2 THE MARKETING ENVIRONMENT & THE SWOT ANALYSIS

Marketing environment consist of forces external and internal to the organization that
affect marketing management’s ability to develop and maintain a successful
transaction with its target customers.

Activity 1

Explain some of the effects of the following on the marketing environment.

a. Use of computers at home and in business

b. Increasing demand for leisure activities
c. Health concerns on clothing and food
d. Growing number of senior citizens

2.1 ENVIRONMENT MONITORING

Environmental monitoring is a two steps process—environment scanning and

environment analysis

 Environmental scanning—collecting information about forces in the marketing

environment through observations, surveys, secondary sources, marketing
research

 Environmental analysis—assessing and interpreting the information obtained

through environmental scanning.

Aim: identifying strengths, weaknesses, opportunities and threats

Activity 2

a. In the context of the growing number of hypermarkets in the Mauritian

environment, what, according to you, are the threats and opportunities for
supermarkets?

b. What can supermarkets do to remain in business?

2.2 THE INTERNAL AND EXTERNAL ENVIRONMENT

The internal environment is concerned with the internal forces within the organisation

The external environment is concerned with everything that happens outside the
organisation

1
The external environment consists of the Macroenvironment & Microenvironment

The Macroenvironment consists of the following main forces:

1. Socio-Cultural Factors
2. Legal & Regulatory
3. Economic Forces
4. Political Forces
5. Technological Factors

6. Natural Factors

2.2.1 Socio-Cultural Factors

Socio-Cultural factors are the dynamics of society. Marketing managers have

to take into consideration the way the society has changed, is changing or will
change. Examples

 Ageing population/consumers
 More single adults
 European countries , birth rate decreasing
 Alternative life style
 Cultural values
 Health consciousness

2.2.2 Legal & Regulatory forces

 Laws having a negative influence on the marketing of the products or in

its operation
 Pro-competition regulation

 Fair trading act

 Price fixing, cartel arrangements
 Unfair prices

 Consumer Protection Institutions

 Watchdogs on behalf the customers—ICP (Institute for Consumer

Protection), ACIM (Association des Consommateurs de L’ile Maurice)

1.1.1Economic Forces

 Level of income
 Purchaing power
 Level of employment

2
  Economic cycle stages
 Prosperity
 Recession
 Depression
 Recovery

2.2.4 Political Forces

 Government can bring laws to control prices

 Levy taxes on certain goods
 Liberalise imports

2.2.5 Technological Forces

 The impact of technology in the business we are in

2.2.6 Natural/Physical factors

 Manufacturing products which are environment friendly

 Production processes should not harm the environment
 Adopt the societal marketing concept

2.3 MICROENVIRONMENT

1. Direct and indirect competition

2. Influence of suppliers
3. Influence of customers

2.3.1 Direct and Indirect Competition

 Direct Competition

 Price Competition—where organizations compete on price reductions,

discounts etc.

 Non-Price Competition—where organizations stress level of service,

facilities

 Indirect Competition

2.3.2 Influence of Suppliers

2.3.3 Influence of Customers

3
Activity 3

Explain briefly how customers and suppliers can influence marketing decisions.

2.4 SWOT ANALYSIS

SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is a

management technique used to clarify an organisation’s current situation. SWOT
is a popular tool, well recognized and easy to understand; typically shown in a
four-cell matrix.

Internal Factors External Factors

1.2 Strengths 1.3 Opportunities

What are we best at? What changes in the external environment can we exploit?
Positive What intellectual property do we own? What weaknesses in our competitors can we attack?
Factors What specific skills does the workforce have? What new technology might become available to us?
What financial resources do we have? What new markets might be opening up to us?
What connections and alliances do we have?

1.4 Weaknesses 1.5 Threats

What are we worst at doing?
Negative Is our technological property outdated?
Factors What training does our workforce lack?
What is our financial position?
What connection or alliance should we have,
but don't?
What might our competitors be able to do to hurt us?
What new legislation might damage our interests?
What social changes might threaten us?
How will the economic cycle affect us?

2.5 IMPORTANCE OF CARRYING SWOT ANALYSIS

 It helps identifying strengths, weaknesses, opportunities and threats, thus

enabling conversion of the weaknesses into strengths and threats into
opportunities.

 Identification of the strengths can then be used to capitalize upon opportunities

4
 Strengths Weaknesses

Opportunities Threats

Figure 1: The SWOT Framework

Source: Strategic Marketing Management
(The Chartered Institute of Marketing)

 It gives a summary of the current situation

 It helps in marketing planning
 SWOT is a useful tool as it promotes active thought and discussion and
encourages marketers to look at every aspect of the business
 It is easy to use and understand and as such makes a good communication tool
within the company
 What else?

2.6 CRITICISMS OF SWOT ANALYSIS

 SWOT analysis is essentially subjective: One company’s old production

equipment (Weakness) may be another’s traditional production methods
(Strength).

