Situation & Environmental Analysis
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Chapter 2 Situation & Environmental Analysis
Components of a Situation Analysis... Internal environment Customer environment External environment
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Important advise in conducting a situational analysis Analysis is not a panacea/Magic potion: Situational analysis is necessary but insufficient prerequisite for strategic planning process; requires intuition and judgement of managers to use information resulted from situational analysis while taking decisions (infect empower managers with information so that they may take informed decision) Data and information are not the same The benefit must outweigh the cost
COPYRIGHT © 2002 Thomson Learning, Inc. Al
The Internal Environment It involves the critical analysis of the organization’s internal environment with respect to its objectives, strategy, performance, allocation of resources, structural characteristics, and political and power struggles. The framework involves following key aspects; Review current objectives, strategy & performance Evaluate the availability of resources Understand the strengths & weaknesses of your organizational culture & structure
COPYRIGHT © 2002 Thomson Learning, Inc. Al
The Internal Environment (contd) Key questions while reviewing current objectives, strategy & performance What are current marketing objective and goals? Are they consistent with overall organizational strategy and objectives? How are current marketing strategy is performing in terms of sales volume, market share, profitability etc ? How does our performance compare to that of other firms in the industry? How can we continually improves the performance of the organization?
COPYRIGHT © 2002 Thomson Learning, Inc. Al
The Internal Environment (Contd) Key questions for evaluating availability of resources What is the state of our current organizational resources? Are these resources are likely to change for better or for the worse in the near future?
COPYRIGHT © 2002 Thomson Learning, Inc. Al
The Internal Environment (contd) key questions for Understanding the strengths & weaknesses of organizational culture & structure What is the positive and negative aspects of the current and anticipated culture? Does the firm emphasize long term or short term planning horizon? Currently, are there any positive or negative issues with respect to motivating our employees, especially those in customer-contact position ?
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Issues in the Customer Environment Identify current & potential customers Understand needs of current & potential customers Determine basic features of the firm’s & competitor’s products that meet customers needs Anticipate changes in customers needs
COPYRIGHT © 2002 Thomson Learning, Inc. Al
The 5-W Model for Customer Analysis... Who are our current & potential customers? What do customers do with our products? Where do customers purchase our products? When do customers purchase our products? Why (& how) do customers select our products? Why do potential customers not purchase our products?
COPYRIGHT © 2002 Thomson Learning, Inc. Al
External Environment Competitive Forces: – Who are our current & future competitors? – Brand competition-what products are similar in features & benefits to the same customers? – Product competition-who competes in the same product class (different features, benefits & price)? – Generic competition-what very different products solve the same problem or needs? – Total budget competition-what competes for limited financial resources of the same customer
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Systematic Criteria for competitive analysis Identify all current and potential brands, products, generic, and total budget competitors Assess each key competitors by determining its size, growth, profitability, objectives, strategies and target market Assess competitors strengths and weakness, including competencies of competitors e.g distribution, R & D etc Focus on analysis on each competitors marketing strategies (Marketing mix components) Estimate competitors response environmental changes
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Other Issues for Consideration in Evaluating the External Environment
Economic growth and stability Political trends Legal and regulatory factors Changes in technology Cultural trends
COPYRIGHT © 2002 Thomson Learning, Inc. Al
External Environmental Factors-Economic Growth & Stability
Inflation Employment & income levels Interest rates Taxes Trade restrictions Tariffs Consumer confidence Business cycles
COPYRIGHT © 2002 Thomson Learning, Inc. Al
External EnvironmentPolitical Trends Issues mostly beyond a firm’s direct control Some firms protest or lobby…others hire specialists to do so for them – – – –
Tobacco industry Automotive industry Drug companies Health care providers
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Other External Environment Considerations Legal and regulatory factors – laws & regulations may influence marketing decisions & activities
Changes in technology – improvements in the way we accomplish tasks & processes
Cultural trends – demographic trends – lifestyle trends – changes in cultural values
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Important Variables of Societal Environment
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Collecting Environmental Data & Information Internal data sources-company sales records & research ( for example, intranets) Government sources-census data, small business administration, etc. Periodicals and books Commercial, fee based sourcesA.C. Nielsen
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Problems That Can Occur During Data Collection
Incomplete or inaccurate definition of the marketing problem Ambiguity about the usefulness or relevance of the data collected Severe information overload Expensive & time consuming data collection Finding ways to organize the data collected
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Components of a Situation Analysis... Internal environment Customer environment External environment
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Important advise in conducting a situational analysis Analysis is not a panacea/Magic potion: Situational analysis is necessary but insufficient prerequisite for strategic planning process; requires intuition and judgement of managers to use information resulted from situational analysis while taking decisions (infect empower managers with information so that they may take informed decision) Data and information are not the same The benefit must outweigh the cost
COPYRIGHT © 2002 Thomson Learning, Inc. Al
The Internal Environment It involves the critical analysis of the organization’s internal environment with respect to its objectives, strategy, performance, allocation of resources, structural characteristics, and political and power struggles. The framework involves following key aspects; Review current objectives, strategy & performance Evaluate the availability of resources Understand the strengths & weaknesses of your organizational culture & structure
COPYRIGHT © 2002 Thomson Learning, Inc. Al
The Internal Environment (contd) Key questions while reviewing current objectives, strategy & performance What are current marketing objective and goals? Are they consistent with overall organizational strategy and objectives? How are current marketing strategy is performing in terms of sales volume, market share, profitability etc ? How does our performance compare to that of other firms in the industry? How can we continually improves the performance of the organization?
