1. Lesson 3- Marketing Audit

2. Lesson 3
Objectives The purpose of this lesson is to learn how to undertake a basic external and internal marketing audit.

3. Lesson 3 Topics Macro-environmental factors (PESTEL)
Micro-environmental factors (Mendelow Matrix)
Internal factors (5Ms – Money, Men, Machines, Materials, Minutes)
SWOT Analysis

4. The Marketing Environment
A marketing orientated firm looks outwards to the environment in which it operates, adapting to take advantage of emerging opportunities and to minimize potential threats. The marketing environment consist of the actors and forces that affect a company’s capability to operate effectively in providing products and services to its customers.

5. A company’s marketing environment

6. Macro-Environmental Factors (PESTEL)
The macro-environment consists of forces that not only affect not only the company but also the other actors in the micro-environment (suppliers, distributors, customers, and competitors). Macro-environmental forces include: political/legal, economic, ecological/physical, social/cultural and technological.

7. Political and Legal Forces
Political and legal forces influence marketing decisions by setting the rules by which businesses can be conducted. For example, smoking bans in public places can have dramatic short term and long term effects on the demand for cigarettes. These rules generally govern competition, collusions,price setting, ethical production of goods and services, amongst others to ensure the protection of consumers and the business environment.

8. Political and Legal Forces
Recently, in Kenya, for example (December 2015), there was set a ban on advertising of condoms during prime time viewing as a result of complaints from parents concerned over the sexual conduct of their adolescent children and the influence condom ads were having on them.

10. Economic Forces
The economic environment can have a critical impact on the success of companies through its effect on supply and demand. Companies must choose those influences that are relevant to them and monitor them. The main economic influences on the marketing environment of companies include: economic growth and unemployment, interest and exchange rates, integration blocs, and the growth of emerging economies such as the ‘BRIC’ countries.

11. Economic Forces
The recent increase in the dollar exchange rate in Kenya for example has made it difficult for many businesses especially those that import goods that they sell directly or as manufacturing inputs. The current dollar exchange rate stands at 1 dollar = Ksh (5th January 2016).

12. Ecological/Physical Environmental Forces
Ecology is the study of living things within their environmental context. In a marketing context it concerns the relationship between people and the physical environment. Environmentalists attempt to protect the physical environment from the costs associated with producing and marketing products. They are concerned with the environmental costs of consumption; not just the cost to the consumer.

13. Ecological/Physical Environmental Forces
Five environmental issues are of particular concern. These are:
combating global warming,
pollution control,
conservation of energy and other scarce resources,
use of environmentally friendly ingredients and components,
and the use of recyclable and non-wasteful packaging.
Marketers too have to show concern for these things because today more than ever consumers want only to be associated with organizations that prove to be environmentally responsible.

14. Ecological/Physical Environmental Forces
In Kenya, for example, plastics have become quite a menace and a threat to flora and fauna especially when dumped in water bodies such as the Nairobi River. As such NEMA has in place standards for making these plastics and a number of companies have followed suit by making their plastics at least 30% out of plant material (bio-degradable) such as Keringet bottles.

15. Keringet’s Bio-Degradable Bottles

16. Social/Cultural Forces
Three key social/cultural forces that have implications for marketing are the changes in the demographic profile of the population, cultural differences within and between nations, and the influence of consumerism. Demographic changes concern changes in populations in terms of their size and characteristics. Demography is important to marketers because it helps to predict the size and growth rates of markets, and the need for products such as schools, one-person housing and homes for the elderly.

17. Social/Cultural Forces
The Kenyan government for example, in response to the predominant youth demographic has put in place programs and funding to help Kenyan youth utilize various facilities to be self-sufficient rather than having an over-reliance on employment. These include the National Youth Service (NYS), the Youth Enterprise Development Fund, among others.

18. Initiatives by the Kenyan government to address its large youth demographic

19. Social/Cultural Forces
Culture is the combination of traditions, taboos, values and attitudes of the society in which individuals live. In pre-dominantly Islamic areas for example, one is not allowed to show depictions of any of the prophets mentioned in the Quran. This is the reason for the very deadly reaction that happened last year (2015) in France after Charlie Hebdo published cartoons that mocked Muhammad.

20. Technological Forces
Technology can have substantial impact on peoples’ lives and companies’ fortunes. Technological breakthroughs have rendered some companies obsolete/outdated whereas also giving underdog companies the opportunity to rise to great heights. Technology also affects the way in which marketing is conducted. Developments in information technology have revolutionized marketing practices. The internet and mobile phone technology have allowed companies to use new channels of communication and distribution to reach consumers.

22. Technological Forces
Marketing led companies seek not only to monitor technological trends but also to pioneer technological breakthroughs that can transform markets and shift competitive advantage in their favor. They also seek to use technology to improve the efficiency and effectiveness of their marketing operations.

