External Environment External Environment

in the Asia Pacific in the Asia Pacific

Region Region
Asia Asia Pacific Narketing Federation Pacific Narketing Federation
Certified Professional Narketer Certified Professional Narketer
Copyright Copyright
Narketing !nstitute of Singapore Narketing !nstitute of Singapore
Outline Outline
!ntroduction !ntroduction
The Company's Nicroenvironment The Company's Nicroenvironment
The Company's Nacroenvironment The Company's Nacroenvironment
The Competitors The Competitors
Porter's Five Forces Nodel Porter's Five Forces Nodel
ntroduction ntroduction
efinition: efinition:
The Company's environment consists of "the The Company's environment consists of "the
actors and forces outside marketing that actors and forces outside marketing that
affect marketing management's ability to affect marketing management's ability to
develop and maintain successful develop and maintain successful
transactions with its target customers" transactions with its target customers"
Kotler et al, 1334 Kotler et al, 1334
ntroduction (cont`d) ntroduction (cont`d)
Companies must evaluate Companies must evaluate both both micro and macro micro and macro
environment to identify environment to identify
any trends that may affect their marketing strategies, any trends that may affect their marketing strategies,
and and
opportunities that can be developed into competitive opportunities that can be developed into competitive
advantages advantages
Porter's Five Forces model analyses market Porter's Five Forces model analyses market
structures to determine market attractiveness structures to determine market attractiveness
taking into consideration the micro and macro taking into consideration the micro and macro
environments in its construction environments in its construction
ompany`s Microenvironment ompany`s Microenvironment
%elates to the internal forces or forces close to the %elates to the internal forces or forces close to the
company over which some control is possible company over which some control is possible
Top management Top management
Other functions e.g. Other functions e.g. finance and accounting, % finance and accounting, %
, manufacturing and purchasing , manufacturing and purchasing
Suppliers Suppliers
Narketing intermediaries (channel partners) Narketing intermediaries (channel partners)
Customers Customers
Competitors Competitors
Public Public
ompany`s Macro ompany`s Macro- -environment environment
%elates to the larger forces having an %elates to the larger forces having an
impact on society as a whole impact on society as a whole
A company has little influence on these A company has little influence on these
forces and therefore can only adapt its forces and therefore can only adapt its
marketing mix to account for the resulting marketing mix to account for the resulting
opportunities and threats opportunities and threats
Major Iorces oI the macro Major Iorces oI the macro- -
environment environment
emographic emographic
Economic Economic
Natural Natural
Technological Technological
Cultural Cultural
Political/legal Political/legal
emographic Environment emographic Environment
emographic trends: emographic trends:
Changing age structure Changing age structure
Changing family structure Changing family structure
Ceographic shifts in population Ceographic shifts in population
Higher education level more white Higher education level more white
collar job holders collar job holders
!ncreasing globalization of cities such as !ncreasing globalization of cities such as
Singapore Singapore
Economic Environment Economic Environment
Economic trends affecting consumers Economic trends affecting consumers
buying power and spending pattern buying power and spending pattern
Change in per capital real income Change in per capital real income
isposable isposable
iscretionary iscretionary
!ncome distribution !ncome distribution
Savings debt Savings debt
Consumer expenditures Consumer expenditures
Change Change in in interest interest rates rates and and cost cost of of living living
atural environment atural 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 activities affected by marketing activities
%aw material shortages %aw material shortages
!ncrease in energy cost !ncrease in energy cost
!ncrease pollution levels !ncrease pollution levels
!ncrease in Covernmental intervention !ncrease in Covernmental intervention in in
natural resource management natural resource management
%echnological Environment %echnological Environment
Consists of forces that affect new Consists of forces that affect new
technology, new product development technology, new product development
and market opportunities and market opportunities
Faster pace of technological change Faster pace of technological change
Shorter PLC Shorter PLC
Higher % budgets Higher % budgets
Concentration on minor improvements Concentration on minor improvements
!ncreased regulations !ncreased regulations
ultural Environment ultural Environment
Affect society's basic values, perceptions, Affect society's basic values, perceptions,
preferences and behaviors preferences and behaviors
Core cultural values and beliefs Core cultural values and beliefs
Secondary cultural values Secondary cultural values
Sub cultures Sub cultures
egal and Political Environment egal and Political Environment
Trends Trends in in the the legal legal and and political political environment environment
include include
!ncreased !ncreased legislation legislation regulating regulating business business
Singapore's Singapore's Fair Fair Trading Trading Act Act (impending) (impending)
Changing Changing government government agency agency enforcement enforcement
Crowth Crowth of of public public interest interest groups groups
%egional groupings %egional groupings
ASEAN FTZ ASEAN FTZ
ompetitive Analysis ompetitive Analysis
ho are your competitors? ho are your competitors?
