Marketing Environment

Company and Business Strategy

Veronica Mak- Lecture 2

Reminder:
Jan 23 Group List
and Self-Introduction

Todays Lecture

Lect. 2

Lect. 4

Lect. 5

Lect. 4

Lect. 5

Lect.5-8

Lect. 3
Lect.5-8
Lect. 6

Lect. 3
Lect. 4

Lect. 7

Lect.5-8

Lect. 8

What does a Marketing Director do?

Managing the marketing process

requires the four marketing management
functions of analysis, planning,
implementation, and control.

Marketing Strategic Management

Todays Objectives
1.
2.
3.
4.

5.

What are the environmental forces that affect the

companys ability to serve its customers?
What is companywide strategic planning and its four
steps?
How to design business portfolios and develop
growth strategies?
How marketing works with its partners to create and
deliver customer value? What are the elements of a
customer-driven marketing strategy and mix? What
are the marketing management functions, including the
elements of a marketing plan?
How to measure return on marketing investment?
6

1.

Marketing Environment

Environmental Forces

The microenvironment consists of the

actors close to the company that affect its
ability to service its customers.
Including:

The company, suppliers, marketing

intermediaries, competitors, publics

The macroenvironment consists of larger

societal forces that affect the
microenvironment.
7

1. Marketing Environment

Macro and Micro-environments

DemographicEconomic
Environment

M
a
Co rke
nt tin
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Target
Consumers
Promotion

Competitors

Company

Publics
Price

Im M
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M
An ark
al eti
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is

PoliticalLegal
Environment

Place

Product

g
tin g
ke in
ar n
M lan
P

Supplier
s

TechnologicalNatural
Environment

Marketing
Intermediaries

SocialCultural
Environment
8

1. Major Forces in the Macroenvironment

- Demographic

Environment

Demography is the study of human populations in terms of size,

density, location, age, gender, race, occupation, and other statistics

Most important Trend: Changing age structure

The Wealthy Baby Boomers: 1946 1964
Generation X 1965 1976
Millennial (Generation Y): 1977 2000

China: one-child policy

Me-generation[Starbuck

& post-80s]

1. Major Forces in the Macroenvironment

- Demographic

Environment

Generational

Marketing

Do

marketers need to create separate

products and marketing programs for
different generations?
Age-specific segments (Millennials:
teens and young adults)
Lifestyle
10

1. Major Forces in the Macroenvironment

- Demographic

Better Educated, more White Collars, More

Professional

Increase single families, working women [baby care, careeroriented womens clothing, financial services, convenience foods
and services]

Geographic Shifts in Population

84% completed high school; 27% completed college

Increase demand in quality products, books, magazines, travel,
personal computers, Internet service

The Changing Family

Environment

Telecommuting [WebEx]

Increasing Diversity

Ethnic groups: HK - Chinese 95%, Filipino 1.6%, Indonesian

1.3%, other 2.1% (2006 census)
Gay & Lesbian consumers [American Airlines]
11

1. Major Forces in the Macroenvironment

- Demographic Environment
FIGURE 3-4 Household data of selected Asian Countries in 2006

Source: Euromonitor International

12

1. Major Forces in the Macroenvironment

- Economic Environment

Factors affecting consumer purchasing

power and spending patterns

Key trends: Change in Income and

Spending after financial crisis

Skewed income distribution; Gini Index

back-to-basics spending [Stella McCartney at

H&M; Infiniti: make luxury affordable, [UNIQLO],

13

1. Major Forces in the Macroenvironment

- Economic Environment

Value Marketing

Just the right combinations of product quality and service at a

fair price

14

1. Major Forces in the Macroenvironment

- Cultural Environment
Forces that affect societys basic values, perceptions, preferences and
behaviors
Persistence of Cultural Values
Core value of USA: Getting married, working, charity, honesty
Secondary belief: change over time, expressed in
Views of themselves, product as self-expression, e.g. Nike
Views of Others: new wave of cocooning ornesting =>
home-cooking, high-end coffee makers, big-screen TV,.
- Views of Organizations: Work hard for money to play hard
- Views of Society: 97 Handover, 9/11, Patriotic products and
promotion
- Views of Nature: LOHAS, Organic, Green, Natural
- Views of Universe: Seek more permanent value: family,
community, earth, faith
15

1.Major Forces in the Macroenvironment

- Technological Environment

Forces that create new technologies creating new

product and market opportunities
New information and technology landscape -Most
dramatic forces affecting marketing strategies

Internet
RFID : re-shape FMCG, retailing and market research - every
product contains a transmitter loaded with information
Mobile technology

Rapid Globalization[Starbuck FaceBook], Customermanaged relationships

16

1. Major Forces in the Macroenvironment

Natural Environment
Natural resources needed as inputs or are
affected by marketing activities
3 key trends:

Shortages of raw materials.

Increased pollution.
Increased government intervention.

