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Environment Analysis & Research. BACKGROUND… Marketing does not operate in a vacuum Environment affects marketing Political, legal, competitive, etc Environment.

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Presentation on theme: "Environment Analysis & Research. BACKGROUND… Marketing does not operate in a vacuum Environment affects marketing Political, legal, competitive, etc Environment."— Presentation transcript:

1 Environment Analysis & Research

2 BACKGROUND… Marketing does not operate in a vacuum Environment affects marketing Political, legal, competitive, etc Environment is dynamic…i.e, it is constantly changing Situation analysis must be an ongoing process The success of a marketing organization depends on its ability to adapt to its environment Failure to exploit/adapt to change leads to marketing failure Marketers must try and be proactive rather than reactive to the marketing environment

3 Conducting an environment (or) a situation analysis Conducting a Situation Analysis is a Challenging Exercise One of the most difficult parts of the marketing plan Should provide a complete picture of three key environments: (1) Internal, (2) Customer, and (3) External

4 Layers in a situation analysis Internal Environment This macro level is not controllable and usually affects the entire industry

5 The Internal Environment (1 of 3) Review of Current Objectives, Strategy and Performance An important input to later stages in the planning process Poor or declining performance must be the result of: (1) Goals or objectives that are inconsistent with customer or external environments (2) Flawed marketing strategy (3) Poor implementation (4) Changes in the customer or external environment beyond the control of the firm

6 Example Nike Demand for high-end shoes decrease Saw demand & profits for retro- and leisure- styled shoes increase Bought Converse and gained immediate access to a growing market

7 The Internal Environment (2 of 3) Availability of Resources Includes review of financial, human and experience resources as well as resources from key relationships Financial resources tend to get most attention Labor shortages are expected to be a major problem in the coming years Projected shortfall in human resources U.S. Dept of Labor predicts 22 M new jobs by 2010 However, civilian labor force is expected to increase by only 17 M Fast food, services, nursing, retail, & computer support will be hardest hit

8 The Internal Environment (3 of 3) Organizational Culture and Structure Problems can arise when marketing does not hold a prominent position in the political hierarchy Culture and structure are relatively stable but can be affected by mergers Asynchronous corporate mergers Daimler- Chrysler Merger HP-COMPAQ

9 Example Sonys core electronics business has been losing money for the last 3 years Microsoft, Nokia, Apple, Dell, Canon Products not cutting edge New CEO Sir Howard Stringer analyzed the internal environment Cost cutting; Aibo rested; Closed Qualia line of boutique electronics (Camera $4K; 70in TV 14K) Eliminated 5700 jobs; closed 9 factories Sold $705M worth assets (incl. cosmetic salons); Retired advisors Realized menus have replaced knobs; Link between content and hardware is software Needs a cultural revolution from product orientation to market and customer orientations

10 Who are our Current and Potential Customers? What do our Customers do with our Products? Where do Customers Purchase our Products? When do Customers Purchase our Products? Why (and How) do Customers Select our Products? Why do Potential Customers not Purchase our Products? The Customer Environment

11 Source: The Customer Environment

12 If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself, but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle. Sun Tzu - The Art of War

13 Competition (1) Brand competitors (2) Product competitors (3) Generic competitors (4) Total budget competitors The External Environment (1 of 4)

14 Levels of Competition Total Budget: consumer dollar Generic: fulfill general need Product: brands in product class Brand: Direct competitor

15 Levels of Competition Diet Coke Pepsi Brand: diet colas Fruit flavored colas Regular colas Diet lemon limes Lemon limes Product category: soft drinks Generic competition: beverages Coffee Bottled water Wine Beer Juices Budget competition: food and entertainment Baseball cards Video rentals Fast food Ice cream Source: Donald R. Lehmann and Russell S. Winer, Product Management, 1997

