Posted at 12.30.2018
This module gives an launch to Business environment where the firm operates. It includes understanding different conditions like the Macro environment, micro environment and inner environment. Thorough understandings of these concepts are essential for understanding the opportunities, risks, finding weaknesses of the organization as well as its advantages. This knowledge helps the businesses to fore plan and makes effective decisions.
This lesson introduces the role and need for Marketing Strategy to a business. When you yourself have finished this lesson you should be able to:
Explain the concept of marketing environment
Identify the macro environmental factors that affect the organizational guidelines.
Identify the micro environmental factors that affect the organizational policies.
Identify the inner environmental factors.
Explain SWOT analysis
The market environment identifies the surroundings that the business operates in, which includes factors and forces that affect the firm's policies and strategies.
There are two levels of market environment.
Internal and external environment, the external environment can be further split into Macro and Micro environment.
(For reference point only)
External Environment: The external environment consists of macro and micro environments.
Macro environment: The macro environment contains much larger and broader affects (which impact the micro environment), such as :
Micro Environment: The micro environment is made of individuals and organizations associated with the company and would directly impact the decisions of the business. It consists of :
Internal Environment: Internal environment consists of elements within the organization such as:
Experience and expertise
Patents and trade secrets
For a business to analyse the entire environment where it operates, environmental scanning becomes necessary.
Environmental scanning is a process of monitoring, evaluating, and transmitting of information from the exterior and internal environment to worried people within the organization. (Kazmi, 2008). Environmental scanning would help accumulate, analyse, and transmit information for strategic purposes.
Environmental scanning is carried out by organizations to find out its competencies, weaknesses as well as the opportunities and hazards existing in the surroundings, which is termed as the SWOT Analysis
SWOT Research: The analysis of the surroundings in which business operates is referred to as a SWOT evaluation. The SWOT analysis supports to find information helpful in corresponding the firm's competencies to the competitive surroundings. It has a major role in strategy formulation.
Internal environmental scanning of the organization helps the firm find its:
External environment scanning can help firms find:
Environmental scanning is important for each and every organization because of the following reasons:
The environment when a firm runs is strong in nature, checking becomes necessary to keep track of the changes happening in it. An environmental check shows the elements that constitute threats and opportunities available to the firms. It also helps maintain the firm prepared about competitor's activities so that appropriate strategies can be developed on that basis. It is an important tool which gives necessary source for formulation of marketing strategies.
(for guide only)
As already reviewed the exterior environment can be categorised into Macro and Micro environment.
Example: SWOT Analysis of Walmart
Strengths - Walmart has become the largest retailer in the US, and perhaps the entire world. It's huge buying volumes and negotiating style helps to keep its cost low, which allows these to keep their prices low. People will travel a pretty long distance to shop there. It includes invested intensely in software technology to keep limited handles on its functions.
Weaknesses - Small local businesses often can't contend with Walmart, and walk out business, which often alienates the tiny local business community. Walmart has been sued for unfair labor routines as well. These and other issues tarnish Walmart's image, especially for individuals who are directly impacted.
Opportunities - Growing markets outside the US offers a great chance to continue its progress.
Threats - Being number one in its market, some of Walmart's proven strategies are being imitated, to various diplomas, by other large retailers. This tends to make the market for the "big box" vendors more competitive over time.
(Source: http://www. businesstune-ups. com/swot-analysis-examples. html)
Resource Research study for SWOT evaluation for TESCO Plc, UK- for University student guide -http://www. oxbridgewriters. com/essays/management/tesco-swot-analysis. php
Macro environmental analysis scans the macro factors that impact the business. The macro environmental evaluation is also referred to as Pest analysis
PESTLE Research: PEST stands for Political, Economic, Social-cultural, Technological, Legal & Environmental analysis. It is composes of the macro-environmental factors used in environmentally friendly scanning for expanding strategic management. It really is a critical strategic strategy used for understanding market expansion or decrease, business position, potential and direction for the organizations businesses.
Composition of the macro environment is really as follows:
(for reference only)
There is certain additional factor apart from PESTLE, which can be contained in the macro environment such as demographic environment.
