Transcript The Marketing Environment

Ashesi University
COURSE TITLE : MARKETING
SEMESTER : FIRST, 2010/2011
MODULE 2: The Marketing Environment
Lecturer: Ebow Spio
Learning Objectives
1. Describe the environmental forces that affect the
company’s ability to serve its customers
2. Explain how changes in the demographic and economic
environments affect marketing decisions
3. Identify the major trends in the firm’s natural and
technological environments
4. Explain the key changes in the political and cultural
environments
5. Discuss how companies can react to the marketing
environment
3-2
Learning Objectives
6. Discuss the need to understand competitors as well as
customers through competitor analysis
7. Explain the fundamentals of competitive marketing
strategies based on creating value for customers
8. Illustrate the need for balancing customer and competitor
orientations in becoming a truly market-centered
organization
18-2
The Marketing Environment
The marketing environment includes the actors and
forces outside marketing that affect marketing
management’s ability to build and maintain successful
relationships with customers
Microenvironment consists of the actors close to the
company that affect its ability to serve its customers, the
company, suppliers, marketing intermediaries, customer
markets, competitors, and publics
3-4
The Company’s Macroenvironment
Marketing Environment
Macroenvironment consists of the larger societal forces that
affect the microenvironment
• Demographic
• Economic
• Natural
• Technological
• Political
• Cultural
3-6
The Company’s Microenvironment
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The Company
Suppliers
Marketing intermediaries
Customers
Competitors
Publics
3-7
The Company’s Microenvironment
The Company
Internal environment includes:
• Top management
• Finance
• R&D
• Purchasing
• Operations
• Accounting
3-8
The Company’s Microenvironment
Suppliers
• Provide the resources to produce goods and
services
• Treated as partners to provide customer value
Marketing Intermediaries
• Help the company to promote, sell, and distribute
its products to final buyers
• Include:
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Resellers
Physical distribution firms
Marketing services agencies
Financial intermediaries
3-9
The Company’s Microenvironment
Marketing Intermediaries
Resellers are the distribution channel firms that help the
company find customers or make sales to them
Include:
• Wholesalers
• Retailers
Physical distribution firms are the distribution
channel firms that help the company to stock and
move goods from their points of origin to their final
destination
3-11
The Company’s Microenvironment
Marketing Intermediaries
Marketing service agencies are the marketing research
firms, advertising agencies, media firms, and marketing
consulting firms that help the company target and
promote its products to the right markets.
Financial intermediaries include banks, credit
companies, insurance companies, and other businesses
that help finance transactions or insure against the
risks associated with the buying and selling of goods
3-13
The Company’s Microenvironment
Customers
Customer markets consist of individuals and
households that buy goods and services for personal
Consumption
Business markets buy goods and services for further
processing or for use in their production process
3-15
The Company’s Microenvironment
Customers
Reseller markets buy goods and services to resell at a profit
Government markets buy goods and services to produce public
services or transfer goods and services to others who need them
International markets consist of buyers in other countries
including consumers, producers, resellers, and governments
3-16
The Company’s Microenvironment
Competitors
• Competition refer to firms that provide similar
solutions to the same consumer problem or need
•
Firms must gain strategic advantage by positioning
their offerings against competitors’ offerings
3-17
The Company’s Microenvironment
Publics
Any group that has an actual or potential interest in or
impact on an organization’s ability to achieve its
objectives
• Financial publics
• Media publics
• Government publics
• Citizen-action publics
• Local publics
• General public
• Internal publics
3-18
The Company’s Microenvironment
Publics
Financial publics influence the company’s ability to
obtain funds—banks, investment houses, and
stockholders
Media publics carry news, features, and editorial
opinion—newspapers, magazines, and radio and
television stations
Government publics influence product safety and truth
in advertising
3-19
The Company’s Microenvironment
Publics
Citizen-action publics include consumer organizations,
environment groups, and minority groups
Local publics include neighborhood residents and community
organizations
General publics influence the company’s public image
Internal publics include workers, managers, volunteers, and
directors
3-20
The Company’s Macroenvironment
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Demographic environment
Economic environment
Natural environment
Technological environment
Political environment
Cultural environment
3-21
The Company’s Macroenvironment
Demographic Environment
Demography is the study of human populations in terms of size,
density, location, age, gender, race, occupation, and other
statistics
Demographic environment is important because it involves
people, and people make up markets
Demographic trends include age, family structure, geographic
population shifts, educational characteristics, and population
diversity
3-22
The Company’s Macroenvironment
Economic Environment
Economic environment consists of factors that affect
consumer purchasing power and spending patterns.
It is basically about the level of demand in the
economy.
