services marketing ch.2
TRANSCRIPT
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Environment
AnalysisChapter 2
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So businesses are to be vigilant in evaluating prevailingand emerging environmental elements regularly because that is
where changes make their presence felt.
Environmental elements may be broadly classified into
External Environment -- Elements capable of affectingservices and service marketing firms from outside.
Internal Environment -- Strengths and weaknesses of
services and service providing firms.
Marketing management is concerned with harnessingopportunities and ameliorating threats; changes areconstant
in throwing open opportunities and threats
Services Marketing Management
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Principal Dimensions of Environment
1. Political and Legal Environment -- concerned with politico
- legal & regulatory factors.
2. Economic Environment -- related to wealth creation anddemandsupply pattern of services.
3. Socio-Cultural Environment -- pertains to people and their
behaviour about services and their use.
4. Technological Environment -- about level and state oftechnology used in service industries
A. External Environments
B. Competition -- Competitive forces acting on the Service.
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1. Political & Legal Environment
All nations wish to enhance their national sovereignty ; sothey frame their polity and laws to keep business under control.
So a service firm should carefully
* study the government structure
* analyse salient issues of political environment including risks
* avoid sitting in judgment on their acts and structure.
a) Government uses rules, regulations and initial licenses
required to initiate service trade.
b) How liberal the Govt. is in allowing foreign service
providers in the same field.
c) Special legislations like Green Marketing , IPR
protection, cyberlaws etc. if applicable, are to be adhered.
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2. Economic Environment
-- Economic factors of a nation influence service marketing,the most. Without purchasing power, service marketing comes
to a nought. So study ofeconomy is essential.
-- Study of Economic environment comprise of :A. Trend of nations economy
B. Economic systems followed
C. Stages of market development
D. Balance of Payment
E. Income & purchasing powerF. Population distribution and growth rate
G. Infrastructure
H. Other economic factors.
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B. Economic Systems
Based on resource allocation and market trends, economy of
nations are classified into:
* Capitalist system -- when entities of market i.e. people and
companies decide what shall be produced and consumed by
whom ; role of state remain restricted to promote competition
and ensure customer protection e.g. U.S., Japan etc.
* Socialist system -- when people and companies are free to
spend their money on what is available but what shall be
produced and made available is decided by state planners asis the case in China, former U.S.S.R., Cuba etc.
* Mixed system -- A combination of two systems as followedby most nations.
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National economic systems are classified asfree, unfree
or repressedbased on following parameters :Trade Policy
Taxation Policy
Govt. consumption of economic output
Monetary policy
Capital flows and foreign investments
Banking policy
Wage and price controls
Property rights
Rules and regulationsPrevailing black market etc.
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C. Stages of Market development
Using GNP as base, global markets are classified into four
categories :
1. LowIncome Countries
Nations with per capita GNP of less than $786 are called low
income countries. These countries constitute 37% of world
population but produce only 3% of world GNP. These
countries represent limited market.
2. Lower Middle Income Countries
[also called Less-developed countries (LDCs)]These are nations with per capita GNP between $786 to
$3125. These nations constitute 39% of world population
with only 11% of GNP. These are at early stages of
industrialisation.
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3. Upper Middle Income Countries
[also known as industrialising countries]
Per capita GNP of these nations are between $3126 to $9655.These nations comprise of 7% world population and GNP.
Level of urbanisation is high and population engaged in
agriculture is very less. Generally these nations are
accounting for rapid export-driven economic growth.
4. High Income countries [also known as advanced,
industrialised, or First World countries]
These nations have per capita GNP above $ 9655. Thesenations have 16% of world population but 80 % of world
GNP. More than 50% of these nations GNP comes from
services.
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D. Stages of Economic Development
-- Economic developmentof a nation indicates the increase in
national production that leads to increase in average percapita Gross Domestic Product (GDP)**
-------------------------------------------------------------------------------
**Gross Domestic Product (GDP) is the measure of market value
of all goods and services produced within boundaries of a nation,regardless of asset ownership.
Whereas, Gross National Product (GNP) indicates sum of GDP
with receipt from nations business operation abroad as well as
share of reinvested earnings in foreign affiliates of domestic cos.
-- Walt Rostow in 1971 indicated that economic development
of a nation is function of cost of labour, technical capability of
buyers, scale of operation, interest rate and level of productsophistication.
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-- Walt Rostowsstages of economic development are
Stage 1 : The traditional society -- Countries in this stage lack
capability of increasing productivity, lacks methods ofmodern science and technology.
Stage 2 : Preconditions for take-off -- Those nations in
process of transition to take-off are, where technology,
infrastructure etc. are getting infused.
Stage 3 : Take-off-- Next, nations take growth as normal
condition. Physical and business infrastructures
start growing in steps.
Stage 4: Drive to maturity -- Sustained progress and economyof scale operation is achieved with modern technology.
