Chapter 4 - The Marketing Environment Flashcards
What characterises the marketing environment?
Factors and forces that affect the firm’s ability to build and maintain market position and customer relationships.
- Internal and external factors
- Dynamicity and uncertainty
- Relativity
- Complexity
- -> Identifying opportunities and threats, managing change.
How can we shape the structure of the market?
The first two points are always going on with new and old players, when markets change.
- Deconstruction. To what extent are players (distributors, competitors, suppliers) eliminated by a variety of means (mergers, bankruptcy, etc)?
- Construction. To what extent are new players created? For example, new intermediaries such as platforms.
- Functional modification. To what extent can we alter the roles of other actors? For example self-service within airport/flight booking: IRL → Call → Online.
How can we shape the behaviour of the market?
- Directly. Building/removing constraints for customers and competitors. They have to change/adapt since there is no other option.
- Indirectly. Shaping preferences for customers and competitors. For example, creating incentives for customers to choose us by having a point/reward program.
What is PESTLE?
Used for external environment analysis on a macro-level. Often, it is not possible for companies to control these elements in any way, which makes monitoring necessary to assess the level of risk associated with one’s business activities.
What parts does PESTLE consist of?
- Political
- Economic
- Socio-cultural
- Technological
- Legal
- Ecological
What is environmental scanning?
The process of gathering information about a company’s external events and relationships to help top management in making decisions.
- In stage 1, focus is primarily on data gathering. This might be time-consuming, and it can be difficult to determine what is the “right” information to collect.
- In stage 2, focus is primarily on interpreting and analyzing the data.
- In stage 3, focus is primarily on developing/formulating a strategy.
Companies might develop different types of scenarios and courses of action based on the probability of the scenarios.
What is the performance environment?
Consists of those organizations that directly or indirectly influence an organization’s operational performance.
- those that compete against the organization in the pursuit of its objectives.
- those that have the potential to directly influence the performance by adding value in the production, assembly and distribution of products before it reaches the end user (suppliers, distributors, dealers, retailers).
- those that have the potential to indirectly influence the performance; often services such as consultancy or financial services, or marketing or communication agencies.
What is Porter’s five forces and what does it consist of?
Reviews the competitive environment within an industry to identify the major competitive forces, to assess current and future competitive positions. Five main competitive forces:
- The level of threat that new competitors will enter the market.
- The threat posed by substitute products.
- The bargaining power of buyers.
- The bargaining power of suppliers.
These four affects the fifth force:
- The intensity of rivalry between the current competitors.
Can lead to assessment of relative strengths. General rule = the stronger the competitive forces, the lower the profitability in a market.
What is Political in Pestle?
Interaction between business, society and government. How will potential changes in political environment affect us.
- Government policy
- Political stability
- Labor law
- Trade restrictions
What is Economic in Pestle?
Economic circumstances.
- Growth/GDP
- Inflation rates
- Disposable income
- unemployment rate
- Taxes
What is Socio-cultural in Pestle?
Lifestyle changes/trends.
- population growth
- safety emphasis
- lifestyle changes
- demographics
What is Technological in Pestle?
Emergence of new technologies. - Automation - R&D - Level of tech innovations Can affect efficiency. Sometimes you want to be pioneer.
What is Legal in Pestle?
Laws and regulations on for example transparency on pricing, trade, packaging and labelling.
- Employment laws
- Antitrust laws
- consumer protection laws
- discrimination laws
What is Ecological in Pestle?
- Environmental impact
- Pressure from NGOs
- Environmental policies
Some might need to comply with new standards to not be called out in the industry. Some can use knowledge to take advantage of new opportunities.
What are some factors affecting Threat of new entrants?
- Economies of scale
- government/regulatory policy
- Capital requirements
- Proprietary products/technologies (patent)
Can they REPLACE us?
