1. INDUSTRY ANALYSIS

2. Definition: The Company’s environment consists of: "the actors and forces outside marketing that affect marketing management's ability to develop and maintain successful transactions with its target customers“ Kotler 1994

3. Introduction
Companies must evaluate both micro and macro-environment to identify
any trends that may affect marketing strategies, and
opportunities that can be developed into competitive
advantages
Porter's Five Forces model analyses market structures to determine market attractiveness taking into consideration the micro and macro environments in its construction

4. Company’s Microenvironment
Relates to the internal forces or forces close to the
company over which some control is possible
Top management
Other functions e.g. finance and accounting, R& D, manufacturing and purchasing
Suppliers
Marketing intermediaries (channel partners)
Customers
Competitors
Public

5. Company’s Macro-environment
Relates to the larger forces having an impact on society as a whole
A company has little influence on these forces and therefore can only adapt its marketing mix to account for the resulting opportunities and threats.

6. Components of the General Environment
Demographic
Economic
Industry Environment
Political/Legal
Global
Competitive
Environment
Technological
Socio cultural 10

7. Major forces of the macro-environment
Demographic
Economic
Natural
Technological
Cultural
Political/legal

8. Demographic Environment
Demographic trends:
Changing age structure
Changing family structure
Geographic shifts in population
Higher education level & more white collar job holders
Increasing globalization of cities

9. Economic Environment Change in per capital real income Savings & debt
Economic trends affecting consumers buying power
and spending pattern
Change in per capital real income
Disposable (Not Refundable)
Discretionary (Flexible)
Income distribution
Savings & debt
Consumer expenditures
Change in interest rates and cost of living

10. Natural environment
Natural trends include those natural resources used
in production or those affected by marketing
Activities.
Raw material shortages
Increase in energy cost
Increase pollution levels
Increase in Governmental intervention in natural resource management

11. Technological Environment
Consists of forces that affect new technology, new
product development and market opportunities
Faster pace of technological change
Shorter PLC
Higher R&D budgets
Concentration on minor improvements
Increased regulations

12. Cultural Environment Affect society's basic values, perceptions,
preferences and behaviors
Core cultural values and beliefs.
Secondary cultural values.
Sub cultures.

13. Legal and Political Environment
Trends in the legal and political environment include
Increased legislation regulating business
Changing government agency enforcement
Growth of public interest groups
Regional groupings

14. Competitive Analysis Who are your competitors?
Do you know about your close competitors’ strengths and weaknesses?
How detail should we analyze the competition?
Use a systematic approach
Analysis competition at various levels (next slide) *

17. 1. Core Product Competition
This is the basic product and the focus is on the purpose for which the product is intended. For example, a warm coat will protect you from the cold and the rain.
2. Generic Product Competition
This represents all the qualities of the product. For a warm coat this is about fit, material, rain repellent ability, high-quality fasteners, etc.
Competition among products that are different, but solve the same problem or provide the same benefit or utility, such as-
Audio cassettes and CDs, Adhesive tape, Glue-sticks, Carpets and Tiles.

18. 3. Expected Product Competition
This is about all aspects the consumer expects to get when they purchase a product.
That coat should be really warm and protect from the weather and the wind and be comfortable when riding a bicycle.
4. Augmented Product Competition
This refers to all additional factors which sets the product apart from that of the competition.
And this particularly involves brand identity and image.
Is that warm coat in style, its color trendy and made by a well-known fashion brand? But also factors like service, warranty and good value for money play a major role in this.

19. 5. Potential Product Competition
This is about augmentations and transformations that the product may undergo in the future.
For example, a warm coat that is made of a fabric that is as thin as paper and therefore light as a feather that allows rain to automatically slide down.
6. Form Product Competition
Competitors as all companies manufacturing products that supply the same service
Toyota against manufacturers of other vehicles that provide the same service.

20. 7. INDUSTRY COMPETITION
competitors as all companies making the same product
or class of products
Honda against Mercedes, Lexus etc who make same
products or class of product (different prices) or
8. BRAND COMPETITION
(Brand Competitors) competing brands of products which can satisfy a consumer's wants almost equally as well as each other.
Honda against Toyota, Nissan etc. who offer similar products and service to the same customers and prizes.
class of products

21. Porter’s Five forces Model of Industry Competition

22. Whether you are starting a new business or looking for more insight into your existing company's prospects, you probably have questions about the competition. One way to answer those questions is by using Porter's Five Forces model.
Originally developed by Harvard Business School's Michael E. Porter in 1979, the five forces model looks at five specific factors that help determine whether or not a business can be profitable, based on other businesses in the industry.

