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External Environment External Environment in the Asia Pacific in the Asia Pacific
RegionRegion
Asia-Pacific Marketing Asia-Pacific Marketing FederationFederation
Certified Professional MarketerCertified Professional MarketerCopyrightCopyright
Marketing Institute of SingaporeMarketing Institute of Singapore
OutlineOutline
IntroductionIntroduction The Company’s MicroenvironmentThe Company’s Microenvironment The Company’s The Company’s
MacroenvironmentMacroenvironment The CompetitorsThe Competitors Porter's Five Forces ModelPorter's Five Forces Model
IntroductionIntroduction
Definition:Definition:
The Company’s environment consists of The Company’s environment consists of "the actors and forces outside "the actors and forces outside marketing that affect marketing marketing that affect marketing management's ability to develop and management's ability to develop and maintain successful transactions with maintain successful transactions with its target customers" its target customers"
Kotler et al, 1994Kotler et al, 1994
Introduction (cont’d)Introduction (cont’d)
Companies must evaluate Companies must evaluate bothboth micro and micro and macro-environment to identify macro-environment to identify any trends that may affect their marketing any trends that may affect their marketing
strategies, and strategies, and opportunities that can be developed into opportunities that can be developed into
competitive advantagescompetitive advantages
Porter's Five Forces model analyses market Porter's Five Forces model analyses market structures to determine market structures to determine market attractiveness taking into consideration the attractiveness taking into consideration the micro and macro environments in its micro and macro environments in its constructionconstruction
Company’s MicroenvironmentCompany’s MicroenvironmentRelates to the internal forces or forces close to the Relates to the internal forces or forces close to the
company over which some control is possible company over which some control is possible Top managementTop management Other functions e.g. Other functions e.g. finance and accounting, R& finance and accounting, R&
D, manufacturing and purchasing D, manufacturing and purchasing SuppliersSuppliers Marketing intermediaries (channel partners)Marketing intermediaries (channel partners) CustomersCustomers CompetitorsCompetitors PublicPublic
Company’s Macro-environmentCompany’s Macro-environment
Relates to the larger forces having an Relates to the larger forces having an impact on society as a whole impact on society as a whole
A company has little influence on A company has little influence on these forces and therefore can only these forces and therefore can only adapt its marketing mix to account for adapt its marketing mix to account for the resulting opportunities and the resulting opportunities and threatsthreats
Major forces of the macro-Major forces of the macro-environmentenvironment
DemographicDemographic EconomicEconomicNaturalNatural TechnologicalTechnologicalCulturalCultural Political/legalPolitical/legal
Demographic EnvironmentDemographic Environment
Demographic trends:Demographic trends: Changing age structure Changing age structure Changing family structureChanging family structure Geographic shifts in populationGeographic shifts in population Higher education level & more Higher education level & more
white collar job holderswhite collar job holders Increasing globalization of cities Increasing globalization of cities
such as Singaporesuch as Singapore
Economic EnvironmentEconomic Environment
Economic trends affecting consumers Economic trends affecting consumers buying power and spending patternbuying power and spending pattern
Change in per capital real incomeChange in per capital real income Disposable Disposable DiscretionaryDiscretionary Income distributionIncome distribution
Savings & debtSavings & debt Consumer expendituresConsumer expenditures Change in interest rates and cost of livingChange in interest rates and cost of living
Natural environmentNatural environment
Natural trends include Natural trends include those natural those natural resources used in production or those resources used in production or those affected by marketing activitiesaffected by marketing activities
Raw material shortagesRaw material shortages Increase in energy cost Increase in energy cost Increase pollution levelsIncrease pollution levels Increase in Governmental intervention Increase in Governmental intervention
in natural resource managementin natural resource management
Technological EnvironmentTechnological Environment
Consists of forces that affect new Consists of forces that affect new technology, new product development technology, new product development and market opportunitiesand market opportunities
Faster pace of technological changeFaster pace of technological change Shorter PLCShorter PLC
Higher R&D budgetsHigher R&D budgetsConcentration on minor improvementsConcentration on minor improvements Increased regulationsIncreased regulations
Cultural EnvironmentCultural Environment
Affect society's basic values, Affect society's basic values, perceptions, preferences and perceptions, preferences and behaviorsbehaviors
Core cultural values and beliefsCore cultural values and beliefs Secondary cultural valuesSecondary cultural values Sub culturesSub cultures
Legal and Political EnvironmentLegal and Political Environment
Trends in the legal and political Trends in the legal and political environment includeenvironment include
Increased legislation regulating businessIncreased legislation regulating business Singapore’s Fair Trading Act (impending)Singapore’s Fair Trading Act (impending)
Changing government agency Changing government agency enforcementenforcement
Growth of public interest groupsGrowth of public interest groupsRegional groupingsRegional groupings
ASEAN FTZASEAN FTZ
Competitive AnalysisCompetitive Analysis
Who are your competitors?Who are your competitors?Do you know about your close Do you know about your close
competitors’ strengths and competitors’ strengths and weaknesses?weaknesses?