Stage 5 : Age of high mass consumption -- Per capita real
income rises with mass consumption of durable goods.
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E. Balance of Payments
-- Balance of payment of a nation is an important cause andeffect of activities of the nation.
F. Income and Purchasing Power
-- For most products including services, successfulmarketing needs sufficient level of income of customers.
-- Per capita GNP (in US dollars) is generally used for
comparing incomes i.e. purchasing power of customers in
various nations.
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G. Populationits Distribution and Growth
People have inhabited the earth for over 2.5 million years.During Christs time, the population was much small about 300
million (approx. onefourth of Indias present population)
Every individual of population is a potential customer ; so
it is essential to learn their growth, distribution and othercharacteristics for efficient marketing.
For low-priced products and services, population and its
distribution is a more important than income.
In 2000, top 10 populous nations had 59% of world
population. And their total GNP was 52% of world GNP. Present
population of world is about 7.2 trillion and is projected to rise to
8.5 trillion by 2020.
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H. Infrastructure
-- Presence of suitable infrastructure facilitate efficient
service marketing operations.
-- Infrastructure are facilities that serve and support
activities of a number industries and businesses e.g., power
supply, roads, banks, transport companies etc.
-- Quality of a nations infrastructure pave its way for
economic development through trade, commerce and industry.
-- Infrastructures may be classified into :
* Physical Infrastructure - like roads, railways, seaports,telecom networks, hospitals, power generation systems, etc.
* Business Infrastructure - like banks, insurance
companies, stock exchanges, advertising agencies, market
research firms, advisers, consultants etc.
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I. Other Economic Factors
-- The manner in which economic policies are planned and
implemented decide following factors* Inflation Rate
* Exchange Rate
* Nature and trend of foreign investments
* Role of govt. in trade and commerce* Influence of trade unions etc.
-- In an integrated manner these factors and their comparison
with other comparable nations indicate the state of economicgrowth of the country.
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3. Socio-Cultural Environment
-- Politico-legal and economic factors may indicate ability ofcustomers to buy.
-- But actual act of buying (or not) depends upon Social and
cultural environment factors.
-- So to understand consumer behaviour , service marketershould study the culture of host countries.
Culture
Culture is integrated sum oflearned behavioural traits
shared by members of a society.
In simple terms, Cultureis the behaviour pattern of people of
a country that they have learned from other members of society.
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Fundamentals of Culture
1. Culture is learned not inborn.
2. Culture depends upon environment and not heredity.3. Culture is the approved and shared behaviour of a group of
people called Society.
MajorElements of CultureA. Material Culture and Technology
-- These are related to the way, a society organises its
economic activities of generating wealth.
-- The way members of society work and how effectivelythey work is determined by technology and material culture.
-- Material culture of societies using different technologies
are different; e.g. culture of societies usingBicycles and
automobiles as mode of transport are obviously different.
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B. Language
-- Language is the mirror of culture. It reflects nature and
value system of the culture.-- Hindi as spoken by Amitabh Bachchan, Amir Khan
(Thanda matlab Coca-Cola), Laloo Yadav, Mulayam Singh
Yadav depict their culture (i.e. pattern of their behaviour).
BIMARU states divorced English long back; today it is
detected as a major cause of their backwardness in industry
and business; Hindi has rich legacy of literature but profile ofindustry and business is different.
-- Knowledge and fluent conversation in English is
considered to be a majorcompetitive advantage in most of
countries including India.
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-- In Congo (Zaire), they have four important tribal languages for
communication among themselves, but they have retained
French, the language of their erstwhile rulers as NationalLanguage and they are prospering fast.
-- Americans not only retained the language of their rulers, but
in two centuries adapted the language in a way that world today
calls it American English.-- Indications are that by Twenty-second century world culture
shall adopt Chinese and Hinglish languages as it has adopted
English, French, German or American English.
C. Aesthetics -- Ideas, principles that depict beauty and good
taste as in arts, music, drama, dances, architecture, colour-
selection, literature etc. is called aesthetics.
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-- Aesthetic aspect of culture have immense application in
Service marketing in
* Product or any creative designing* Selection of brand and corporate names
* Selection of colours
* Choosing right words for expressing ideas etc.
D. Education
-- It is the process of transmitting skills, ideas, attitudes, culture
and traditions of a society beside training in different
disciplines (and not just cramming some books and notes topass examinations).
-- Nature ofrighteducation is to help in harnessing different
skills for success in service, other trade and commerce.
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E. Religion
-- Dimension that provides insight into human behaviour is
Religion.
-- So service marketing, PR policies and strategies should be in
consonance with local religious sensitivities.
F. Attitudes and Values
-- Our thinking about what is right , appropriate or desirable
are conditioned by our attitudes and concept of values.
-- According to Douglas North, People act on the basis oftheir ideologies and religious views. So a study of these is
essential.
