Module One

TEBEK 1
The Nature of Marketing
 Part Two: Developing
Marketing Opportunities
1. Marketing Environment
2. Marketing Information
and Research
3. Consumer Behavior
4. Segment, Target,
Position
TEBEK The Nature of Marketing 2
 Module One
TEBEK
The Nature of Marketing
 Organizational
Organizational Environment
Environment
1. Introduction
2. The External Environment
3.1 Macro Environment
3.2 Micro Environment
3. Internal Environment
3.1 Internal Environment Components
3.2 Internal Environment Value Chain
4. Managing the Environment
 1.
1. Introduction:
Introduction: Environment
Environment of
of Marketing
Marketing
• The existence, development and growth
of an organization depends on how well it
interacts with its environment.
• Organizational environment can be
classified into internal and external
environment.
• The analysis of the external and internal
environment of organizations is called-
strength, weakness, opportunities and
threats (SWOT) analysis
• Environmental analysis helps to diagnose
the opportunities and threats, (OT) of the
external environment and the strengths
and weaknesses (SW) of the internal
The purpose of SWOT Analysis
• It is an easy-to-use tool to develop strategy
• It provides the “raw material” to do more
extensive internal (within the company)
and external (outside the company)
analysis.
 Opportunities
• An OPPORTUNITY is a chance for
organization’s growth or progress due to a
favorable circumstances in the business
environment.
• Possible Opportunities examples:
– Emerging customer needs
– Quality Improvements
– Expanding global markets
– Vertical Integration
 Threats
• A THREAT is a factor in a company’s
external environment that poses a danger
to its well-being.
• Possible Threats examples:
– New entry by competitors
– Changing demographics/shifting demand
– Emergence of cheaper technologies
– Regulatory requirements
 2.
2. Types
Types of
of Environment
Environment
The Environment can generally be divided into:
A. External-Environmental
A.1 Macro
A. 2 Micro
B. Internal Environment.

A.1 Macro A.2 Micro

 A.
A. The
The External
External Environment
Environment
• External environment: everything outside
an organization’s boundaries that might
affect it. The uncontrollable environment.
The external environment constitutes the
opportunities (O) and threats (T).
• External analysis often is termed as
PEST analysis.
• Political • Social
• Economic • Technological
 The
The External
External Environment
Environment
The external environment
(Opportunities and Threats) can
be grouping into:
1. Macro Environment (General)
2. Micro Environment. (Task)
 A.1
A.1 The
The Macro-environment
Macro-environment
• Larger societal forces that affect
the whole Micro-Environment.
• Include: Political-Legal,
Economic, Socio-Cultural ,
Technological (Demographic
and Natural Environment).
 AA 11 Macro-Environment
Macro-Environment

1. Political
5. Demographic
2. Economic
6. Natural
3. Socio-cultural
4. Technological

Organization
 The
The Macro-Environment
Macro-Environment
1. Political-Legal Environment
• The political environment includes
the nature of relationship between
various areas of government and
the organization.
• Factors of politics include
governmental stability, ideology,
international relations, tax,
incentives, etc.
 The
The Macro-Environment
Macro-Environment
Political-Legal Environment
Governments develop wide range of laws and
regulations. That affect organizations as:
• Protect organizations from each other (antitrust).
• Protecting consumers (users) from unfair
business practices.
• Protecting interests of society against
unrestrained business behavior.
• Increased emphasis on ethics and socially
responsible actions.
• Regulates relationship between employers and
employees (Labor relations)
 The
The Macro-Environment
Macro-Environment
2. Economic Environment
The economic factors such
as the business cycle,
inflation, interest rate, and
income distribution affect
organizations significantly.
 Economic Environment
1.Business cycle is the measure of the
economy rise and fall cyclically.
• Prosperity : is the period of economic growth,
high employment and high income. Strategy
is to expand organizational performance and
activities such as produce more, introduce
new products, enter new market.
• Recession: is a period of retrenchment for
consumers and business. Consumers are
discouraged, scared and angry which has an
implication for organizational operations.
 Economic Environment

• Depression: is the period of economic

stagnation, where unemployment is high,
income is low and spending is low
• Recovery: is the movement of the
economy upwards towards from recession
to prosperity. Where employment rises,
income increases
An organization needs to operate its system
quite differently during each economic stage.
 Economic Environment

