1. MARKETING AND ENVIRONMENTAL ANALYSIS
Strategic Marketing Management

2. Marketing and Environmental Analysis

3. Marketing and Environmental Analysis
Marketing strategy is concerned with matching the capabilities of the organization with the demands of the environment.
The strategists monitor the environment on an ongoing basis so that opportunities and threats are identified and subsequently reflected in strategy.
In analyzing the environment a stepwise approach is needed. This begins with an initial audit of general environmental influences, followed by a series of increasingly tightly-focused stages designed to provide the strategist with a clear understanding of the organization’s strategic position.
Although a variety of approaches can be used for analyzing the environment, arguably the most useful is the PEST framework. This involves the strategist focusing in turn upon the Political/legal, Economic, Social/cultural and Technological elements of the environment..
The environmental conditions faced by an organization are capable of varying greatly in their complexity, and need to be reflected both in the ways in which environmental analysis is conducted and in the ways in which strategy is subsequently developed.
It is widely recognized that the pace of environmental change is increasing and that the need for organizations to develop a structured approach to environmental analysis, with the results then being fed into the strategic marketing planning process, is greater than ever.
Despite this, the evidence suggests that in many organizations environmental scanning systems are only poorly developed. If this is to change, top management commitment both to the development of a scanning system and to the incorporation of the results into the planning process is essential.

4. Learning Objectives
Why a regular and detailed analysis of the organization’s environment is important
The key elements of the environment
How firms go about analyzing the environment
How environmental factors are changing
The dimensions of environmental scanning systems

5. Importance of Organization’s Environment
An understanding of macro and micro marketing environment forces is essential for planning.
Helps a business to compete more effectively against its rivals.
Assists in the identification of opportunities and threats.
Enables an organization to take advantage of emerging strategic opportunities.

6. THE MARKETING ENVIRONMENT
The forces that directly and indirectly influence an organization’s capability to undertake its business.
The trading forces operating in a market place over which a business has no direct control ,but which shape the manner in which the business function and is able to satisfy its customers.

7. COMPONENTS OF MARKETING ENVIRONMENT
Internal environment : Forces and actions inside the firm that affect the marketing operation composed of internal stake holders and the other functional areas within the business organization.
External environment
Macro environment
Micro environment

8. COMPONENTS OF MARKETING ENVIRONMENT
MICRO ENVIRONMENT
The factors in the immediate environment .
MACRO ENVIRONMENT
Broad forces which shape the character of opportunities and threats.

9. COMPONENTS OF MARKETING ENVIRONMENT

11. THE INTERNAL ENVIRONMENT
All factors that are internal to the organization are known as the 'internal environment'. They are generally audited by applying the 'Five Ms' which are Men, Money, Machinery, Materials and Markets. The internal environment is as important for managing change as the external. As marketers we call the process of managing internal change 'internal marketing.‘

12. THE INTERNAL ENVIRONMENT
It includes the following:
The human resource department.
The operations department.
The accounting and finance department.
The research and development department.

13. INTERNAL PROCESSES AND PROCEDURES
Allocation of responsibilities within the organization.
Resources availability .
The extent to which the major functional areas work together supporting the marketing function to be customer oriented .
The culture of organization.
The attitude of internal stakeholders.

14. Micro Environment
The forces close to the company that affects its ability to serve.
It comprises all those organizations and individuals who directly affect the activities of a company.
All factors which impact directly on a firm and its activities in relation to a particular market.
Suppliers
The market channel
Customers.
Competitors
Community

15. SUPPLIERS Suppliers are either individuals or business houses.
They provide resources needed by the company .
The developments in the suppliers environment have a substantial impact on the marketing operations of the company .
Companies can lower their supply costs and increase product quality to gain competitive advantage in the market.
supply shortages have to be fully monitored and plans should be made to avoid it.

16. Market Intermediates They are either business houses or individuals .
They help the company in promoting, selling and distributing the goods to customers.
They are middlemen, distributing agencies, market service agencies and financial institutions.

17. Customers The target market of the company is usually of five types:
1.Consumer market i.e. individual and householders
2.Industrial market i.e. organizations buying for producing other and services.
3.Reseller market i.e. organizations buying goods and services with a view to sell them to others.
4.Government and other non profit markets.i.e.those buying goods and services in order to produce public services.
5.International market i.e. individuals and organizations of nations other then home land who buy for either consumption or industrial use.

18. Competitors
No company stands alone in serving and satisfying the needs of a customer market. It faces competition.
This helps the company in facing a host of competitors with confidence .
The company in order to come out successfully has to adopt means which may help it to outmaneuver.
The competitive environment consists of certain basic things which every marketing manager has to take note of.
Philip Kotler ‘the best way for a company to grasp the full range of its competition is to take view point of a buyer.”

