Environmental Forces

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Environmental Forces

• Marketing for Engineers
• ELE 4EMT

Lecture 3 5 March, 2007
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Last lecture

• Strategy
• SWOT analysis
• Other aspects of situational appraisal

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This lecture

• The difference between the domestic and the
  foreign environments.
• The difference between macro and
  micro-environment.
• Examine the components of macro-environment.
• Examine the components of micro-environment.

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But first more on strategy
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Market/Product Mix
Markets
Existing
New
Market Penetration
Market Development
Existing
products
Diversification
Product Development
New
Consider QANTAS/Jetstar and TELSTRA/Fairfax
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concentration
Vertical integration
Growth
Diversification
Stability
GRAND STRATEGIES
harvest
turnaround
divestiture
Defensive
bankruptcy
liquidation
Bartol, K.M., Martin, D.C., Tein, M., Matthews,
G., Management A Pacific Rim Focus,
McGraw-Hill, 2002.
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Growth Strategy

• Concentration
• Market development
• Product development
• Horizontal integration
• Vertical Integration
• Backward integration, business grows by becoming
  its own supplier
• Forward integration, business growth encompasses
  a role previously fulfilled by a customer

Bartol, K.M., Martin, D.C., Tein, M., Matthews,
G., Management A Pacific Rim Focus,
McGraw-Hill, 2002.
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Growth Strategy - Cont.

• Diversification
• Conglomerate diversification when an organisation
  diversifies into areas unrelated to its current
  business
• Concentric diversification when an organisation
  diversifies into related, but distinct, business
• Growth strategies can be implemented by
• Internal growth
• An acquisition
• A merger

Bartol, K.M., Martin, D.C., Tein, M., Matthews,
G., Management A Pacific Rim Focus,
McGraw-Hill, 2002.
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Domestic Foreign Environments
Domestic Environment
Foreign Environments
Marketing Mix

• Product
• Place
• Price
• Promotion

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Definitions

• Domestic Environment
• The environment in an organisations home
  country.
• Foreign Environment
• The environment outside an organisations home
  country.
• Imports
• Foreign products purchased domestically.
• Exports
• Domestically produced products sold in foreign
  markets.

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Environment Types
Environment (Domestic, Foreign, World)
Macro- environment
Micro- environment
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Analysing environmental conditions

• Characteristics of the environment
• Uncertainty
• Condition in which future environmental
  circumstances affecting an organisation cannot be
  accurately assessed and predicted
• Complexity
• Number of elements in an organisations
  environment and their degree of similarity

• Bartol, K.M., Martin, D.C., Tein, M., Matthews,
  G., Management A Pacific Rim Focus,
  McGraw-Hill, 2002.

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Macro-environment

• The broad social forces that shape every business
  and non-profit marketer.
• Components of the Macro-environment
• Physical environment,
• Sociocultural forces,
• Demographic forces,
• Economic forces,
• Scientific knowledge and technology, and
• Political and legal forces.

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Macro-environmental Influence
Physical Environment
Sociocultural Forces
Demographic Forces
Marketing Mix
Economic Competitive Forces
Science Technology
Political Legal Forces
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Physical Environment

• The environment, domestic or foreign or both,
  consisting of natural resources and other aspects
  of the natural world.
• The availability of natural resources may have a
  direct and far-reaching impact on marketing
  activities in a geographical region.
• Climate influence on marketing
• Food and drinks
• Clothes
• Housing
• Oil

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Sociocultural Forces

• Social Values,
• Belief,
• Religion,
• Language,
• Cultural Symbols, and
• Ethnocentrism
• The tendency to consider our own culture and way
  of life as the natural and normal ones.

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Demographics

• Demography is defined as the study of the size,
  composition, and distribution of human population
  in relation to social factors such as geographic
  boundaries.
• The size, composition, and distribution of the
  population in any geographic market clearly
  influence marketing.

