central database– Electronic diary– E-mail/fax/internet connection– Mobile communications– Skill in video/teleconferencing– Ability in desktop publishing


Marketing Information System

} The people, equipment and procedures togather, sort, analyse, evaluate and distributeneeded, timely and accurate information tomarketing decision-makers. ~ (P. Kotler)

Subsystems

– a sensing/monitoring system– a classification system– a processing system– a database and retrieval system– a control system– a communication system

‘To manage a business well is to manage itsfuture – to manage its future is to manageinformation’ (Harper Jr)

Marketing intelligence

– distilled from stakeholders andmarket/competitor research

Marketing research

– lack of secondary sources– to identify threats and marketing opportunities– monitor effectiveness of the marketing process


An Integrated Internal and External Information System


Online Information

An information service that is in active and continuouscommunication with a central system that isfrequently updated — allows the marketer to access,for example, current prices, competitor data, supplierstatus, economic and financial context, specificproduct and market information

Online positives

– Real time– Remote access via mobile or laptop– Interactive– Time-saving– Flexible– Sales support– Quality; information on tap– Competitive edge– Falling cost

3 Online access to the changing environment

3 Search engines facilitate access to externaldatabases

3 Enables telecommuting and enriches sales andexecutive effectiveness in the field

3 Must be combined with human judgement

3 Must balance cost/avoid information overload


Importance of Marketing Research

} The process of collecting and analysinginformation in order to solve marketingproblems. ~

• Provides specific information not available fromsecondary sources

• Provides quality information when it is needed

• Helps to define the customer/their future needs

• Identifies opportunites and threats

• Calculates market potential, assesses trends,analyses competitors and feeds in to forecasts

• Prerequisite to marketing mix decisions

Benefits of marketing research

l Organization specificl Defines problemsl Future orientatedl Potential competitive edgel Tailored to providing solutionsl Informs strategy and planning


Forecasting: Problems

} Quantitative and qualitative estimates of thefuture. ~

n The future is essentially unknowable, yetmarketing concerns anticipating needs and wants

n The longer the time horizon the greater theuncertainty, yet future planning is essential

n Uninsurable business risk of producing inanticipation of demand

n Which are the ‘right’ forecasts? When does apattern become a trend? When are the turningpoints? What is the pace of change?

Meeting the forecasting challenge

A. Abandon forecasts

– Impractical: marketing is planning

– Clear view of the future required even in day-to-day decisions

B. Flexible response

– Aim for rapid adaptation to environment change

– Only possible if short planning horizons

C. Improve conventional forecast

– Obtain quality data input

– Apply statistical methods to extrapolations

– Based on past relationships/historical data


Qualitative forecasts

Delphi: Combined view of experts

– Relies on human judgement and expertise, notstatistical technique

– May be functional specialists, academics orconsultants

– Each makes an independent forecast, then allfeed back for comment and refinement

– Informed consensus results– But costly, time-consuming, may reflect

common mindset

Scenarios: Alternative views of the future

– Need more than one to compare– Describes possible futures using different

assumptions regarding key variables– A tool for understanding context of strategic

decision-making– Places responsibility on the decision-taker, not

the forecast– Based on belief that the future cannot be

measured or controlled


Techniques for Analysing Information

A. Environmental audit

A formal means of taking stock of anorganization’s marketing environment. It involvesexamination of markets, competitors, externalenvironments, opportunities and threats.

l Systematic assessmentl Current situationl Input to strategyl Complements marketing auditl Means of controll Respond and adapt to any deviation from

realization of objectives

B. Environmental set

A ranking of the key environmental factorscurrently impacting on the organization andspecific to it.

• Starting point for envionmental assessment• Focus on critical impacts• Set factors change in importance over time• A threat for one organization may be an

opportunity for another


C. Impact Grids

l Assesses likely impacts of changingenvironmental parameters on the organization/rivals

l Allows visual comparative analysisl Cross impact analysis recognizes that the

impact of a change in one variable may affectothers, causing positive or negative feedbackeffects

l Influence diagrams also seek to classify causeand effects of key environmental factors

D. SWOT Analysis

n Internal strengths and weaknesses comparedto competitors

n Identify and assess external threats andopportunities

n Uses output from internal and external auditand forms input into strategy/planning

n Use matrices to rank opportunities by degree ofattractiveness/probability of success and torank threats by probability of occurrence/degree of impact


Continuing Impact of ICT

Convergence of information technology and digitalcommunication advances

l Driver of change in a dynamic information society

l Precisely targeted communication

l Ultimate information source for marketers

l Development of digital broadband via cable,satellite, TV aerial and 3G mobiles

l Exponential growth in developing countries

l Interactive internet facilitates networks andrelationships: connected stakeholders

ICT Effects on Organizations

l Better connectivity to stakeholdersl Two-way communication to customers

— opens up opportunitiesl E-business to business having dynamic effectsl New intermediaries emerge, e.g. infomediaries

in marketing researchl Scope for virtual organizations


Hints and Tips


n Combine revision with that of information sourcesin Unit 3 and Unit 4

n Element 4 of the syllabus is relatively new andvery important, so optional questions continue tobe posed relatively frequently

n Also expect at least part questions in the mini case

n Revise all aspects but particularly MIS, SWOT,forecasting techniques and ICT

n To manage your exam you must manage yourinformation, i.e. organize revision notes

n Environmental information systems may be linkedwith other aspects of the syllabus

n Important: prepare outline answers for all theexam questions at the end of the unit

n A common cause of not passing the exam isfailure to answer the question posed: so practiseon past questions; follow key word instructions;provide format and context



[marketing knowledge] cim revision card marketing(book4me.org)(2)

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