8/3/2019 Lt3--AnalysExternalEnv

1/23

External Environment

in the Asia PacificRegion

Asia-Pacific Marketing Federation

Certified Professional Marketer

Copyright

Marketing Institute of Singapore

8/3/2019 Lt3--AnalysExternalEnv

2/23

Outline

Introduction

The Companys Microenvironment

The Companys Macroenvironment The Competitors

Porter's Five Forces Model

8/3/2019 Lt3--AnalysExternalEnv

3/23

Introduction

Definition:

The Companys environment consists of "the

actors and forces outside marketing thataffect marketing management's ability todevelop and maintain successfultransactions with its target customers"

Kotler et al, 1994

8/3/2019 Lt3--AnalysExternalEnv

4/23

Introduction (contd)

Companies must evaluate both micro and macro-environment to identifyany trends that may affect their marketing strategies,

andopportunities that can be developed into competitive

advantages

Porter's Five Forces model analyses marketstructures to determine market attractiveness

taking into consideration the micro and macroenvironments in its construction

8/3/2019 Lt3--AnalysExternalEnv

5/23

Companys Microenvironment

Relates to the internal forces or forces close to thecompany over which some control is possible

Top management

Other functions e.g. finance and accounting, R&D, manufacturing and purchasing

Suppliers

Marketing intermediaries (channel partners)

Customers Competitors

Public

8/3/2019 Lt3--AnalysExternalEnv

6/23

Companys Macro-environment

Relates to the larger forces having animpact on society as a whole

A company has little influence on theseforces and therefore can only adapt itsmarketing mix to account for the resultingopportunities and threats

8/3/2019 Lt3--AnalysExternalEnv

7/23

Major forces of the macro-

environment

Demographic

Economic

Natural

Technological

Cultural

Political/legal

8/3/2019 Lt3--AnalysExternalEnv

8/23

Demographic Environment

Demographic trends:

Changing age structure

Changing family structure

Geographic shifts in population

Higher education level & more whitecollar job holders

Increasing globalization of cities such asSingapore

8/3/2019 Lt3--AnalysExternalEnv

9/23

Economic Environment

Economic trends affecting consumersbuying power and spending pattern

Change in per capital real income

Disposable

Discretionary

Income distribution

Savings & debt

Consumer expenditures Change in interest rates and cost of living

8/3/2019 Lt3--AnalysExternalEnv

10/23

Natural environment

Natural trends include those naturalresources used in production or thoseaffected by marketing activities

Raw material shortages

Increase in energy cost

Increase pollution levels

Increase in Governmental intervention innatural resource management

8/3/2019 Lt3--AnalysExternalEnv

11/23

Technological Environment

Consists of forces that affect newtechnology, new product developmentand market opportunities

Faster pace of technological change Shorter PLC

Higher R&D budgets

Concentration on minor improvements

Increased regulations

8/3/2019 Lt3--AnalysExternalEnv

12/23

Cultural Environment

Affect society's basic values, perceptions,preferences and behaviors

Core cultural values and beliefs

Secondary cultural values

Sub cultures

8/3/2019 Lt3--AnalysExternalEnv

13/23

Legal and Political Environment

Trends in the legal and political environmentinclude

Increased legislation regulating business Singapores Fair Trading Act (impending)

Changing government agency enforcement

Growth of public interest groups

Regional groupingsASEAN FTZ

8/3/2019 Lt3--AnalysExternalEnv

14/23

Competitive Analysis

Who are your competitors?

Do you know about your close competitorsstrengths and weaknesses?

How detail should we analyze thecompetition? Use a systematic approach

Analysis competition at various levels (nextslide)

8/3/2019 Lt3--AnalysExternalEnv

15/23

Levels of Competition

Generic Competition

Form Competition

Industry Competition

Brand Competition

8/3/2019 Lt3--AnalysExternalEnv

16/23

Levels of Competition (contd)

Generic competitione.g. Honda against SilverSea Cruise for the same consumer dollars

Form competitione.g. Toyota againstmanufacturers of other vehicles that provide the

same service such as Yamaha (motorcycle) Industry competitione.g. Honda against

Mercedes, Lexus etc who make the sameproducts or class of products (different prices)

Brand competitione.g. Honda against Toyota,Nissan etc. who offer similar products and serviceto the same customers at similar prices

8/3/2019 Lt3--AnalysExternalEnv

17/23

Industry Competition

Different industries can sustain differentlevels of profitability; partly due to thedifference in industry structure

Porters Model of Industry Competition,commonly know as Porters Five Forcesprovides a framework for analyzing theinfluence of the forces on the industry todetermine the industrys profitability andcompetitiveness

P M d l f I d

8/3/2019 Lt3--AnalysExternalEnv

18/23

Porters Model of Industry

Competition

Industry degree

of rivalry BuyersSuppliers

Barriers to Entry

Substitutes

(Source: Aakers pp.8487)

P 5 F

8/3/2019 Lt3--AnalysExternalEnv

19/23

Porters 5 Forces

Barriers to Entry

Absolute costadvantages

Proprietary learning

curve

Access to inputs

Government policy

Economies of scale

Capital requirements

Brand identity

Switching costs

Access to distribution

Expected retaliation

Proprietary products

(Source: Michael Porter, On Competition)

8/3/2019 Lt3--AnalysExternalEnv

20/23

Threats of Substitutes

Switching costs

Buyer propensity to substitute

Relative price performance ofsubstitutes

(Source: Michael Porter, On Competition)

8/3/2019 Lt3--AnalysExternalEnv

21/23

Buyer Power

Bargaining leverage

Buyer volume

Buyer information

Brand identity

Price sensitivity

Threat of backwardintegration

Product differentiation

Buyer concentration vs.industry

Substitutes available

Buyers' incentives

(Source: Michael Porter, On Competition)

8/3/2019 Lt3--AnalysExternalEnv

22/23

Supplier Power

Supplier concentration

Importance of volumeto supplier

Differentiation ofinputs

Impact of inputs oncost or differentiation

Switching costs offirms in the industry

Presence of

substitute inputsThreat of forward

integration

Cost relative to totalpurchases in industry

(Source: Michael Porter, On Competition)

8/3/2019 Lt3--AnalysExternalEnv

23/23

Degree of Rivalry

Exit barriers

Industry growth

Industry concentration ratio

Fixed costs/Value added

Product differentiation

Buyers' incentives

(Source: Michael Porter, On Competition)