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Environment Analysis & Research
BACKGROUND…
Marketing does not operate in a vacuum Environment affects marketing
Political, legal, competitive, etc Environment is dynamic…i.e, it is constantly
changing Situation analysis must be an ongoing process
The success of a marketing organization depends on its ability to adapt to its environment
Failure to exploit/adapt to change leads to marketing failure
Marketers must try and be proactive rather than reactive to the marketing environment
Conducting an environment (or) a situation analysis
Conducting a Situation Analysis is a Challenging Exercise One of the most difficult parts of the
marketing plan Should provide a complete picture of
three key environments: (1) Internal, (2) Customer, and (3) External
Layers in a situation analysis
Internal Environment
This macro level is not controllable and usually affects the entire industry
The Internal Environment (1 of 3)
Review of Current Objectives, Strategy and Performance An important input to later stages in the
planning process Poor or declining performance must be the
result of: (1) Goals or objectives that are inconsistent
with customer or external environments (2) Flawed marketing strategy (3) Poor implementation (4) Changes in the customer or external
environment beyond the control of the firm
Example
Nike Demand for high-end shoes decrease Saw demand & profits for retro- and
leisure- styled shoes increase Bought Converse and gained immediate
access to a growing market
The Internal Environment (2 of 3)
Availability of Resources Includes review of financial, human and
experience resources as well as resources from key relationships Financial resources tend to get most attention
Labor shortages are expected to be a major problem in the coming years Projected shortfall in human resources
U.S. Dept of Labor predicts 22 M new jobs by 2010 However, civilian labor force is expected to increase by only
17 M Fast food, services, nursing, retail, & computer support will
be hardest hit
The Internal Environment (3 of 3)
Organizational Culture and Structure Problems can arise when marketing does not hold
a prominent position in the political hierarchy Culture and structure are relatively stable but can
be affected by mergers Asynchronous corporate mergers Daimler- Chrysler Merger HP-COMPAQ
Example Sony’s core electronics business has been losing
money for the last 3 years Microsoft, Nokia, Apple, Dell, Canon Products not cutting edge
New CEO Sir Howard Stringer analyzed the internal environment Cost cutting; Aibo rested; Closed Qualia line of boutique
electronics (Camera $4K; 70in TV 14K) Eliminated 5700 jobs; closed 9 factories Sold $705M worth assets (incl. cosmetic salons); Retired
“advisors Realized “menus” have replaced “knobs”; Link between
content and hardware is software Needs a cultural revolution from product orientation to
market and customer orientations
Who are our Current and Potential Customers? What do our Customers do with our Products? Where do Customers Purchase our Products? When do Customers Purchase our Products? Why (and How) do Customers Select our
Products? Why do Potential Customers not Purchase our
Products?
The Customer Environment
Source: http://www.peanuts.com/wash/pcnpixel/archive/pcnpixel-20040114.html
The Customer Environment
If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself, but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.
Sun Tzu - The Art of War
Competition (1) Brand competitors (2) Product competitors (3) Generic competitors (4) Total budget competitors
The External Environment (1 of 4)
Levels of CompetitionTotal Budget: consumer dollar
Generic: fulfill general need
Product: brands in product class
Brand: Direct competitor
Levels of Competition
Diet DietCoke Pepsi
Brand:diet colas
Fruitflavored
colas
Regularcolas
Dietlemonlimes
Lemonlimes
Product category:
soft drinks
Genericcompetition:
beverages
Coffee
Bottledwater
Wine
Beer
Juices
Budgetcompetition:
food and entertainment
Baseballcards
Videorentals
Fastfood
Icecream
Source: Donald R. Lehmannand Russell S. Winer, ProductManagement, 1997
Example: “Cruising for a Bruising” The world’s largest cruise ship company operates 6
cruise lines, employs 37,000 people and has 43% global market share
Norwalk food-borne virus, SARs, environmental violations, and economic woes are plaguing the company
Standardizes its fleets and does not put in dazzling options, like rock-climbing walls and skating rinks
How can we develop the four levels of competition for Carnival Cruise Lines?
