The Marketing Environment.

The Marketing Environment.

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What is the marketing environment?
The marketing environment surrounds and impacts upon the organization. There are three key perspectives on the marketing environment, namely the 'macro-environment,' the 'micro-environment' and the 'internal environment'.

micro-environment
This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence.

The macro-environment
This includes all factors that can influence and organization, but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology.

The internal environment.
All factors that are internal to the organization are known as the 'internal environment'. They are generally audited by applying the 'Five Ms' which are Men, Money, Machinery, Materials and Markets. The internal environment is as important for managing change as the external. As marketers we call the process of managing internal change 'internal marketing.'

Essentially we use marketing approaches to aid communication and change management.
The external environment can be audited in more detail using other approaches such as SWOT Analysis, Michael Porter's Five Forces Analysis or PEST Analysis.

Internal Marketing - Lesson
Internal marketing is an important 'implementation' tool. It aids communication and helps us to overcome any resistance to change. It informs, ands involves all staff in new initiatives and strategies. It is simple to construct, especially if you are familiar with traditional principles of marketing.

If not, it would be valuable to spend some time considering marketing plans. Internal marketing obeys the same rules as, and has a similar structure to, external marketing. The main differences are that your customers are staff and colleagues from your own organization.

Managing the implementation of internal marketing
In previous lessons, you will have seen that the process of marketing follows a familiar pattern for which we use the acronym AOSTC - Analysis, Objectives, Strategies, Tactics, and Control. In the diagram above, Jobber (1995) uses a similar approach as a structure for the implementation of internal marketing. The process is straightforward.
· Set objectives for internal marketing e.g. to persuade 100 staff to join a new Performance Related Pay (PRP) scheme.
· Your strategy is 'internal marketing.'
· Tactics would include an internal application of the marketing mix, and could include staff forums, presentations, an intranet, away days, videos, personal visits by company directors or newsletters.
· Evaluation would consider the take up of PRP against your objectives, attendees at away days, visits to an intranet page, and so on..

Let's have a look a closer look at the practicalities of internal marketing.
At this stage internal marketing meets traditional 'change management.' Firstly you should identify your internal customers. As with your external customers, they will have their own buyer behavior, or way of 'buying into' the changes which you are charged to implement. The similarities in differing groups of internal customers allows you to segment them. As Jobber (1995) explains, you can target three different segments namely 'supporters,' neutral,' and finally 'opposers.' Each group requires a slightly different internal marketing mix in order that your internal marketing objectives can be achieved.

For example, if the change was that a company was to relocate closer to its market, you could target 'supporters' with a tailor-made relocation video explaining about the lower property prices in the new location; 'neutral' internal customers could be targeted with incentives such as pay increases; and 'opposers' could be coerced, or forced to accept the change regardless.

How do we plan for a change program?
· Always make sure that you have thought through your approach before starting the implementation.
· Make sure that you have created a cultural climate that is willing to accept change.
· Appoint a change agent, or champion for change that will help to ease your changes through.
· Audit the skills and capabilities of your team. Train and develop as necessary.
· Your team must be built around you with the objective as the focus for you all.
· The change must be correctly marketed to your target audience using an approach such as Jobbers.'
· Decide what the change will be. Give it boundaries.
· Decide upon the plan.
· Work out a realistic budget and stick to it.
· Try to anticipate the arguments against change, and decide how to counteract them positively.

SWOT Analysis: Lesson
Strengths, Weaknesses, Opportunites and Threats (SWOT).
SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.
At the bottom of this page are FREE SWOT examples - so please read on.
In SWOT, strengths and weaknesses are internal factors.

For example:A strength could be:
· Your specialist marketing expertise.
· A new, innovative product or service.
· Location of your business.
· Quality processes and procedures.
· Any other aspect of your business that adds value to your product or service.

A weakness could be:
· Lack of marketing expertise.
· Undifferentiated products or services (i.e. in relation to your competitors).
· Location of your business.
· Poor quality goods or services.
· Damaged reputation.

In SWOT, opportunities and threats are external factors. For example: An opportunity could be:
· A developing market such as the Internet.
· Mergers, joint ventures or strategic alliances.
· Moving into new market segments that offer improved profits.
· A new international market.
· A market vacated by an ineffective competitor.