2. Inflation: Inflation is a rise in price levels. When

prices rise faster than personal incomes
customer buying power declines
3. Interest Rate: When interest rate are high,
consumers hold back long term purchases
such as housing.
4. Income Distribution: different segment of
people and countries have different economic
levels that affect transaction and exchange
dealings
 3. Socio-cultural Environment
The Socio-cultural Factors: refers to, attitude,
beliefs and values of people, of the society in
which organizations operates.
•Culture teaches the people’s behavioral
standards, language, and the products they use.
•An organization, which is insensitive to culture,
may end up in dealing with goods or services that
are undesirable, unacceptable and
misunderstood by the culture.
•Firms make grave mistakes if they lack
awareness of the culture of their environment.
 Socio-cultural Environment

Culture Affects:
•Perception •Touching
•Language and •Food and eating
meaning of words habits
•Greetings •Body language
•Contact •Exposure
 4. Technological Environment
• Technological breakthroughs can affect
organizations in three ways.
• Start and operate entirely new industries, as
computers and robots have done
• Virtually destroy or cripple existing industries,
for example video crippled movie industries.
• Stimulate demand by improving consumer
life standard and provide additional life by
saving time
• Advance in technology in communications now,
permit transact business from almost any
location at any time of the day through the
internet.
 5. Natural Environment

Involve the resources that are needed as inputs by

organizations

Changing
ChangingRole
Role
of
of Government
Government

Higher
HigherPollution
Pollution Natural Shortage
Shortageof
of
Levels
Levels Environment Raw
Raw Materials
Materials

Increased
IncreasedCosts
Costs
of
ofEnergy
Energy
 5. Natural Environment
• Changing Roles of Governments: Governments make
different regulations on the exploitation and use of
natural resources
• Shortages of raw materials: Staples such as air, water,
and wood products have been seriously damaged and
non-renewable such as oil, coal, and various minerals
have been seriously depleted .
• Increased pollution : Industrial damage to the
environment is very serious. Far-sighted companies are
becoming “environmentally friendly” and are producing
environmentally safe and recyclable or biodegradable
goods.
• Increased cost of energy: the cost of energy used by
organization is increasing consistently.
 External Environment
Michael Porter’s Five Forces
Industry Competition
Model

TEBEK
 Industry Competition
• Marketing need to understand how
competition affect sustained level of
profitability.
• Porter’s Model of Industry Competition,
Is a major tool for Strategic Marketing
Management which is commonly
known as Porter’s Five Forces provides
a framework for analyzing the influence
of the forces on the industry to determine
the industry’s profitability and
competitiveness
 Elements of Industry – The Five Forces Model
New
Entrants

Threat of New Entrants

Bargaining Industry Bargaining

Power of Competitors Power of
Suppliers Buyers
Suppliers Buyers
Intensity of
Rivalry

Threat of Substitutes

Substitutes
 Intensity of Rivalry
• The industry is less attractive if:
Industry • Numerous competitors, none
Competitors
dominant
• Stable or declining market
Intensity of • High investment/large capacity
Rivalry
increments
• Low product differentiation
• Low switching costs
• Competing for small pie
 1. Potential New Market Entrants
The easier to jump in, the less
attractive. Less barrier to enter. Conditions
that make the industry less attractive include:
Threat of New Entrants

• Low economies of scale and

learning effects
Entrants
New

• Low capital intensity

• Low product differentiation
• Gaining distribution outlets is easy
 Supplier Power
The industry is less attractive if:
• Suppliers are
concentrated or organized
Bargaining
Power of • Substitute prices are high
Suppliers
Suppliers • Providing critical
component/large value
added
• High switching costs exist
 Buyer Power
The industry is less attractive if:
• Buyers are few or organized
• Your product is undifferentiated
• Switching costs are low Bargaining
Power of
• Buyer profits are low & your product Buyers
is a large percentage of buyer’s total Buyers
costs
• Your product isn’t all that critical to
buyer
 Threat of Substitutes
The industry is less attractive if:
Numerous potential substitutes
Threat of Substitutes

• Numerous current substitutes

Substitutes

• Buyer propensity to substitute

• Relative price performance of

substitutes
• Switching cost
Substitute doesn’t mean another brand, but
another product type. (Tea for Coffee)
 A.
A. 22 The
The Micro-environment
Micro-environment
• The micro-environment (Task) are
those parties that have direct impact
and influence on the organization.
• They include: customers,
competitors, publics, intermediaries,
suppliers, regulators
 The
The Micro-environment
Micro-environment

Customers Suppliers

Publics
Competitors

Intermediaries Regulators
 The
The Micro-environment
Micro-environment
• Competitors: an organization that
competes with other organizations by
adding competitive advantage through
adding greater customer value.
Competitors can be opportunities as well
ad threats
• Customers: whoever pays money to
acquire an organization’s products or
services.
• Suppliers: organizations that provide
resources for other organizations
 The
The Micro-environment
Micro-environment
• Publics: Affect organizations in many
ways. They include financial publics,
media publics, internal publics.
• Regulators: a unit that has the potential
to control, legislate, or influence an
organization’s policies and practices.
(Example Ministry of Labor and Social
affairs)
• Intermediaries: Those who act in
between, distributors, agents etc.
 The
The Internal
Internal Environment
Environment

