MKTG101 Marketing Fundamentals

ASSOCIATE PROFESSOR ROSS GORDON

LECTURE 2 – Tuesday 7th August 2018
Week 2 - The marketing environment and
market analysis
 Agenda: Chapter 2: The marketing
environment and market analysis
Learning objectives:
• describe the marketing environment and the purpose
of environmental analysis
• discuss the relationship between strategy and
marketing
• explain the factors at work in the internal
environment
• understand the importance of the different micro-
environmental factors
• outline the different types of macro-environmental
forces
• conduct a preliminary situational analysis.
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The essence of strategy:

is the process of developing and maintaining a

viable match of the organisation’s resources
and capabilities (strengths and weaknesses)
to the demands of the changing environment
(opportunities and threats) in pursuit of its
objectives.

with the aim of achieving of a sustainable

differential advantage in the changed
environment
The central importance of
marketing in organisational strategy

As the principal boundary-spanning

function within the organisation,
marketing should play a leading role in the
strategy process as marketing has
responsibility for the choices of products,
markets and competitors.
The marketing environment

The marketing environment

• All of the internal and external forces that affect a
marketer’s ability to create, communicate, deliver
and exchange offerings of value.

Environmental analysis
• A process that involves breaking the marketing
environment into smaller parts in order to gain a better
understanding of it.
The marketing environment

External Environment
1)Micro
2)Macro

Figure 2.1
Internal environment

The internal environment

• The parts of the organisation, the people and the
processes used to create, communicate, deliver and
exchange offerings that have value. [Marketing
definition]
• The organisation can directly control its internal
environment.
• Strengths and weaknesses are internal
factors that positively and negatively affect the
organisation’s ability to compete in the
marketplace. [O & T -external]
Internal Marketing

• Achieving alignment between marketing strategy

and front-line staff. [Senior management (overall objectives
and strategies); middle management [dept. or geographic region;
functional departments; employees – responsible for meeting
departmental objectives and strategies]
• Informs, educates, develops and motivates staff
to serve external clients more effectively. [Offering
value for target market]
• Includes internal communications, internal
research and training.
• Not isolated from the external environment.
[Affected by PESTL factors]
An example of an organisation
chart

Figure 2.2
External environment

The external environment

• The people and processes that are outside the organisation
and cannot be directly controlled. Marketers can only seek
to influence [not control the]external environment.
• (Outsourcing: Transferring an internal function to an
external provider. [e.g. production, customer service, IT,
distribution])
• Opportunities and threats: External factors that
positively and negatively affect the organisation’s ability to
serve the market.
• The external environment includes the micro-environment
and macro-environment.
The micro-environment

• The forces within an organisation’s industry that

affect its ability to serve its customers and clients
— target markets, partners and competitors.
• The organisation cannot control the micro-
environment but it will seek to negotiate with, or
influence, it.
• The micro-environment consists of customers,
clients, partners and competitors.
• It constitutes the organisation’s “task”
environment.
The micro-environment

Customers and clients

•Marketers must understand the current and future
needs and wants of their target market:
• understand what their customers value now
• identify changes in customer preferences
• be willing and able to respond to changes
• anticipate how needs and wants might change
• be able to influence customer preferences.
• [Economic downturns = job insecurity = unwillingness to spend freely.
Companies such as the fashion industry need to change from ‘wear
once and throw away’, to subdued, durable clothing.]
 The micro-environment

• Partners include:
• logistics firms — storage and transport
• financiers — banking, loans, insurance, and
electronic payment infrastructure
• advertising /promotion /salesforce agencies
• Retailers
• Wholesalers – storage and distribution
• Suppliers
The micro-environment

• Competitors
• Marketers must ensure their offerings provide their
target market with greater value than their competitors’
offerings.
• Marketers often think in terms of brand marketing –
better to think more broadly, eg
• New entrants
• Substitute technology
• Suppliers
• Customers
Types of competition

• Pure competition – Numerous competitors offer

undifferentiated products. No buyer or seller can
exercise market power. [Sugar, lamb, shares].
• Monopolistic competition – Numerous competitors
offer products that are similar, prompting the
competitors to strive to differentiate their product
offering from others. [E.g., bread – Sunblest, Tip Top,
Burgen, Bakers Delight, Farmhouse, organic,
sourdough, wholemeal, brown, seeded, etc.].
Types of competition

• Oligopoly – A small number of competitors offer

similar, but somewhat differentiated, products. There are
significant barriers to new competitors entering the
market. [e.g. mobile telecommunications industry –
Telstra, Optus, Vodafone Hutchison Australia (VHA),
Virgin – offering quite similar services]
• Monopoly – There is only one supplier and there are
substantial, potentially insurmountable, barriers to new
entrants. [Mainly government services – provision of
roads and rail]
• Monopsony – The market situation where there is only
one buyer. [Federal government – fighter jets]
 The marketing
“macro-environment”