A threat could be:
· A new competitor in your home market.
· Price wars with competitors.
· A competitor has a new, innovative product or service.
· Competitors have superior access to channels of distribution.
· Taxation is introduced on your product or service.

A word of caution, SWOT analysis can be very subjective. Do not rely on SWOT too much. Two people rarely come-up with the same final version of SWOT. TOWS analysis is extremely similar. It simply looks at the negative factors first in order to turn them into positive factors.

So use SWOT as guide and not a prescription.

Simple rules for successful SWOT analysis.
· Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis.
· SWOT analysis should distinguish between where your organization is today, and where it could be in the future.
· SWOT should always be specific. Avoid grey areas.
· Always apply SWOT in relation to your competition i.e. better than or worse than your competition.
· Keep your SWOT short and simple. Avoid complexity and over analysis
· SWOT is subjective.

Once key issues have been identified with your SWOT analysis, they feed into marketing objectives. SWOT can be used in conjunction with other tools for audit and analysis, such as PEST analysis and Porter's Five-Forces analysis. So SWOT is a very popular tool with marketing students because it is quick and easy to learn. During the SWOT exercise, list factors in the relevant boxes. It's that simple. Below are some FREE examples of SWOT analysis - click to go straight to them

Do you need a more advanced SWOT Analysis?
Some of the problems that you may encounter with SWOT are as a result of one of its key benefits i.e. its flexibility. Since SWOT analysis can be used in a variety of scenarios, it has to be flexible. However this can lead to a number of anomalies. Problems with basic SWOT analysis can be addressed using a more critical POWER SWOT.

SWOT Analysis Examples
A summary of FREE SWOT analyses case studies are outlined as follows (those in the table above are far more detailed and FREE!):

Example 1 - Wal-Mart SWOT Analysis. Strengths - Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.Weaknesses - Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.Opportunities - To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region. Threats - Being number one means that you are the target of competition, locally and globally.

Example 2 - Starbucks SWOT Analysis. Strengths - Starbucks Corporation is a very profitable organisation, earning in excess of $600 million in 2004.Weaknesses - Starbucks has a reputation for new product development and creativity. Opportunities - New products and services that can be retailed in their cafes, such as Fair Trade products. Threats - Starbucks are exposed to rises in the cost of coffee and dairy products.

Example 3 - Nike SWOT Analysis. Strengths - Nike is a very competitive organisation. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.'Weaknesses - The organisation does have a diversified range of sports products. Opportunities - Product development offers Nike many opportunities. Threats - Nike is exposed to the international nature of trade.

SWOT Analysis - POWER SWOT.
Marketing Teacher's Approach to SWOT Analysis.
Why is there a need for an advanced approach to SWOT Analysis?
SWOT analysis is a marketing audit that considers an organization's strengths, weaknesses, opportunities and threats. Our introductory lesson gives you the basics of how to complete your SWOT as you begin to learn about marketing tools. As you learn more about SWOT analysis, you will become aware of a number of potential limitations with this popular tool. This lesson aims to help you overcome potential pitfalls.

Some of the problems that you may encounter with SWOT are as a result of one of its key benefits i.e. its flexibility. Since SWOT analysis can be used in a variety of scenarios, it has to be flexible. However this can lead to a number of anomalies. Problems with basic SWOT analysis can be addressed using a more critical POWER SWOT. POWER is an acronym for Personal experience, Order, Weighting, Emphasize detail, and Rank and prioritize. This is how it works.
P = Personal experience.
How do you the marketing manger fit in relation with the SWOT analysis? You bring your experiences, skills, knowledge, attitudes and beliefs to the audit. Your perception or simple gut feeling will impact the SWOT.

O = Order - strengths or weaknesses, opportunities or threats.
Often marketing managers will inadvertently reverse opportunities and strengths, and threats and weaknesses. This is because the line between internal strengths and weaknesses, and external opportunities and threats is sometimes difficult to spot. For example, in relation to global warming and climate change, one could mistake environmentalism as a threat rather than a potential opportunity.

W = Weighting.
Too often elements of a SWOT analysis are not weighted. Naturally some points will be more controversial than others. So weight the factors. One way would be to use percentages e.g. Threat A = 10%, Threat B = 70%, and Threat C = 20% (they total 100%).