23. "Understanding the competitive forces, and their underlying causes, reveals the roots of an industry's current profitability while providing a framework for anticipating and influencing competition (and profitability) over time," Porter wrote in a Harvard Business Review article. “
A healthy industry structure should be as much a competitive concern to strategists as their company’s own position.“
According to Porter, the origin of profitability is identical regardless of industry.
In that light, industry structure is what ultimately drives competition and profitability —not whether an industry produces a product or service, is emerging or mature, high-tech or low-tech, regulated or unregulated.

24. "IF THE FORCES ARE INTENSE, AS THEY ARE IN SUCH INDUSTRIES AS AIRLINES, TEXTILES, AND HOTELS, ALMOST NO COMPANY EARNS ATTRACTIVE RETURNS ON INVESTMENT," PORTER WROTE. "IF THE FORCES ARE BENIGN, AS THEY ARE IN INDUSTRIES SUCH AS SOFTWARE, SOFT DRINKS, AND TOILETRIES, MANY COMPANIES ARE PROFITABLE
Understanding the Five Forces
Porter regarded understanding both the competitive forces and the overall industry structure as crucial for effective strategic decision-making.
In Porter's model, the five forces that shape industry competition are:

26. BARGAINING POWER OF SUPPLIERS
This force analyzes how much power a business's supplier has and how much control it has over the potential to raise its prices, which, in turn, would lower a business's profitability.
In addition, it looks at the number of suppliers available: The fewer there are, the more power they have.
Businesses are in a better position when there are a multitude of suppliers.
Sources of supplier power also include the switching costs of firms in the industry, the presence of available substitutes, and the supply purchase cost relative to substitutes.

27. BARGAINING POWER OF CUSTOMERS
This force looks at the power of the consumer to affect pricing and quality.
Consumers have power when there aren't many of them, but lots of sellers, as well as when it is easy to switch from one business's products or services to another.
Buying power is low when consumers purchase products in small amounts and the seller's product is very different from any of its competitors.

28. COMPETITIVE RIVALRY
This force examines how intense the competition currently is in the marketplace, which is determined by the number of existing competitors and what each is capable of doing.
Rivalry competition is high when there are just a few businesses equally selling a product or service, when the industry is growing and when consumers can easily switch to a competitors offering for little cost.
When rivalry competition is high, advertising and price wars can ensue, which can hurt a business's bottom line.
Rivalry is quantitatively measured by the Concentration Ratio (CR), which is the percentage of market share owned by the four largest firms in an industry.

29. THREAT OF SUBSTITUTE PRODUCTS OR SERVICES
This force studies how easy it is for consumers to switch from a business's product or service to that of a competitor.
It looks at how many competitors there are, how their prices and quality compare to the business being examined and how much of a profit those competitors are earning, which would determine if they have the ability to lower their costs even more.
The threat of substitutes are informed by switching costs, both immediate and long-term, as well as a buyer's inclination to change.

30. Coca-Cola is seen not only as a beverage but also as a brand.
FIVE FORCES ANALYSIS OF THE COCA-COLA COMPANY IN RELATIONSHIP TO ITS COCA-COLA BRAND.
Threat of New Entrants/Potential Competitors: (Medium Pressure)
Entry barriers are relatively low for the beverage industry: there is no consumer switching cost and zero capital requirement.
There is an increasing amount of new brands appearing in the market with similar prices than Coke products.
Coca-Cola is seen not only as a beverage but also as a brand.
It has held a very significant market share for a long time and loyal customers are not very likely to try a new brand.

31. THREAT OF SUBSTITUTE PRODUCTS (MEDIUM TO HIGH PRESSURE)
There are many kinds of energy drinks/soda/juice products in the market.
Coca-cola doesn’t really have an entirely unique flavor.
In a blind taste test, people can’t tell the difference between Coca- Cola and Pepsi.

32. THE BARGAINING POWER OF BUYERS: (LOW PRESSURE)
The individual buyer no pressure on Coca-Cola
Large retailers, like Wal-Mart, have bargaining power because of the large order quantity, but the bargaining power is pointed because of the end consumer brand loyalty.