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Recession
Economic Boom
3-31
The Company’s Macroenvironment
Natural Environment
Natural environment involves the natural resources that are
needed as inputs by marketers or that are affected by
marketing activities
• Trends
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Shortages of raw materials
Increased pollution
Increased government intervention
Environmentally sustainable strategies
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Green marketing
3-35
The Company’s Macroenvironment
Technological Environment
Most dramatic force in changing the marketplace with many
positive and negative effects
• Rapid change
• Provides new markets and new opportunities
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Internet
Medicine
Miniaturization
Weapons
Credit cards
Communication
3-37
The Company’s Macroenvironment
Political Environment
Political environment consists of laws, government
agencies, and pressure groups that influence or limit
various organizations and individuals in a given society
Legislation regulating business
• Public policy to guide commerce—sets of laws and
regulations that limit business for the good of society at
large
• Increasing legislation
• Protect companies
• Protect consumers
• Protect the interests of society
Increased Emphasis on Ethics and Socially Responsible
Actions
3-38
The Company’s Macroenvironment
Cultural Environment
Cultural environment consists of institutions and other
forces that affect a society’s basic values, perceptions,
and behaviors
Core beliefs and values have a high degree of
persistence, are passed on from parents to children,
and are reinforced by schools, churches, businesses,
and government
3-42
Responding to the Marketing
Environment
Views on Responding
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Uncontrollable
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Proactive
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Reacting and adapting to forces in the environment
Taking aggressive actions to affect forces in the
environment
Reactive
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Watching and reacting to forces in the environment
3-48
Creating Competitive Advantage
1. Competitor Analysis
2. Competitive Strategies
3. Balancing Customer and Competitor orientations
18-3
Competitor Analysis
Identifying Competitors
Competitors can include:
• All firms making the same product or class of
products
• All firms making products that supply the same
service
• All firms competing for the same consumer dollars
18-4
Competitor Analysis
Identifying Competitors
Industry point of view refers to competitors within the
same industry
Market point of view refers to competitors trying to
satisfy the same customer need or build relationships
with the same customer group
18-6
Competitor Analysis
Identifying Competitors
Market point of view is considered to provide a broader
set of actual and potential competitors, and a competitor map
illustrates the steps buyers take in obtaining the product.
Competitor map highlights both competitive opportunities and
challenges facing the firm
• Center is the list of consumer activities
• First outer ring lists main competitors
• Second outer ring lists indirect competitors
18-7
Competitor Analysis
Assessing Competitors
• Competitor’s objectives
• Competitor’s strategies
• Competitor’s strengths and weaknesses
• Competitor’s actions and reactions
18-9
Competitor Analysis
Determining Competitor’s Objectives
Competitor’s objectives include:
• Profitability
• Market share growth
• Cash flow
• Technological leadership
• Service leadership
18-10
Competitor Analysis
Identifying Competitor’s Strategies
A strategic group is a group of firms in an industry following the
same or similar strategy in a given target market
• Competition is most intense within a strategic group
• Competition among strategic groups is due to overlapping
customers and lack of perceived differentiation and
expansion of one strategic group into new segments
18-11
Competitor Analysis
Identifying Competitor’s Strategies
Companies need to understand the competitor’s
ability to deliver value to its customers
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Product quality
Product features
Customer service
Pricing policy
Distribution coverage
Sales force strategy
Promotion programs
Financial strategies
R&D
18-12
Competitor Analysis
Assessing Competitor’s Strengths and Weaknesses
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Primary data
Secondary data
Personal experience
Word of mouth
Benchmarking is the comparison of the company’s products
or services to competitors or leaders in other industries to
find ways to improve quality and performance
18-13
Competitor Analysis
Estimating Competitor’s Reactions
Marketing managers need to develop an understanding
of a given competitor’s mentality, culture, values,
and way of doing business to anticipate how the
competitor will react to the company’s marketing
strategies
18-14
Competitor Analysis
Selecting Competitors to Attack and Avoid
Customer value analysis determines the benefits that target
customers value and how customers rate the relative value
of various competitor’s offers.
• Identification of major attributes that customers value and
the importance of these values
• Assessment of the company’s and competitors’
performance on the valued attributes
18-15
Competitor Analysis
Close or Distant Competitors
Close competitors resemble the company the most
Good or Bad Competitors
Good competitors:
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Increase total demand
Share costs of market and product development
Legitimize new technologies
Serve less attractive market segments
Provide more product differentiation
Lower the anti-trust risk
Improve bargaining power versus legislators and regulators
Bad competitors:
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Try to share rather than earn in the market
Take large risks
Create disruption
18-16
Competitor Analysis
Designing a Competitive Intelligence System
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Identifies competitive information and the best sources of
this information
Continually collects information
Checks information for validity and reliability
Interprets information
Organizes information
Sends key information to relevant decision makers
Responds to inquiries about competitors
18-19
Competitive Strategies
Basic Competitive Strategies
Michael Porter’s four basic competitive positioning
strategies
• Overall cost leadership
• Differentiation
• Focus
• Middle-of-the-roaders
18-22
Competitive Strategies
Basic Competitive Strategies
Overall cost leadership strategy is when a company
achieves the lowest production and distribution
costs and allow it to lower its prices and gain
market share
18-23
Competitive Strategies
Basic Competitive Strategies
Differentiation strategy is when a company
concentrates on creating a highly differentiated
product line and marketing program so it comes
across as an industry class leader
18-24
Competitive Strategies
Basic Competitive Strategies
Focus strategy is when a company focuses its effort on
serving few market segments well rather than going
after the whole market
18-25
Competitive Strategies
Basic Competitive Strategies
Porter believed that companies that pursued a clear
strategy would achieve superior performance and that
companies without a clear strategy would not succeed
Porter considered them to be “middle-of-the-roaders”
18-26
Competitive Strategies
Basic Competitive Strategies
Michael Treacy and Fred Wiersema suggest companies
can gain leadership positions by delivering superior
value to their customers in three strategies or
“value disciplines”
• Operational excellence
• Customer intimacy
• Product leadership
18-27
Competitive Strategies
Basic Competitive Strategies
Operational excellence refers to a company providing
value by leading its industry in price and
convenience by reducing costs and creating a lean
and efficient value delivery system
18-28
Competitive Strategies
Basic Competitive Strategies
Customer intimacy refers to a company providing
superior value by segmenting markets and tailoring
products or services to match the needs of the
targeted customers
18-29
Competitive Strategies
Basic Competitive Strategies
Product leadership refers to a company providing
superior value by offering a continuous stream of
leading edge products or services. Product leaders
are open to new ideas and solutions and bring
them quickly to the market.