 New technology can be seen either as an opportunity or a threat

2.7 OTHER KEY ISSUES

 Many companies analyses strengths and weaknesses without sufficient

attention being paid to market perceptions.

 Detailed attention MUST be paid to the organisations strengths and

weaknesses as perceived by customers and competitors.

5
 E.g. An organization is large and long established—Strengths

This may be seen by customers as indicators of an organization that is

inflexible, old fashioned, lacking innovation and overly bureaucratic

Important: look at the strengths and weaknesses from the market’s point of
view

 SWOT analysis carried by business organizations is at times too blend—not

sufficiently focused. There should be a detailed definition of the area that is
being evaluated

2.8. MARKETING STRATEGIES

2.8.1 Porter’s Generic Strategies

 Cost leadership

Maintain low cost of operation (Southwest Airlines US, Cash and Carry UK)

Innovation (Samsung, Emtel)

 Differentiation
Quality/Service (Qatar Airways)

Virgin Atlantics do not compete on price; they offer better comforts—seat

back videos, an upgraded business class, on-board manicures and massages,
and curbside check-in

Differentiate the company’s offering from that of competitors

 Focus

It is about focusing on a specific product-market niche (Porche, Ferrari)

2.8.2 Intensive Strategies (Ansoff’s Matrix)

 Ansoff’s Matrix
Ansoff has worked from two axes
a. The markets of the company, current and new ones
b. The products of the company, current and new ones

Ansoff Matrix—Market Penetration Strategy, Market Development Strategy,

Product Development Strategy, Diversification Strategy

6
 MARKETS
Existing New
Markets Markets

Existing Market Market

Products Penetration Development
PRODUCTS Strategy Strategy

New Product Diversification

Products Development Strategy
Strategy
Ansoff’s Product/Market Expansion Grid

Goals of different strategies

a. Market Penetration Strategy
 To Increase market share in the existing markets
 To induce trial purchase

b. Market Development Strategy

 To increase geographical coverage (new geographic markets)
 Orange and Emtel launching their services on Rodrigues
 MTML, India launching its services in Mauritius
 Air Mauritius adding new routes on its flights—Chengdu (China), Vienna
(Austria)

c. Product Development Strategy

 Introduce new products
 Considerably improved products for better quality, performance, environment
friendly
E.g. Toyota developing hybrid automobiles running on electricity and
gasoline

d. Diversification Strategy—the introduction of new products unrelated to the

firm’s exiting technology, products or markets.
 New products for new markets
Ex-BAI investment in the health care industry—Apollo Hospital
DCDM Consulting Ltd—organisation of chartered accountants and business
consultants. It has also diversified in the educational sector—The Charles
Telfair Institute

Note: Risky, new knowledge and new competency are required to adopt a
diversification strategy

7
 Conglomerate diversification—
Examples:
IBL group of companies—winners supermarkets, domestic appliances, Mauritian
Eagle Insurance.
Currimjee Group of companies—Telecommunication industry, manufacturing
industry, Tourism and Hospitality Development, Insurance etc...

2.9. CASE STUDY 1: Portland Promotional Products Ltd (PPPL) 2011

Established in the late 2000, PPPL specialises in the manufacture and

supply of business and advertising gifts and employs a total of 30 people.
The company’s proud boast is that it supplies promotional products ‘from a
few pence to the limit of your imagination’. These products, which
amongst other items include pens, key rings and desk accessories, are
printed with the client’s name and designed as giveaways to customers.
The company gives lots of emphasis on design and high aesthetic looks of
its end products

The business and promotional gifts market has become increasingly

competitive over the past few years partly as the result of buyers becoming
more demanding in their purchasing patterns, and partly because the
number of companies within the industry has increased dramatically; the
barriers to enter in this industry have been relatively low.

Having experienced a decade of sales and profit growth, PPPL’s

management was concerned to find that the sales performance in 2009 was
static, and that in 2010 it declined. This was despite an apparent general
increase in demand within the industry as a whole. More worryingly,
profits had by the end of 2010 virtually disappeared. At the same time
average order size and level of repeat buying had both declined. Moreover,
the very few times the company has launched innovative products, sales
were below than expected.

With no sign that the next 12 months would see an improvement, a local
market research agency was commissioned to conduct what PPPL’s
Managing Director referred to as ‘a bit of image research’ in order to find
out why the company’s performance in its market was so disappointing.
Preliminary findings suggested that there is nothing distinctive about the
company and its products but level of awareness of the company amongst
buyers of business and advertising gifts is high.

8
 PPPL’s Directors are, despite the poor sales performance, seemingly
surprised by these findings and were inclined to dismiss them. They are of
the opinion that while adopting relationship marketing to secure repeat
purchase, along with a more aggressive advertising campaign, will
significantly increase sales. It is generally admitted that the company was
less aggressive in the market for the past few years.