COPYRIGHT © 2002 Thomson Learning, Inc. Al
The Internal Environment (Contd) Key questions for evaluating availability of resources What is the state of our current organizational resources? Are these resources are likely to change for better or for the worse in the near future?
COPYRIGHT © 2002 Thomson Learning, Inc. Al
The Internal Environment (contd) key questions for Understanding the strengths & weaknesses of organizational culture & structure What is the positive and negative aspects of the current and anticipated culture? Does the firm emphasize long term or short term planning horizon? Currently, are there any positive or negative issues with respect to motivating our employees, especially those in customer-contact position ?
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Issues in the Customer Environment Identify current & potential customers Understand needs of current & potential customers Determine basic features of the firm’s & competitor’s products that meet customers needs Anticipate changes in customers needs
COPYRIGHT © 2002 Thomson Learning, Inc. Al
The 5-W Model for Customer Analysis... Who are our current & potential customers? What do customers do with our products? Where do customers purchase our products? When do customers purchase our products? Why (& how) do customers select our products? Why do potential customers not purchase our products?
COPYRIGHT © 2002 Thomson Learning, Inc. Al
External Environment Competitive Forces: – Who are our current & future competitors? – Brand competition-what products are similar in features & benefits to the same customers? – Product competition-who competes in the same product class (different features, benefits & price)? – Generic competition-what very different products solve the same problem or needs? – Total budget competition-what competes for limited financial resources of the same customer
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Systematic Criteria for competitive analysis Identify all current and potential brands, products, generic, and total budget competitors Assess each key competitors by determining its size, growth, profitability, objectives, strategies and target market Assess competitors strengths and weakness, including competencies of competitors e.g distribution, R & D etc Focus on analysis on each competitors marketing strategies (Marketing mix components) Estimate competitors response environmental changes
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Other Issues for Consideration in Evaluating the External Environment
Economic growth and stability Political trends Legal and regulatory factors Changes in technology Cultural trends
COPYRIGHT © 2002 Thomson Learning, Inc. Al
External Environmental Factors-Economic Growth & Stability
Inflation Employment & income levels Interest rates Taxes Trade restrictions Tariffs Consumer confidence Business cycles
COPYRIGHT © 2002 Thomson Learning, Inc. Al
External EnvironmentPolitical Trends Issues mostly beyond a firm’s direct control Some firms protest or lobby…others hire specialists to do so for them – – – –
Tobacco industry Automotive industry Drug companies Health care providers
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Other External Environment Considerations Legal and regulatory factors – laws & regulations may influence marketing decisions & activities
Changes in technology – improvements in the way we accomplish tasks & processes
Cultural trends – demographic trends – lifestyle trends – changes in cultural values
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Important Variables of Societal Environment
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Collecting Environmental Data & Information Internal data sources-company sales records & research ( for example, intranets) Government sources-census data, small business administration, etc. Periodicals and books Commercial, fee based sourcesA.C. Nielsen
COPYRIGHT © 2002 Thomson Learning, Inc. Al
Problems That Can Occur During Data Collection
Incomplete or inaccurate definition of the marketing problem Ambiguity about the usefulness or relevance of the data collected Severe information overload Expensive & time consuming data collection Finding ways to organize the data collected
COPYRIGHT © 2002 Thomson Learning, Inc. Al
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