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Economic Competitive Forces

• Economic Systems
• Capitalism
• Socialism
• Communism
• Pure Competition
• Monopolistic Competition
• Oligopoly
• Monopoly

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Pure Competition

• A market structure that is characterised by
• No barriers,
• Free entry to the market,
• Steady demand and supply,
• Homogeneous (identical) product, and
• Many sellers and buyers, none of whom can control
  the price.
• Example is basic food commodities, such as rice,
  sugar, mushrooms, etc.

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Monopolistic Competition

• A market structure that is characterised by
• A large number of sellers offering slightly
  differentiated products, and
• exerting some control over their own price.
• The fast-food industry is a good example.

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Oligopoly

• A market structure that is characterised by
• a small number of sellers,
• who control the market.
• Competition may not be based on prices.
• Examples include some airline, telecommunication
  carriers, petrol companies etc.

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Monopoly

• A market structure that is characterised by
• a single seller in a market in which there are no
  suitable substitute products.
• Example Telecom Australia was seen as such
  before Optus and deregulation of the market.

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The Business Cycle

• Reflects recurrent fluctuation in general
  economic activity.
• Influences unemployment, inflation, and consumer
  spending and saving pattern.
• The phases of business cycle
• Prosperity
• Recession
• depression
• Recovery

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GDP GNP

• Gross Domestic Product
• The total value of all the goods and services
  produced by capital and workers in a country.
• Gross National Product
• The total value of all the goods and services
  produced by a nations residents or corporations,
  regardless of location.

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Science Technology

• Science
• The accumulation of knowledge about humans and
  the environment.
• Technology
• The application of science to practical purposes.

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Politics Law

• Political Environment - The practices and
  policies of governments.
• Legal Environment - Laws and regulations and
  their interpretation.
• Federal Level
• State Level
• Local Level
• International Laws

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Exercise

• Consider and compare the macro-environments of
  retailers such as Coles and Woolworths with
  telecoms companies such as Telstra and Ericsson.
• What are the major macro-environmental factors
  they have to contend with?

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Micro-environment

• Consists of the environmental forces that
  directly influence a company, such as its
  customers and the institutions that shape its
  marketing practice.
• Because of their more specific nature, it is more
  likely that the organisation can influence them,
  than it can the macro-environment elements.

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Elements of the Micro-environment

• The textbook refers to the 4 C s
• The company itself and its internal environment
• Customers
• Competitors
• Collaborators
• Suppliers
• Service providers banks, utilities
• Others
• Various labour markets, unions
• Specific government departments/agencies

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Organisational AssessmentBartol, K.M., Martin,
D.C., Tein, M., Matthews, G., Management A
Pacific Rim Focus, McGraw-Hill, 2002
Skills levels (competency profiles)
The organisations strengths and weaknesses
Information systems (up-to-date)?
Organisational culture
Tangible assets (buildings and equipment)
Sales and distribution channels
Liquidity (and other financial dimensions)
Organisational structure (flexibility)
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Keeping tabs on competitors

• Commercial databases
• Web searches
• Competitors web pages
• Specialty trade publications
• Local newspaper clippings
• Advertised vacancies
• Published market research
• Trade shows product literature
• Personal contacts
• Suppliers

• Bartol, K.M., Martin, D.C., Tein, M., Matthews,
  G., Management A Pacific Rim Focus,
  McGraw-Hill, 2002.

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Exercise

• Consider and compare the micro-environments of
  retailers such as Coles and Woolworths with
  telecoms companies such as Telstra and Ericsson.
• What are the major micro-environmental factors
  they have to contend with?

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Wednesdays lecture

• Global Information systems and marketing research

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References

• Zikmund, W. G. dAmico M. Marketing (1996, 5th
  Edition), West Publishing Company.
• Bartol, K.M., Martin, D.C., Tein, M., Matthews,
  G., Management A Pacific Rim Focus,
  McGraw-Hill, 2002.

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Thanks for your attention