Transcript The Marketing Environment and Competitor Analysis

The Marketing Environment and
Competitor Analysis
• SWOT analysis
• PEST analysis
• Five forces analysis
SWOT analysis
• Strengths (internal)
• Weaknesses (internal)
• Opportunities (external)
• Threats (external)
SWOT ANALYSIS
• A SWOT analysis is an excellent tool to use
if the organization wants to take a step back
and assess the situation they are in. Issues
raised from the analysis are then used to
assist the organization in developing their
marketing mix strategy. A SWOT analysis
must form the part of any prudent marketing
strategy.
SWOT Analysis
Based on assumption an effective strategy derives from
a sound “fit” between a firm’s internal resources and
its external situation
Opportunities
Threats
A major favorable situation
in a firm’s environment
A major unfavorable situation in
a firm’s environment
Strengths
Weaknesses
A resource advantage
relative to competitors and
the needs of markets firm
serves
A limitation or deficiency in one
or more resources or
competencies relative to
competitors
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Strength examples could include:
A strong brand name.
Market share.
Good reputation.
Expertise and skill.
Weaknesses could include:
Low or no market share.
No brand loyalty.
Lack of experience.
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Opportunities could include:
A growing market.
Increased consumer spending.
Selling internationally.
Changes in society beneficial to your company.
Threats could include:
Competitors
Government policy eg taxation, laws.
Changes in society not beneficial to your company.
PEST analysis
• Political factors
• Economic factors
• Socio-cultural factors
• Technological factors
Political/legal
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Monopolies legislation
Environmental protection laws
Taxation policy
Employment laws
Government policy
Legislation
Others?
Economic Factors
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Inflation
Employment
Disposable income
Business cycles
Energy availability and cost
Others?
Socio-cultural factors
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Demographics
Distribution of income
Social mobility
Lifestyle changes
Consumerism
Levels of education
Others?
Technological
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New discoveries and innovations
Speed of technology transfer
Rates of obsolescence
Internet
Information technology
Others?
Porter’s Five Forces Model
Potential Entrants
Threat of
Bargaining
Power
of Suppliers
New Entrants
Industry
Competitors
Suppliers
Bargaining
Power
of Buyers
Buyers
Rivalry Among
Existing Firms
Threat of
Products
Substitute
or Services
Substitutes
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Five forces analysis
• One assumption of Porter’s five forces
model is that some industries are inherently
more attractive than others; that is, the
profit potential for companies in that
industry is higher. As this figure indicates,
the interaction and strength of five forces
influences profit potential.
The purpose of
Five-Forces Analysis
• The five forces are environmental forces
that impact on a company’s ability to
compete in a given market.
• The purpose of five-forces analysis is to
diagnose the principal competitive pressures
in a market and assess how strong and
important each one is.
Threat of New Entrants
Economies of Scale
Product Differentiation
Capital Requirements
Barriers
to Entry
Switching Costs
Access to Distribution Channels
Cost Disadvantages Independent
of Scale
Government Policy
Bargaining Power of Suppliers
Suppliers are likely to be powerful if:
Suppliers exert power
in the industry by:
* Threatening to raise
prices or to reduce quality
Powerful suppliers
can squeeze industry
profitability if firms
are unable to recover
cost increases
Supplier industry is dominated by a
few firms
Suppliers’ products have few substitutes
Buyer is not an important customer to
supplier
Suppliers’ product is an important
input to buyers’ product
Suppliers’ products are differentiated
Suppliers’ products have high
switching costs
Supplier poses credible threat of
forward integration
Bargaining Power of Buyers
Buyer groups are likely to be powerful if:
Buyers are concentrated or purchases
are large relative to seller’s sales
Purchase accounts for a significant
fraction of supplier’s sales
Products are undifferentiated
Buyers face few switching costs
Buyers’ industry earns low profits
Buyer presents a credible threat of
backward integration
Product unimportant to quality
Buyer has full information
Buyers compete
with the supplying
industry by:
* Bargaining down prices
* Forcing higher
quality
Threat of Substitute Products
Keys to evaluate substitute products:
Products
with
similar
function
limit the
prices
firms can
charge
Products with improving
price/performance tradeoffs
relative to present industry
products
Example:
Electronic security systems in
place of security guards
Fax machines in place of
overnight mail delivery
Rivalry Among Existing Competitors
Intense rivalry often plays out in the following ways:
Jockeying for strategic position
Using price competition
Staging advertising battles
Increasing consumer warranties or service
Making new product introductions
Occurs when a firm is pressured or sees an opportunity
Price competition often leaves the entire industry worse off
Advertising battles may increase total industry demand, but
may be costly to smaller competitors
Rivalry Among Existing Competitors
Cut-throat competition is more likely to occur when:
Numerous or equally balanced competitors
Slow growth industry
High fixed costs
High storage costs
Lack of differentiation or switching costs
Capacity added in large increments
Diverse competitors
High strategic stakes
High exit barriers
Strategic Management in Action
Analyzing
Current
Situation
Deciding
on
Strategies
Putting
Strategies
in Action
Evaluating and
Changing
Strategies
Situation
Analysis
Strategy
Formulation
Strategy
Implementation
Strategy
Evaluation
Organizational
Context
Internal
Analysis
External
Analysis
Functional
Competitive
Corporate
The directional policy matrix (GE
matrix)
INDUSTRY ATTRACTIVENESS
High
Medium
Low
Investment
and Growth
Selective
Growth
Selectivity
Selective
Growth
Selectivity
Harvest
Or Divest
Selectivity
Harvest
Or Divest
Harvest
Or Divest
High
BUSINESS
STRENGTH
Medium
Low
Porter - the value chain
FIRM INFRASTRUCTURE
SUPPORT
ACTIVITIES
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT
INBOUND OPERATIONS
LOGISTICS
OUTBOUND MARKETING
LOGISTICS
& SALES
SERVICE
PRIMARY ACTIVITIES
(Source: M Porter)
Gap analysis - and what to do
about it …
Sales/Profits (Rs.)
Objective
The
strategic
‘gap’
Forecast
Time
Strategic Alternatives
1. Improve productivity
 Reduce costs
 Improve the sales mix
 Increase prices
 Reduce discounts
 Increase productivity
2. Market penetration
 Increase market share
 Increase usage frequency
 Increase purchase values
3. Market development
 Geographical expansion
 Find new customer segments
4. Product development
 Develop new products
 Reconfigure existing products
5. Diversification
 New products to new markets