Download - 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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DemographicEnvironment
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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DemographicEnvironment
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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DemographicEnvironment
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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DemographicEnvironment
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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DemographicEnvironment
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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