CHAPTER 2- Marketing Environmwnt & SWOT Analysis

MARKETING

ENVIRONMENT AND

SWOT ANALYSIS

The operations of a company can never be isolated from its environment. An ENVIRONMENT consists

of forces that are expected to affect company operations.

A firm has two sets of environment: the MIRCOENVIRONMENT

and MACROENVIRONMENT

THE MICROENVIRONMENT

• The microenvironment is also called the internal environment.

• It includes forces affecting operations that are within the control of the company, that is, the company is able to manipulate these forces towards the firm's advantage.

The internal environment consists of 5 equally powerful forces:

• I. MANAGEMENT- This pertains to the organizational setup, including goals and objectives, organizational structure, managerial composition, company philosophy, vision-mission, policies, programs, plans, strategies, tactics, etc.

• II. MARKETING- This includes the marketing program of the company covering the basic marketing mix- product, price, place, and promotion. - Specific items falling under this force are product quality, packaging, pricing strategies, intermediaries used, advertising efforts, public relations, company image and reputation, distribution channels, "green marketing" campaigns, warehousing, discounts and other sales promotion tools, market segmentation and a lot more.

• III. FINANCE- This includes the company's resources. - Items covered under this force are profitability indices, financial performance, balance sheet and income statement results, assets, liabilities, net worth, investments, capital expenditures, and operating expenses, among others.

• IV. PRODUCTION AND OPERATIONS

- This includes all aspects of manufacturing(pertaining to industries) or operations (for commercial and service enterprises).

• V. HUMAN RESOURCES- This aspect pertains to the people in the organization. - Specifically, it includes motivation, compensation, training and development, promotion, recruitment, selection, placement, hiring policies and procedures, fringe benefits, performance appraisal, grievance-handling mechanisms, management-labor relations, etc.

THE MACROENVIRONMENT

• This is also known as the external environment, consisting of the forces that are beyond a company's control.

• The marcoenvironment includes the economic, the sociocultural, the politico-legal, the technological, and the natural environment.

Economic Environment

- This environment includes such forces as balance of trade, balance of payments, foreign exchange, import-export situations, competitive situation, taxation, energy and oil prices, employment, GNP, GDP, per capita income, and other measures of economic performance.

Sociocultural Environment

- This environment pertains to people and their culture.- Examples of forces under this type of external environment are education, customs and traditions, religious affiliations, perception, cultural values, demography, ethnic and racial diversity, etc.

Politico-legal Environment

- Politico pertains to government while legal pertains to law. - This environment includes legislation regulating business, legal restrictions, elections, political stability, presidency, peace and order situation, armed forces, etc.

Technological Environment

- This refers to the advancement of science and technology and includes new inventions or discoveries, technological breakthroughs, research and development, information technology, scientific experiments, etc.

Natural Environment

- This includes typhoons, earthquakes, the El Nino, and La Nina phenomena, pollution, ozone depletion, deforestation, preservation, and extinction of animal species, etc.

• Assessing a firm's internal environment gives a company an idea of what it is doing poorly, and how it can improve its operations.

• Though the external environment cannot be manipulated, the company can prepare for external forces and eventually make these forces work to the company's competitive advantage.

The SWOT Analysis

• A very powerful tool in marketing.

• SWOT stands for Strengths, Weakness, Opportunities and Threats.

- Is something that a company is good at doing. - - It is a quality that produces a competitive advantage for the company. - A characteristic is said to be a strength if it belongs to the internal environment and is expected to affect company operations in a positive manner.

STRENGTH

- Is something that a company lacks. - It is a quality that puts the company at a disadvantage. - A quality is said to be a weakness if it belongs to the internal environment and has a detrimental effect on company operations.

WEAKNESS

- Is a factor in the external environment that is expected to work favorably towards company operations.- Improvements in the economy, high barriers to entry, high population growth rate, increase in purchasing power, stable political leadership, and strong confidence of investors are some examples of opportunities.

OPPORTUNITY

- Is a factor in the external environment that is expected to have a negative effect on company operations. - Political unrest, presence of substitute products, dumping of low-priced items from Asian neighbors, piracy, and a pending oil price hike are examples of threats.

THREAT

- It is important to note that a factor can sometimes be viewed as both a strength and a weakness.- It is also possible that a factor may work as an opportunity for one company and a threat for another.- It is not possible for a factor to be a strength and an opportunity to one company at the same time, nor it is possible for a factor to at once be a weakness and a threat to one company simultaneously.

- The real challenge of marketing, then, is to maintain (if not improve) a company's strength and find ways on how to turn weaknesses into strengths. - It is also a challenge to take advantage of opportunities with the amount of resources that a company has and to turn threats into opportunities or exhaust all possible means to be unaffected by these threats.

The Two-Part Questions for SWOT Analysis

1. Is the factor within the control of the company or is it beyond the company's control? If your answer is within, then it belongs to the internal environment. If beyond, it is part of the external environment.

2. Is the factor expected to affect company operations positively or negatively? If positively, it may be either a strength or an opportunity. If negatively, it can be a threat or a weakness.