Evaluating Opportunities in the Changing Marketing Environment Chapter Four

Evaluating Opportunities in the Changing Marketing Environment

Chapter FourChapter Four

Mission Statement Provides Guidance

• Mission statement helps set the course of a firm by explicitly stating the organization’s basic purpose for being– May make it clear that some opportunities (target market or

marketing mix alternatives) are not related to the mission– Some opportunities may be a good fit with mission, but not

as good a fit or as high a priority as others• Mission statement works in combination with specific

objectives and should relate to screening criteria used to evaluate strategy alternatives

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Essentials of Marketing

Mission Statement Provides Guidelines

• Mission statement - the organization’s basic purpose for being

• Mission statement - works in combination with specific objectives to evaluate strategy alternatives


Resourcesand Objectives

of the Firm

CompetitiveEnvironment

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

The Marketing Environment

Cultural andSocial

Environment

EconomicEnvironment

TechnologicalEnvironment

Political andLegal Environment

Direct Market Environment

External Market Environment


Socially and Economically

Useful Functions


Useful Functions


Useful Functions


Useful Functions

Develop an OrganizationDevelop an

OrganizationDevelop an

OrganizationDevelop an

Organization

Earn ProfitEarn Profit


Objective’s Should Set Firm’s Course

ThreeBasic Objectives

ProvideGuidelines

ThreeBasic Objectives

ProvideGuidelines



Company Objectives

Company Objectives

Production Objectives


Finance Objectives

Finance Objectives

Marketing Objectives

Marketing Objectives

HR Objectives

HR Objectives

R&D Objectives

R&D Objectives

Mission Statement and Objectives

MissionStatementMission

Statement

Product Objectives

Product Objectives

Place Objectives

Place Objectives

Price Objectives

Price Objectives



Finance Objectives

Finance Objectives

HR Objectives

HR Objectives

R&D Objectives

R&D Objectives

Promotion Objectives

Promotion Objectives

Personal Selling Objectives

Personal Selling Objectives

Mass Selling Objectives

Mass Selling Objectives

Sales Promotion Objectives

Sales Promotion Objectives



Financial StrengthFinancial StrengthFinancial StrengthFinancial Strength

Producing Capability and Flexibility


Company Resources May Limit Search for Opportunities




Marketing StrengthsMarketing Strengths

Examples of Company Resources

• Financial strength (Intel)

• Producing flexibility (DaimlerChrysler)

• Patents (IBM)

• Channel relationships (Kraft)

• Loyal customer base (Coke)

• Technical capability (3M)


Examples of Company Resources

• Financial strength (AT&T)

• Producing flexibility (Chrysler)

• Patents (IBM)

• Channel relationships (Kraft)

• Loyal customer base (Coke)

• Technical capability (3M)


Basic Objectives Provide Guidelines

MonopolyMonopoly Monopolistic CompetitionMonopolistic Competition OligopolyOligopolyMonopolyMonopoly Monopolistic CompetitionMonopolistic Competition OligopolyOligopoly

The Competitive Environment


Avoid HeadAvoid Head--On Competition!On Competition!

Know the Market Situation!Know the Market Situation!

Pure Competition

Pure Competition

Courtesy Harley-Davidson Motor Company—for use only with Essentials of Marketing

Competitive Advantage


Competitive Rivals

Competitive Rivals

Competitor Analysis

Competitor Analysis

KeyConcepts

KeyConcepts

Competitive Rivals

Competitive Rivals



Competitor Analysis

Competitor Analysis

Analyzing Competition


Competitive Barriers

Competitive Barriers

Competitor Analysis: Disposable Diaper Competition in Japan

P&G’s Current andPlanned Strategy

Kao’s Strengths (+) andWeaknesses (-)

Uni-Charm’s Strengths(+) and Weaknesses (-)

Target Market(s)Upscale, modern parents whocan afford disposable diapers

Same as for P&G

Same as for P&G, but alsobudget-conscious segmentthat includes cloth diaper

users (+)

ProductImproved fit and absorbency

(+); brand name imageryweak in Japan (-)

Brand familiarity (+); but nolonger the best performance

(-)

Two brands- for differentmarket segments- and more

convenient package withhandles (+)

Place

Distribution throughindependent wholesalers to

both food and drugstores (+),but handled by fewer retailers

(-)

Close relations with andcontrol over wholesalers whocarry only Kao products(+);

computerized inventoryreorder system (+)

Distribution through 80% offood stores in best locations

(+); shelf space for two brands(+)

Promotion

Heaviest spending on daytimeTV, heavy sales promotion,including free samples (+);

small sales force (-)

Large efficient sales force (+);lowest advertising spending (-) and out-of-date ad claims (-)

Advertising spending high(+); effective ads that appeal

to Japanese mothers (+)

PriceHigh retail price (-) but lowerunit price for larger quanities

(+)

Highest retail price (-), butalso best margins for

wholesalers and retailers (+)

Lowest available retail price(+);price of premium brand

comparable to P&G (-)(Potential) Competitive

BarriersParent protection (+), limits inaccess to retail shelf space (-)

Inferior product (-), excellentlogistics support system (+)

Economies of scale and lowercosts (+); loyal customers (+)

Likely response(s)

