© 2004 Mark H. Hansen External Factors in Marketing

External Factors 2 Firm & Rivals Suppliers Buyers Substitutes Entry Barriers Legal Ethical Economic Political Technology Social Demographic Global General Industry

External Factors 3 Porter’s Five Forces Threat of Entry Power of Suppliers Power of Buyers Threat of Substitutes Threat of Rivalry Competitor Analysis Consumer Behavior

External Factors 4 Porter’s Five Forces Threat of Rivalry High if: high fixed costs, storage costs many competitors, no leadership Low if: competitors that recognize interdependence high or growing demand

External Factors 5 Porter’s Five Forces Threat of Entry low barriers lead to high threat if more firms enter, profits are bid down

External Factors 6 Porter’s Five Forces Power of Suppliers few, large suppliers relative to focal firm High if: focal firm is highly dependent on supply

External Factors 7 Porter’s Five Forces Power of Buyers High if: few, large buyers relative to focal firm many buyers can act as a block (boycott)

External Factors 8 Porter’s Five Forces Threat of Substitutes High if: a close substitute exists a product which could fill the same need Close substitutes create constraints on pricing

External Factors 9 Competitor Analysis Who are they? firms that fill the same need products may not appear to compete Who is Carmike Theater’s competition? should be able to name competitors

External Factors 10 Competitor Analysis What are their Objectives? ORA Threat Model What are their Resources? Are their objectives and resources Aligned? The level of threat depends on all three elements

External Factors 11 General Environment Look at the general environment to spot trends changing trends signal opportunity and threat changes across multiple elements combine to create opportunity or threat which elements have changed to give Subway the incentive to market Atkins friendly food?

External Factors 12 General Environment Technology: communications, medicine, packaging Legal: active courts, product liability, deregulation Global: IMF, WTO, WHO, trading blocks, terror threat Social: health conscious, family issues, environment

External Factors 13 General Environment Demographics: age, income, education, ethnicity Political: environmental, regulation, consumer advocacy Ethical: honesty, fairness, pricing, use of data Economic: interest rates, unemployment, inflation

External Factors 14 Culture crosses the general-industry boundary may be shaped by external elements may shape external elements sum of learned beliefs, values, & customs effective marketers tap into these beliefs, values, & customs

External Factors 15 Analysis of external factors: allows marketers to identify a need allows marketers to help customers recognize latent needs informs marketers as to how best to fill needs Superior external analysis can lead to competitive advantage