April 8, 2023

Business Environment refers to all the internal and external factors which impact the functioning & performance of a firm and/or its decision making.

Internal Factors: Factors within the firm and in its control.

1. Company’s Vision, Mission, and Objectives.

2. Management & Structure

3. Company Image & Brand Equity

4. Marketing Resources5. Physical Assets &

Facilities

External Factors: Factors affecting a firm that are beyond its control.

1. Near Environment Factors

1. Suppliers2. Customers3. Competitors

2. Far environment Factors

1. Political2. Economic3. Social4. Technological

Michael Porter’s Five Forces Analysis is a helpful tool to analyze

the competitive structure of the industry. One can understand the

influence of ‘micro’ environmental factors through this analysis.

The five forces are:

Competition from existing players

Threat of new Entrants

Threat of substitutes

Bargaining Power of Buyers

Bargaining Power of Suppliers

• Ad Promotion Company is an Iranian business organization, that performs activities like designing advertisements and building advertisement structures.

• It’s main focus is marketing, apart from that it rents advertisement boards to post advertisements

• Ad Promotion is ranked 1 for many years in “Iran’s ministry of culture and Islamic Guidance” ranking of environmental media companies.

• Its media work can be divided into1. Signboards2. Bridges3. Airports4. Super buses5. Scrolling

Competition exists whenever 2 or more companies organizations offer similar products or services for the same group of individuals or customers.

Competition depends on

•Firm concentration & their relative market share : More the number of companies, greater is the competition for resources & market share.•Product pricing: When one company reduces its prices, other companies are forced to follow the suit.•Product differentiation: Improving features, and making innovative changes. If products are more or less the same, competition is intense.•Low switching costs: When a customer can freely switch over from one company to another, the rivalry intensifies.

Ad Promotion company faces high competition as

firm concentration is high.

There are about 980 registered companies in

Tehran, all vying for the same market share.

Price reduction by one company will force Ad

Promotion too to do so to retain its customers.

This sharply reduces its profit margins.

Since customer loyalty is difficult to retain in this

industry, one should look at new innovative ways

to attract new customers and retain existing

ones.

It refers to the power of the customers, and how much pressure they can put on margins.

The measure of customer power is by the answer to the question “How much of company’s income is from customers’ purchase?”

Strong customers can force a decrease in costs or increase in quality.

Iranian foreign policies have lead to decrease in number of companies that want to advertise.

Since Ad Promotion’s main source of income is from customer purchases, it intends to win maximum customer satisfaction.

Suppliers exercise control over the company by increasing prices or reduction of quality.

If there are few suppliers/contractors and many companies dependent on them, then they have a lot a power.

However, in the environmental media-owners industry, there are many contractors, so they have less bargaining power.

Since the contractors’ work is very limited such as printing & maintaining flaxy faces, they exercise less control over Ad Promotion.

New entrants could change major determinants of market environment like market share, prices, customer loyalty.

In the environmental media industry, high initial investment is required, which acts a substantial barrier to entry.

The Tehran municipality has issued enormous number of legal grounds for environmental media construction without realizing its potential, leading to reduced demand for it.

Exists if alternate products are available with lower prices, for the same purpose and better performance parameters.

It will help attracting a significant proportion of the market volume & hence reduce the potential sales volumes of existing players. Buyer inclination towards substitute will increase.

If Switching Costs are less, customers will easily shift to substitute product.

Strategic Partners- companies that supply their services to the company

They are associated with profitability and success

The less the number of strategic partners- more the bargaining power

Strategic partners in environmental media are called advertising agencies.

Advertising Agencies: Agencies responsible for designing and implementing a company’s advertising campaign

1) When a company decides the product or services estimated budgets, it authorizes an agency to prepare plan for company’s advertising

2) Then the agency prepares a company’s plan within the budget

3) These advertising agencies determine type and plan of advertising considering company's objective.

In Iran there is a rule that if a media owner hires a media for customer from another media owner, the leaseholder is projected as “Agency” and the lesser company should pay a % of the contract’s price as the agency right.

According to this rule, if a company assigns Ad Promotion as its media provider custodian, its role as collecting agency is one of the most important income gain.