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Environment Analysis

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The success of a marketing organization depends on its ability to adapt to its environment ... Retailer strategy: Banana Republic, Gap, Old Navy. Political Trends ... – PowerPoint PPT presentation

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Title: Environment Analysis


1
Environment Analysis Research
2
BACKGROUND
  • Marketing does not operate in a vacuum
  • Environment affects marketing
  • Political, legal, competitive, etc
  • Environment is dynamici.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

3
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

4
Layers in a situation analysis
This macro level is not controllable and usually
affects the entire industry
5
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

6
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

7
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

8
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

9
Example
  • Sonys 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

10
The Customer Environment
  • 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?

11
The Customer Environment
Source http//www.peanuts.com/wash/pcnpixel/archi
ve/pcnpixel-20040114.html
12
  • 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

13
The External Environment (1 of 4)
  • Competition
  • (1) Brand competitors
  • (2) Product competitors
  • (3) Generic competitors
  • (4) Total budget competitors

14
Levels of Competition
Total Budget consumer dollar
Generic fulfill general need
Product brands in product class
Brand Direct competitor
15
Levels of Competition
Ice cream
Beer
Regular colas
Wine
Diet lemon limes
Juices
Diet Diet Coke Pepsi
Fast food
Video rentals
Brand diet colas
Fruit flavored colas
Lemon limes
Product category soft drinks
Bottled water
Coffee
Generic competition beverages
Baseball cards
Budget competition food and entertainment
Source Donald R. Lehmann and Russell S. Winer,
Product Management, 1997
16
Example Cruising for a Bruising
  • The worlds 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
17
Carnival Cruise Lines
  • 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?

18
Stages of Competitive Analysis
  • 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 competitors strengths and
  • weaknesses.
  • Capabilities and vulnerabilities in different
    functional areas
  • Focus the analysis on each key competitors
  • marketing capabilities.
  • In terms of product, price, place, and promotion
  • Estimate each key competitors most likely
  • strategies and responses under different
  • environmental situations.

19
The External Environment (2 of 4)
  • 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

20
The External Environment (3 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)

21
The External Environment (4 of 4)
  • Sociocultural Trends
  • Demographic Trends
  • Lifestyle Trends
  • Trends in Cultural Values

22
Examples of Trends in theSociocultural
Environment
  • 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

23
Age Distribution in U.S.
Generational Cohorts
Baby Boomers (82 million people born
1946-1964) Generation X (45 million
people born 1965-1976) Generation Y (Echo
Boomers) (72 million people born 1977-1994
Woodstock, Kennedy Assassination, Vietnam
Divorce, AIDS The MTV generation more cynical
honesty and irreverence in advertising
The Internet, 9/11 Relate 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.
24
Supporting Marketing Decisions
Training and motivating the sales force
Motivating channel members to
share info
Buying info from commercial data
sources
Improving the quality of marketing intelligence
Collectingcompetitive intelligence
Developing a customer advisory panel
Establishing a marketing information center
25
Supporting Marketing Decisions
The Marketing Research Process
26
Collecting Environmental Dataand Information (1
of 2)
  • Secondary Information Sources
  • Internal Data Sources
  • Government Sources
  • Periodicals/Book Sources
  • Commercial (Fee-Based) Sources

27
Collecting Environmental Dataand Information (2
of 2)
  • Primary Data Collection
  • Direct Observation
  • Focus Groups
  • Surveys
  • Experiments
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