E = Emphasize detail.
Detail, reasoning and justification are often omitted from the SWOT analysis. What one tends to find is that the analysis contains lists of single words. For example, under opportunities one might find the term 'Technology.' This single word does not tell a reader very much. What is really meant is:

'Technology enables marketers to communicate via mobile devices close to the point of purchase. This provides the opportunity of a distinct competitive advantage for our company.'
This will greatly assist you when deciding upon how best to score and weight each element.

R = Rank and prioritize.
Once detail has been added, and factors have been reviewed for weighting, you can then progress to give the SWOT analysis some strategic meaning i.e. you can begin to select those factors that will most greatly influence your marketing strategy albeit a mix of strengths, weaknesses, opportunities and threats. Essentially you rank them highest to lowest, and then prioritize those with the highest rank

e.g. Where Opportunity C = 60%, Opportunity A = 25%, and Opportunity B = 10% - your marketing plan would address Opportunity C first, and Opportunity B last. It is important to address opportunities primarily since your business should be market oriented. Then match strengths to opportunities and look for a fit. Address any gaps between current strengths and future opportunities. Finally attempt to rephrase threats as opportunities (as with global warming and climate change above), and address weaknesses so that they become strengths. Gap analysis would be useful at this point i.e. where we are now, and where do we want to be? Strategies would bridge the gap between them.

Five Forces Analysis
Analyzing the environment - Five Forces Analysis
Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PEST analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products. For example, Dell would analyse the market for Business Computers i.e. one of its SBUs.
Five forces analsysis looks at five key areas namely the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry.

The threat of entry.
· Economies of scale e.g. the benefits associated with bulk purchasing.
· The high or low cost of entry e.g. how much will it cost for the latest technology?
· Ease of access to distribution channels e.g. Do our competitors have the distribution channels sewn up?
· Cost advantages not related to the size of the company e.g. personal contacts or knowledge that larger companies do not own or learning curve effects.
· Will competitors retaliate?
· Government action e.g. will new laws be introduced that will weaken our competitive position?
· How important is differentiation? e.g. The Champagne brand cannot be copied. This desensitises the influence of the environment.

The power of buyers.
· This is high where there a few, large players in a market e.g. the large grocery chains.
· If there are a large number of undifferentiated, small suppliers e.g. small farming businesses supplying the large grocery chains.
· The cost of switching between suppliers is low e.g. from one fleet supplier of trucks to another.

The power of suppliers.
The power of suppliers tends to be a reversal of the power of buyers.
· Where the switching costs are high e.g. Switching from one software supplier to another.
· Power is high where the brand is powerful e.g. Cadillac, Pizza Hut, Microsoft.
· There is a possibility of the supplier integrating forward e.g. Brewers buying bars.
· Customers are fragmented (not in clusters) so that they have little bargaining power e.g. Gas/Petrol stations in remote places.

The threat of substitutes
· Where there is product-for-product substitution e.g. email for fax Where there is substitution of need e.g. better toothpaste reduces the need for dentists.
· Where there is generic substitution (competing for the currency in your pocket) e.g. Video suppliers compete with travel companies.
· We could always do without e.g. cigarettes.

Competitive Rivalry
· This is most likely to be high where entry is likely; there is the threat of substitute products, and suppliers and buyers in the market attempt to control. This is why it is always seen in the center of the diagram.

PEST Analysis.
What is PEST Analysis?
It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning.

The organization's marketing environment is made up of:
1. The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc.
2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our competitors, etc.
3. The macro-environment e.g. Political (and legal) forces, Economic forces, Sociocultural forces, and Technological forces. These are known as PEST factors.

Political Factors.
The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:
1.How stable is the political environment?
2.Will government policy influence laws that regulate or tax your business?
3.What is the government's position on marketing ethics?
4. What is the government's policy on the economy?
5. Does the government have a view on culture and religion?
6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

Economic Factors.
Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:
1. Interest rates.
2. The level of inflation Employment level per capita.
3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.

Sociocultural Factors.
The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:
1.What is the dominant religion?
2.What are attitudes to foreign products and services?
3.Does language impact upon the diffusion of products onto markets?
4.How much time do consumers have for leisure?
5.What are the roles of men and women within society?
6.How long are the population living? Are the older generations wealthy?
7.Do the population have a strong/weak opinion on green issues?

Technological Factors.
Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:
1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?
2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?
3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?
4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

Bojourn........... !!!!!!!!!!!!!!! agarbandhu