Marketing Environment

Definition “The actors and forces outside marketing that affect marketing mgt’s ability to build and maintain successful relationships with target customers” – Kotler Today's markets change rapidly and marketers need to adopt their strategies and to meet new challenges and opportunities

The Environmental forces Marketing Environment -Macro- Technological factors Legal factors Marketing Environment -Micro- The Internal Environment COMPANY PESTLE Consumer PESTLE Supplier Political factors Economic factors Stakeholder Environmental factors Socio- Cultural factors The Marketing Environment

Micro Environment Macro Environment The actors close to the company that affect its ability to serve its customers Macro Environment The larger societal forces that affect the micro environment

Exercise :Internal Environment Money Material Machinery Markets (Analyzing in the context of Sri Lankan Airlines)

Micro Environment- Key Stakeholders Company Suppliers Competitors Customers Channel Partners Share holders & creditors Employees & Unions Pressure groups (Intermediaries)

Strengths Brand Product portfolio Financial Resources Managerial ability Knowledge/Skill Economies of scale Technology Weakness Lack of skilled labor High labor turn over Overcapacity Poor internal communication Supplier relationships Opportunity Investments Diversifying portfolio Global markets Internet Innovation Demand for high quality products Threats Competitor activity Supplier desertion Market saturation Substitute products Resistance to change

(Threat of Substitutes) Porters 5 Forces Potential Entrant (Threat of Mobility) Substitutes (Threat of Substitutes) Buyer (Buyer Power) Supplier (Supplier Power) Industry Rivalry

Industry Rivalry Sustainable competitive advantage through innovation Competition between online and offline companies Level of advertising expense Powerful competitive strategy Apple vs Anroid

Bargaining Power of Suppliers Supplier switching costs relative to firm switching costs Degree of differentiation of inputs Impact of inputs on cost or differentiation Presence of substitute inputs Strength of distribution channel Supplier concentration to firm concentration ratio Employee solidarity (e.g. labor unions) Supplier competition – ability to forward vertically integrate and cut out the BUYER

Bargaining Power of Buyers Buyer concentration to firm concentration ratio Degree of dependency upon existing channels of distribution Bargaining leverage, particularly in industries with high fixed costs Buyer switching costs relative to firm switching costs Buyer information availability Availability of existing substitute products Buyer price sensitivity Differential advantage (uniqueness) of industry products Key Accounts Chains

Threat of Substitutes Buyer propensity to substitute Relative price performance of substitute Buyer switching costs Perceived level of product differentiation Number of substitute products available in the market Ease of substitution Substandard product Quality depreciation Water vs Cola

Threat of New Competition The existence of barriers to entry (patents, rights, etc.) Economies of product differences Brand equity Switching costs Capital requirements Access to distribution Customer loyalty to established brand Absolute cost Industry profitability; the more profitable the industry the more attractive it will be to new competitors.

Analyzing the Macro Environment P Political E Economic S Social T Technological L Legal E Environmental

Political factors Main concern for business is for stability in political decision making, a dependable planning horizon and a positive climate Alert management to impending legislation Mobilize efforts to represent stakeholder interest to the legislators Develop awareness of the intentions of those public bodies that can make decisions affecting business operations Identify changes out of electoral shifts Implications of Political manifestos and philosophies of the party

Economic factors Business cycle Inflation GDP Economic policies Employment levels Disposable income

Social factors Trends in population Dependency ratio Population structure Occupational structure Regional distribution Marital status and household structure (Case: BMW)

Technological factors Technology is a primary driving force for social change Computer, mobile media and telecommunications are converging Credit transfers rather than cash based society Rise of the knowledge worker Rising proportion of IT and tele communications ownership (Case: Nike) 90’s. Bookshops generally just did not see AMAZON coming – until it was too late. Bookshops seemed to be convinced that people wanted to browse. They did want to browse – so Amazon included this feature in their Web Site.

Ecological factors What are the issues that will directly and indirectly impact the business How will the business mitigate this challenge? Assess stakeholder impact Can the environmental issues be used to ones advantage? What should be our strategic positioning? (Case: Marks & Spencer)

Legal factors Legislation governing business Legislation governing trade practices Laws governing packaging Price ceiling