Improve wholesaler andretailer margins; faster

deliveries in channel; changepackage to require less shelf

space

Press retailers to increase in-store promotion; change

advertising and/or improveproduct

Increase short-term salespromotions; but if P&G takes

customers, cut price onpremium brand

©2001 Hertz System, Inc. Hertz is a registered service mark and trademark of Hertz System, Inc. —for use only with Essentials of Marketing

The Political Environment


Regional Economic Groupings

Regional Economic Groupings

NationalismNationalism

ConsumerismConsumerism

Characteristicsof the PoliticalEnvironment

Characteristicsof the PoliticalEnvironment


Major Focus of Some Important Lawsthat Affect Marketing

• Sherman Act (1890)

– prohibits conspiracy to reduce competition

– example: price "fixing" agreements among competing firms

• Federal Trade Commission Act (1914)

– prohibits unfair methods of competition

– example: use of deceptive advertising

• Robinson-Patman Act (1936)

– prohibits most types of price-related discrimination

– example: offering "advertising allowances" to some middlemen but not others (without cost justification)


Exhibit 4-2


The Legal Environment

+


Some Important U.S. Federal RegulatoryAgencies

AgenciesAgencies ResponsibilitiesResponsibilities

Federal Trade Commission (FTC)Federal Trade Commission (FTC) Enforces laws and develops guidelines regarding unfair business practices

Enforces laws and develops guidelines regarding unfair business practices

Food and Drug Administration (FDA)Food and Drug Administration (FDA) Enforces laws and develops regulations to prevent distribution and sale of adulterated or misbranded foods, drugs, cosmetics, and hazardous consumer products

Enforces laws and develops regulations to prevent distribution and sale of adulterated or misbranded foods, drugs, cosmetics, and hazardous consumer products

Consumer Product Safety Commission (CPSC)

Consumer Product Safety Commission (CPSC)

Enforces the Consumer Product Safety Act—which covers any consumer product not assigned to other regulatory agencies

Enforces the Consumer Product Safety Act—which covers any consumer product not assigned to other regulatory agencies

Federal Communications Commission (FCC)Federal Communications Commission (FCC) Regulates interstate wire, radio, television, and telephone

Regulates interstate wire, radio, television, and telephone

Environmental Protection Agency (EPA)Environmental Protection Agency (EPA) Develops and enforces environmental protection standards

Develops and enforces environmental protection standards

Office of Consumer Affairs (OCA)Office of Consumer Affairs (OCA) Handles consumers’ complaintsHandles consumers’ complaints


Examples of Changes in the Political/Legal Environment

• Deregulation of energy industries

• Less emphasis on antitrust laws by federal government

• Maturing of consumerism

• More attention to laws governing international trade

• Changes in labeling requirements

Courtesy of CNN—for use only with Essentials of Marketing

CNN ad


“Let the Seller Beware”“Let the Seller Beware”

Consumer Protection

Examples of Effect of Technological Environment

• Rapid changes in the Internet and World Wide Web

• Robotics (better quality control, lower production costs)

• Computer scanners at retail check-out counters

• Worldwide satellites for data communication

• Automated inventory control

• Electronic fuel injection on automobiles

• Cellular phones and fax machines for communication

Examples of Trends in the Cultural Environment

• More women in the work force

• "Aging" of America, but accompanied by new growth in the “teen” group

• More single-person households

• More health consciousness

• More concern about the environment


Examples of Effect of Technological Environment

• Rapid changes in the Internet and World Wide Web

• Robotics (better quality control, lower production costs)

• Computer scanners at retail check-out counters

• Worldwide satellites for data communication

• Automated inventory control

• Electronic fuel injection on automobiles

• Cellular phones and fax machines for communication

Other CountriesOther Countries

Current PopulationCurrent Population

Other CountriesOther Countries

Current PopulationCurrent Population


People with Money Make Markets

Search for Growing Markets

Population TrendPopulation Trend

www.demographicsnow.com

Age Distribution

• Average age is increasing

• But there is a big teen cycle under way

• Post World War II "Baby Boomers“– Still a big, influential group

• 50 and older group to grow dramatically in next decade

Median Family Income, Over Time (in 2001 dollars)

0

10,000

20,000

30,000

40,000

50,000

60,000

196019

6219

6419

6619

6819

7019

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

00

Income Distribution• Growth in real income has slowed down• Middle income groups in U.S. enjoy real choices

– U.S. distribution like Canada, Western Europe, Japan, Australia, New Zealand

• Higher income groups still have much of the spending power– Top 20% income group has over 47 percent of

total income!– Bottom 20% income group has only about 4

percent!

Percent of Total Income Going to Different Income Groups in 2001

4.2

9.7

15.4

22.9

47.7

0 20 40 60

Lowest 20%

Middle

Top 20%

Each Group's Percent of Total Income

Note: the 20 percent of all families who have the lowestincomes account for only 4.2% of total income; the20% with the highest incomes have 47.7 percent--

a 10-fold difference between the “haves” and “have-nots”

GE's Strategic Planning Grid

• A way of organizing business judgments about existing and/or proposed product-market plans

• Business Strengths Dimension– Company size, market share– Profit margins– Technology position– Limiting factors (personnel, capital needed, etc.)

• Industry Attractiveness Dimension– Size of market and growth trends– Competitive situation– Social impact– Industry profitability


General Electric’s Strategic Planning GridExhibit 4-9

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Evaluating Opportunities in the Changing Marketing Environment Chapter Four