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Chapter 4: Evaluating Opportunities in the Changing Marketing Environment For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Chapter 4 Objectives When you finish this chapter, you should 1. Know the variables that shape the environment of marketing strategy planning. 2. Understand why company objectives are important in guiding marketing strategy planning. 3. See how the resources of a firm affect the search for opportunities. 4. Know how the different kinds of competitive situations affect strategy planning. 4-2 5. Understand how the economic and technological environment can affect strategy planning. 6. Know why you might be sent to prison if you ignore the political and legal environment. 7. Understand how to screen and evaluate marketing strategy opportunities. 8. Understand the important new terms. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Importance of Objectives Provide Guidelines Setting Company Objectives Be Explicit Coordinate Effort Lead to Marketing Objectives 4-3 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill A Hierarchy of Objectives Company Objectives Production Objectives Finance Objectives Product Objectives Marketing Objectives Place Objectives Personal Selling Objectives HR Objectives Promotion Objectives Mass Selling Objectives R&D Objectives Price Objectives Sales Promotion Objectives Exhibit 4-1 4-4 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Limits on Opportunity Search ????? ????? ????? ????? ????? 4-5 Financial Strength Producing Capability and Flexibility Marketing Strengths For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Competitive Environment Kinds of Markets Competitor Analysis Key Concepts in the Competitive Environment Competitive Rivals Competitive Barriers Information on Competitors 4-6 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Economic and Technological Environment Global Economy Rapid Change Key Economic Forces Interest Rates 4-7 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Impact of Technology Technology is the application of science to convert and economy’s resources to output Technology impacts marketing both through opportunities for new products and new ways (processes) for handling marketing functions Example: consider the Internet Products: software for computer users Process: selling from a web site 4-8 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Political and Legal Environment Nationalism Consumerism Characteristics of the Political Environment Regional Groupings 4-9 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Some Important U.S. Federal Regulatory Agencies Agencies Responsibilities Federal Trade Commission (FTC) Enforces laws and develops guidelines regarding unfair business practices Food and Drug Administration (FDA) Enforces laws and develops regulations to prevent distribution and sale of hazardous consumer products Consumer Product Safety Commission (CPSC) Enforces Consumer Product Safety Act Federal Communications Commission (FCC) Regulates interstate wire, radio, and television Environmental Protection Agency (EPA) Develops and enforces environmental protection standards Office of Consumer Affairs (OCA) Handles consumer complaints Exhibit 4-4 4-10 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Cultural and Social Environment Time Poverty Economic Power Career Opportunity 4-11 Cultural Trend: The Changing Roles of Women For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Sales and Cost Curves of Two Strategies Product A Dollars Sales 0 Total cost 1 2 3 4 In this graphic, a too-narrow focus on the first year’s results might cause the marketing manager to abandon this product as too costly. 5 Years Exhibit 4-6 4-12 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Sales and Cost Curves of Two Strategies Product B In this graphic, a too-narrow focus on the first year’s results might cause the marketing manager to adopt the product prematurely, since its performance in year one is misleading. Sales Total cost 0 1 2 3 4 5 Years Exhibit 4-6 4-13 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Sales and Cost Curves of Two Strategies Product A Product B Sales Sales Dollars Total cost 0 Total cost 1 2 3 Years 4 5 0 1 2 3 4 5 Years Seen together, it is easy to see that Product A offers a vastly better overall return than does Product B Exhibit 4-6 4-14 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Evaluating Opportunities Industry Attractiveness Low Medium High Medium No Growth Low Business Strength High Borderline Growth Exhibit 4-7 4-15 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Continuum of Environmental Sensitivity Insensitive Industrial products Sensitive Basic commodity-type consumer products Consumer products that are linked to cultural variables Exhibit 4-8 4-16 For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Key Terms Mission Statement Competitive Environment Competitor Analysis Competitive Rivals Competitive Barriers Economic and Technological Environment 4-17 Technology Nationalism NAFTA Consumerism Cultural and Social Environment Strategic Business Unit (SBU) Portfolio Management For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill