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UNIT 4: Marketing UNIT 4: Marketing PrinciplesPrinciples

Micro Micro andand Macro Macro Environment Environment

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Internal and External ForcesInternal and External ForcesMicro & Macro EnvironmentMicro & Macro Environment

The aim of today’s lecture is to view how internal and external influencers could affect a business and its overall strategic development.

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Internal and External ForcesInternal and External ForcesMicro & Macro EnvironmentMicro & Macro Environment

By the end of this learning sessions, all students should be able to:-

1. Explain what is a SWOT Analysis, and its purpose within a business.

2. Explain and identify key areas of a Pestel Analysis, and its key function to a business.

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Internal and External ForcesInternal and External ForcesMicro & Macro EnvironmentMicro & Macro Environment

• Explain the key differences between Micro and Macro Environment, and which External Force is currently present within the UK.

• To explain SWOT and PESTEL Analysis through group discussion and presentation in reference to a given company – (e.g. Argos).

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Definition of Marketing Definition of Marketing EnvironmentEnvironment

“the factors and forces external to the marketing management function of the firm that impinge on the marketing management’s ability to develop and maintain successful transactions with its customers” (Kotler 1997)

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Components of the Components of the Marketing EnvironmentMarketing Environment

• Micro-environment - Internal

• Macro-environment - External

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Internal EnvironmentInternal EnvironmentSWOT ANALYSISSWOT ANALYSIS

PositiveInternal Factors

NegativeInternal Factors

STRENGTHS WEAKNESSES

PositiveExternal Factors

NegativeExternal Factors

Opportunities Threats

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SWOT ANALYSISSWOT ANALYSISTESCO SupermarketTESCO Supermarket

Activity: (Pairs)

To carry out a SWOT Analysis in reference to the above company.

(See handout also– page 4)

(15 Min)

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Swot AnalysisSwot AnalysisInternal ToolInternal Tool

Strengths

• Technological skills• Leading Brands• Reputation• Production quality• Management

Weaknesses

• Lack of skills• Weak brands• Accessibility/

distribution• Low customer

retention• Management

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Swot Analysis ContSwot Analysis ContOpportunities

• New Market• Changing customer

tastes• Change in population

age structure• Technological

advances• Changes in

government policies• New distribution

channels

Threats

• Changing in customer tastes

• Closing of geographic market

• Technological advance• Tax increases• Changes in

government politics• New distribution

channels

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The Macro-EnvironmentThe Macro-EnvironmentComprises general forces and trends

rather than specific to organisations.

• Macro-economic environment• Political environment• Social and cultural environment• Demographic environment• Technological environment

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PESTEL ANALYSISPESTEL ANALYSIS(Tool)(Tool)

• Political

• Economical

• Social

• Technological

• Environmental

• Legislation

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MACRO-ECONOMIC MACRO-ECONOMIC ENVIRONMENTENVIRONMENT

• How much money do How much money do consumers have consumers have available to spend?available to spend?

• How much will they How much will they have in the future?have in the future?

• How fierce is How fierce is competition in the competition in the market?market?

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POLITICAL ENVIRONMENTPOLITICAL ENVIRONMENT

• What are politicians What are politicians saying that might saying that might affect our customers affect our customers and our marketing and our marketing activities? activities?

• Cuts in government Cuts in government spending? New tax spending? New tax allowances?allowances?

• What external What external pressures are pressures are influencing politicians?influencing politicians?

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Economical EnvironmentEconomical Environment

Increase interest ratesIncrease interest rates

• this makes it more this makes it more expensive for both expensive for both industrialists and industrialists and consumers to borrow moneyconsumers to borrow money• What is the current state of the UK

economy and the effect on consumers and businesses?

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SOCIAL AND CULTURAL SOCIAL AND CULTURAL ENVIRONMENTENVIRONMENT

• What will be the What will be the challenges and challenges and opportunities arising opportunities arising from greater cultural from greater cultural diversity?diversity?

• Cultural Cultural convergence or a convergence or a greater need for greater need for cultural identity?cultural identity?

• Attitudes to 24/7 Attitudes to 24/7 society?society?

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Social Environment ContSocial Environment ContDEMOGRAPHIC ENVIRONMENTDEMOGRAPHIC ENVIRONMENT

• More affluent, fit, More affluent, fit, elderly people in the elderly people in the populationpopulation

• What other What other demographic trends demographic trends have marketers have marketers reacted to?reacted to?

• What changes should What changes should they be anticipating?they be anticipating?

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TECHNOLOGICAL TECHNOLOGICAL ENVIRONMENTENVIRONMENT

How will new How will new technology affect technology affect marketing?marketing?

• new products?new products?• new promotional new promotional

media?media?• new distribution new distribution

channels?channels?

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ECOLOGICAL ENVIRONMENTECOLOGICAL ENVIRONMENT

• Growing concern Growing concern about the ecological about the ecological environment – e.g. environment – e.g. global warmingglobal warming

• Ecological Ecological environment is a environment is a resource for businessresource for business

• Good marketers need Good marketers need to be seen not to to be seen not to harm itharm it

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Monitoring and Responding to Monitoring and Responding to Environmental ChangeEnvironmental Change

Organisations that do not adapt may decline and dies….

To avoid this, organisations must:-

• Understand what is going on in their business environment

• Respond and adapt to this change

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Monitoring and Responding to Monitoring and Responding to Environmental ChangeEnvironmental Change

Information about the environment is crucial, but will not produce decisions.

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Stakeholder AnalysisStakeholder Analysis

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Stakeholder AnalysisStakeholder AnalysisFor further reading, refer to PowerPoint

on Stakeholder Perspective

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Porter’s Five ForcesPorter’s Five ForcesAssessing the Balance of Power in a Business SituationAssessing the Balance of Power in a Business Situation

The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into.

With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit.

Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations.

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Porter’s Five (Cont)Porter’s Five (Cont)

1. Supplier Power Here the company will need to assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices the company has, the more they need suppliers' help, the more powerful their suppliers are.

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2. Buyer Power - Here you ask yourself how easy it is for buyers to drive prices down

3. Competitive Rivalry - What is important here is the number and capability of the organisation competitors, i.e. supermarkets.

4. Threat of Substitution - This is affected by the ability of your competitors to find a different way of doing what you do.

5. Threat of New Entry - Power is also affected by the ability of other companies to enter your market.

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Porter’s Five Forces - ModelPorter’s Five Forces - Model

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Relationships Between Members Relationships Between Members of the Micro-Environmentof the Micro-Environment

Organisations that make up a company’s micro-environment are referred to as the “environmental set”.

Membership and relationships between them change over time.

Palmer (2001) Principles of Marketing. England: Oxford University Press

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BibliographyBibliography

KOTLER, P. ET AL (2001) Principles of KOTLER, P. ET AL (2001) Principles of Marketing. 3Marketing. 3rdrd European Edition; Harlow: European Edition; Harlow: Prentice Hall.Prentice Hall.

PALMER, A. (2001) Principles of Marketing. PALMER, A. (2001) Principles of Marketing. England: Oxford University Press England: Oxford University Press