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G. Social Organisations
-- Social organisation refers to the manner in which people
relate to other people. It differs from society to society.-- There may be special interest groups of caste, creed, religion,
hobby, profession etc. which may have influence in different
kinds of decision making.
-- Four social organisations cast strongest influence on people
* Family -- Members of family and extended family extend
safety and security .* School -- Education influences culture considerably.
* Religion -- It influences value system and also consumerbehaviour.* Media -- With increase in literacy rate and radios & TV ,
influence of this institution is very much on rise more than
their parents and family members.
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H. Dimensions of Culture
-- Hofstede and Bond have identified dimensions ofcultural as
1. Individualism vs. Collectivism
-- In many nations, prominence is observed in culture and
goal achievement of individuals and immediate families; it is
termed as individualistic culture e.g. in India, Bangladesh,
Pakistan etc.-- Whereas, some cultures emphasise upongroups goalover
that of individuals and people think that they belong to a
group. It is calledcollective culture e.g. in Japan.
2. Power Distance -- Distribution of power in many
societies is considered to be uneven, it is called PowerDistance.
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-- Nations like India, Japan, Mexico, Brazil etc. are high
power- distance societies where people accept that superior
shall not consider subordinates as equal.-- Thus, subordinates tend to prefer autocratic or paternalistic
behaviour from leaders.
-- Whereas, in low power distance societies like US,
Germany, Canada etc. superiors and subordinates have a sense
of equality among them.
-- So subordinate may approach superior for consultation
easily in these nations.
3. Gender of Society-- Rigidity in role played by members of
society decide its gender.
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-- Those nations where men are more assertive, competitive,
ambitious and achievement-oriented whereas, women are
modest, tender and concerned with life are termed asmasculine culture.
-- Whereas, in Feminine cultures both men and women are
found to be modest, tender and concerned with quality of
life.
-- In masculine cultures like Japan, Germany, UK, US,
Mexico etc. employees live in order to work. But in
feminine cultures like in Sweden, Norway, Denmark,
Thailand etc. employees work in order to live.
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4. Uncertainty Avoidance
-- The extent of tolerance of uncertainty and ambiguity by a
society indicates its uncertainty avoidance culture.
-- Generally, rules and norms are not very clear-cut or rigid in
low uncertainty avoidance societies like India, Hong Kong,
Singapore, Great Britain etc.. These nations are more open and
willing to explore anything new and foreign.
-- Whereas, high uncertainty avoidance cultures are more
formal in rules and regulations and less tolerant to deviant ideas
and behaviour e.g. Japan, Portugal, Greece etc.
5. Cultural Homogeneity
-- It indicates the manner in which communications and
commitments are viewed in the nation.
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-- Inhigh context societies, implicit communications are
viewed as important i.e. verbal commitments are given
greater sanctity as in China, Korea or Japan.
-- Whereas, in low context societies, communications are
more explicit i.e. they rely more on written ones like
Germany, Switzerland, Scandinavia etc.
6. Cultural Homogeneity
-- Nations where people share same beliefs, speak same
language, practice same religion are said to have
Homophilous Culture as in Japan, Korea and Scandinaviancountries
-- Countries having appreciable difference in belief, religion
and language are calledHeterophilous Culture, as exists in
India, China etc.
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IV. Technological Environment-- Todays trade, commerce and industries are
technology-driven. So marketers should study :* Type of technology used in services, manufacture and
commerce
* State of technological development in the country and
abroad* Extent of adaptation of technology
* Technology policy of nation
* Labour content of technologies used
* Prevalence of technology and economy of scale.
-- Schumacher introduced the concept of combining
traditional technology with elements of modern technology
calledAppropriate technology. Developing nations are fast
adapting capital intensive modern technologies for labour
intensive purposes.
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Technology in Service Offering & Delivery
Technology has substantially aided Service industry of
the country. Imagine the case of payment of bills, withdrawl of
cash from banks or retrieving information from obscure journals.
Today, newer services are designed where these aspects oflife have become more livable. Further, these aspects of service
are poised to be more customer friendly through innovations.
Process of service delivery has also been made morecustomer-friendly, convenient and cost-efficient through BPOand IT-enabled services.
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B. Competition
In addition to environmental factors, Service marketer has to
identify and manage Competition-forces acting upon theService and Service-providing company.
Major Competition-forces are :
Direct CompetitionForce of competition of one hotelupon another in the town.
Alternative CompetitionForce exerted by different type
of service-providers e.g., videoconferencing with airlines.
Bargaining power of customers
Bargaining power of suppliers
Threats paused by new entrants
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Internal Environment
Internal attributes like strength, weakness etc. of
other service-providers keep on changing dynamically
these are to be actively managed along following lines :
1. Industry
* Extent of Service differentiation* Economies of scale
* Strategy followed etc.
2. Operation & Operating Environment
* Customer and Suppliers profile
* Quality of available human resources3. Value-chain Analysis
* Primary activities
* Secondary activities