3 THE MARKETING ENVIRONMENT

THE MARKETING ENVIRONMENT COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY THE MARKETING ENVIRONMENT COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY THE MARKETING ENVIRONMENT COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY

3 THE MARKETING ENVIRONMENT

Marketing Environment —

Actors and forces outside marketing that affect marketing management ability to develop and maintain successful transactions with target customers.

COLLEGE OF BUSINESS ADMINISTRATION

CHUNG-ANG UNIVERSITY PROF HYUNSUK SUH

The objectives of the current chapter are described.

Objectives

Understand the marketing environment that affect the company’s ability

to serve its customers

Understand the meaning of microenvironment and macroenvironment

Understand tools to analyze marketing situations

0 Objectives

The objectives of the current chapter are described.

Chapter Opening Example

0 Objectives

Example

Xerox introduced the first plain-paper copier almost 50 years ago For years, the company that invented photocopying dominated the field In 1998, Xerox’s profits were growing at 20 percent a year.

Then everything went wrong In only 18 months, Xerox lost $38 billion in market value The company

was on the brink of bankruptcy

The world had quickly gone digital and Xerox had not kept up While Xerox was busy perfecting copy

machines, customers were no longer relied on the company’s flagship products – stand alone copiers They were looking for more sophisticated document management solutions They wanted systems that would let them scan documents in Frankfurt weave them into colorful showpieces in San Francisco.

Since those dark days, Xerox has rethought, redefined and reinvented itself The new Xerox mission is

to “help companies and people be smarter about their documents.” Xerox CEO Anne Mulcahy sums

things up this way: “We have transformed Xerox into a business that connects closely with customers

in a content rich digital marketplace.”

The message is clear Even the most dominant companies can be vulnerable to changing marketing

environments.

STRATEGIC PLANNING PROCEDURE

Mission Objectives & Goals Strategies/Sols Alternative

Internal Competency

External Environment

Selection of Strategy

Execution of Strategy Result

The procedure of establishing a company strategy is illustrated in below diagram.

Establishing Company Strategy

TOOLS & FRAMEWORKS

 FAW

 5 Forces

Value Chain Analysis

 7S

3 C SWOT

ANALYSIS ON THE EXTERNAL ENVIRONMENT

ANALYSIS ON THE INTERNAL COMPETENCY

ANALYSIS ON THE COMPETITIVENESS

Tools and Frameworks for the Analysis

The tools for the analysis of strategic planning should selectively be employed according to the different purposes intended on the target occasions.

1 Strategic Process

Strategy

Structure ( 전전전전 ) System ( 전전전전 ) Staff ( 전전 ) Skill ( 전전전전 )

Threat of

Threat of

Threat of New Entrants

Threat of New Entrants

Threat of New Entrants

Rivalry Among Competing Firms in Industry

Rivalry Among Competing Firms in Industry

Bargaining Power of Buyers

Bargaining Power of Buyers

7S Check Points

The following is an example of the 7S analysis being actually employed in one of the

business consulting projects.

1 Strategic Process

Pivotal Job Design How behavior patterns of front-line people need

to change in order to build new institutional skills Career Path Analysis Expected career path for key managers Managerial Candidate Evaluation Helps match individual managers strengths with

position requirements Promotion Speed by Function What functions have or have not been enhanced

by promotion patterns Career Blochage Analysis Where and how promotion is blocked or career

progression options are limited Managers' Background What backgrounds dominate among managers

or employees at a certain level Cross-Functional Experience Whether senior management has a broad or

functional perspective on issues

T urnover Analysis T he extent and organizational location of

employee turnover Executive Readiness Assessment Readiness of CEO(and other key executives) to

lead major change Staff Role and Evolution T he roles staff play and the change in those roles

over time

Organizional Skills Analysis

What the organization is good(or poor) at, the new skills required to execute a winning strategy, and the organizational changes necessary Skills Self-Assessment What the managers believe are their

organization's strengths and weaknesses Skills Gap Analysis If an organization has the necessary skills to

maintain competitive advantage Competitive Skills Assessment A comparison of our performance on skills with

competitor's skills performance Dimensions of Challenge Company's relative ability to decide the right thing

to do and then implement that chosen direction Content Analysis Hard data on the way top management really

spends its time and attention

Actual T ime Allocation

Difference between what a manager supposedly does and what he or she really does to support out strategy