16 Example: Cruising for a Bruising The worlds largest cruise ship company operates 6 cruise lines, employs 37,000 people and has 43% global market share Norwalk food-borne virus, SARs, environmental violations, and economic woes are plaguing the company Standardizes its fleets and does not put in dazzling options, like rock-climbing walls and skating rinks How can we develop the four levels of competition for Carnival Cruise Lines? Julia Boorstin, Fortune, June 9, 2003

17 Brand competitors: Offer comparable cruises Product competitors: Offer luxury & specialty cruises Generic competitors: Travel/Holiday Total budget competitors: Vie for customer $ Car? Home improvement? Investment? Carnival Cruise Lines

18 Identify all current and potential competitors Brand, product, generic, and total budget. Assess each key competitor Size, growth, profitability, objectives, strategies, and target markets. Assess each key competitors strengths and weaknesses. Capabilities and vulnerabilities in different functional areas Focus the analysis on each key competitors marketing capabilities. In terms of product, price, place, and promotion Estimate each key competitors most likely strategies and responses under different environmental situations. Stages of Competitive Analysis

19 Economic Growth and Stability In U.S the size of upper-income class has increased, middle income remained mostly stable, lower-income declined Discretionary income has supported growth of bottled water, Godiva chocolates Average savings have declined: (43% wont have enough for retirement. Link)Link Retailer strategy: Banana Republic, Gap, Old Navy Political Trends Elected political officials influence taxes, Tobacco industry, Recycling, antitrust cases The External Environment (2 of 4)

20 Legal and Regulatory Issues Emphasis on natural environment has forced companies to become more green Increased rigor in corporate accounting and reporting (Sarbanes- Oxley Act) to limit corporate and accounting scandals involving prominent companies in the United States. Has resulted in a surge of hiring of auditors and increased business for consulting firms NAFTA (North American Free Trade Agreement) prompted diversification into Canadian and Mexican markets; I-35 high priority Technological Advancements Influence of the Internet on all aspects of marketing including product/production, communication, pricing, promotion, channels Trends in biological research have led to better drugs and medicines, disease resistant crops, genetically modified foods RFID (Radio Frequency Identification) The External Environment (3 of 4)

21 Sociocultural Trends Demographic Trends Lifestyle Trends Trends in Cultural Values The External Environment (4 of 4)

22 Demographic Trends Aging of the American population Fighting aging: skin care, adventure vacations, health foods Increasing demand for health care, hospitals, senior lifestyle providers Increasing population diversity Bi-lingual signs, salespeople; Support community programs Cosmetics firms need to cater to different audiences Population growth in the Sun Belt states Demand for homes, support services, appliances like ACs Lifestyle Trends Clothing has become more casual, especially at work Growing focus on health and nutrition; Organic produce; vegetarianism Time spent watching television has declined Trends in Cultural Values Less focus on me-oriented values Increasing importance of family and children Examples of Trends in the Sociocultural Environment

23 Generational Cohorts* Woodstock, Kennedy Assassination, Vietnam Divorce, AIDS The MTV generation; more cynical; honesty and irreverence in advertising The Internet, 9/11 Relate well to causes; teen markets * Events occurring when people first became economic adults (usually ages 17 – 21) and its affect on their lifelong attitudes and values. Baby Boomers (82 million people born 1946-1964) Generation X (45 million people born 1965-1976) Generation Y (Echo Boomers) (72 million people born 1977-1994 Age Distribution in U.S.

24 Supporting Marketing Decisions Establishing a marketing information center Motivating channel members to share info Collecting competitive intelligence Buying info from commercial data sources Developing a customer advisory panel Improving the quality of marketing intelligence Training and motivating the sales force

25 Supporting Marketing Decisions The Marketing Research Process

26 Secondary Information Sources Internal Data Sources Government Sources Periodicals/Book Sources Commercial (Fee-Based) Sources Collecting Environmental Data and Information (1 of 2)

27 Primary Data Collection Direct Observation Focus Groups Surveys Experiments Collecting Environmental Data and Information (2 of 2)

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