Introduction to Marketing &
The Business Environment
Chris Kariyawasam
BBA (hons), MBA, MCIM, CPM (Asia Pacific)

What is Marketing
Marketing is the Management process responsible for identifying,
anticipating and satisfying consumer
needs profitably
(Source: Chartered Institute of Marketing UK)

• Realised the consumers ultimate dream – a soap that does not dry skin
due to a quarter moisturizing cream
• A clearly demonstrable point of difference helped position the brand and
gain market share of 12% in the US by mid 1990s and now a global brand
Example of Innovation

Marketing is about ….
C C D V P (Philip Kotler)
 Creating
Solving a important consumer problem that competitor have not
 Communicating
How do you set your brand / product apart from competition ?
 Delivering
Does your product actually live up to consumer expectations ?
 Value to a target market for …
What is the unique value proposition of your product ?
 Profit
Does the price you charge more than off-set the cost of making it ?
Philip Kotler

The Strategic Marketing Planning Process
Source: McDonald, 2007 p.49

Steps in Business Analysis
1. Where are we today in terms of business performance ?
E.g. Current turnover of the Company is 12 billion
2. Where do we want to be ?
E.g. Required turnover is Rs 24 billion in 5 years
E.g. Unilever wants to double its business in the next five years
3. How do we get there ?
What do you do as the top management team to achieve the
difference (24 – 12) called the planning gap ?

Ansoff Matrix - Growth Strategies
An important model for strategic planning
How do we Grow the Business ?
Products
Existing New
Existing
New
Markets
Market Penetration
New Market Development
New Product Development
Diversification
• New Market Segments
– Heavy user
VFM segment SKUs
• New distribution channels
• New geographic areas
• Product modification via new
features, new variants
• Different quality levels
• New products / range extensions
• More purchasing and usage by
Existing customers
• Gain from competitors
• Convert non-users
• Extend availability – new outlets
• Extend the range in exist outlets
• Joint ventures
• Mergers
• Acquisitions
• Strategic alliances
• New categories
McDONALD, M. (2007) Marketing Plans. 6th ed. Italy: Butterworth-Heinemann, p.361

Gap Analysis
Used to indicate current situation vs future objectives
(planning gap)
Incremen
tal Sales

Summary Financial Statement of a
Company
2006 2007 Plan 2008 Actual 2008
Volume (millions of units) 60.0 59.9 60.2 64.0
growth -0.2 0.5 6.8
Market Share NA 23.1 23.1 24.2
Turnover (GBP '000) 660.7 687.2 686.2 883.8
growth 4.0 -0.1 28.6
Gross Profit (GBP '000) 353.2 355.5 383.6 506
"% to Turnover 53 52 56 57
growth 0.7 7.9 42.3
Support Spend (GBP '000) 26.6 19.8 37.2 124.0
Net Profit (GBP "000) 326.6 335.7 346.4 382
"% to Turnover 49 49 50 43
growth 2.8 3.2 13.8

• “I can’t believe its not butter” (ICBINB) is the only alternative to butter
that satisfies a passion for the taste of butter without cholesterol
• The product tested prior to launch, was rated highly by consumers
• 84% of butter users in the study rated it equal to or better than butter
on an overall rating
• The brand combined major benefits of taste value of butter and
health benefit of margarine
Result
No 1 position in USA in premium margarine
segment today
TVC
Example of Innovation

The Business Environment
 The Company’s external environment changes so opportunities and threats
emerge and disappear
 The Strategist has to recognise the need to monitor the external
environment to identify in advance any possible opportunities and threats
 This will allow for a planning system and organisational structure that is
capable of handling change that will minimise the effects of threats and
help seize opportunities
 Formulation of strategy is concerned with matching the capabilities of the
organisation with the demands of the environment
 The business environment is made up of the sectors and forces outside the
firm which infringe upon the ability of management to develop and
maintain a successful relationship with its target group

The Macro-environment of a Company

The Micro & Macro Environments
Five Competitive Forces – Michael Porter
THOMPSON, A. and STRICKLAND, A (2001) Crafting and Executing Strategy. 12th ed. New York: McGraw-Hill, p.74
How GE managed a hostile
business environment

The Five Stages of Environmental
Analysis
Audit of Environmental
influences
Assessment of the nature
Of the environment
Identification of the key
Environmental forces that impact the business
Identification of the
competitive position
Identification of key
Opportunities and threats
Strategic position

Key Questions
 How uncertain is the environment ?
 What are the sources of this uncertainty ?
 How should this uncertainty be dealt with ?

The Micro and Macro Environments
 Micro-environment
Is made of those elements which are closest to the company and which
exert the greatest and most direct influence over its ability to deal with
its markets
 E.g. Organisation itself, its suppliers, its distribution network,
customers, competitors and the public at large
 Macro-environment
Consists of the broader set of forces that have a bearing upon the
company
 E.g. economic, demographic, technological, political, legal, social
and cultural factors
Read Business Environment Analysis

The PESTEL Framework
 Complexity arises because many of the different issues in the business
environment are interconnected
 E.g. Tech development in IT changes the way we operate which alters
consumer behaviour and purchasing patterns
 Therefore understanding the interconnections are important in
developing a strategic picture of the business environment
 Speed of change – the pace of technological change and the speed of
global communication mean more and faster change now than ever
before
 Your task is to perform environmental analysis for organisations that will
help in identifying key issues and ways for coping with complexity and
change

The PESTEL Framework
 It is important to build an understanding of how changes in the macro
environment are likely to impact on individual organisations
 Use the PESTEL framework to identify how future trends in the political,
economic, social, technological, environmental and legal environments
might affect the organisation
 This provides the broad data from which the key drivers of change can
be identified
 These will differ from sector to sector and from country to country
 If the future environment is going to be very different from the past it is
important to create possible future scenarios

