Transcript Analysing External Environment

External Environment
in the Asia Pacific
Region
Asia-Pacific Marketing Federation
Certified Professional Marketer
Copyright
Marketing Institute of Singapore
Outline
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Introduction
The Company’s Microenvironment
The Company’s Macroenvironment
The Competitors
Porter's Five Forces Model
Introduction
Definition:
The Company’s environment consists of "the
actors and forces outside marketing that
affect marketing management's ability to
develop and maintain successful
transactions with its target customers"
Kotler et al, 1994
Introduction (cont’d)
 Companies must evaluate both micro and macroenvironment to identify
 any trends that may affect their marketing strategies,
and
 opportunities that can be developed into competitive
advantages
 Porter's Five Forces model analyses market
structures to determine market attractiveness
taking into consideration the micro and macro
environments in its construction
Company’s Microenvironment
Relates to the internal forces or forces close to the
company over which some control is possible
 Top management
 Other functions e.g. finance and accounting, R&
D, manufacturing and purchasing
 Suppliers
 Marketing intermediaries (channel partners)
 Customers
 Competitors
 Public
Company’s Macro-environment
 Relates to the larger forces having an
impact on society as a whole
 A company has little influence on these
forces and therefore can only adapt its
marketing mix to account for the resulting
opportunities and threats
Major forces of the macroenvironment
 Demographic
 Economic
 Natural
 Technological
 Cultural
 Political/legal
Demographic Environment
Demographic trends:
 Changing age structure
 Changing family structure
 Geographic shifts in population
 Higher education level & more white
collar job holders
 Increasing globalization of cities such as
Singapore
Economic Environment
Economic trends affecting consumers
buying power and spending pattern
 Change in per capital real income
 Disposable
 Discretionary
 Income distribution
 Savings & debt
 Consumer expenditures
 Change in interest rates and cost of living
Natural environment
Natural trends include those natural
resources used in production or those
affected by marketing activities
 Raw material shortages
 Increase in energy cost
 Increase pollution levels
 Increase in Governmental intervention in
natural resource management
Technological Environment
Consists of forces that affect new
technology, new product development
and market opportunities
 Faster pace of technological change
 Shorter PLC
 Higher R&D budgets
 Concentration on minor improvements
 Increased regulations
Cultural Environment
Affect society's basic values, perceptions,
preferences and behaviors
 Core cultural values and beliefs
 Secondary cultural values
 Sub cultures
Legal and Political Environment
Trends in the legal and political environment
include
 Increased legislation regulating business
 Singapore’s Fair Trading Act (impending)
 Changing government agency enforcement
 Growth of public interest groups
 Regional groupings
 ASEAN FTZ
Competitive Analysis
 Who are your competitors?
 Do you know about your close competitors’
strengths and weaknesses?
 How detail should we analyze the
competition?
 Use a systematic approach
 Analysis competition at various levels (next
slide)
Levels of Competition
Generic Competition
Form Competition
Industry Competition
Brand Competition
Levels of Competition (cont’d)
 Generic competition—e.g. Honda against Silver
Sea Cruise for the same consumer dollars
 Form competition—e.g. Toyota against
manufacturers of other vehicles that provide the
same service such as Yamaha (motorcycle)
 Industry competition—e.g. Honda against
Mercedes, Lexus etc who make the same
products or class of products (different prices)
 Brand competition—e.g. Honda against Toyota,
Nissan etc. who offer similar products and service
to the same customers at similar prices
Industry Competition
 Different industries can sustain different
levels of profitability; partly due to the
difference in industry structure
 Porter’s Model of Industry Competition,
commonly know as Porter’s Five Forces
provides a framework for analyzing the
influence of the forces on the industry to
determine the industry’s profitability and
competitiveness
Porter’s Model of Industry
Competition
Barriers to Entry
Suppliers
Industry degree
of rivalry
Buyers
Substitutes
(Source: Aakers pp.8487)
Porter’s 5 Forces—
Barriers to Entry
 Absolute cost
advantages
 Proprietary learning
curve
 Access to inputs
 Government policy
 Economies of scale
 Capital requirements
 Brand identity
 Switching costs
 Access to distribution
 Expected retaliation
 Proprietary products
(Source: Michael Porter, “On Competition”)
Threats of Substitutes
 Switching costs
 Buyer propensity to substitute
 Relative price performance of
substitutes
(Source: Michael Porter, “On Competition”)
Buyer Power
 Bargaining leverage  Threat of backward
integration
 Buyer volume
 Buyer information  Product differentiation
 Buyer concentration vs.
 Brand identity
industry
 Price sensitivity
 Substitutes available
 Buyers' incentives
(Source: Michael Porter, “On Competition”)
Supplier Power
 Supplier concentration  Switching costs of
 Importance of volume
firms in the industry
to supplier
 Differentiation of
inputs
 Impact of inputs on
cost or differentiation
 Presence of
substitute inputs
 Threat of forward
integration
 Cost relative to total
purchases in industry
(Source: Michael Porter, “On Competition”)
Degree of Rivalry
 Exit barriers
 Industry growth
 Industry concentration ratio
 Fixed costs/Value added
 Product differentiation
 Buyers' incentives
(Source: Michael Porter, “On Competition”)