Demographic Environment: Demographic environment involves the next elements that includes a huge effect on the organizations operations:
Population progress worldwide: The huge inhabitants growth that is seen in the few generations has been an area of concern; the populace growth has led to exhaustion of scarce world resources such as fuel, food and natural resources. The other reason for concern is the fact the population development sometimes appears generally in those countries which will be the reduced developed countries or as called the reduced income countries who cannot find the money for to support this kind of population growth.
High population progress can have significant implications on the business. Population growth is effective for businesses only where this kind of expansion is supported with the purchasing ability.
For example: India and China - Both these countries have high society growth and are the countries having the highest population on the planet. Whereas Chinese authorities has a rigid one child insurance policy, which has led to a decrease in their human population, in India no such insurance policy exists. The "one young child insurance policy" in china has resulted in one young child in a family group, which has resulted in excessive pampering of the children by their members of the family. Here we can easily see that even with a high society the purchasing power is high. As the children in china are pampered with toys and other children's products, the toy stores and other kids related products makes find a lot of potential in entering the Chinese market to capitalise on the existing opportunity.
Whereas in India the increase in population hasn't seen an increase in the entire purchasing power of the current economic climate, hence the potential for such kind of goods is less.
Population Age groups - Different countries have different composition of age organizations. Population age groups can be sub-divided into
School heading children
Young individuals - 25 to 40
Middle aged - 40 to 65
Elderly - 65 and above
The composition of age group of the society can determine the sort of products that would dominate the production and market. For instance a country has an aging population would have demand for products that might be required for middle aged and elderly human population, while a country with a population will have prospect of children products and products for youngsters.
The business insurance policies and strategies would vary for different ethnic and ethnic categories existing in the culture.
Education founded groups
The different kinds of education teams that exist will again know what kind of products would be demanded in the market.
Household and consumption patterns differ in various societies.
Migration and ability to move of population
Migration of society in one region to some other has led to a multi-cultural environment. Where in a few countries you can view a mix of different nationals and in others you will see only natives. The business guidelines and strategies will change accordingly.
All these factors have led to a fragmentation of the market. Businesses have finally started to focus on smaller markets than mass market segments based on these differentiations in human population.
Economic factors would be financial growth, interest levels, exchange rates, circulation of prosperity and income and inflation rate. These factors have major effects on how businesses operate and make decisions.
Distribution of riches and income: The distribution of wealth in the modern culture also establishes the consumption routine of that contemporary society. Countries where there is similar circulation of income the usage level and quality lifestyle of men and women will be higher. Countries where circulation of income is unequal, the typical of living will be low. The type of products demanded in these societies would also vary. Where the quality lifestyle is high, more of luxury and comfort goods will be demanded.
Financial insurance policies: Financial guidelines also have a big impact on the consumption pattern of the consumers. Availability of good credit facilities and a well create credit system brings about a higher consumption level.
The natural resources which can be scarce in character, needs to be conserved, market sectors need to be careful how these resources are widely-used. New substitutes for these scarce resources have to be found so that they are suffered.
There has been a rise in fuel costs and energy which is employed for creation. The firm has to keep a close watch how the prices would have effect on its revenue.
Another reason behind matter is the pollution that industrial activities have brought about. The global warming that has been a major global matter. Companies who take this as a chance by opting in for pollution control programs such as recycling would be ones who gain.
There are also several governmental polices on environmental control which must be honored by every firm. Organizations need to aid the governmental effort somewhat than opposing it.
Technological factors include technological aspects such as R&D activity, automation, technology bonuses and the speed of technological change. They are able to determine entry obstacles, minimum efficient development level and effect outsourcing decisions.
Furthermore, scientific shifts can affect costs, quality, and business lead to invention.
Technological advancement has brought about products into the market that was never dreamt of a few decades back.
Increased costs for R&D have led to increased range for innovations in the market. Another major issues faced by organizations today are Health insurance and basic safety issues; there are several laws in regards to health and safeness which organizations needs to abide by. These complete factors have substantial effect in the strategies and regulations of organizations.
Political environment would contain the government of the current economic climate, that is how also to the degree of government intervention exists in the economy. It includes factors such as duty policy, labour regulation, environmental laws, trade restrictions, tariffs, and political stability.
Bargaining vitality of special interest group: They are groups of individuals who have affinity for the activities of the company, such as consumer rights, women's rights, older citizen's privileges, minority protection under the law etc.
Example of Nestle
Nestles business plans in the less developed countries have been criticised generally across the world, especially in britain and other countries in European countries, there can be an ongoing boycott on Nestle Products.