The PESTEL Framework
 Within the general environment, an important layer is the industry or
sector – a group of organisations producing the same products or
services
 The five-forces framework and competitor analysis can be used to
understand how the competitive dynamics in an industry are changing
 The concept of strategic groups can be used to identify direct and
indirect competitors
 Consumer expectations are not all the same and market segmentation
and critical success factors for each segment needs to be considered
 Remember that PESTEL factors are linked and NOT interdependent

The PESTEL Framework
 Managers need to identify the key drivers of change and the differential
impact of these external influences on particular industries, markets and
organisation
 Identifying key drivers cuts across “layers of the business environment”
 Although there will be many changes happening in the macro
environment of organisations, it is important to identify the key factors
and their influence rather than all of the factors

The Key Drivers of Change
 Remember that key drivers will be different from country to country and
market / sector and the specific key drivers of change need to be
identified depending on the organisation and the environment it is
operating in

 Political stability
 Risk of military invasion
 Legal framework for contract enforcement
 Intellectual property protection
 Trade regulations & tariffs
 Favoured trading partners
 Anti-trust laws
 Pricing regulations
 Taxation - tax rates and incentives
 Wage legislation - minimum wage and overtime
 Work week
 Mandatory employee benefits
 Industrial safety regulations
 Product labelling requirements
Political and Legal Environment
What impact would a change in each factor below have on the
Company sales, profit, and market share ? And what do you
recommend doing to deal with opportunities or threats as a result?

Economic Environment
 Type of economic system in countries of operation
 Government intervention in the free market
 Comparative advantages of host country
 Exchange rates & stability of host country currency
 Efficiency of financial markets
 Infrastructure quality
 Skill level of workforce
 Labour costs
 Business cycle stage (e.g. prosperity, recession, recovery)
 Economic growth rate
 Discretionary income
 Unemployment rate
 Inflation rate
 Interest rates

Demographic Environment
How the are factors below predicted to change in the next two years and
therefore, what should you do if you were formulating strategy for the
Company
 Demographics
 Class structure
 Education
 Culture (gender roles, etc.)
 Entrepreneurial spirit
 Attitudes (health, environmental consciousness, etc.)
 Leisure interests

Technological Environment
What are the global trends and how can the current technology change or
be made obsolete ? If so what will be the impact on the Company be ?
How should my strategy change to deal with this situation in the next two
years?
 Recent technological developments
 Technology's impact on product offering
 Impact on cost structure
 Impact on value chain structure
 Rate of technological diffusion

http://www.youtube.com/watch?v=GNXY
I10Po6A
SWOT Analysis

Strengths
What are your Company’s key strengths that enable it to take advantage
of opportunities in the business environment ?
 Advantages of proposition?
 Capabilities?
 Competitive advantages?
 USP's (unique selling points)?
 Resources, Assets, People?
 Experience, knowledge, data?
 Financial reserves, likely returns?
 Marketing - reach, distribution, awareness?
 Innovative aspects?
 Location and geographical?
 Price, value, quality?
 Accreditations, qualifications, certifications?
 Processes, systems, IT, communications?
 Cultural, attitudinal, behavioural?

Weaknesses
What weaknesses should we overcome and why? How do you propose it
be done as part of the implementation plan of your strategy ?
 Disadvantages of proposition?
 Gaps in capabilities?
 Lack of competitive strength?
 Reputation, presence and reach?
 Financials?
 Own known vulnerabilities?
 Timescales, deadlines and pressures?
 Cash flow, start-up cash-drain?
 Continuity, supply chain robustness?
 Effects on core activities, distraction?
 Reliability of data, plan predictability?
 Morale, commitment, leadership?
 Accreditations, etc?
 Processes and systems, etc?

Opportunities
Trends in the micro and macro environment that can have a favourable
impact or effect on your Company’s sales and profit, i.e. to grow sales and
profitability
 Market developments?
 Competitors' vulnerabilities?
 Industry or lifestyle trends?
 Technology development and innovation?
 Global influences?
 New markets, vertical, horizontal?
 Niche target markets?
 Geographical, export, import?
 New USP's?
 Tactics - surprise, major contracts, etc?
 Business and product development?
 Information and research?
 Partnerships, agencies, distribution?
 Volumes, production, economies?

Threats
Trends or events that will have a negative impact on the Company’s sales,
market share, and profit
 Political effects?
 Legislative effects?
 Environmental effects?
 IT developments?
 Competitor intentions - various?
 Market demand?
 New technologies, services, ideas?
 Vital contracts and partners?
 Sustaining internal capabilities?
 Obstacles faced?
 Insurmountable weaknesses?
 Loss of key staff?
 Sustainable financial backing?
 Economy - home, abroad?

Structure
Vision
Systems
Strategy
Skills Culture
Staff
Environment
The 7S Framework for
Strategy Implementation
Fit
Source: Mintzberg & Quinn 1992 p.136

Swatch Case Study
 Do A SWOT Analysis for the Swiss Watch Industry
 What went wrong with Swatch and why?
 What were the key driving forces in the environment that led to
this situation and why?
 How would you as the management team of ensure that your
market share did not erode?
Swatch Experience

Practice Questions
1. The business environment is increasingly dynamic and complex and
unstable. Discuss the implications of this for the strategic planning
process. Illustrate your answer with appropriate contemporary
examples from a sector of your choice.
2. All business operate within an environment which directly or
indirectly affects the way in which they function. Critically discuss
this statement using illustrations from an industry of your choice