Examples:

PepsiCo [- reduce environmental footprint ] [solar-energy for Frito-Lay

production]; half-liter bottles for Tropicana juice]

Starbuck: Ethical Sourcing

(C.A.F.E. Practices)

17

1. Major Forces in the Macroenvironment

- Political & Social Environment

Increased Emphasis on Ethics and Socially

Responsible actions
Key Trends [Societal Marketing Concept]
Sustainable Marketing [timberland? McDonald?]
Growth of Nonprofit Marketing [ASPCA]
Socially Responsible Behavior

Internet and Ethic & Privacy issues [Facebook, Octopus

Cause-related

Marketing

TOMS Shoes pledges

18

1. Major Forces in the Macroenvironment

- Political

& Social Environment

Consists of laws, government

agencies and pressure group
Increasing Legislation
Regulating Business
New food label laws- Oneplus-seven scheme
Advertising Industry Code of
practice [the best, the most
successful]
Satellite TV Code of Practice
of Advertising Stands

19

1. Major Forces in the Microenvironment

Actors in the Microenvironment

DemographicEconomic
Environment

M
a
Co rke
nt tin
ro g
l

Target
Consumers
Promotion

Competitors

Company
Publics

Price

Im M
pl ark
em e
en ting
ta
ti o
n

M
An ark
al eti
ys ng
is

PoliticalLegal
Environment

Place

Product

g
tin g
ke in
ar n
M lan
P

Supplier
s

TechnologicalNatural
Environment

Marketing
Intermediaries

SocialCultural
Environment
20

1. Major Forces in the Microenvironment

- Marketing

Intermediaries

Help the company to promote, sell and distribute

its products to final buyers
Resellers
Physical

distribution firms
Marketing services agencies
Financial intermediaries

21

1. Major Forces in the Microenvironment

- Publics

A public is any group that has an actual or

potential interest in or impact on an
organizations ability to achieve its objectives
Financial

publics
Media publics
Government publics
Citizen-action publics
Local publics
General publics
Internal publics
22

1. Major Forces in the Microenvironment

- Competitors

Marketers must gain

strategic advantage by
positioning their offerings
strongly against
competitors offerings in
the minds of consumers.
No single competitive
marketing strategy is best
for all companies.

23

Marketing Analysis SWOT analysis

The goal with a SWOT analysis is to match the companys strengths to
attractive opportunities and to eliminate weakness and minimize the
threats.

24

Case Study: McDonald's 'I'm Amazing

25

1. Major Forces in the Macroenvironment

- Demographic Environment affecting McDonlad

Threat:
The Wealthy Baby Boomers,
Generation X, professionals :

Not attracted by unhealthy fast food

Millennials (Generation Y): many

choices in causal dining out
Opportunity:

Low fertility, huge investment in 1 to 2 children

Increase single families, working women
looking for convenient dining services

26

1. Major Forces in the Macroenvironment

- Economic and Technoglical Environment of

McDonald

Opportunity:
Skewed

income
distribution; room for
affordable partying
and dining experience
[value marketing]

27

2. Major Forces in the Macroenvironment

- Cultural Environment affecting McDonald

Threat:
Views of Self : Fast food as fatty food and challenge to slim
and healthy body

Opportunity:
Views
-

of Self: Trend of Intensive Parenting

Views of Organizations: Work hard for money to
play hard
Views of Universe: Seek more permanent value:
family, community, faith

28

2. Steps in Strategic Planning

Purpose: find ways in which the company
can best use its strengths to take
advantage of attractive opportunities in the
environment.
Steps:

29

2. Strategic Planning

Step 1: (re-)Define Market-Oriented Mission

A Market-oriented Mission Statement

defines the business in terms of satisfying
basic customer needs.

30

Product-Oriented Mission

Facebook:
we

Nike:
we

are an online social network.

sell athletic shoes and apparel.

Walmart:
we

run discount stores

31

Market-Oriented Mission

Facebook:
we

give power to people and make the world

more open and connected.

Nilke:
we

bring inspiration and innovation to every

athlete in the world

Walmart:
Save

money. Live Better

32

2. Strategic Planning

Step 1: (re-)Define Market-Oriented Mission

33

2. Strategic Planning

Step 2: Setting Company Objectives and Goals

Developing company objectives and goals based on its

mission.
Develop Customer-Driven Marketing Strategy and
programs to support these objectives.

Marketing requires a deep understanding of customers.

Companies cannot profitably serve them all. Companies must
divide up the total market, choose the best segments, and
design strategies for profitably serving chosen segments.
This process involves market segmentation, market targeting,
differentiation, and positioning

34

2. Strategic Planning

Step 3: Designing the Business Portfolio

a.

b.

