1. Marketing Environments Professor Chip Besio Cox School of Business Southern Methodist University

2. Outline  The Company’s Environment — Macro- and Micro-Environments and their composition  Analysis of the Environment — S.W.O.T.

3. The Company’s Micro Environment - The 5 Cs  The “5 Cs” can be used as a framework to describe and analyze the company’s immediate environment  Company  Customers  Competitors  Channels  Constituents

4.  Company’s Internal Environment  Company’s Internal Environment - functional areas such as top management, finance, and manufacturing, marketing, etc.  Customers  Customers - buyers in markets that purchase a company’s goods and services  Competitors  Competitors - those who serve the target market with similar products / services The Company’s Micro Environment

5.  Channels (Suppliers, Distributors, Wholesalers and Retailers)  Channels (Suppliers, Distributors, Wholesalers and Retailers) - Provide the resources needed to produce goods and services and help the company to promote, sell, and distribute to final buyers  Constituents (stakeholders)  Constituents (stakeholders) - any group that perceives itself having an interest in the company’s ability to achieve its objectives The Company’s Micro Environment

6. Micro Environment - The Market  The immediate environment for the company is the market(s) in which it offers goods and/or services Company Competitors Customers Market Constituents

7. Types of Markets Company Consumer Markets International Markets Government Markets Business Markets Reseller Markets Source: Prentice Hall

8. Micro Environment - Channels of Distribution  The market operates within a broader framework which we call the channel of distribution  The channel of distribution involves a coordinated effort among different firms to offer products to an end user

9. Micro Environment - Channels of Distribution  The channel of distribution Company Competitors Customers/ Intermediaries Suppliers Market Channel of Distribution End Users Constituents

10. The Company’s Macro Environment  Beyond the channel of distribution there are other environmental factors that impact on the company and its market  Among them are:  Society/Culture  Society/Culture - e.g., dual income households are less likely to prepare meals in the home  Economy  Economy - e.g., recession reduces discretionary spending by consumers, as well as investments by competitors and suppliers  Natural Environment – e.g., resources needed by marketers

11. The Company’s Macro Environment  Among them are (continued):  Demographics  Demographics - e.g., the aging population dictates that more incontinence products will be needed in the future  Legal/Regulatory  Legal/Regulatory - e.g., EPA regulations regarding hazardous waste disposal could affect the demand for motor oil and batteries  Technology  Technology - e.g., low cost, high speed computers could allow quicker, more effective dissemination of information to the sales people and widely dispersed business units

12. Social/Cultural Environment  The institutions and other forces that affect a society’s basic values, perceptions, preference, and behaviors.

13. Social/Cultural Environment  Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government.  Secondary beliefs and values are more open to change.

14. Social/Cultural Environment  Yankelovich Monitor has identified eight major consumer value themes: 1. Paradox 2. Trust not 3. Go it alone 4. Smarts really count 5. No sacrifices 6. Stress hard to beat 7. Reciprocity is the way to go 8. Me 2 www.yankelovich.com

15. Themselves Others Organizations Society Nature The Universe Social/Cultural Environment Society’s Major Cultural Views Are Expressed in People’s Views of:

16. Economic Environment  Changes in Income  1980’s – consumption frenzy  1990’s – “squeezed consumer”  2000’s – value marketing  Income Distribution  Upper class  Middle class  Working class  Underclass Consists of factors that affect consumer purchasing power and spending patterns. The Hourglass Economy

17. Natural Environment  Involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities.

18. Factors Impacting the Natural Environment Shortages of Raw Materials Increased Pollution Increased Government Intervention Environmentally Sustainable Strategies

19. Demography  Demographics:  The study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics.  Marketers track changing age and family structures, geographic population shifts, educational characteristics, and population diversity.

20. Changing American Family  Household makeup:  Married couples with children = 34%, and falling  Married couples and people living with other relatives = 22%  Single parents = 12%  Single persons and adult “live-togethers” = 32%

21. Geographic Shifts in Population  16% of U.S. residents move each year  General shift toward the Sunbelt states  City to suburb migration continues  More people moving to “micropolitan” areas  More people telecommute

22. Better Educated Population  1980:  69% of people over 25 completed high school  17% had completed college  2002:  84% of people over 25 completed high school  27% had completed college  Currently, ⅔ of high school grads start college

23. Increasing Diversity  U.S. is a “salad bowl”  Various groups mixed together, each retaining its ethnic and cultural differences  Increased marketing to:  Growing ethnic communities  Gay and lesbian consumers  People with disabilities

24. Political Environment 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 Increased Emphasis on Ethics & Socially Responsible Actions

25. Technological Environment  Most dramatic force now shaping our destiny.

26. Technological Environment  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. The Company’s Macro Environment  The broader corporate environment Economy Legal/RegulatoryTechnology Social/Cultural Demographics Company Competitors Customers/ Intermediaries Suppliers Market Channel of Distribution End Users Constituents

28.  Environmental Management Perspective Taking a proactive approach to managing the microenvironment and the macro- environment to affect changes that are favorable for the company. How? Hire lobbyists, run “advertorials”, file law suits and complaints, and form agreements. Responding to the Marketing Environment Source: Prentice Hall

29. Environmental Analysis S.W.O.T.

30. What Is S.W.O.T. Analysis? S.W.O.T. analysis groups observations of the company and its environment into:  Internal  Strengths  Weaknesses  External  Opportunities  Threats

31. What Is S.W.O.T. Analysis?  Strengths and weaknesses are factors specific to company which contribute to either good performance (strengths) or poor performance (weaknesses).  Microsoft example:  Strengths - Scale, excellent development capability; Windows OS as a basis for development and product tie-ins; reputation with end users for ease of use  Weaknesses - Reputation for “vaporware;” broad scope makes focus on niches difficult

32. What Is S.W.O.T. Analysis?  Opportunities and threats are based on the activities in the company’s environment by others, including customers, competitors and suppliers and other constituents.  Examples include:  Opportunities - Increasing computing power; increasing penetration of PCs and handhelds; increasing availability and speed of internet access; bundling different software products  Threats - Government antitrust action; power of Intel as dominant supplier of microprocessors; investment by telephone and cable companies in internet “distribution”

33. What Is S.W.O.T. Analysis? The same information can often be viewed as either an opportunity or a threat Consider the company’s current position and determine the most likely effect (positive or negative) of the information

34. Why Is S.W.O.T. Analysis Important?  S.W.O.T. analysis is a useful tool for for assessing both the company and its environment Identify Problem Analyze Problem in Pieces Develop Recommend -ations S.W.O.T. Analysis