Marketing Strategy MKT 460. Chapter 3 Environmental Analysis Taufique Hossain. Learning Objectives. To define the marketing environment and discuss the relevant types of market information that are required for market scanning and analysis.
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Marketing StrategyMKT 460 Chapter 3 Environmental Analysis Taufique Hossain
Learning Objectives • To define the marketing environment and discuss the relevant types of market information that are required for market scanning and analysis. • To review the analytical models and frameworks that can be used in the analysis stage.
Environment • Macro-environment • Social, political, economic, technological contexts • Competitive environment • Company, immediate competitors, customers • Internal environment • Resources, capabilities
PEST Analysis of the Macro-Environment Economic Social Political Technological Legal
The Economic and Political Environment Economic growth rates and the business cycle Interest rates, consumer and business confidence Employment and unemployment National and supra-national governments Taxation and fiscal policy Internationalisation and globalisation Regional trade and trading areas
The Youth Market The Grey Market The Social and Cultural Environment Demographic Change Changing life-styles and living patterns Multi-ethnic societies
Technological Environment • Technological changes impact every industry • Shortening of commercialization times • Short product life cycles • Impact of internet
Legal Environment • Laws, regulations and codes of practice emanating from national governments, EU, local governments, statutory bodies, trade associations etc.
New Strategies for Changing Environments • Global positioning • The master brand • The integrated enterprise and end user focus • Best in class processes • Mass customization • Breakthrough technology
The Shift in Strategy for Delivering Shareholder Value Focus on core competencies The new strategic imperative Domestic focus Global focus Portfolio approaches
Analysis of the Competitive Environment • Porter’s five forces model • Strategic groups • Industry evolution and forecasting • Environmental stability
Five Forces Driving Competition Threat of new entrants Bargaining power of suppliers Rivalry among existing firms in the industry Bargaining power of buyers Threat of substitutes Source: Adapted from Porter (1986, 1988)
Rivalry Among Existing Firms • Competitors are roughly evenly balanced • Low market growth • Exit barriers are high • Product differentiation is low • Fixed costs are relatively high
Threat of Market Entry • Costs of entry are low • Existing or new distribution channels are open to use • Little competitive retaliation is anticipated • Differentiation is low • There are gaps in the market
Threat of Substitutes • Making existing technologies redundant • Incremental product improvement
Bargaining Power of Suppliers • Suppliers are more concentrated than buyers • Costs of switching suppliers are high • Suppliers’ offerings are highly differentiated
Bargaining Power of Buyers • More concentrated than sellers • Alternative supply sources are readily available • Buyer switching costs are low
Strategic Groups • Firms within an industry following similar strategies aimed at similar customers or customer groups • E.g. Coca cola and Pepsi
Map of Strategic Groups in the US Automobile Market The Faded Champions VW Audi, Rover Group The Big Three GM, Ford, Chrysler Broad line The Samurai Toyota, Nissan, Honda, Mazda Degree of Specialisation Luxury cars Mercedes, BMW, Volvo*, Saab* Jaguar* Specialists Rolls-Royce*, Ferrari*, Aston Martin*, Lamborghini*, Lotus*, Morgan, McLaren Narrow line High Low Local Content (*brands now owned by large-scale American or European manufacturers)
Reading • Hooley et al. Chapters 3 and 6. • Day and Schoemaker (2005), ‘Scanning the Periphery’, Harvard Business Review, 83, 11, pp. 135-148. • Kangis and O’Reilly (2003), ‘Strategies in a Dynamic Marketplace: A Case Study in the Airline Industry’, Journal of Business Research, 56, pp. 105-111.