33. THE BARGAINING POWER OF SUPPLIERS: (LOW PRESSURE)
The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and caffeine.
The suppliers are not concentrated or differentiate.
Coca-Cola is likely a large, or the largest customer of any of these suppliers.

34. RIVALRY AMONG EXISTING FIRMS: (HIGH PRESSURE)
Currently, the main competitor is Pepsi which also has a wide range of beverage products under its brand.
Both Coca-Cola and Pepsi are the major sparkling beverages and committed heavily to sponsoring outdoor events and activities.
There are other soda brands in the market that become popular, like Dr. Pepper, because of their unique flavors.
These other brands have failed to reach the success that Pepsi or Coke have enjoyed.

36. Porter’s Five Forces Model of Competition
Threat of New Entrants
Rivalry Among Competing Firms in Industry
Bargaining Power of Suppliers
Bargaining Power of Buyers
Threat of Substitute Products 23

37. Intensity of Rivalry Among Existing Competitors
Intense rivalry often plays out in the following ways:
Using price competition *
Performing advertising fight *
Increasing consumer warranties or service *
Making new product introductions *
Occurs when a firm is pressured or sees an opportunity
Price competition often leaves the entire industry worse off * *
Advertising battles may increase total industry demand, but may be costly to smaller competitors 25

38. * * * * * * * * Intensity of Rivalry Among Existing Competitors
Cutthroat competition is more likely to occur when:
Numerous or equally balanced competitors *
Slow growth industry *
High fixed costs *
High storage costs *
Lack of differentiation or switching costs *
Capacity added in large increments *
High strategic stakes *
High exit barriers * 26

39. * * * * * Intensity of Rivalry Among Existing Competitors
High Exit Barriers are economic, strategic and emotional factors which cause companies to remain in an industry even when future profitability is questionable.
Specialized assets *
Fixed cost of exit (e.g., labor agreements) *
Strategic interrelationships *
Emotional barriers *
Government and social restrictions * 27

40. Performing a Detailed Analysis of the Firm’s Main Competitors
Competitor Analysis
Performing a Detailed Analysis of the Firm’s Main Competitors
Industry Environment
Competitive
Environment 33

41. Competitor Analysis Future Objectives What force the competitor?
How do our goals compare to our competitors’ goals?
Where will emphasis be placed in the future?
What is the attitude toward risk? 34

42. Competitor Analysis Future Objectives Current Strategy
What is the competitor doing?
How do our goals compare to our competitors’ goals?
What can the competitor do?
Current Strategy
Where will emphasis be placed in the future?
How are we currently competing?
What is the attitude toward risk?
Does this strategy support changes in the competitive structure? 35

43. Competitor Analysis Future Objectives Current Strategy
How do our goals compare to our competitors’ goals?
Where will emphasis be placed in the future?
What is the attitude toward risk?
What does the competitor believe about itself and the industry?
Current Strategy
How are we currently competing?
Does this strategy support changes in the competition structure?
Assumptions
Do we assume the future will be volatile?
What assumptions do our competitors hold about the industry and themselves?
Are we assuming stable competitive conditions? 36

44. Competitor Analysis Future Objectives Current Strategy Assumptions
How do our goals compare to our competitors’ goals?
Where will emphasis be placed in the future?
What is the attitude toward risk?
What are the competitor’s capabilities?
Current Strategy
How are we currently competing?
Does this strategy support changes in the competition structure?
Do we assume the future will be volatile?
Are we operating under a status quo?
What assumptions do our competitors hold about the industry and themselves?
Assumptions
Capabilities
What are my competitors’ strengths and weaknesses?
How do our capabilities compare to our competitors? 37

45. Competitor Analysis Future Objectives Response Current Strategy
How do our goals compare to our competitors’ goals?
Where will emphasis be placed in the future?
What is the attitude toward risk?
Response
What will our competitors do
in the future?
Current Strategy
How are we currently competing?
Does this strategy support changes in the competition structure?
Where do we have a
competitive advantage?
Do we assume the future will be volatile?
Are we operating under a status quo?
What assumptions do our competitors hold about the industry and themselves?
Assumptions
How will this change our
relationship with our
competition?
Capabilities
What are my competitors’ strengths and weaknesses?
How do our capabilities compare to our competitors? 38