Benefits of carrying out an external environment analysis

Nowadays, competition between companies tends to increase every single day. With the phenomenon of globalization, the advent of Internet, the speed of transactions and the reduced lifetime of products, companies are forced to implement effective strategic analysis tools in order to deal with perpetual economic changes. The first tool is the internal analysis which can be made by the SWOT analysis. The internal analysis deals with strengths and weaknesses of the company to assess the chance that will have the company to obtain a favorable position in its market. However, being successful in a business request also, a full knowledge about the external environment which is the second tool we are going to talk about. In a first part we will explain what microenvironment is and why it is crucial to work on it in our competitive world. Then, in a second part we will demonstrate how it is important to study the Macroenvironment through the PEST and the Porter analysis.

The external analysis

The analysis (Opportunities / Threats market) is to investigate the threats and opportunities before the company could face. The company is located in a sector, which mean in a set composed by all companies involved in the industry, directly or indirectly in the production and / or sells of goods and services in order to satisfy a type of need. Study the micro and macro environment means understanding the conditions of struggle between actors in the same sector.

Microenvironmental Factor

The microenvironment includes internal factors which are close to the company and have a direct impact on the organisations strategy. A good knowledge about studying these factors will have gainful influence on marketing decision.

Customers

They are vital for the company and the whole organization thus knowing what they need and what they want will provide benefits for business. In the opposite it will fail the business strategy and therefore the company.

Competitors

To stay in a market a full analysis about what is doing or what plan competitors are making is crucial to maintain its position in the market. Getting information about competitors will allow a differentiation which can give the opportunity of getting better than others.

Employees

Having the right staff, motivated and well trained is essential to get a good strategic planning process of the organisation but also to get competitive edge.

Suppliers

Having good relationships with supplier will help to have bests prices on raw material will affect on the mix strategy of the organisation. Moreover it also helps to get the best quality of products which are going to be sold to customers.

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Media

Media can have a very powerful impact on customers way of buying. It can be positive or negative thus make a company revise its strategic plan according to what media said. This is the reason why media shouldn’t be neglected at all.

Macroenvironmental factors

The pest analysis

The whole company environment is composed by several factors, Politic, Economic, Social and Technologic that have to be studied and taking in consideration.

After analysis, the synthesis should help to find new business segments and financial resources, human and material for several years. From the analysis PEST it is crucial to identify links and patterns between all these elements. PEST factors play an important role in the opportunities for value creation strategy in order to promote the company development and sustainability.

The porter analysis

Michael Porter is the creator of a methodology to analyze the competitive environment, represented by 5 “forces” in order to know the intensity of competition:

Bargaining power of suppliers

Substitutes

Substitutes

Bargaining power of customers

New entrants

Intensity of competition

The analysis of five forces, or threats, helps the marketing team to simulate a competitive situation. This analysis tends to focus on a single Strategic Business Area rather than a product line. Moreover, these five forces determine the ability of firms involved to make a profit. If all forces are high, profits are going to be limited. Conversely, if these forces are weak, it will be possible to identify a substantial profit. The main point is therefore to prioritize these forces so as to identify the key success factors in the industry, that is to say the strategic elements which must be studied to obtain a competitive advantage.

To put it in a nutshell, the list of evidence above shows that a deep analyze of the external environment is vital to ensure the sustainability and the well being of companies. All these tools give us information on the various factors that affect and influence business strategic decision

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nom

incoming

freshman

tenderfoot

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new

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Definition of key words;

Marketing environment: “The actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships’ with target customers.”

Microenvironment: “The actors close to the company that affect its ability to serve its customers, the company suppliers, marketing intermediaries, customer markets, competitors and publics.”

Microenvironment: “The larger societal forces that affect the microenvironment demographic, economic, natural, technological, political and cultural forces.”

Using appropriate models and frameworks evaluate the stages of the buying decision process. What challenges & opportunities might the increasing role of technology and the internet bring to marketers? Use examples where appropriate.

