© 2000 South-Western College Publishing Slide #1 Marketing Management 2nd Edition Chapter 3: Understanding the Environment and the Competition Michael R. Czinkota and Masaaki Kotabe

© 2000 South-Western College Publishing Slide #2 Chapter Outline l Growing Environmental Turbulence l Overall Environment l Sociocultural Environment l Technological Environment l Economic Environment l Political and Legal Environment l Environmental Analysis l Competition

© 2000 South-Western College Publishing Slide #3 Growing Environmental Turbulence 1900 Stable 1930 Reactive 1950 Anticipating 1970 Exploring 1990 Creative

© 2000 South-Western College Publishing Slide #4 Overall Environment InternalOrganization Marketing Environment External Environment Laws Technology Geography Culture Society Politics EconomyDemographics Suppliers Competitors

© 2000 South-Western College Publishing Slide #5 Sociocultural Environment l Societal trends l Goods-producing to service-producing l Materialist society to postmaterialist society l Demography

© 2000 South-Western College Publishing Slide #6 U.S. Age Groups Millions 77M born M born M born “Baby Boomers” 76M born “Baby Boomers”

© 2000 South-Western College Publishing Slide #7 Technological Environment l Electronic Data Interchange (EDI) l Merchandise scanning l Data sharing l Distribution relationships l Customer communication

© 2000 South-Western College Publishing Slide #8 Economic Environment l Globalization l Regional economic integration l NAFTA l European Union l MERCOSUR l Exchange rates l Currency flows

© 2000 South-Western College Publishing Slide #9 Political and Legal Environment l Laws and regulations l Intellectual property l Contract law l Interest groups l Stakeholders l Workers’ councils

© 2000 South-Western College Publishing Slide #10 Environmental Analysis Track information on political, social, and economic affairs; on changes in attitudes, and changes in the market. Example: Content analysis Method 1: Environmental Scanning

© 2000 South-Western College Publishing Slide #11 Environmental Analysis Aggregate judgment of a number of experts who cannot come together physically. Method 2: Delphi Studies

© 2000 South-Western College Publishing Slide #12 Environmental Analysis Group of employees identifies the forces of change within an industry. Method 3: Scenario Building

© 2000 South-Western College Publishing Slide #13 Competition: Industry Industry: Group of organizations that offer products that are near substitutes for each other. Important factors: l Size of the market l Number of organizations

© 2000 South-Western College Publishing Slide #14 Competitive Structure Issues affecting structure of competition: l Economies of scale l Government influence l Competitive history of firms l Distribution channels l Production capacity configuration

© 2000 South-Western College Publishing Slide #15 Forces Driving Competition Industrycompetitors Rivalry among existing firms Industrycompetitors Rivalry among existing firms BuyersBuyersSuppliersSuppliers SubstitutesSubstitutes Potential entrants Threat of new entrants Threat of substitute products Bargaining power of suppliers Bargaining power of buyers

© 2000 South-Western College Publishing Slide #16 Competitive Structure Three types of competitive response: l Nonresponse (or slow response) l Fast response l Focused response

© 2000 South-Western College Publishing Slide #17 Competitive Strategies Cost Leadership Product Differentiation Focus

© 2000 South-Western College Publishing Slide #18 Attack Strategies Attacker Defender Frontal attack Flank attack Encirclement attack Bypass attack Guerillawarfare