19. Community
Community is defined as ‘any group that has an actual or potential interest in or impact on a company’s ability to achieve it’s objective.
The actions of the company do affect the interest of other groups i.e., those who form general public for the company who must be satisfied along with the consumers of the company.
According to Kotler ‘companies must put their primary energy into effectively managing their relationships with their customers.

20. Macro Environment
Macro environment refers to those factors which are external to company’s activities and do not concern the immediate environment.
It comprises general forces that affect all business activities in market .

21. Factors Affecting Macro Environment
POLITICAL AND LEGAL FORCES
ECONOMIC FORCES
SOCIAL AND CULTURAL FORCES
NATURAL FORCES
TECHNOLOGICAL FORCES
DEMOGRAPHIC FORCES

22. Political and Legal forces
Includes laws, government agencies and pressure groups that influence or limit various organizations and individuals in a given society.
Increasing legislation.
Changing government agency enforcement.
More emphasis on ethics and socially responsible actions.

23. Economic Environment
The economic environment consists of factors that affect consumers purchasing and spending power.
Under economic environment manager generally studies
1.trends of gross national product
2.patterns of real growth in income
3.variations in geographical income distribution.
4.borrowing pattern ,trends and governmental and legal restrictions.
5.major economic variables

24. Social and Cultural Forces
Social responsibility has crept into the marketing literature as an alternative to the market concept.
Socially responsible marketing is that business firms should take the lead in eliminating socially harmful products

25. DEMOGRAPHIC FORCES
Demographic data helps in preparing geographical marketing plans, household marketing plans, age and sex wise plans.
It influences behavior of consumers which in turn will have direct impact on market place.
A marketer must communicate with consumers anticipate problems ,respond to complaints and make sure that the firm operates properly.

26. Technological Environment
Most dramatic force now shaping our destiny.
Changes rapidly.
Creates new markets and opportunities
Challenge is to make practical, affordable products.
Safety regulations result in higher research costs and longer time between conceptualization and introduction of product.

27. Natural Forces
Involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities.

28. Natural Environment Trends
Shortage of raw materials.
Limited quantities of non-renewable resources.
Increased pollution.
Waste disposal, air/water pollutants.
Increased government intervention.
Kyoto and other initiatives.
Environmentally sustainable strategies.
G.R.E.E.N. movement.

29. Pest Analysis
A scan of the external macro environment in which the firm operates can be expressed as a PEST Analysis.
The acronym PEST (or sometimes rearranged as “STEP”) is used to describe a framework for the analysis of these macro environmental factors.
A PEST Analysis fits into an overall environmental scan, which includes Political, Economical, Social, and Technological environment.

30. PURPOSE OF ANALYSING THE MARKET
To know where the environment is heading
To discern which events and trends are favorable
To assess the scope of various opportunities
To help secure the right fit between the environment and the business unit

31. CONTROLLABILITY
The organization has no control over the macro environment. It can only respond to the changes taking place.
The organization has some degree of influence over the micro environment but by no means complete control.
The organization controls its own internal environment although this does not mean the marketing department or marketing manager has control.

32. The changing business environment
The stagnation of many markets
Market fragmentation
Product proliferation
Growing product parity
Shorter product life cycles
Increasingly frequent niche attacks by competitors
Greater customer sophistication and increased customer demands
Downward price pressures
Rising promotional costs and lower promotional returns
Increasing sales force costs
Changing patterns of distribution and shifts in the balance of power as intermediaries become more dominant
The erosion of many of the traditional bases of competitive advantage
An increased emphasis upon environmental and ‘green’ issues
The increasingly global nature of many markets 

33. An Environmental Scanning process is influenced by a variety of factors
The management expectations.
The size of the organization
The managerial perceptions of the complexity of its environment.
Top management involvement and commitment.
A detailed understanding of the dimensions and parameters of the scanning model that it is intended should operate.
An established strategic planning culture.

34. Specific benefits of environmental scanning
An increased general awareness by management of environmental changes
Better planning and strategic decision-making
Greater effectiveness in government matters
Better industry and market analysis
Better results in foreign business
Improvements in diversification and resource allocations
Better energy planning.

35. The Difficulties in Environmental Analysis
The interpretation of results and the assessment of their specific impact upon the organization is rarely clear-cut
The output of environmental analysis may be too inaccurate, general or uncertain to be taken seriously
A preoccupation with the short term pre-empts attention being paid to longer-term environmental issues
Long-term environmental analyses are often treated sceptically
In diversified businesses the amount of analysis needed is likely to be both consider- able and complex, particularly when interrelationships are considered
Perceptions and interpretations of scenarios identified may differ significantly between one manager and another.