session 3 - mabd

8/3/2019 Session 3 - MABD

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ar e ngManagement

Marketing

Environmen

t


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MarketingEnvironment

The marketing environment may be defined as a mlange ofcontrollable and uncontrollable elements that influence thestrategic direction of a company.

An organization's success is influenced by these factorsoperating in the marketing environment.

An organization can increase its success by adoptingstrategies which manipulate these factors to its advantage.

A successful organization will not only understand the existingfactors but also forecast change, so that it can take advantageof change within the environments in which it operates.

The companys marketing environment can be analyzed in two

broad levels.

The Micro-environment The Macro-environment


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MicroEnvironment

The micro environment involves analyzing those variablesthat exist because of the existence of the company that the

company. This usually involves undertaking a stakeholder

analysis


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MicroEnvironment

CustomersOrganizations survive on the basis of meeting the needs,

wants and providing benefits for their customers. Failure to do

so will result in a failed business strategy.

Employees

Employing the correct staff and keeping these staff motivated

is an essential part of the strategic planning process of an

organization. Training and development plays an essential

role particular in service sector marketing in order to gain a

competitive edge. This is clearly apparent in the airline

industry.

Suppliers

Increase in raw material prices will have a knock on affect on

the marketing mix strategy of an organization. Prices may be

forced up as a result. Closer supplier relationships is one way

of ensuring competitive and quality products for an

organization.


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MicroEnvironment

Shareholders

As organization require greater inward investment for growth they faceincreasing pressure to move from private ownership to public. Howeverthis movement unleashes the forces of shareholder pressure on thestrategy of organizations. Satisfying shareholder needs may result in achange in tactics employed by an organization. Many internetcompanies who share prices rocketed in 1999 and early 2000 haveseen the share price tumble as they face pressures from shareholders

to turn in a profit. In a market which has very quickly becomeovercrowded many have failed.

Media

Positive or adverse media attention on an organizations product orservice can in some cases make or break an organization.. Consumerprograms with a wider and more direct audience can also have a verypowerful and positive impact, forcing organizations to change theirtactics.

Competitors

The name of the game in marketing is differentiation. What benefit canthe organization offer which is better then their competitors. Can theysustain this differentiation over a period of time from their competitors?.Competitor analyses and monitoring is crucial if an organization is to

maintain its position within the market..


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MacroEnvironment

The external forces that the organization cannot

influence are termed as Macro Environment of the

organization.The macro environment of an

organization is broadly made of the following fiber.

Demographic Environment

PEST Analysis


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MacroEnvironment

Demographic Environment

The demographic trends usually last for a longer time

horizon and the changes are generally predictable

with some foresight.

Broadly the following macro-environmental factors

can be classified under demographic factors.

Worldwide Population Growth Population Age Mix Ethnic and Other Markets

Educational Groups Household Patterns Geographical Shifts in Population


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DemographicEnvironment

Worldwide Population Growth

The growth of population has thrown manyopportunities to businesses. India being thesecond most populated country, now there is anawareness amongst the Indian households tohave one or two children only. This meansincreased discretionary incomes and more care

and luxuries being bestowed upon limitedchildren in each family. This has opened up aplethora of opportunities for businesses thrivingon child space such as child products ininsurance companies


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Population Age Mix

Countries like Mexico who have the highestyounger population percentage throw

opportunities for businesses that provide

childcare products such as diapers, milk, school

supplies etc. On the other side, Japan has the

highest percentage of older population in theworld and it could be a market for adult and old

age products.


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Ethnic and Other Markets

In India, people from various ethnic backgroundslive together. However, their lifestyles vary and

so do their demands. Every ethnic group

presents a unique opportunity to the businesses.

E.g There are about 900 million Hindus in India

and all of them celebrate Diwali. This is a hugebusiness opportunity for garments,

confectionaries, fireworks and such type of

businesses.


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Educational Groups

The levels of literacy defines the need for books,

magazines, information channels etc.

These literacy groups would also expect different

levels of skills in service providing organizations.


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Household Patterns

Nuclear families, joint families, live alones, live-ins etc have different requirements from the

market. Joint families may require larger cooking

and washing appliances. Nuclear families require

baby sitting services, singles/live alones may

require more of microwave able food and so on.


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Geographical Shifts in Population

Migratory movements across countries/continentspresents opportunities for companies to alter their

product lines and align them to the more robust,demanding immigrant population. E.g. Demand forIndian food in the US and UK.

Further, the migration of population from rural to urbancenters has dual effect. Depleting rural populationmeans less hands available for basic rural activities

such as farming, throwing open the opportunities forfarm automation equipment companies. On the otherhand, increased influx of population to urban centersincreases the demand for housing, transport ,recreation and telecommunication.


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MacroEnvironment

PEST Analysis

It is used to identify the external forces affecting anorganization .

This is a simple analysis of an organization's Political,

Economical, Social and Technological environment.


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PEST Analysis

The components of PEST analysis are listed as

follows.

A PEST analysis incorporating legal and

environmental factors is called a PESTLE analysis.