Questions

As a marketing analyst recently appointed, reporting to the Marketing

Manager of PPPL, you have been requested to:

i. Carry out a SWOT analysis and to critically analyse the case

2.10 CASE STUDY 2: NEW DIRECTIONS PLC (DECEMBER 1992)

New Directions is a high-street fashion chain which was founded in the late
1950’s. After 20 years of slow and generally unspectacular growth, a new
Managing Director, Thomas Oakley, was appointed in 1978. Under his
very different and aggressively entrepreneurial management style, the
company underwent a decade of explosive growth. Many of the old staff
left during this period and a far younger team was recruited. The new staff
were given considerable operating freedom and high salaries, but were
expected to achieve performance levels well above the industry average.
By 1988, the company had 400 stores and had become one of the major
players in the young (15-25), C1/C2, male and female fashion sectors.
Their reputation in the city was that of an ambitious, design-oriented
company led by an unconventional, abrasive and maverick figure who
inspired considerable loyalty among his employees.

At the beginning of 1987 the company was bought by a large and cash-rich
conglomerate whose financial performance over the preceding decade had
proved to be consistently strong. Despite this, the group’s senior
management was viewed by the city as being generally staid and
unimaginative. The group overall was viewed as having a strong financial
orientation with an emphasis upon systems and control. Strategy at the
group level was perceived as being risk aversive.

New Directions’ Managing Director and small senior management team

quickly found that operating within a group in which they were accountable
to the group’s main board constrained their entrepreneurial style and

9
traditional freedom. Not only were they faced with the need to make out a
strong written case for anything other than a minor change in strategy but,
as they saw it, major restrictions were placed on their ability to capitalize
upon short-term opportunities. Profits were remitted to the centre and each
division’s MD was then required on an annual basis to bid for sums for
capital expenditure.

After two years in succession in which his plans for development were
rejected by the main board, Oakley resigned. At the heart of the
disagreement was his belief that New Directions needed to move up the
quality scale and both up and down the age scale. The demographic
changes taking place would, he argued, lead to a reduction of at least 20
percent in the size of the company’s traditional target market over the next
few years. They should therefore chase the demographic shift by targeting
the 30-40 years old, a sector in which annual growth of 12 percent was
being forecast. At the same time, he suggested, a new chain should be
developed that would appeal to the children’s market. ‘Children’ he said,
‘are the ultimate fashion accessory. We need to capitalize on this.’

He also pointed to the research evidence which suggested that buyers

wanted better quality, something for which New Directions had never had a
particular strong reputation. Instead, they had concentrated on developing a
strong fashion element at ‘popular’ prices. While this strategy had
undoubtedly been successful, there was now a need to begin the process of
making a series of fundamental changes. Oakley also argued for the need
for a re-think in the approach to store design. Competition from other retail
chains had become ever more aggressive during the 1980’s and evidence
existed to suggest that buyers were looking for new and more exciting
shopping experiences. An essential element in this was the retail concept,
something which had taken a significant step forward in the late 1980’s in
the repositioning and renaming of one of the company’s major competitors.
Oakley also pointed to the need to begin looking towards opportunities
overseas. ‘The British market,’ he suggested, ‘offers only limited scope for
growth. Despite several attempts to aggressively promote the products in
our existing market (British), marketing objectives set were not attained. We
need to get into some of the other European markets and particularly Spain.’
He went on to point out that the Spanish market was growing at a faster rate
than any other. Indeed, without telling the main board or getting their
agreement, he had already gone ahead with plans to begin selling into one
of the largest chains of Spanish fashion stores.

Each of these arguments was rejected by the group’s main board on the
grounds of their cost and the perceived risk.

10
Following Oakley’s resignation, the group appointed as his replacement one
of their fast-track corporate finance staff. With little direct retailing
experience, he set about re-organising the company. In doing this, he
slashed Oakley’s plans for development. Largely because of this, a
significant number of the team who had worked with Oakley and who very
largely saw themselves as his protegés left. In most cases, they were
snapped up by competitors who placed considerable value on the training
and experience they had been exposed to.

As the recession of the early 1990’s began to bite, turnover dropped. The
new MD’s almost desperate response was to pursue an aggressive price
cutting policy and to reduce overheads/cost of operations as far as possible.

The annual strategic review of 1991 (two years after Oakley’s replacement
had taken over) painted a dismal picture. Sales were down, market share
was slipping, staff were demoralized and, as a market research report
highlighted, the image of the chain in the 15-25, 25-30 and 30-40 age
groups was confused. In short, New Directions was no longer a leader or
even a serious player in the young fashion market.

QUESTIONS FOR CASE STUDY (NEW DIRECTIONS PLC)

1. Backed by evidence from the case, identify the different marketing

strategies adopted or envisaged by Oakley. Is there any other marketing
strategy relevant to the case?

2. State and justify the MOST SIGNIFICANT factor which lead to the
down fall of New Directions PLC?

11