Strategic Marketing Topic 2: Environmental and internal analysis: market information and intelligence

Structure C. WHERE DO WE WANT TO BE? B. WHERE ARE WE NOW? A. INTRODUCTION 1. Overview and Strategy Blueprint 2. Marketing Strategy: Analysis & perspectives B. WHERE ARE WE NOW? 3. Environmental & Internal Analysis: Market Information & Intelligence C. WHERE DO WE WANT TO BE? 4. Strategic Marketing Decisions, Choices & Mistakes 5. Segmentation, Targeting & Positioning Strategies 6. Branding Strategies 7. Relational & Sustainability Strategies E. DID WE GET THERE? 14. Strategy Implementation, Control & Metrics D. HOW WILL WE GET THERE? 8. Product Innovation & Development Strategies 9. Service Marketing Strategies 10. Pricing & Distribution 11. Marketing Communications 12. E-Marketing Strategies 13. Social and Ethical Strategies

Learning Objectives To review the three stages/areas of the Strategic Marketing Management Process (SMM) To define the marketing environment and its components To review the analytical models/frameworks that can be used in the strategic analysis stage To outline the outcome of the strategic marketing analysis 3

Strategic analysis Strategic analysis is concerned with understanding the strategic position of the organisation in terms of its external environment, internal resources and competencies, and the expectations and influence of stakeholders Johnson and Scholes (2005) 4

WHERE ARE WE NOW? Environmental and Internal Analysis What are the major trends and probable changes in the marketing environment? Who are the main competitors, and how can we differentiate our company from competition? Who are our target customers & what are their needs? What competitive advantages and core competences do we have? 5

The marketing environment Company Microenvironment Suppliers Customers Distributors Competitors Macroenvironment Political/Legal Environment Technological Social Economic 6

Macro (remote) environment: PESTLE model Political Factors Political stability Regime orientations Government stability Pressure groups Trades union power A framework that assists in analyzing the external (remote) environment and identifying the existing opportunities & threats 7

Economic Factors Business Cycles ‘Interest rates Inflation rates Investment levels Unemployment GNP trends Patterns of owndership

PESTLE framework for environmental analysis Socio-cultural Factors Demographics Lifestyles Social mobility Educational levels Attitudes Consumerism

PESTLE framework for environmental analysis Technological Factors Levels and focuses of government and industrial R & D expenditure Speed of technology transfer Product life cycles Legal Factors Legislative structures Anti trust laws Trade policies Employment legislation Foreign trade regulation

PESTLE framework for environmental analysis Environment Factors Sustainability legislation Green issues Energy supply

Environmental impact matrix: Macro (Remote) Environment Factor Impact of Factor Potential opportunity or threat Political/legal Increased legislation on product liability Mild threat (-1) Economic Recession in key overseas markets Major threat (-4) Technological Little innovation likely from competitors Neutral impact (0) Socio-cultural Increased awareness of environmental protection issues Significant opportunity (+5)

ENVIRONMENTAL IMPACT MATRIX: Competitive Environment Factor Impact of Factor Potential opportunity or threat Competition Intense rivalry in industry/market place Critical threat (-5) Buyers Convergence of customer requirements worldwide Significant opportunity (+5) Suppliers Few suppliers dominate the industry Threat of new entrants Industry barriers to entry low Threat (-3)

Strategic analysis of the micro (competitive) environment Industry definition based on brand competition – Ford competing with fiat, Toyota, Nissan, Honda and not Mercedes, BMW. Industry definition based on product competition- Ford competing against all automobile manufacturers. Industry definition based on form competition- Ford competition against not only car manufacturer but against all vehicles form like cycle, ship, trucks. Industry definition based on generic competition- Ford might compete against companies that sell major consumer durables, houses.

A Model of Industry Analysis Define industry structure and characteristics Identify and analyze strategic groups Identify and describe key competitors Evaluate Key competitors Anticipate actions by competitors Identify new competitors Product – market structure and market segments

Analysis of internal environment Two models to use: Resource audit financial resources, human resources, physical resources, intangible resources Porter’s Value Chain Model: Help analysing Firm’s Competitive Advantage and Core Competencies 16

Porters Five forces model

Competitor analysis Identifying the company's competitors Understanding competitors objectives Identifying competitors strategies Assessing competitors strengths and weaknesses Estimating competitors reactions Selecting competitors to attack and those to avoid.

Types of competitors The laid back The selective competitor- competitor-does not react quickly or strongly to a given assault. The selective competitor- might react to certain types of assault and not others. The Tiger competitor- react swiftly and strongly to any assaults The stochastic competitor- Does not exhibit a predictable reaction pattern.

A Resource Based approach to strategy analysis Identify and classify the firm resources. Appraise strengths and weaknesses relative to competitors. Identify the opportunities for better utilization Select strategy which best exploits the firms resources and capabilities relative to external opportunities Strategy Appraise the rent-generating potential of resources and capabilities in terms of : a) their potential for sustainable competitive advantage and b) the appropriability of their returns 5. Identify resources gaps which need to be filled. Invest in replenishing, augmenting and upgrading the firm’s resource base. Competitive Advantage Identify the firm capabilities: what can the firm do more effectively than its rivals? Identify the resources inputs to each capability, and the complexity of each capability Capabilities Resources

VALUE CHAIN ANALYSIS: Identifying Competitive Advantage Competitive advantage will arise through: Providing buyer value comparable to competitors but performing value chain activities more efficiently – cost based advantage and / or Performing value chain activities in unique ways that create greater buyer value than competitors and hence command a premium price – differentiation based advantage 21

Value Chain Model

STRATEGIC CAPABILITY PROFILE Resource Audit Internal area Resource/competence Evaluation Physical resources New facilities incorporating latest technology Major strength (+4) Human resources Highly trained technical staff Top scientists recruited Minor strength (+2) Financial resources High gearing Mild weakness (-2)

STRATEGIC CAPABILITY PROFILE Value Chain Activities Internal Area Resource/competence Evaluation Intangibles Strong corporate image in the marketplace Well-established brand names Significant strength (+5) Significant strength (+4) Inbound logistics/procurement Over-reliance on a limited no. of suppliers Significant weakness (-4) Outbound logistics Ineffective warehouse automation Weakness (-3) Human resource management High levels of absenteeism/poor industrial relations record

Strategic fit ‘Strategic Fit’ is the effective match and management of the environmental opportunities and threats while taking into account the organisation strengths and weaknesses 25

SWOT analysis Integrates the internal and external environmental analysis Not just a list of SWOT variables! SWOT/TOWS Matrix can be helpful SWOT/TOWS analysis is the alternative ways in which an organisation can use its specific strengths to capitalise on opportunities or to minimise threats and invest in available opportunities to overcome its weaknesses 26

SWOT / TOWS Matrix

SWOT (TOWS) matrix 28

Conclusion Strategic marketing management (SMM) process covers 3 areas; strategic analysis, strategic choice and strategy implementation Strategic analysis involves the collection and analysis of relevant types of information about the environmental forces and trends, and organisational resources and capabilities External (macro) environment can be analysed using PESTLE model, while the micro environment could be examined using Porter Five forces model. The internal environment can be assessed using various models, most notably is the ‘value chain’ approach The effectiveness of any marketing intelligence system is dependent on the frequency of collecting, interpreting, and disseminating the information required about the marketing environment & competition SWOT analysis is an important foundation for producing realistic and meaningful strategic recommendations for the firm’s future directions 29