o you know about your close competitors' o you know about your close competitors'
strengths and weaknesses? strengths and 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 (next Analysis competition at various levels (next
slide) slide)
evels oI ompetition evels oI ompetition
eneric Competition
Form Competition
Industry Competition
Brand Competition
evels oI ompetition (cont`d) evels oI ompetition (cont`d)
Ceneric competition Ceneric competition- -e.g. Honda against Silver e.g. Honda against Silver
Sea Cruise for the same consumer dollars Sea Cruise for the same consumer dollars
Form competition Form competition- -e.g. Toyota against 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)
!ndustry competition !ndustry competition- -e.g. Honda against e.g. Honda against
Nercedes, Lexus etc who make the same Nercedes, Lexus etc who make the same
products or class of products (different prices) products or class of products (different prices)
Brand competition Brand competition- -e.g. Honda against Toyota, e.g. Honda against Toyota,
Nissan etc. who offer similar products and service Nissan etc. who offer similar products and service
to the same customers at similar prices to the same customers at similar prices
ndustry ompetition ndustry ompetition
ifferent industries can sustain different ifferent industries can sustain different
levels of profitability, partly due to the levels of profitability, partly due to the
difference in industry structure difference in industry structure
Porter's Nodel of !ndustry Competition, Porter's Nodel of !ndustry 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 to influence of the forces on the industry to
determine the industry's profitability and determine the industry's profitability and
competitiveness competitiveness
Porter`s Model oI ndustry Porter`s Model oI ndustry
ompetition ompetition
ndustry degree
oI rivalry
Buyers Suppliers
Barriers to Entry
Substitutes
(Source: Aakers pp.8487)
Porter`s 5 Forces Porter`s 5 Forces
Barriers to Entry Barriers to Entry
Absolute cost Absolute cost
advantages advantages
Proprietary learning Proprietary learning
curve curve
Access to inputs Access to inputs
Covernment policy Covernment policy
Economies of scale Economies of scale
Capital requirements Capital requirements
Brand identity Brand identity
Switching costs Switching costs
Access to distribution Access to distribution
Expected retaliation Expected retaliation
Proprietary products Proprietary products
(Source. Michael Porter, 'On Competition`)
%hreats oI Substitutes %hreats oI Substitutes
Switching costs Switching costs
Buyer propensity to substitute Buyer propensity to substitute
%elative price performance of %elative price performance of
substitutes substitutes
(Source. Michael Porter, 'On Competition`)
Buyer Power Buyer Power
Bargaining leverage Bargaining leverage
Buyer volume Buyer volume
Buyer information Buyer information
Brand identity Brand identity
Price sensitivity Price sensitivity
Threat of backward Threat of backward
integration integration
Product differentiation Product differentiation
Buyer concentration vs. Buyer concentration vs.
industry industry
Substitutes available Substitutes available
Buyers' incentives Buyers' incentives
(Source. Michael Porter, 'On Competition`)
Supplier Power Supplier Power
Supplier concentration Supplier concentration
!mportance of volume !mportance of volume
to supplier to supplier
ifferentiation of ifferentiation of
inputs inputs
!mpact of inputs on !mpact of inputs on
cost or differentiation cost or differentiation
Switching costs of Switching costs of
firms in the industry firms in the industry
Presence of substitute Presence of substitute
inputs inputs
Threat of forward Threat of forward
integration integration
Cost relative to total Cost relative to total
purchases in industry purchases in industry
(Source. Michael Porter, 'On Competition`)
egree oI Rivalry egree oI Rivalry
Exit barriers Exit barriers
!ndustry growth !ndustry growth
!ndustry concentration ratio !ndustry concentration ratio
Fixed costs/value added Fixed costs/value added
Product differentiation Product differentiation
Buyers' incentives Buyers' incentives
(Source. Michael Porter, 'On Competition`)