Download Environmental Analysis

Environmental Analysis
01/19/05
Objectives
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Why is environmental analysis important?
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What constitutes the marketing environment?
Importance of environment
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The success of a marketing organization depends on its
ability to adapt to its environment
Changes in environment increase uncertainty and
environmental analysis helps reduce this uncertainty
Failure to exploit/adapt to change leads to marketing
failure
Fads vs. Trends
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Fads
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Make your money and run!
It’s all about products
Trends
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What drives consumers to buy products?
Lasts an average of ten years or more
Crises do not make sweeping changes to trends
“You can’t create a trend; you can only observe it. And
you can’t change a trend. You can only change
people’s minds about believing in it.”
Source: “Clicking” by Faith Popcorn and Lys Marigold, pg. 12
Marketing Environment
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Two types based on controllability and impact
The macro environment consists of broad trends in
industries, global markets, and technologies
Micro environment is defined by 5 C’s
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Company
Consumers
Competition
Channels of distribution
Constituents
Macro environment
1.
Demographic environment
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Increasing number of working women
Increasing number of non-traditional families in the US
Aging of the population
Geographical shifts
Age Distribution in U.S.
Generational Cohorts*
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
Woodstock, Kennedy
Assassination, Vietnam
Fighting aging: skin care,
adventure vacations, health
foods
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.
Macro Environment
2.
Socio-Cultural environment
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3.
Desire to lead longer and more enjoyable lives has led to
increasing vegetarianism, low tech-medicine and meditation
9/11 changed our perceptions of air travel and hurt the airline
industry
Political-Legal/ Regulatory environment
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Emphasis on natural environment has forced companies to
become more “green”
Increased rigor in corporate accounting and reporting (SarbanesOxley Act) has resulted in a surge of hiring of auditors and
increased business for consulting firms
Macro-Environment
4.
Economic environment
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Slowing economy and recession has led to downsizing, reduced
marketing expenditures, price slashing
Globalization
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Overseas revenues increasingly important for US firms
Macro environment
5.
Technological environment
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The Internet affects all aspects of marketing including
product/production, communication, pricing, promotion,
channels
In terms of technology, the Internet has definitely affected
several businesses and forced them to rethink and redesign
their offering
Trends in biological research have led to better drugs and
medicines, disease resistant crops, genetically modified foods
Macro environment
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The macro-environment is not controllable and
usually affects the entire economy; all companies in a
given industry
Micro environment
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Company
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Customers
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New threats, potential entrants (E.g. Amazon.com)
Channels
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Changes in wants, demands, behaviors (E.g. Krispy Kreme)
Competitors
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Financial, Human resources (E.g. Google.com)
New channel members (E.g. Cars.com)
Constituents
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Consumer watch groups (E.g. PETA)
Shareholders (E.g. Disney)
Micro environment
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The micro environment is relatively more controllable
and its impact can be company specific
For both micro and macro environments, forecasting
trends is critical to marketplace success
Data Sources for
environmental analysis
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Internal sources such as company records, customer
surveys, financial records
External sources such as syndicated data, trade
publications, news media
But…
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Data is NOT equal to information
Too much analysis leads to paralysis
Environment analysis and
strategic planning
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A marketing planner understands environment based on
a thorough analysis of the Five C’s and the macro
environment
There are two reasons why environment analysis is done
BEFORE strategy planning:
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Environment analysis involves information search. Information
reduces uncertainty.
Strategy planning before understanding the marketing
environment will lead to “confirmation bias,” which is a tendency
to look for information that confirms one’s ideas.
Managing the environment
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It is important to take a proactive approach to
managing the microenvironment and the macro
environment to affect changes that are favorable for
the company.
How? Hire lobbyists , run “advertorials”, file law suits
and complaints, and form agreements.
Key Points
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Managing environmental complexity is critical to
marketing success
An environmental analysis is done before strategy
planning in order to reduce confirmation bias
Marketers must try and be proactive rather than
reactive to the marketing environment