1. AGRI INPUT MARKETING MARKETING ENVIRONMENT CHAPTER II R.SHRIKANTH
ASSOC.PROFESSOR
FOOD AND AGRI BUSINESS SCHOOL

2. INTRODUCTION
The Market Environment is a marketing term and refers to factors and forces that affect a firm’s ability to build and maintain successful relationships with customers.

3. Importance of environment
The success of a marketing organization depends on its ability to adapt to its environment
Changes in environment increase uncertainty and environmental analysis helps reduce this uncertainty
Failure to exploit/adapt to change leads to marketing failure

4. Objectives Why is Marketing environmental analysis important?
What constitutes the marketing environment?

5. NEED FOR UNDERSTANDING THE TOPIC
Globalization and liberalization of Indian economy has altered agriculture input marketing environment .
Changed business environment has brought in rapid pace of advances in production technologies, created increasingly competitive marketplace, and resulted in thin profit margins for marketing agencies.
In old government controlled traditional agricultural input marketing environment, selling of agri inputs was very smooth affair as it was essentially seller driven market.
Present agriculture input marketing environment has thrust agricultural suppliers into intense battles for customers pushing their agricultural sales professional into front lines of the battle.
Changed marketing landscape has necessitated need for adoption of efficient marketing strategies to market new ideas and services to farm customers.

6. Marketing Environment Analysis
The marketing environment surrounds and impacts upon the organization. There are three key elements to the marketing environment which are ;
Micro (internal) environment - forces within the company that affect its ability to serve its customers.
Meso environment – the industry in which a company operates and the industry’s market(s).
Macro (national) environment - larger societal forces that affect the microenvironment.

7. Methods of Marketing Environment Analysis
PEST/PESTLE Analysis
Porter Five Forces Analysis
SWOT Analysis
5 C Analysis
Porter Diamond Model

8. PEST ANALYSIS
PEST analysis is also known as: STEP, PESTEL, PESTLE, PESTE, PESTLIED, SLEPT, STEEPLE, STEEPLED, LE PEST C and LEPEST analysis, looks at the external business environment.
P= Political factors
E= Economical factors
S= Socio cultural factors
T= Technological factors
L= Legal factors
E= Environmental Factors

9. PEST ANALYSIS….. Contd… Political Factors:
The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:
How stable is the political environment?
Will government policy influence laws that regulate or tax your business?
What is the government's position on marketing ethics?
What is the government's policy on the economy?
Does the government have a view on culture and religion?
Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

10. PEST ANALYSIS….. Contd… Economic Factors.
Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:
Interest rates.
The level of inflation Employment level per capita.
Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.

11. PEST ANALYSIS….. Contd… Socio cultural Factors.
The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:
What is the dominant religion?
What are attitudes to foreign products and services?
Does language impact upon the diffusion of products onto markets?
How much time do consumers have for leisure?
What are the roles of men and women within society?
How long are the population living? Are the older generations wealthy?
Do the population have a strong/weak opinion on green issues?

12. PEST ANALYSIS….. Contd… Technological Factors.
Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:
Does technology allow for products and services to be made more cheaply and to a better standard of quality?
Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?
How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?
Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

13. PEST ANALYSIS USEFULNESS
PEST analysis is an appropriate strategic tool for understanding the "big picture" of the environment in which business operates, enabling the company to take advantage of the opportunities and minimize the threats faced by their business activities.
By looking to the outside environment to see the potential forces of change looming on the horizon, firms can take the strategic planning process out of the arena of today and into the horizon of tomorrow.

14. Porter Five Forces Analysis

15. Porter Five Forces Analysis….contd..
Five Forces Analysis helps the marketer to contrast a competitive environment.
It tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products.
It looks at :
Threat of new entrants.
Threat of substitutes.
Bargaining Power of buyers.
Bargaining Power of suppliers.
Competitive rivalry.

16. Porter Five Forces Analysis….contd..
Threat of new entrants:
Economies of scale e.g. the benefits associated with bulk purchasing.
The high or low cost of entry e.g. how much will it cost for the latest technology?
Ease of access to distribution channels e.g. Do our competitors have the distribution channels sewn up?
Cost advantages not related to the size of the company e.g. personal contacts or knowledge that larger companies do not own or learning curve effects.
Will competitors retaliate?
Government action e.g. will new laws be introduced that will weaken our competitive position?
How important is differentiation? e.g. The Champagne brand cannot be copied. This desensitizes the influence of the environment.
This is high, where there a few, large players in a market e.g. the large grocery chains.
If there are a large number of undifferentiated, small suppliers e.g. small businesses supplying the market for biofertilizers.
The cost of switching between suppliers is low e.g. from one fleet supplier of trucks to another.

17. Porter Five Forces Analysis….contd..
Threat of Substitutes :
Where there is product-for-product substitution e.g. chemical for bio fertilizers, Where there is substitution of need e.g. Disease resistant varieties reduces the need for pesticides.
Where there is generic substitution (competing for the currency in your pocket) e.g. Video suppliers compete with travel companies.
We could always do without e.g. cigarettes.

