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Marketing ManagementMarketing Management2nd Edition2nd Edition

Chapter 3:Chapter 3:

Understanding the Understanding the Environment and Environment and the Competitionthe Competition

Michael R. Czinkota and Masaaki KotabeMichael R. Czinkota and Masaaki Kotabe

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Chapter OutlineChapter Outline Growing Environmental TurbulenceGrowing Environmental Turbulence Overall EnvironmentOverall Environment Sociocultural EnvironmentSociocultural Environment Technological EnvironmentTechnological Environment Economic EnvironmentEconomic Environment Political and Legal EnvironmentPolitical and Legal Environment Environmental AnalysisEnvironmental Analysis CompetitionCompetition

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Growing Environmental Turbulence

1900

Stable

1930

Reactive

1950

Anticipating

1970

Exploring

1990

Creative

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Overall EnvironmentOverall Environment

InternalInternalOrganizationOrganization

MarketingEnvironment

ExternalEnvironment

Laws

Technology

Geography

Culture

Society

Politics

EconomyDemographics

Supp

liers

Com

petitors

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Sociocultural EnvironmentSociocultural Environment

Societal trendsSocietal trends Goods-producing to Goods-producing to

service-producingservice-producing Materialist society to Materialist society to

postmaterialist postmaterialist societysociety

DemographyDemography

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U.S. Age GroupsU.S. Age Groups

0

5

10

15

20

25

30

35

40

45

0-9 10-19 20-29 30-39 40-49 50-59 60-69 70-70 80-89 90-99

Mill

ions

77M born1980 - 1999

76M born1945 - 1964

“Baby Boomers”

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Technological EnvironmentTechnological Environment

Electronic Data Electronic Data Interchange (EDI)Interchange (EDI)

Merchandise scanningMerchandise scanning Data sharingData sharing Distribution Distribution

relationshipsrelationships Customer Customer

communicationcommunication

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Economic EnvironmentEconomic Environment

GlobalizationGlobalization Regional economic Regional economic

integrationintegration NAFTANAFTA European UnionEuropean Union MERCOSURMERCOSUR

Exchange ratesExchange rates Currency flowsCurrency flows

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Political and Legal EnvironmentPolitical and Legal Environment

Laws and regulationsLaws and regulations Intellectual propertyIntellectual property Contract lawContract law

Interest groupsInterest groups StakeholdersStakeholders

Workers’ councilsWorkers’ councils

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Environmental AnalysisEnvironmental Analysis

Track information on Track information on political, social, and political, social, and economic affairs; on economic affairs; on changes in attitudes, changes in attitudes, and changes in the and changes in the

market.market.Example: Example:

Content analysisContent analysis

Method 1:Environmental

Scanning

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Environmental AnalysisEnvironmental Analysis

Aggregate judgment Aggregate judgment of a number of of a number of

experts who cannot experts who cannot come together come together

physically.physically.

Method 2:Delphi

Studies

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Environmental AnalysisEnvironmental Analysis

Group of employees Group of employees identifies the forces identifies the forces of change within an of change within an

industry.industry.

Method 3:ScenarioBuilding

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Competition: IndustryCompetition: Industry

Industry:Industry:Group of organizations Group of organizations

that offer products that that offer products that are near substitutes for are near substitutes for each other.each other.

Important factors:Important factors: Size of the marketSize of the market Number of Number of

organizationsorganizations

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Competitive StructureCompetitive Structure

Issues affecting structure of Issues affecting structure of competition:competition:

Economies of scaleEconomies of scale Government influenceGovernment influence Competitive history of firmsCompetitive history of firms Distribution channelsDistribution channels Production capacity configurationProduction capacity configuration

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Forces Driving CompetitionForces Driving Competition

IndustryIndustrycompetitorscompetitors

Rivalry amongRivalry amongexisting firmsexisting firms

BuyersBuyersSuppliersSuppliers

SubstitutesSubstitutes

Potential entrantsPotential entrants

Threat ofnew entrants

Threat ofsubstitute products

Bargaining powerof suppliers

Bargaining powerof buyers

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Competitive StructureCompetitive Structure

Three types of competitive response:Three types of competitive response: Nonresponse (or slow response)Nonresponse (or slow response) Fast responseFast response Focused responseFocused response

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Competitive StrategiesCompetitive Strategies

CostLeadership

ProductDifferentiation

Focus

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Attack StrategiesAttack Strategies

Attacker DefenderFrontal attack

Flank attack

Encirclement attack

Bypass attack

GuerillaGuerillawarfarewarfare