18-31
Competitive Strategies : Blue
Ocean Strategy by W Chan Kim & Renee Mauborgne
Blue Ocean Thinking is designing creative business ventures to positively
affect both a company’s cost structure and its value proposition to consumers. Cost
savings result from eliminating and reducing the factors affecting traditional industry
Competition; value to consumers comes from introducing factors the industry has never
before offered E.g. Southwest Airlines
Red Ocean Strategy
Blue Ocean Strategy
Compete in existing market space
Create uncontested market space
Beat the competition
Make the competition irrelevant
Exploit existing
Create and capture new demand
Make the value/cost trade-off
Break the value/cost trade-off
Align the whole system of company’s
activities with its strategic choice
differentiation or low cost
Align the whole system of a company’s
activities in pursuit of differentiation and
low cost
Competitive Strategies : Blue
Ocean Strategy by W Chan Kim & Renee Mauborgne
4 Key questions for marketers to ask in guiding blue
ocean thinking and creating value innovation:
1. Which of the factors that our industry takes for
granted should we eliminate?
2. Which factors should we reduce well below the
industry’s standard?
3. Which factors should we raise well above the
industry’s standard?
4. Which factors should we create that the industry has
never offered?
Competitive Strategies
Competitive Positions
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Market leader strategy
Market challenger strategy
Market follower strategy
Market nicher strategy
18-32
Competitive Strategies
Competitive Positions
1. Market leader is the firm with the largest market
share and leads the market price changes, product
innovations, distribution coverage, and promotion
spending
2. Market challengers are firms fighting to increase
market share
3. Market followers are firms that want to hold onto
their market share
4. Market nichers are firms that serve small market
segments not being pursued by other firms
18-33
Competitive Strategies
Market Leader Strategies
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Expand total demand
Protect their current market
Expand market share
18-34
Competitive Strategies
Market Leader Strategies
Expanding Total Demand
Expand total demand by developing:
• New users
• New uses
• More usage of its products
18-35
Competitive Strategies
Market Leader Strategies
Protecting Market Share
Protect current market by:
• Fixing or preventing weaknesses that provide opportunities
to competitors
• Maintaining consistent prices that provide value
• Keeping strong customer relationships
• Continuous innovation
18-36
Competitive Strategies
Market Leader Strategies
Expanding Market Share
Expand market share by:
• Increasing market share in served markets, thus increasing
profitability
• Producing high-quality products
• Creating good service experiences
• Building close customer relationships
18-37
Competitive Strategies
Market Challenger Strategies
1. Define the strategic objective and opponents
Challenge the leader with an aggressive bid for more
market share
2. Choose a general attack strategy
• Frontal attack
• Flank attack
• Encirclement attack
• Bypass attack
• Guerilla warfare
18-38
Competitive Strategies
Market Challenger Strategies
3. Choose a specific attack strategy
• Price discounts
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Lower-priced goods
Value-priced goods
Prestige goods
Product proliferation
Product innovation
Improved services
Distribution innovation
Manufacturing-cost reduction
Intensive advertising promotion
18-38
Guerrilla Marketing : Virgin Atlantic
Competitive Strategies
Market Nicher Strategies
Ideal market niche is big enough to be profitable with high
growth potential and has little interest from competitors
Key to market niching is specialization
• Market
• Customer
• Product
• Marketing mix
18-40
Balancing Customer and Competitor Orientations
Companies need to continuously adapt strategies to
changes in the competitive environment
• Competitor-centered company
• Customer-centered company
• Market-centered company
18-41
Balancing Customer and Competitor Orientations
Competitor-centered company spends most of its time
tracking competitor’s moves and market shares and
trying to find ways to counter them
• Advantage is that the company is a fighter
• Disadvantage is that the company is reactive
18-42
Balancing Customer and Competitor Orientations
Customer-centered company spends most of its time
focusing on customer developments in designing
strategies
Provides a better position than competitor-centered
company to identify opportunities and build customer
relationships
18-43
Balancing Customer and Competitor Orientations
Market-centered company spends most of its time
focusing on both competitor and customer
developments in designing strategies
18-44