Political

Economical

Social

Technological

Legal

Environmental


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PEST Analysis

PoliticalThe first element of a PEST analysis is a study of politicalfactors. Political factors influence organizations in many ways.Political factors can create advantages and opportunities fororganizations. Conversely they can place obligations andduties on organizations. Political factors include the followingtypes of instruments:

Legislations such as minimum wages or antidiscrimination laws. Voluntary codes and practices Market regulations Trade agreements, tariffs or restrictions Tax levies and Tax breaks

Type of government regimes, e.g. communist,democratic, dictatorship.

Non conformance with legislative obligations can lead tosanctions such as fines, adverse publicity and imprisonment.Ineffective voluntary codes and practices will often lead togovernments introducing legislation to regulate the activitiescovered by the codes and practices.


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PEST Analysis

Economical

The second element of a PEST analysis involves a study of economic factors.All businesses are affected by national and global economic factors. National andglobal interest rate and fiscal policy will be set around economic conditions. Theclimate of the economy dictates how consumers, suppliers and other organizationalstakeholders such as suppliers and creditors behave within society.

An economy undergoing recession will have high unemployment, low spendingpower and low stakeholder confidence. Conversely a booming or growingeconomy will have low unemployment, high spending power and high stakeholderconfidence.

A successful organization will respond to economic conditions and stakeholderbehavior. Furthermore organizations will need to review the impact economicconditions are having on their competitors and respond accordingly.

In this global business world organizations are affected by economies throughoutthe world and not just the countries in which they are based or operate from. Forexample: a global credit crunch originating in the USA contributed towards thecredit crunch in the UK in 2007/08.

Cheaper labor in developing countries affects the competitiveness of products fromdeveloped countries. An increase in interest rates in the USA will affect the shareprice of UK stocks or adverse weather conditions in India may affect the price of teabought in an English caf.

A truly global player has to be aware of economic conditions across all borders andneeds to ensure that it employs strategies that protect and promote its businessthrough economic conditions throughout the world.


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PEST Analysis

Social

The third aspect of PEST focuses its attention on forces within society such asfamily, friends, colleagues, neighbors and the media. Social forces affect ourattitudes, interest s and opinions. These forces shape who we are as people, the

way we behave and ultimately what we purchase. For example within the UKpeoples attitudes are changing towards their diet and health. As a result the UK isseeing an increase in the number of people joining fitness clubs and a massivegrowth for the demand of organic food. Products such as Wii Fit attempt to dealwith societys concern, about childrens lack of exercise.

Population changes also have a direct impact on organizations. Changes in thestructure of a population will affect the supply and demand of goods and serviceswithin an economy. Falling birth rates will result in decreased demand and greatercompetition as the number of consumers fall. Conversely an increase in the globalpopulation and world food shortage predictions are currently leading to calls for

greater investment in food production. Due to food shortages African countries suchas Uganda are now reconsidering their rejection of genetically modified foods.

In summary organizations must be able to offer products and services that aim tocomplement and benefit peoples lifestyle and behavior. If organizations do notrespond to changes in society they will lose market share and demand for theirproduct or service.


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PEST Analysis

Technology

Unsurprisingly the fourth element of PEST is technology, as you are probably aware technologicaladvances have greatly changed the manner in which businesses operate.Organizations use technology in many ways, they have

1. Technology infrastructure such as the internet and other information exchange systems includingtelephone.

2. Technology systems incorporating a multitude of software which help them manage theirbusiness.

3. Technology hardware such as mobile phones, Blackberry's, laptops, desktops, Bluetooth devices,photocopiers and fax machines which transmit and record information.

Technology has created a society which expects instant results. This technological revolution hasincreased the rate at which information is exchanged between stakeholders. A faster exchange ofinformation can benefit businesses as they are able to react quickly to changes within their operatingenvironment.

However an ability to react quickly also creates extra pressure as businesses are expected to deliveron their promises within ever decreasing timescales..

For example the Internet is having a profound impact on the marketing mix strategy of organizations.Consumers can now shop 24 hours a day from their homes, work, Internet cafs and via 3G phonesand 3G cards. Some employees have instant access to e-mails through Blackberry's but this can bea double edged sword, as studies have shown that this access can cause work to encroach on theirpersonal time outside work.

The pace of technological change is so fast that the average life of a computer chip is approximately6 months. Technology is utilized by all age groups, children are exposed to technology from birth anda new generation of technology savvy pensioners known as silver surfers have emerged.Technology will continue to evolve and impact on consumer habits and expectations, organizations

that ignore this fact face extinction.


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PEST Analysis

Legal and Environmental

A PEST analysis is sometimes expanded to incorporate legal and

environmental factors; this is known as a pestle analysis. There are

many statutes books containing company law as almost every aspect ofan organization's operation is controlled through legislation from

treatment of employees through to health and safety. Legal factors are

important as organizations have to work within legislative frameworks.

Legislation can hinder business by placing onerous obligations on

organizations. On the other hand legislation can create market

conditions that benefit business.


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session 3 - mabd

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