The company must analyze its current

business portfolio and decide which
businesses should receive more, less, or
no investment.
It must shape the future portfolio by
developing strategies for growth and
downsizing.
35

Strategic Planning

Step 3: Designing the Business Portfolio

Portfolio analysis is where management

evaluates the products and businesses making
up the company.
The steps in portfolio analysis are:

To identify the strategic business units (SBU). The

SBU is a unit of the company that has a separate
mission and objectives and that can be planned
independently from other company businesses.
To assess the attractiveness of its various SBUs
and decide how much support each deserves on 2
dimensions: (1) The attractiveness of the market or
industry, (2) The strength of the position in that
market or industry.
36

2. Strategic Planning

Step 3: Designing the Business Portfolio

The growthshare matrix defines four types of SBUs:

Stars. Highgrowth, highshare businesses or
products. They will turn into cash cows.
Cash cows. Lowgrowth, highshare businesses or
products. They produce a lot of cash that the company.
Question marks. Lowshare business units in
highgrowth markets. They require a lot of cash to hold
their position.
Dogs. Lowgrowth, lowshare businesses and
products.
37

Strategic Planning

Step 3: Designing the Business Portfolio for

McDonald

38

2. Strategic Planning

Step 3: Designing the Business Portfolio

One of four strategies can be pursued for each
SBU.

The company can invest to build its share.

It can invest just enough to hold its share.

It can milk its short-term cash flow, or harvest.

It can divest by selling it or phasing out.

39

Strategic Planning

Step 3: Designing the Business Portfolio

Problems with Matrix Approaches.

Difficult, time consuming, and costly to

implement.

These approaches focus on classifying current

businesses but provide little advice for future
planning.
Many companies have dropped matrix methods in
favor of customized approaches better suited
to their specific situations.
40

3. Business Portfolio and Growth Strategy

Developing Strategies for Growth and Downsizing

Marketing has the main responsibility to achieve profitable growth.

Products

Markets

Current

New

Current

Market Penetration

Product Development

New

Market Development

Diversification

41

3. Business Portfolio and Growth Strategy

Product/Market Expansion Grid:

Market Penetration:
- making more sales to current customers without changing products.
How? Cut prices, increase advertising, get products into more stores.
Market Development:
- identifying and developing new markets for its current products. How?
Identify new demographic or geographic markets.
Product Development:
- offering modified or new products to current markets. How? New styles,
sizes, colors, or other modified products.
Diversification:
- start up or buy new businesses outside of its current products and
markets.
42

3. Business Portfolio and Growth Strategy for

McDonald

Products

Markets

Current

New

Current

Market Penetration

Product Development

Selling more hamburgers to

customers in HK

Selling McCafe to middle-class

young adults

New

Market Development

Diversification

Selling more hamburgers to

people in Vatican City, Nepal,
etc.

Selling Event management

service to other corporations

43

Strategic Planning

4: Marketing Strategies to deliver value

Develop Customer-Driven Marketing Strategy

and programs to support these objectives.
Marketing

requires a deep understanding of

customers. Companies cannot profitably serve them
all. Companies must divide up the total market,
choose the best segments, and design strategies for
profitably serving chosen segments.
This process involves market segmentation, market
targeting, differentiation, and positioning

44

Strategic Planning

4: Marketing Strategies of McDonlad to

deliver value

Customer-Driven Marketing Strategy

New market segmentation, market
targeting, differentiation, and
positioning :
Generation

X, young parents with kids

45

Strategic Planning

4: Marketing Strategies of McDonald to deliver

value
New Positioning
-McDonalds

of

your Dream-Facilitating

amazing kids

46

Strategic Planning

4: Marketing Strategies to deliver value

Marketing Mix

47

Developing an Integrated Marketing Mix

48

Strategic Planning

4: Marketing Strategies to deliver value

1. Partnering to build Customer Relationship
1.1 Partnering with Other Company
Departments,e.g. Wal-Mart marketing
with logistics
1.2 Partnering with Other in Marketing System
(value delivery network), e.g. LOreal with
raw material suppliers, BEA & HSBC with
pizza hut
49

Control of Marketing Activities

- by Return on Marketing Investment (ROI)

A company can assess return on marketing in terms of standard

marketing performance measures, such as brand awareness, sales,
or market share.

50

Review
Describe the environmental forces that affect
the companys ability to serve its customers.
Explain how changes in the demographic
and economic environments affect marketing
decisions.
Identify the major trends in the firms natural
and technological environments.

3-51

Review
Explain the key changes in the political
and cultural environments.
Discuss how companies can react to the
marketing environment.

3-52

Review
Explain company-wide strategic planning
and its four steps.
Discuss how to design business portfolios
and develop growth strategies.
Explain marketings role in strategic
planning and how marketing works with its
partners to create and deliver customer
value.
2 - 53

Review
Describe the elements of a customerdriven marketing strategy and mix and the
forces that influence it.
List the marketing management functions,
including the elements of a marketing
plan, and discuss the importance of
measuring and managing return on
marketing investment.
2 - 54