The customer behaviour is based on a rational thinking which follows a specific order of reflection characterized by 5 phases. A potential client will found information about a product through advertising tools he knows such as, magazine, television, and all other media support. But since almost 20 years a new and powerful tool appears under the name INTERNET. Indeed, internet connects quickly businesses and individuals around the world via e-mail. Thus the traditional marketing had to change at the same time of the technology evolution. The marketing adaptation and challenges has growth rapidly in recent years due to internet. In a first part we are going to analyze the buying decision process of customers and in a second part we will talk about the e-marketing opportunities.

The process of consumer decision

1)Recognition the need: to perceive a gap between the current situation and the ideal situation.

2) Search internal and external information: use of past experiences and others.

3) Evaluation of choices (analysis of solutions) ;to determine its criteria and the value of the product (value; price/quality).

4) Purchase decision: to make a choice.

5) The post-purchase behaviour: evaluation of a product after using it. (Satisfaction or dissatisfaction).

The main target of marketing is to satisfy consumer needs by giving him the opportunity or the information about his problem. As we all know marketing is everywhere around us, home through the Television, in streets through advertising on blackboard and so on. However, advances in information technology have changed the B to B marketing process face. Indeed, internet has quickly become a new huge worldwide store thus this way of purchasing by staying home also called e-procurement (purchasing through electronic connections between buyers and sellers, usually online. Definition from principle of marketing. This opportunity has been promptly taken by companies majority because they have adapt their selling and advertising process.

The answer to the question “what are the advantages of being online for a company?” is;

Communicate with customers or suppliers because marketers can be link every day and every time to consumers online in order to share marketing information, sell services and products, give support services and also maintain relationship with them. Moreover companies can launch marketing campaigns targeted and choose to find new customers in their immediate environment, in the neighboring province or on another continent, with a shop open 7 / 7. Therefore, marketers can easily accurately measure the results of each action taken in order to know if it worked and would work again. This is the reason why they can propose best prices because of reduces costs by selling online.

to illustrate this thinking let’s take the example of Tesco which has invest in things that interest consumers such as the creation of a web site to make its products accessible from everywhere. Thus in 1998 Tesco launched Tesco.com. The result came quickly, the turnover and the selling space increased massively.

Moreover, the development of Tesco through catalogue and online shopping will increase the use of technology such as internet which will increase the number of purchase on the web but also raise the number of delivery directly to customers place.

Then, the Group has published sales gain of 13% for UK markets and 26% growth in foreign markets due to the use of the technology by consumers.

Accordingly, TESCO is today the third largest global grocer after Wal-Mart and Carrefour.

Last but not least, we have seen that consumers are well users and very aware about new technology which is an opportunity for ambitious companies which want to growth in a business way. The technology brings wide open door to companies it is just a question of adaptation and creation of new services always to reach the same goal, satisfy the consumer needs.

Explain the role of a “mission statement” in guiding company strategy. Critically evaluate the elements of a “good” mission statement. Give examples to support your analysis.

Because of the globalization and growing markets in numbers of competitors, companies have to work on their mission statement in order to make better organization purpose and financial performance than other. Thus to achieve this, companies have to answer questions such as “What is our business? Who is the customer? What do consumers value? What should our business be? And so on. In a word, a good mission statement is composed by several comprehensive message that make customers and consumers understanding what the company can offer to them. A hard brainstorming on these simple questions will make a huge difference between a company compare to another. Moreover, a company’s mission I not stated as making more sales and profits which are reward for creating value for customers. Indeed, a good mission give to employees the need to feel that their work is significant, useful and that it contributes to peoples lives.

Here is a definition of mission statement; “A statement of organization’s purpose, what it wants to accomplish in the larger environment.” (From “principle of marketing”)

WHY DO WE EXIST?

This model is the “Ashridge Diamond” which helps to understand what a mission statement is. The fourth parts of the diamond give us the most important points to take care of, if a company wants to distinguish itself and attract maximum customers who know why the company exists!

In general when companies want sell a product competitor are probably going to do the same thus the product and market orientation have to be clearly identified by consumer has the best one.

