Professional Documents
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Unit 1 BE
Unit 1 BE
An Introduction
INTRODUCTION
Business enterprises cannot function in isolation Open systems interact with their environment Business enterprises exist in and are surrounded by an
environment the business or organisational environment Society and business enterprises are mutually dependent Business enterprises satisfy societal needs Relationship between society and business enterprises takes place in a changing environment
ENVIRONMENTAL SCANNING
Identification and forecasting phenomena in the
environment Ongoing environmental scanning is essential for strategy formulation Enterprises continuously engage in identifying and forecasting opportunities and threats Enterprises need to proactively or reactively respond to changing conditions in the environment Various sources of information are available to assist with scanning
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Companys Microenvironment
Relates to the internal forces or forces close to the company over which some control is possible Top management Other functions e.g. finance and accounting, R& D, manufacturing and purchasing Suppliers Marketing intermediaries (channel partners) Customers Competitors Public
Companys Macro-environment
impact on society as a whole A company has little influence on these forces and therefore can only adapt its marketing mix to account for the resulting opportunities and threats
Major forces of the macroenvironment Demographic Economic Natural Technological Cultural Political/legal
Demographic Environment
Demographic trends: Changing age structure Changing family structure Geographic shifts in population Higher education level & more white collar job holders Increasing globalization of cities such as Singapore
Economic Environment
Economic trends affecting consumers buying power and spending pattern
Savings & debt Consumer expenditures Change in interest rates and cost of living
Natural environment
Natural trends include those natural resources used in production or those affected by marketing activities Raw material shortages Increase in energy cost Increase pollution levels Increase in Governmental intervention in natural resource management
Technological Environment
Consists of forces that affect new technology, new product development and market opportunities Faster pace of technological change
Shorter PLC Higher R&D budgets Concentration on minor improvements Increased regulations
Cultural Environment
Affect society's basic values, perceptions, preferences and behaviors Core cultural values and beliefs Secondary cultural values Sub cultures
Singapores Fair Trading Act (impending) Changing government agency enforcement Growth of public interest groups Regional groupings ASEAN FTZ
Competitive Analysis Who are your competitors? Do you know about your close competitors
strengths and weaknesses? How detail should we analyze the competition?
slide)
Levels of Competition
Generic Competition Form Competition Industry Competition Brand Competition
Suppliers
Buyers
Substitutes
(Source: Aakers pp.8487)
Capital requirements Brand identity Switching costs Access to distribution Expected retaliation Proprietary products
Threats of Substitutes Switching costs Buyer propensity to substitute Relative price performance of
substitutes
Buyer Power Bargaining leverage Threat of backward integration Buyer volume Buyer information Product differentiation Buyer concentration vs. Brand identity industry Price sensitivity Substitutes available Buyers' incentives
(Source: Michael Porter, On Competition)
Supplier Power
Supplier concentration Switching costs of firms in the industry Importance of volume
to supplier Differentiation of inputs Impact of inputs on cost or differentiation
Presence of
substitute inputs Threat of forward integration Cost relative to total purchases in industry
Degree of Rivalry Exit barriers Industry growth Industry concentration ratio Fixed costs/Value added Product differentiation Buyers' incentives (Source: Michael Porter, On Competition)
Questions