How detail should we analyze the How detail should we analyze the competition?competition? Use a systematic approach Use a systematic approach Analysis competition at various levels Analysis competition at various levels
(next slide)(next slide)
Levels of CompetitionLevels of Competition
Generic Competition
Form Competition
Industry Competition
Brand Competition
Levels of Competition (cont’d)Levels of Competition (cont’d) Generic competition—e.g. Honda against Silver Generic competition—e.g. Honda against Silver
Sea Cruise for the same consumer dollarsSea Cruise for the same consumer dollars Form competition—e.g. Toyota against Form competition—e.g. Toyota against
manufacturers of other vehicles that provide the manufacturers of other vehicles that provide the same service such as Yamaha (motorcycle)same service such as Yamaha (motorcycle)
Industry competition—e.g. Honda against Industry competition—e.g. Honda against Mercedes, Lexus etc who make the same Mercedes, Lexus etc who make the same products or class of products (different prices)products or class of products (different prices)
Brand competition—e.g. Honda against Toyota, Brand competition—e.g. Honda against Toyota, Nissan etc. who offer similar products and Nissan etc. who offer similar products and service to the same customers at similar prices service to the same customers at similar prices
Industry CompetitionIndustry Competition
Different industries can sustain different Different industries can sustain different levels of profitability; partly due to the levels of profitability; partly due to the difference in industry structuredifference in industry structure
Porter’s Model of Industry Competition, Porter’s Model of Industry Competition, commonly know as Porter’s Five Forces commonly know as Porter’s Five Forces provides a framework for analyzing the provides a framework for analyzing the influence of the forces on the industry influence of the forces on the industry to determine the industry’s profitability to determine the industry’s profitability and competitivenessand competitiveness
Porter’s Model of Industry Porter’s Model of Industry CompetitionCompetition
Industry degree of rivalry
BuyersSuppliers
Barriers to Entry
Substitutes
(Source: Aakers pp.8487)
Porter’s 5 Forces—Porter’s 5 Forces—Barriers to EntryBarriers to Entry
Absolute cost Absolute cost advantages advantages
Proprietary learning Proprietary learning curve curve
Access to inputs Access to inputs Government policy Government policy Economies of scaleEconomies of scale
Capital requirements Capital requirements Brand identity Brand identity Switching costsSwitching costs Access to distribution Access to distribution
Expected retaliation Expected retaliation Proprietary products Proprietary products
(Source: Michael Porter, “On Competition”)
Threats of SubstitutesThreats of Substitutes
Switching costsSwitching costsBuyer propensity to substitute Buyer propensity to substitute Relative price performance of Relative price performance of
substitutes substitutes
(Source: Michael Porter, “On Competition”)
Buyer PowerBuyer Power
Bargaining Bargaining leverage leverage
Buyer volume Buyer volume Buyer Buyer
information information Brand identity Brand identity Price sensitivity Price sensitivity
Threat of backward Threat of backward integration integration
Product Product differentiation differentiation
Buyer concentration Buyer concentration vs. industry vs. industry
Substitutes available Substitutes available Buyers' incentives Buyers' incentives
(Source: Michael Porter, “On Competition”)
Supplier PowerSupplier Power
Supplier Supplier concentration concentration
Importance of Importance of volume to supplier volume to supplier
Differentiation of Differentiation of inputs inputs
Impact of inputs on Impact of inputs on cost or cost or differentiation differentiation
Switching costs of Switching costs of firms in the industry firms in the industry
Presence of Presence of substitute inputs substitute inputs
Threat of forward Threat of forward integration integration
Cost relative to total Cost relative to total purchases in purchases in industry industry
(Source: Michael Porter, “On Competition”)
Degree of RivalryDegree of Rivalry
Exit barriers Exit barriers Industry growthIndustry growth Industry concentration ratio Industry concentration ratio
Fixed costs/Value added Fixed costs/Value added Product differentiation Product differentiation Buyers' incentivesBuyers' incentives(Source: Michael Porter, “On Competition”)