Julia Boorstin, Fortune, June 9, 2003
Brand competitors: Offer comparable cruises
Product competitors: Offer luxury & specialty cruises
Generic competitors: Travel/Holiday
Total budget competitors: Vie for customer $ Car? Home improvement? Investment?
Carnival Cruise Lines
Identify all current and potential competitors Brand, product, generic, and total budget.
Assess each key competitor Size, growth, profitability, objectives, strategies, and target markets.
Assess each key competitor’s strengths andweaknesses. Capabilities and vulnerabilities in different functional areas
Focus the analysis on each key competitor’smarketing capabilities. In terms of product, price, place, and promotion
Estimate each key competitor’s most likelystrategies and responses under differentenvironmental situations.
Stages of Competitive Analysis
Economic Growth and Stability In U.S the size of upper-income class has increased,
middle income remained mostly stable, lower-income declined Discretionary income has supported growth of bottled water,
Godiva chocolates Average savings have declined: (43% wont have enough for
retirement. Link) Retailer strategy: Banana Republic, Gap, Old Navy
Political Trends Elected political officials influence taxes, Tobacco
industry, Recycling, antitrust cases
The External Environment (2 of 4)
Legal and Regulatory Issues Emphasis on natural environment has forced companies to become
more “green” Increased rigor in corporate accounting and reporting (Sarbanes-
Oxley Act) to limit corporate and accounting scandals involving prominent companies in the United States. Has resulted in a surge of hiring of auditors and increased business for
consulting firms NAFTA (North American Free Trade Agreement) prompted
diversification into Canadian and Mexican markets; I-35 high priority Technological Advancements
Influence of the Internet on all aspects of marketing including product/production, communication, pricing, promotion, channels
Trends in biological research have led to better drugs and medicines, disease resistant crops, genetically modified foods
RFID (Radio Frequency Identification)
The External Environment (3 of 4)
Sociocultural Trends Demographic Trends Lifestyle Trends Trends in Cultural Values
The External Environment (4 of 4)
Demographic Trends Aging of the American population
Fighting aging: skin care, adventure vacations, health foods Increasing demand for health care, hospitals, senior lifestyle providers
Increasing population diversity Bi-lingual signs, salespeople; Support community programs Cosmetics firms need to cater to different audiences
Population growth in the Sun Belt states Demand for homes, support services, appliances like ACs
Lifestyle Trends Clothing has become more casual, especially at work Growing focus on health and nutrition; Organic produce;
vegetarianism Time spent watching television has declined
Trends in Cultural Values Less focus on “me-oriented” values Increasing importance of family and children
Examples of Trends in theSociocultural Environment
Generational Cohorts*
Woodstock, Kennedy Assassination, Vietnam
Divorce, AIDSThe MTV generation; more cynical; honesty and irreverence in advertising
The Internet, 9/11Relate well to causes; teen markets
* Events occurring when people first became economic adults (usually ages 17 – 21) and its affect on their lifelong attitudes and values.
Baby Boomers(82 million people born 1946-1964)
Generation X(45 million peopleborn 1965-1976)
Generation Y (Echo Boomers)(72 million people born 1977-1994
Age Distribution in U.S.
Supporting Marketing Decisions
Establishing a marketing information center
Motivating channel members to share info
Collectingcompetitive intelligence
Buying info from commercial data sources
Developing a customer advisory panel
Improving Improving the quality of the quality of
marketing marketing intelligenceintelligence
Training and motivating the sales force
Supporting Marketing Decisions
The Marketing Research Process
Secondary Information Sources Internal Data Sources Government Sources Periodicals/Book Sources Commercial (Fee-Based) Sources
Collecting Environmental Dataand Information (1 of 2)
Primary Data Collection Direct Observation Focus Groups Surveys Experiments
Collecting Environmental Dataand Information (2 of 2)