18. Porter Five Forces Analysis….contd..
Bargaining Power of Suppliers :The power of suppliers tends to be a reversal of the power of buyers.
Where the switching costs are high e.g. Switching from one practice to another.
Power is high where the brand is powerful e.g. Rallis, Bayer, Monsanto.
There is a possibility of the supplier integrating forward e.g. suppliers starting farming.
Customers are fragmented (not in clusters) so that they have little bargaining power e.g. Small Scale Farmers.

19. Porter Five Forces Analysis….contd..
Competitive rivalry :
This is most likely to be high where
entry is likely;
there is the threat of substitute products,
Suppliers and buyers in the market attempt to control.
This is why it is always seen in the center of the diagram.

20. Situation Analysis /5 C analysis
In order to profitably satisfy customer needs, the firm first must understand its external and internal situation, including the customer, the market environment, and the firm's own capabilities. Furthermore, it needs to forecast trends in the dynamic environment in which it operates.

21. 5 C analysis……. Contd…
The 5C analysis is an environmental scan on five key areas especially applicable to marketing decisions. It covers the Micro, the Meso-environmental, and the macro-environmental situation. It includes:
Company
Customer
Competition
Collaborators
Climate

22. 5 C analysis……. Contd… Company Product line Image in the market
Technology and experience
Culture
Goals

23. 5 C analysis……. Contd…
Collaborators
Distributors
Suppliers
Alliances

24. 5 C analysis……. Contd… Customers Market size and growth
Market segments
Benefits that consumer is seeking, tangible and intangible.
Motivation behind purchase; value drivers, benefits vs. costs
Decision maker or decision-making unit
Retail channel - where does the consumer actually purchase the product?
Consumer information sources - where does the customer obtain information about the product?
Buying process; e.g. impulse or careful comparison
Frequency of purchase, seasonal factors
Quantity purchased at a time
Trends - how consumer needs and preferences change over time

25. 5 C analysis……. Contd… Competitors Actual or potential
Direct or indirect
Products
Positioning
Market shares
Strengths and weaknesses of competitors

26. 5 C analysis……. Contd… Climate (or context)
Political & regulatory environment - governmental policies and regulations that affect the market
Economic environment - business cycle, inflation rate, interest rates, and other macroeconomic issues
Social/Cultural environment - society's trends and fashions
Technological environment - new knowledge that makes possible new ways of satisfying needs; the impact of technology on the demand for existing products.
The analysis of the these four external "climate" factors often is referred to as a PEST ANALYSIS.

27. PORTER DIAMOND ANALYSIS
Model given by Michael E. Porter , suggests that there are inherent reasons why some nations, and industries within nations, are more competitive than others on a global scale.
The national home base of an organization provides organizations with specific factors, which will potentially create competitive advantages on a global scale.
Porter's model includes 4 determinants of national advantage.

28. DIAMOND ANALYSIS…. Contd…

29. DIAMOND ANALYSIS…. Contd…
FactorConditions Factors that can be exploited by companies in a given nation and seen as advantageous factors found within a country that are subsequently built upon by companies to more advanced factors of competition.
Some examples of factor conditions:
Highly skilled workforce
Linguistic abilities of workforce
Rich amount of raw materials
Workforce shortage

30. DIAMOND ANALYSIS…. Contd…
Demand conditions
If the local market for a product is larger and more demanding at home than in foreign markets, local firms potentially put more emphasis on improvements than foreign companies, potentially increasing the global competitiveness of local exporting companies.
A more demanding home market can thus be seen as a driver of growth, innovation and quality improvements.
For instance, Japanese consumers have historically been more demanding of electrical and electronic equipment than western consumers. This has partly founded the success of Japanese manufacturers within this sector.

31. DIAMOND ANALYSIS…. Contd…
Related and Supporting Industries
When local supporting industries and suppliers are competitive, home country companies will potentially get more cost efficient and receive more innovative parts and products, potentially leading to greater competitiveness for national firms.
For instance, the Italian shoe industry benefits from a highly competent pool of related businesses and industries, which has strengthened the competitiveness of the Italian shoe industry world-wide.

32. DIAMOND ANALYSIS…. Contd…
Firm Strategy, Structure, and Rivalry
The structure and management systems of firms like hierarchical, or flat and organic organizational structure in different countries can potentially affect competitiveness.
For example:
German firms are oftentimes very hierarchical, which has resulted in advantages within industries such as engineering.
Danish firms are oftentimes more flat and organic, which leads to advantages within industries such as biochemistry and design.

33. USEFULNESS OF DIAMOND ANALYSIS
Analyze which competitive factors may reside in their company's home country.
which of these factors may be exploited to gain global competitive advantages.
Porter's diamond model can be used during a phase of internationalization, in which leaders may use the model to analyze whether or not the home market factors support the process of internationalization.
whether or not the conditions found in the home country are able to create competitive advantages on a global scale.
Finally, business leaders may use this model to asses in which counties to invest, and to assess which countries are most likely to be able to sustain growth and development.