Though Nestle products can be purchased in the market on the market, it's sales volume and market talk about is well below objectives. Specifically its Baby products like Baby dairy range, Baby food supplements and other products for infants are least demanded. The boycott of Nestle products has led to an increase on the market show of its competitors, namely Cow & Gate,
Social-cultural factors are the cultural aspects, profession attitudes and focus on safe practices etc. Changes in the communal setup and culture have significant impact on the demand for products and services and exactly how an organization performs.
Shifts in cultures
The micro environment involves factors that are near to the organization and has a direct impact on its businesses.
Company itself: This would include the inside environment of the business. (We will cover this part in the next topic)
Supplier: The suppliers of the business are the businesses and corporation who supply resources for creation purposes. The way to obtain raw materials, labour, electricity, equipment, gasoline etc. would be achieved by these organizations. Developing a good source environment is very important for an organization. Having the option of resources as required helps to keep the production heading. For this function, there were significant initiatives in the modern times to develop a sophisticated source chain by organizations. The insurance policies of organizations and their suppliers are receiving integrated more and more. Organizations now, try to create a backward integration with their suppliers. This ensures that the way to obtain materials and function of the organizations go properly.
Marketing Intermediaries: They will be the organizations that support the firm in advertising, distributing and promoting the products and services to customers. Intermediaries help create place electricity for the products. All the intermediaries associated with the company would be collectively called stations of distribution. Stations of circulation can be of various levels and can include a number of intermediaries like distributors, agents, dealers, vendors. Designing and taking care of marketing programs is not a simple task, it needs a lot of work from the organizations path. The organization has to understand how to control and keep all the intermediaries satisfied for the soft working of the channels.
Customers: Customers will be the most integral facet of the external environment. Most of the organizations activities and functions are aimed towards gratifying the customer's needs and requirements.
There can be following type of consumers on the market:
Consumer marketplaces -would be individuals and households
Industrial marketplaces - industries who purchase products for development purposes
Resellers market - organizations that buy goods and services in order to resell them at a certain profit
Government and non-profit markets - buy goods and services for producing open public services
International markets - includes international buyers, companies, resellers etc.
Competitors: Rivals are those organizations that produce similar products as yours and compete with you for the marketplace share. The competition need to be identified, checked and competed with to maintain your market share.
The rivals strategies and plans have significant impact on the organizations own strategies and procedures, hence a close monitoring of the opponents plans and activities are eminent.
Public: Would be a group of individuals who have a pastime in the businesses of the organization and also could have a direct effect on the organizations decisions and guidelines.
Every organization has to face certain publics:
(for research only)
Internal environmental scanning is the process of evaluating the organizations talents and weaknesses. It is through this technique that organizations competencies and competitive advantages can be revealed.
Every organization will involve some areas where it'll be strong and other where it might be weak. It's the first rung on the ladder towards locating and producing its core competencies so as to survive available.
The elements under internal environment are:
Experience and expertise
Patents and trade secrets
(Source: http://www. netmba. com/strategy/swot/)
Through inner scanning, organizations try to size up its competitive talents.
Strengths of the firm can be as follows:
Access to resources
Established distribution networks
The Weaknesses of the organization is often as follows:
Weak brand names
Lower quality of product
High cost structure
An inside environmental scan involves looking at the present capabilities of the business (infrastructure, hardware, personnel, abilities, structure, etc) and this information can be compared to what the business will need in the future to attain its strategic goals.
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The market environment refers to the environment that the business enterprise operates in, which include factors and causes that influence the firm's procedures and strategies.
There are two degrees of market environment
Internal and exterior environment, the exterior environment can be further split into Macro and Micro environment.
The examination of the environment where business operates is referred
to as a SWOT research. The SWOT evaluation helps to find information helpful in coordinating the firm's competencies to the competitive environments.
Macro environmental evaluation scans the macro factors that effect the business. The macro environmental examination is also referred to as Pest examination. The factors under macro environment are:
The micro environment involves factors that are close to the business and has a direct effect on its procedures.
The factors under micro environment are:
Internal scanning is the process of evaluating the organization's strengths and weaknesses. It really is through this technique that organizations competencies and competitive advantages can be identified.
The elements under inner environment can be:
Experience and expertise
Patents and trade secrets