Shared Values Identification Makes employees decide what is of crucial

importance to them Perception Difference Analysis Whether people at different levels of the

organization see the company the same way

Skill

Style

Shared Value

Staff

7S Analysis What is shows

Strategic Era Analysis T he organizational characteristics of the

past eras Changes Strategy Matrix Magnitude of required change and

pressures for/against it Decision Grid How and where decisions are made as well

as centralization/decentralization concerns Responsibility Dispersion How Many people are involved in making key

decision(is anybody responsible?) Expenditure Authority T he extent to which managers have the

proper level of authority over expenditures Organization Chart Analysis Structural barriers to organizational

effectiveness

"Real" Organization Chart

T he effects of actual reporting relationships

in an organization-as opposed to the official ones

Overhead Distribution Analysis If the numer and location of overhead

personnel supports the company's strategy Systems Analysis If systems provide a source of competitive

advantage

Strategic Impact of Systems

If systems are appropriately calibrated to a company's strategy and management is giving appropriate attention to key systems Decision Flows Decision-making patterns which support or

diminish an organization's efficiency

Systems Evolution Flow Chart

If systems have evolved to keep pace with changes in the organization or the competitive environment Systems/Process Flows If Information or a product is efficiently

transmitted across the organization Systems Redesign What current systems focus on and how they

might be more effectively designed Compensation Comparision Competitive and behavioral impact of

compensation package Reward Systems Analysis If the reward systems are still meaningful and

in support of the company's strategy

Strategy

Structure

System

Example

Forces at Work

The tools for the analysis of strategic planning should selectively be employed according to the different purposes intended on the target occasions.

1 Strategic Process

What is “Marketing Environment”?

Marketing Environment

The actors and forces that affect a firm’s ability to build and maintain

successful relationships with target customers.

Aspects of the marketing environment:

- Micro environment : Includes the actors close to company

- Macro environment: Involves larger social forces

Kotler and Armstrong, 2011, 2013

2 Marketing Environment Definition

The Microenvironment of the Company

The major actors in marketer’s microenvironment to create customer value and

satisfaction are illustrated below.

company

MACRO

MICRO

Su pp lie r

Su pp lie r

C

us to m er

C

us to m er

C om

pe tit or

C om

pe tit or

Po liti ca l

2 Intermediaries Help company to promote, sell, and distribute its goods to final buyers (e.g reseller, physical distribution firm, marketing service agency, financial service)

3 Customers Consumer/ Business/ Reseller/ Government/

International markets that include all of above

4 Competitors

5 Public Any group with actual & potential interest/impact

on organization’s ability to achieve its objectives Cultural

3 Microenvironment

자 자 (Company)

자자자 (Competitor)

자 자 (Customer)

3C

To understand and deal with the competitive environment today, 3C analysis works on the core factors of following levels; the customer, competitor, and company.

3C Analysis

1 Who are they?

2 Characteristics and Behaviors?

3 Size of target market?

1 Who are our competitors?

2 Pros and Cons?

The list of things to consider for your competitors are suggested below.

Competitor Analysis: Start from

Competitor Analysis has several important roles in strategic planning:

• To help management understand their competitive advantages/disadvantages relative

• Who are our competitors?

• What threats do they post?

• What is the profile of our competitors?

• What are the objectives of our competitors?

• What strategies are our competitors pursuing and how successful are these strategies?

• What are the strengths and weaknesses of our competitors?

• How are our competitors likely to respond to any changes to the way we do business?

Suggestion

4 3C and SWOT

KOREAN POSTAL SERVICE

CUSTOMER

COMPETITOR

•자자자 자자자자자 자자자자자 자자자 자자자자자 자자자 자자자자 자자 자가

3C: Korean Postal Service Project

The following example is extracted from one of the consulting project outputs Are there any connections between the issues and analyses? See for yourself.

4 3C and SWOT

Example

- What areas of business need most improvement?

- As environmental forces/changes affect and influence the marketplace, what new threats are emerging?

- As environmental forces/changes affect and influence marketplace, what opportunities are emerging?

- What are the core competencies of our company? (what do we do well?)

- What is the company’s reputation

in the market place?

O

Threat Opportunity

*SWOT 자자자 자자자자자 자자자자자 자자자자자 자자자자 자자 자자자 자자 자 자자자 자자자 자 자자 자자자자 자자자 자자자 자자자자 자자자

The questions you need to deal with SWOT analyses are addressed below.

SWOT Analysis

4 3C and SWOT

The SWOT analysis concerns internal strengths and weaknesses and finds out what external opportunities and threats are, to draw overall strategic view of the company.