23. European Clothing Retail example

25. Micro-Environmental Factors (Mendelow Matrix)
The micro-environment consists of the actors in the firm’s immediate environment that affects its capabilities to operate effectively in its chosen markets. They consist of customers, competitors, distributors, and suppliers.

26. Customers
Customers are at the center of the marketing philosophy and effort and it is the task of marketing management to satisfy their needs and expectations better than the competition. The starting point is understanding them and this is normally conducted by undertaking marketing research.

27. Customers
Furthermore is the grouping of consumers to form market segments that can be targeted with specific marketing mix offerings. Changing customer tastes, lifestyles, motivations and expectations need to be monitored so that companies supply the appropriate targeted marketing mix strategies that meet their needs.

28. Competition
Competitors have a major bearing on the performance of companies. Marketing orientated companies not only monitor and seek to understand customers but also research companies and their brands to understand their strengths, weaknesses, strategies and response patterns. No longer is it sufficient to meet customer needs and expectations – success is dependent on doing it better than competitors.

29. Distributors
Some companies, such as those providing services, dispense without the use of distributors, preferring to deal directly with end-user customers. Others use the services of distributors such as wholesalers and retailers to supply end users. Channel intermediaries perform many valuable services, including breaking bulk, making products available to customers where and when they want them, and providing specialist services such as maintenance and installation.

30. Suppliers
Increases in supply costs can push up prices, making other alternatives more attractive. Powerful suppliers also have the power to push up prices. Companies need to monitor supply availability, such as shortages due to labor strikes or political factors, as these can cause customer dissatisfaction and lost sales.

31. Suppliers
They also need to be sensitive to alternative input materials that can be substituted for those of existing suppliers if the latter’s prices rise or availability diminishes significantly.

32. Internal Factors – 5Ms
Man - the first of the five M’s is the most important. The right personnel for the right position is a sure bet for organizational effectiveness and efficiency. People make sure materials, machines, minutes and money are utilized in a productive manner to achieve goals or aims and objectives of organizations and enterprises.

33. Internal Factors – 5Ms
Materials - Without materials, human resource is made redundant. Thus every right thinking and right planning organization knows that materials needed for any business or service must be in place before ‘man’ can be of use in any business activity.

34. Internal Factors – 5Ms
Machines - The metal contraptions called machines have made man fulfill almost effortlessly various dreams of creating things that make our existence more worthwhile. However, without man and materials, machines will be useless. They need to be operated by man and fed with materials.

35. Internal Factors – 5Ms
Minutes - Time management is one contemporary aspect of business that has been employed in use by effective and successful business ventures to optimize delivery. Poor time management is as ineffectual as a broken down machine, an indisposed employee or lack of adequate materials for production of goods or services.

36. Internal Factors – 5Ms
Money - Without money, no venture or enterprise can motivate workers, get quality and sufficient materials, get the right machines and maintain them or even ensure that time is properly managed. Money management, when not properly organized has been the most known factor involved in collapse of enterprises in history.

37. SWOT Analysis
The SWOT analysis plays an important role in an effective marketing audit. It helps evaluate a company’s strengths, weaknesses, opportunities and threats and develop a strategic plan for each of them. When evaluating strengths and weaknesses, only those resources or capabilities that would be valued by the customer should be considered. Also, opportunities and threats should be listed as anticipated events or trends outside the business that have implications for performance

38. SWOT Analysis
Strengths – Positive tangible and intangible internal attributes (within the company’s control).
Weaknesses – Issues within the company’s control that detract efforts towards success.
Opportunities – External attractive factors
Threats – External factors outside the company’s control which pose risks to success.

39. SWOT Analysis Diagrammatically, a SWOT chart is as below: Strengths
Weaknesses
Opportunities
Threats

40. Coca-Cola SWOT Analysis

41. SWOT Analysis
Once a SWOT analysis has been completed, thought can be given to how to turn weaknesses into strengths and threats into opportunities. For example, a perceived weakness in customer care might suggest the need for staff training to create a new strength. A threat posed by a new entrant might call for a strategic alliance to combine the strengths of both parties to exploit a new opportunity. These strategies are known as conversion strategies.

42. SWOT Analysis
Another way to use a SWOT analysis is to match strengths with opportunities e.g. a telecom provider with a strong call center network can utilize this to provide telemarketing services for other companies. These strategies are known as matching strategies.

43. SWOT Analysis Diagrammatically, this is represented as below:
Strengths
Weaknesses
Opportunities
   
Threats
Conversion strategies
Matching Strategies
Conversion strategies

44. Question
Undertake a basic internal and external marketing audit for an FMCG company and a financial services company which you have an understanding of.

45. End