• The macro-environmental framework has been called the

PESTEL framework.
• Macro-environmental factors include:
• political forces
• economic forces
• sociocultural forces
• technological forces
• legal forces.
• environmental forces

• The macro-environment is a “given” for the firm (acting

on its own) although firms will endeavour to influence it.
The macro-environment

PESTEL

Figure 2.3
The macro-environment

• Political forces
• The influence of politics on marketing decisions.
• Politics is directly relevant through:
• lobbying for favourable treatment at the hands of the
government
• lobbying for favourable regulation
• the very large market that the government and its
bureaucracy comprise
• the effect of political issues on international
marketing. [e.g. sanctions, embargoes]
The macro-environment

• Economic forces
• Factors that affect how much people and organisations can
spend and how they choose to spend it.
• Economic forces include income, prices, the level of savings,
the level of debt and the availability of credit.
• Currently, and most recently:
• GFC
• Interest rates
• Resources boom and bust
• Exchange Rate
• Greek crisis
• TPP etc
All directly and immediately impact on business and
consumer confidence
 The macro-environment

• Sociocultural forces
• The social and cultural factors that affect people’s attitudes,
beliefs, behaviours, preferences, customs and lifestyles.
• Demographics
• Statistics about a population: age, gender, race, ethnicity,
educational attainment, marital status, parental status and
so on
• The natural environment is an example of sociocultural
theme that has emerged recently.
The macro-environment

• Technological forces
• Technology allows a better way of doing things.
• Technology changes the expectations and behaviours of
customers and clients and can have huge effects on how
suppliers work.

• Environmental forces
• Natural disasters, weather and climate change.
• Growing ecological awareness and social changes
influence how firms will operate.
 The macro-environment

• Laws
• Legislation enacted by elected officials – tied to politics.
• Regulations
• Rules made under authority delegated by legislation. [Therefore tend to
deal with more minor or more specific issues than
legislation]
• Laws and regulations govern what marketing organisations can and cannot
legally do. [Dictate
what obligations they have to consumers,
partners, suppliers, government authorities and society as
a whole]
Macro-environment (cont’d)

• Laws and Regulations

include privacy, competition, fair trading,
consumer safety, prices, contract terms and
intellectual property.
• http://www.smh.com.au/business/retail/how-
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gihyil.html
Situational analysis

• Before marketers can create an offering for

exchange, they must understand their current
position or situation
• Situational analysis
• Identifying the key factors that will be used as a basis for the development
of marketing strategy.
• Marketing planning
• An ongoing process that combines organisational objectives and
situational analyses to formulate and maintain a marketing plan that
moves the organisation from where it currently is to where it wants to be.
Marketing planning

Figure 2.4
Situational analysis

https://www.youtube.com/watch?v=uOwLb0Ibebs

Figure 2.5
Marketing plan

Executive Marketing mix

summary strategy

Introduction Budget

Situation
Implementation
analysis

Objectives – Evaluation
SMART

Future
Target market recommendations
SWOT

• Analysis that identifies the internal strengths

and weaknesses and the external opportunities
and threats in relation to an organisation.
• Central to any strategic planning
• Strengths: Those attributes of the
organisation that help it achieve its objectives.
• Weaknesses: Attributes of the organisation
that hinder it in trying to achieve its objectives.
• Strengths and weaknesses are internal factors,
directly controllable by the organisation.
SWOT

• Opportunities
• External factors that are potentially helpful to achieving the
organisation’s objectives.
• Threats
• External factors that are potentially harmful to the
organisation’s efforts to achieve its objectives.
• Threats and opportunities are beyond the organisation’s
direct control.
• Ideally, marketers will match their strengths against market
opportunities and exploit competitor weaknesses or voids.
SWOT

Figure 2.8
An example of a SWOT analysis for
Hungry Jack’s
 BCG Growth/ Share Matrix
RELATIVE MARKET SHARE
(Share Relative to Next Largest Competitor)

High

MARKET
GROWTH
RATE
10%
?
Low

10x 1x .1x
Strategic planning tools:
Ansoff’s Product/Market Expansion Matrix

Current New
Products Products

1. Market 3. Product
Current penetration development
Markets strategy strategy

2. Market (Diversification
New
development strategy)
Markets
strategy
Marketing Metrics

Figure 2.7
 Marketing Metrics

• Measures used to assess marketing performance

• i.e., they are measurable
• Marketing metrics are essential to marketers
• Need to articulate ROI:
• Continued funding
• Allocate resources
• Build a database of various ROIs to compare effectiveness
of various programs
• Marketers need to predict what they think if likely to occur
in order to plan how they will compete in the market
 Questions?
Associate Professor Ross Gordon
Email: ross.gordon@mq.edu.au
Tel: 02 9850 8559
http://www.businessandeconomics.mq.edu.au/contact_the_faculty/all_fbe_staff/ross_gordon

Australian Association of Social Marketing – President

http://au.linkedin.com/pub/dr-ross-gordon/4a/25b/38a

http://scholar.google.co.uk/citations?user=npZ4I3gAAAAJ&hl=en