• Internal environment: the

conditions and forces within an
organization. They are
controllable.
• Internal environment determines
the strengths (S) and weaknesses
(W) of Organizations (ST).
 Organization’s
Internal
Environment
  Structure
Owners
 Board of Directors  Culture
 Employees  Facilities
  Functional units
Guidelines
  Etc.,
Strategies
 The Internal Environment
• Owner: someone who has legal
property rights to a business.
• Board of directors: governing body
elected by a corporation’s stockholders
and charged with overseeing the
general management of the firm.
• Employees: those employed by the
organization (management and non
management).
• Guidelines: Policies, Strategies,
Mission, Vision: Guide for actions
 The Internal Environment

• Physical work environment: the firm’s

facilities (building, space, equipments
etc.,).
• Culture: The set of values, beliefs,
behaviors, customs, and attitudes that
helps the members of the
organization understand what it
stands for, how it does things, and
what it considers important.
 The Internal Environment
Michael Porter’s value chain
Model

TEBEK
The
The Internal
Internal Environment:
Environment: Value
Value Chain
Chain
Successful organization create values that satisfy and
delight customers more than competitors. Michael Porter
(1985) suggested that the activities of a business can be
grouped under two headings.
1.Primary activities: those that are directly
involved with the physical creation and delivery of
the product or service.
2.The support activities: which feed both
into primary activities and into each other. Support
activities are not directly involved in production, but
have the potential to increase effectiveness and
efficiency.
 Value Chain Support Activities

Firm infrastructure ( financing, planning, )

A
ACTIVITIES

Human Resource Management

SUPPORT

Technology development U

E
Procurement
 Support Activities
1.Organizational infrastructure: which is
concerned with a wide range of support
systems and functions, such as planning ,
external relations, finance, planning, quality
control and coordinating ability.
2.Human resource management, dealing with
those activities concerned with recruiting,
developing, motivating, and rewarding the
workforce of the organization and employee
relations.
 Support activities
3. Technology development, managing
information, R&D, meeting deadlines,
innovation and protection of
"knowledge" in the organization.
4. Procurement, which deals with how
resources are acquired for the
organization (e.g., sourcing and
negotiating with)
Value Chain Primary Activities

V
A
Inbound Outbound Marketing After-sales
Operations L
logistics logistics And sales service

PRIMARY ACTIVITIES
 Primary Activities
Inbound logistics: involves preparations
for operations, including production and
operation planning; acquiring and
ordering inputs and materials, receiving
and storing and supplying to operations.
Operations: involve the actual
conversion process. The transformation
of inputs into outputs.
 Primary Activities
Outbound logistics: concerns the packaging
and warehousing of the processed materials
and physical distribution to customers
Marketing and Sales: involves in the
satisfaction of customer needs and wants and
creating demand and revenue to the
company’s product.
After Sales service: Creating enduring
relationship by monitoring and guarantying
customers the best use of the product they
have bought
 Value Chain
Firm infrastructure ( financing, planning, )
ACTIVITIES

Human Resource Management

SUPPORT

M
Technology development
A
R
Procurement
G

I
Inbound Operations outbound Marketing After-sales
logistics logistics And sales service N

PRIMARY ACTIVITIES
 5.
5.Managing
Managingthe
theEnvironment
Environmentand
andInteraction
Interaction

Some of the most common techniques for

interaction with the environment in order to
lesson the threat and take advantage of
opportunities, include:
• Research and intelligence,
• Public relations,
• Boundary spanning,
• Lobbying,
• Negotiation,
• Strategic alliance
• Organizational design and restructuring.
 Managing
Managing the
the Environment
Environment and
and Interaction
Interaction

• Research and Intelligence: Obtain

information about developments in the
environment.
• Public Relations: Creating good image of the
company in the environment
• Boundary spanning: Regularly meet with
stakeholders to explain the current and future
status of the organization
 Managing
Managing the
the Environment
Environment and
and Interaction
Interaction
• Lobbying: Meeting with government officials,
representatives to attempt to influence their votes
on some policies that affect organization
• Strategic Planning: developing vision, mission,
objectives and strategies
• Organizational Restructuring: changing the
organization’s structure and work arrangement to
make the organization competitive, (continuous
change, BPR).
• Creating Strategic Alliance: With competitors and
suppliers