Chapter 3: Environmental and internal analysis: market information and intelligence

Structure A. INTRODUCTION 1. Overview and Strategy Blueprint 2. Marketing Strategy: Analysis & perspectives B. WHERE ARE WE NOW? 3. Environmental & Internal Analysis: Market Information & Intelligence C. WHERE DO WE WANT TO BE? 4. Strategic Marketing Decisions, Choices & Mistakes 5. Segmentation, Targeting & Positioning Strategies 6. Branding Strategies 7. Relational & Sustainability Strategies E. DID WE GET THERE? 14. Strategy Implementation, Control & Metrics D. HOW WILL WE GET THERE? 8. Product Innovation & Development Strategies 9. Service Marketing Strategies 10. Pricing & Distribution 11. Marketing Communications 12. E-Marketing Strategies 13. Social and Ethical Strategies

Learning Objectives  To review the three stages/areas of the Strategic Marketing Management Process (SMM)  To define the marketing environment and its components  To review the analytical models/frameworks that can be used in the strategic analysis stage  To outline the outcome of the strategic marketing analysis

Strategic analysis Strategic analysis is concerned with understanding the strategic position of the organisation in terms of its external environment, internal resources and competencies, and the expectations and influence of stakeholders Johnson and Scholes (2005)

WHERE ARE WE NOW? Environmental and Internal Analysis  What are the major trends and probable changes in the marketing environment?  Who are the main competitors, and how can we differentiate our company from competition?  Who are our target customers & what are their needs?  What competitive advantages and core competences do we have?

Company Microenvironment SuppliersCustomers Distributors Competitors Macroenvironment Political/Legal Environment Technological Social Economic The marketing environment

Macro (remote) environment: PESTLE model PESTLE:  Political Factors  Economic Factors  Socio-cultural Factors  Technological Factors  Legal Factors  Environment Factors A framework that assists in analyzing the external (remote) environment and identifying the existing opportunities & threats

Environmental impact matrix: Macro (Remote) Environment FactorImpact of FactorPotential opportunity or threat Political/legalIncreased legislation on product liability Mild threat (-1) EconomicRecession in key overseas markets Major threat (-4) TechnologicalLittle innovation likely from competitors Neutral impact (0) Socio-culturalIncreased awareness of environmental protection issues Significant opportunity (+5)

5 Forces Model

Strategic Groups Strategic Groups within the world automobile industry Regional Broad-Line FIAT, Renault Global Broad-Line Producers FORD, TOYOTA, Nissan, Honda, VW, Hyundai National Intermediate KIA, Proton National / Specialist Morgan UK, Classic Roadsters US Global Suppliers of Narrow Model Range Volvo, Suzuki Luxury Cars Jaguar, RR, BMW Performance Cars Porsche, Lotus

ENVIRONMENTAL IMPACT MATRIX: Competitive Environment FactorImpact of FactorPotential opportunity or threat CompetitionIntense rivalry in industry/market place Critical threat (-5) BuyersConvergence of customer requirements worldwide Significant opportunity (+5) SuppliersFew suppliers dominate the industry Critical threat (-5) Threat of new entrants Industry barriers to entry low Threat (-3)

Analysis of internal environment Two models to use: 1.Resource audit  financial resources,  human resources,  physical resources,  intangible resources 2.Porter’s Value Chain Model: Help analysing Firm’s Competitive Advantage and Core Competencies

STRATEGIC CAPABILITY PROFILE Resource Audit Internal areaResource/competenceEvaluation Physical resourcesNew facilities incorporating latest technology Major strength (+4) Human resourcesHighly trained technical staff Top scientists recruited Minor strength (+2) Financial resourcesHigh gearingMild weakness (-2)

VALUE CHAIN ANALYSIS: Identifying Competitive Advantage Competitive advantage will arise through: –Providing buyer value comparable to competitors but performing value chain activities more efficiently – cost based advantage and / or –Performing value chain activities in unique ways that create greater buyer value than competitors and hence command a premium price – differentiation based advantage

STRATEGIC CAPABILITY PROFILE Value Chain Activities Internal AreaResource/competenceEvaluation IntangiblesStrong corporate image in the marketplace Well-established brand names Significant strength (+5) Significant strength (+4) Inbound logistics/procure ment Over-reliance on a limited no. of suppliers Significant weakness (-4) Outbound logistics Ineffective warehouse automation Weakness (-3) Human resource management High levels of absenteeism / poor industrial relations record Significant weakness (-4)

Value Chain Analysis

Strategic fit ‘Strategic Fit’ is the effective match and management of the environmental opportunities and threats while taking into account the organisation strengths and weaknesses

SWOT analysis Integrates the internal and external environmental analysis  Not just a list of SWOT variables!  SWOT/TOWS Matrix can be helpful  SWOT/TOWS analysis is the alternative ways in which an organisation can use its specific strengths to capitalise on opportunities or to minimise threats and invest in available opportunities to overcome its weaknesses

SWOT (TOWS) matrix

Conclusion Strategic marketing management (SMM) process covers 3 areas; strategic analysis, strategic choice and strategy implementation Strategic analysis involves the collection and analysis of relevant types of information about the environmental forces and trends, and organisational resources and capabilities External (macro) environment can be analysed using PESTLE model, while the micro environment could be examined using Porter Five forces model. The internal environment can be assessed using various models, most notably is the ‘value chain’ approach The effectiveness of any marketing intelligence system is dependent on the frequency of collecting, interpreting, and disseminating the information required about the marketing environment & competition SWOT analysis is an important foundation for producing realistic and meaningful strategic recommendations for the firm’s future directions