UNIT 4: Marketing Principles Micro and Macro Environment 1

Internal and External Forces Micro & Macro Environment The aim of today’s lecture is to view how internal and external influencers could affect a business and its overall strategic development. 2

Internal and External Forces Micro & Macro Environment By the end of this learning sessions, all students should be able to:- Explain what is a SWOT Analysis, and its purpose within a business. Explain and identify key areas of a Pestel Analysis, and its key function to a business. 3

Internal and External Forces Micro & Macro Environment Explain the key differences between Micro and Macro Environment, and which External Force is currently present within the UK. To explain SWOT and PESTEL Analysis through group discussion and presentation in reference to a given company – (e.g. Argos). 4

Definition of Marketing Environment “the factors and forces external to the marketing management function of the firm that impinge on the marketing management’s ability to develop and maintain successful transactions with its customers” (Kotler 1997) 5

Components of the Marketing Environment Micro-environment - Internal Macro-environment - External 6

Internal Environment SWOT ANALYSIS Positive Internal Factors Negative STRENGTHS WEAKNESSES External Factors Opportunities Threats 7

SWOT ANALYSIS TESCO Supermarket Activity: (Pairs) To carry out a SWOT Analysis in reference to the above company. (See handout also– page 4) (15 Min) 8

Swot Analysis Internal Tool Strengths Technological skills Leading Brands Reputation Production quality Management Weaknesses Lack of skills Weak brands Accessibility/ distribution Low customer retention Management 9

Swot Analysis Cont Opportunities New Market Changing customer tastes Change in population age structure Technological advances Changes in government policies New distribution channels Threats Changing in customer tastes Closing of geographic market Technological advance Tax increases Changes in government politics New distribution channels 10

The Macro-Environment Comprises general forces and trends rather than specific to organisations. Macro-economic environment Political environment Social and cultural environment Demographic environment Technological environment 11

PESTEL ANALYSIS (Tool) Political Economical Social Technological Environmental Legislation 12

MACRO-ECONOMIC ENVIRONMENT How much money do consumers have available to spend? How much will they have in the future? How fierce is competition in the market? 13

POLITICAL ENVIRONMENT What are politicians saying that might affect our customers and our marketing activities? Cuts in government spending? New tax allowances? What external pressures are influencing politicians? 14

Economical Environment Increase interest rates this makes it more expensive for both industrialists and consumers to borrow money What is the current state of the UK economy and the effect on consumers and businesses?

SOCIAL AND CULTURAL ENVIRONMENT What will be the challenges and opportunities arising from greater cultural diversity? Cultural convergence or a greater need for cultural identity? Attitudes to 24/7 society? 16

Social Environment Cont DEMOGRAPHIC ENVIRONMENT More affluent, fit, elderly people in the population What other demographic trends have marketers reacted to? What changes should they be anticipating? 17

TECHNOLOGICAL ENVIRONMENT How will new technology affect marketing? new products? new promotional media? new distribution channels? 18

ECOLOGICAL ENVIRONMENT Growing concern about the ecological environment – e.g. global warming Ecological environment is a resource for business Good marketers need to be seen not to harm it 19

Monitoring and Responding to Environmental Change Organisations that do not adapt may decline and dies…. To avoid this, organisations must:- Understand what is going on in their business environment Respond and adapt to this change 20

Monitoring and Responding to Environmental Change Information about the environment is crucial, but will not produce decisions. 21

Stakeholder Analysis 22

For further reading, refer to PowerPoint on Stakeholder Perspective Stakeholder Analysis For further reading, refer to PowerPoint on Stakeholder Perspective

Porter’s Five Forces Assessing the Balance of Power in a Business Situation The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into. With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations.

Porter’s Five (Cont) Supplier Power Here the company will need to assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices the company has, the more they need suppliers' help, the more powerful their suppliers are.

2. Buyer Power - Here you ask yourself how easy it is for buyers to drive prices down 3. Competitive Rivalry - What is important here is the number and capability of the organisation competitors, i.e. supermarkets. 4. Threat of Substitution - This is affected by the ability of your competitors to find a different way of doing what you do. 5. Threat of New Entry - Power is also affected by the ability of other companies to enter your market.

Porter’s Five Forces - Model

Relationships Between Members of the Micro-Environment Organisations that make up a company’s micro-environment are referred to as the “environmental set”. Membership and relationships between them change over time. Palmer (2001) Principles of Marketing. England: Oxford University Press 28

Bibliography KOTLER, P. ET AL (2001) Principles of Marketing. 3rd European Edition; Harlow: Prentice Hall. PALMER, A. (2001) Principles of Marketing. England: Oxford University Press 29