4. Model 1 - Using PEST/PESTEL analysis to scan the “MACRO” environment ORGANISATION Legal Political Social Ecological Technological Economic
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6. Model 2 – Using 5 Forces analysis to scan the “MICRO” environment Industry Competitors Intensity of Rivalry Buyers Suppliers New Entrants Substitutes Threat of New Entrants Threat of Substitutes Bargaining Power of Suppliers Bargaining Power of Buyers
7. 5 Forces example: BT Cellnet MM02(phones) Strong Vodaphone Orange One-to-one Weak Cost of licence High barrier to entry Huge cost to 3G New functions? Strong Customers have many competing offers, some including airtime, some not. Cheap deals through Internet Weak Nokia Motorola Ericsson Competing strongly For share of Mature market Medium Customers returning to land lines Convergence with PDAs Location technology
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12. Effective use of SWOT STRENGTHS WEAKNESSES OPPORTUNITIES THREATS Matching Strategies Conversion Strategies Conversion Strategies
13. Model 4 - The Marketing Plan Corporate objectives Marketing audit SWOT Marketing objectives/strategies Alternative plans/ mix Programmes Measure/review Assumptions Estimate results FEEDBACK
1. Porter’s 5 Forces. (The ideas discussed here are attributable to the work of Professor Michael Porter of Harvard Business School) In any segment there is a limited total amount of profit that can be shared among the various players. Hence, given normal business drivers, they can all be expected to fight for the bulk of the profit. This means that competitor analysis must be extended beyond conventional rivals to include all of these forces. Specifically, firms need to understand structural rivals’ needs, power, capabilities and motivations and to develop strategies to achieve their own profit and performance objectives given the constraints the five forces impose. Customers: in consumer markets, end customers and powerful retailers apply pressures for lower prices and better benefits. In industrial and other organisational markets, customers and/or channel members apply this same profit pressure. They demand the best levels of benefits at the lowest attainable prices by playing off the various suppliers against each other. Their ability to do this is strong when: products are not well differentiated: they have monopoly power: and can buy in bulk. Defensive options for suppliers include: building differential advantage; fixing long-term contracts; forward integration; and targeting the less powerful customers. Conventional Competitors: Rivalry here is usually most intense in oligopoly markets (where only a few firms supply all or most of the market). This typifies most markets. Company growth is only possible at the expense of rivals so that fighting for market share is common and fierce and, of course, encouraged by customers. The outcome is usually downward-spiralling profits for all competitors that are unable to protect themselves. New Entrants: These are competitors entering markets they haven’t played in before because they believe they have differential advantage. Further, as they are not known or understood as well as existing rivals, their actions are less predictable, they raise market uncertainty and frequently cause existing firms to panic, thus increasing competitive pressure. Examples include: creation of differential advantage; patents; captive channels and/or suppliers and threats of massive retaliation by attacking entrants own markets or market spoiling tactics. Substitutes: These take the form of new technologies or benefits that satisfy buyer needs more effectively than they were satisfied before. For instance: railways damaged the canal business; electricity replaced steam; calculators killed off the slide rule; television eroded cinema attendance; Encarta CD Rom replaced Encyclopaedia Britannica. Suppliers: Competition with suppliers is similar to that with buyers. Firms and their conventional rivals seek maximum benefits and minimum prices from suppliers, who are seeking the opposite. Supplier power is enhanced when suppliers are few, have a strong differential advantage, cannot be played off against each other, provide essential inputs, or can integrate forward, and when users face high switching costs. Options for defence include: accepting lower margins; shifting the costs to customers; finding new suppliers or substitutes; integrating backwards; fixing long-term deals and/or targeting particular suppliers with which to form close strategic partnerships.
