Environmental Analysis

Environmental analysis

Market Growth Rate

The Boston Consulting Group’s Growth-Share Matrix 20%18%16%14%12%10%8%6%4%2%0

Stars

Question marks

4

3

5

?2

?

1

Dogs

Cash cow

8 6 10x

7 4x

2x 1.5x

1x

.5x .4x .3x .2x .1x

Relative Market Share

The Marketing Environment and Competitor Analysis

•SWOT analysis •PEST analysis •Five forces analysis

SWOT analysis

• Strengths (internal) • Weaknesses (internal) • Opportunities (external) • Threats (external)

Strengths • • • • •

Your specialist marketing expertise. A new, innovative product or service. Location of your business. Quality processes and procedures. Any other aspect of your business that adds value to your product or service

• A weakness could be: • Lack of marketing expertise. • Undifferentiated products or services (i.e. in relation to your competitors). • Location of your business. • Poor quality goods or services. • Damaged reputation

An opportunity could be: • A developing market such as the Internet. • Mergers, joint ventures or strategic alliances. • Moving into new market segments that offer improved profits. • A new international market. • A market vacated by an ineffective competitor.

A threat could be: • A new competitor in your home market. • Price wars with competitors. • A competitor has a new, innovative product or service. • Competitors have superior access to channels of distribution. • Taxation is introduced on your product or service.

Simple rules for successful SWOT analysis. • Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis. • SWOT analysis should distinguish between where your organization is today, and where it could be in the future. • SWOT should always be specific. Avoid grey areas. • Always apply SWOT in relation to your competition i.e. better than or worse than your competition. • Keep your SWOT short and simple. Avoid complexity and over analysis • SWOT is subjective.

Wal-Mart SWOT Analysis. •

Strengths - Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store. • Weaknesses - Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control. • Opportunities - To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region. • Threats - Being number one means that you are the target of competition, locally and globally.

Starbucks SWOT Analysis Strengths - Starbucks Corporation is a very profitable organisation, earning in excess of $600 million in 2004 Weaknesses - Starbucks has a reputation for new product development and creativity. Opportunities - New products and services that can be retailed in their cafes, such as Fair Trade products. Threats - Starbucks are exposed to rises in the cost of coffee and dairy products.

SWOT Analysis STRENGTHS

WEAKNESS

India’s geographical location

Not adequate infrastructure

Diversity in culture

No proper marketing

Historical monuments

TOURISM

OPPORTUNITY Allowing entry of multinational company Proactive role from the govt Growth of domestic tourism

THREATS Economic conditions and political turmoil Aggressive strategies adopted by other countries

STRENGTHS

Large Number of outlets. In house sourcing of coffee beans. Tie Ups with good companies

WEAKNESS Limited Target Audience. Follow the competitor strategy. Quality of food- Stale breads. Loud and Hard Music. Improper sitting arrangement.

OPPORTUNITIES

THREATS

Large Untapped Market

Entry of Foreign players like Georgia & Starbucks.

Tie-ups with other companies for promotion

Large unorganized market.

Nike SWOT Analysis. Strengths - Nike is a very competitive organisation. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets. 'Weaknesses - The organisation does have a diversified range of sports products. Opportunities - Product development offers Nike many opportunities. Threats - Nike is exposed to the international nature of trade.

PEST analysis

• Political factors • Economic factors • Socio-cultural factors • Technological factors

Political/legal • • • • •

Monopolies legislation Environmental protection laws Taxation policy Employment laws Government policy

Economic Factors • • • • •

Interest rates Currency exchange rates Inflation Employment Disposable income

Sociocultural factors • • • • • •

Demographics Distribution of income Social mobility Lifestyle changes Consumerism Levels of education

Technological • • • • •

New discoveries and innovations Speed of technology transfer Rates of obsolescence Internet Information technology

Five forces analysis Potential entrants Threat of entrants

Suppliers

COMPETITIVE RIVALRY

Buyers Bargaining power

Bargaining power

Threat of substitutes

Substitutes

Source: Adapted from M. E. Porter, Competitive Strategy, Free Press, 1980, p. 4.

Threat of new entrants • Economies of scale • Government policy • Strong Brands • Consumers • Capital requirements • Switching costs eg FedEx, Gillette, Sony, Nintendo • Distribution Slotting allowance Retaliation against new comers Barriers change over time

Bargaining power of Buyers • When the product bought is undifferentiated • When the product bought is large percentage of the buyer’s cost eg steel in automobiles • When the buyer threatens to backward integrate • When the buyer has full information

Bargaining power of suppliers • Suppliers are highly concentrated • There is no substitute available for the product • Supply is limited

Pressure from substitutes

Five Forces Analysis: Key Questions and Implications • What are the key forces at work in the competitive environment? • Are there underlying forces driving competitive forces? • Will competitive forces change? • What are the strengths and weaknesses of competitors in relation to the competitive forces? • Can competitive strategy influence competitive forces (eg by building barriers to entry or reducing competitive rivalry)?