자자자 자자자 자자자자 자자 IMPLICATIONS

SWOT Analysis

4 3C and SWOT

내내 내내내내

내내내 내내내 내내내내내내내

내내 내내내내

내내내 내내내 내내내내내내내

내내 내내내내

내내내 내내내 내내내내내내내

The Macroenvironment of the Company

company

MACRO

MICRO

Su pp lie r

Su pp lie r

C

us to m er

C

us to m er

C om

pe tit or

C om

pe tit or

Po liti ca l

2 Cultural Institutions and forces affect society’s basic values, perceptions, preferences, and behaviors

3 Natural Natural resources needed by marketing activities

4 Political Laws and government agencies that influences organization

and individuals

5 Technological New technologies create market opportunities and new products

6 Economical Factors affecting consumer behavior and buying power

Cultural

In a larger sense, the macroenvironment shapes opportunities, and poses threats to the company Six(6) major forces are illustrated below.

5 Macroenvironment

The demographic environment is the most basic factor that determines size of the

market.

Statistics for the World Population

Imagine the world is a large village, and the total number of people is 1,000, our village

4 1/3 have access to clean, safe drinking water, half of children would be immunized

5 200 controls 75% of wealth, 70 own cars, 1 own computers that even may not be connected

Demographic Environment of Korea

1 Decreasing Birth Rate (Summated Birthrate-between the child bearing period b/w 15-49yrs)

2 Increasing number of people over the age of “65”

5 Macroenvironment

It takes only 26 years for us to reach from aging society(7~14% of pop is composed of people with ages 65 or older) to aged society(20% or more of pop Is composed of

people with ages 65 or older).

Changing Age Structure

Changing age structure of the population can result into three or more different

 Believe old age begins at 80

 Feel much younger due to

their mental attitude

 Born between 1965~1978

 40 million consumers

 First “latchkey” products of dual career households

children- Now in their 30s and 40s planning to send their kids off

 New products and services (e.g Tommy Hilfiger, DKNY, Gap, Toys “R” us, Talbots, Eddie Bauer, etc.)

 Computer, Internet and digitally savvy

 Challenging target for marketers

Let’s take a look at some of the business fields that can target for the Silver Market.

5 Macroenvironment

Issues of Disability

What is Disability ?

Example

Cultural environment is explained as the institutions and other forces that affect

society’s basic values, perceptions, preferences, behaviors, and even

communications.

5 Macroenvironment

- Verbal Cues

- Nonverbal Cues or Body Language

Language and Communications

CULTURE WATCH: Using English as a Marketing Tool in Japan

In Japan, consumer packaged goods have English, French, or German labels to suggest a

stylish, Western look A Westerner may wonder what the copywriters wish to achieve

English on the label of City Original Coffee proclaims "Ease Your Bosoms This coffee has

carefully selected high quality beans and roasted by our all the experience." The intended

message: Drinking the coffee provides a relaxing break and "takes a load off your chest."

One expert believes these messages highlight differences between Japanese and other

languages Many Western languages lack exact equivalents for the rich variety of Japanese

words that convey feelings This presents difficulties for copywriters trying to render feelings

in a language other than Japanese

Q: Why are Japanese retailers unconcerned that the messages are syntactically suspect ?

Culture Watch: Using English as a Marketing Tool in Japan

5 Macroenvironment

HIGH CONTEXT

- Nonverbal messages are full of important and intended meanings

- When words are spoken, “reading between the lines” is important emphasis

on background, basic values -The meaning of individual behavior and speech changes depending on the situation or context

- Less emphasis on legal paper work

- Focus on personal reputation

- Latin American countries, Japan, and industrializing Asian countries

LOW CONTEXT

- Messages are explicit and specific

- Words carry all information (intentions are expressed verbally)

- Reliance on legal paperwork

- Focus on non-personal documentation of credibility

- Low context cultures can be found in culturally diverse countries such as Switzerland, US, and Germany

The important distinction between cultures suggested by Hall is that between HIGH and LOW context cultures which are described below.

High and Low Context Cultures

5 Macroenvironment

The high and low context cultures across different countries are illustrated below.

High and Low Context Cultures

H/L Communication Style

A US business man picked up a German client from his hotel near LAX and asked what kind of food he wanted for dinner He said, “something local.” Now in LA, the local food is Mexican food We went to a great Mexican restaurant in Santa Monica and had it all When we were done I asked him how he like the food He responded rather blandly, “It wasn’t very good”.

Germans being low-context oriented, they deliver information without any social padding If it was Americans in the same situation, the answer would more likely be

“It was pretty good but a bit too spicy.” A Japanese would answer “It was very good Thanks.” But he would never order Mexican food again

Example