For example the product-oriented definition of L’Oreal is “we make cosmetics” and there market oriented definition is “We sell lifestyle and self expression; success and status; memories, hopes and dreams. “moreover the company shows that its product are 100% natural and respect the environment. In this case l Oreal emphasise the consumer beauty in its slogan “because I am worth it” which means that the company propose product for people (= everyone).

brand

Product oriented definition

Market oriented definition

slogan

Burger king

Makes fast food

Make your own meal as you feel

Have it you way

Nike

Makes sportswear

Makes the sport easier and accessible just for you.

Just do it

L oreal

Makes cosmetics

Sells lifestyle and self expression

Because I am worth it

Coca cola

Makes drinks

Sells a drinks often copied but never equal. Matched

It is the real thing

In the table upon we can see that every famous brand has its own slogan and when consumers hear these sentences, they automatically think about the brand that made it. Thus they know what the brand is doing and what it can bring to improve their lives.

At last but not least, the mission statement is the mirror of what is the company’s vision of how it would rather be seen by its customers because they like to deals with a company they agreed with and believe in. Thus In order to be successful in business the mission statement has to have a clear and understand by clients. We have seen that a good mission statement should inspire employees and contribute to the final product due to common values shared throughout the company.

Critically evaluate the increased focus on “sustainability” as a growing element of modern marketing. Illustrate your answer with examples from different organisations.

Societies are constantly changing and have to adapt their rules according to these evolutions. Marketing is also following these trends, based on the long term. Indeed, in the 80’s, 90’s, consumer society proposed products which were “disposable”, offering the advantage of freedom. But after 2000, came terms such as “sustainable development” and “ecology” questioning everything that was disposable because of the disregard for the environment. Disposable product becomes recyclable (pencil, paper, camera, lighter and so on). Therefore the modern marketing had emphasize the sustainability of product in order to fulfill this new mentality that respect the environment for next generation by offering product that last over time.

Here is two definition of sustainability in a marketing way:

“The process of promoting, selling, and distributing a product or service in a sustainable market in such a way as to educate customers of the multiple benefits of valuing human, economic, and natural capital. (from the dictionary of sustainable management).

“Marketing that meets the present needs of consumers and businesses whiles also preserving or enhancing the ability of future generations to meet there needs” (from principle of marketing)

This model shows that sustainable is a mix of socially acceptable + respect for the environment + economic =” the three pillars of the sustainable development”. Here is on what companies are working on to provide products expected by consumers and customers while keeping social responsibility and ethics.

Nowadays, “sustainability of product” becomes very popular as the new catchword to sell and be more competitive than competitors. Moreover sustainability rhymes with quality of product. Let’s take the example of the company BIC. In 1975 BIC launches its first razor which is a single-blade razor, not refillable. Later, the company develops a range of single blade razors disposable for men and woman. Since the popularity of sustainable product (2000), disposable product became frowned by population a mentality which doesn’t want to through this plastic tool in trash anymore. Because with 11 million units sold around the world every single day, it is such a mountain of ephemera plastic that feeds our landfill sites. Thus In 2003, BIC launched a three blade razor sustainable which was a great success.

Before today

The new slogan is “ECOLUTION” (ecology + solution) which is a “bioplastic” from plants and a 100% recyclable. Therefore, when consumer buys this new product, they know that it will respect the hearth and this make sells growth more than the same razor from a different brand. Other products from the same company are the famous ballpoint pen and the disposable lighter. These product have the same characteristic but the weight has been reduced from 20% to 30% for the same performance. The company collects these items at the end of life and recycled it in washing machine parts.

To put it in a nutshell, the Marketing in general has to adapt its strategy in order to always propose the best reflection of products characteristics. Marketing actors now show the environmental argument in terms of eco-design, sales and communication of products which deals with sustainable development and companies are oriented to innovate sustainable development whatever the cause of their engagement. In a word a good and strategic marketing has to identify opportunities and threats in a context of increasing the sensitivity of consumer.

In the 70s mains words were “productivity”, “profitability”, “mass” consumption” and so on.

Today, as I explain upon mains words are “ecology”, “sustainable” and “environment” but tomorrow, who knows….?