Corporate strategy 06/07/2006

PRESENTATION IN CORPORATE STRATEGY

CORPORATE STRATEGY

THE CORPORTE Environment:Content

1. The company’s micro-environment• The company: employees, management, shareholders, BOD.• Suppliers• Marketing intermediaries: distributors, media, banks.• Customers• Competitors• Pressure groups• Competitors

2. The company’s macro-environment• Political • Economic• Social• Technological• Ecological• Legal •

Created by

Marketing Environment:

LEARNING OBJECTIVESBy the end of this module you should be able to:

• Explain the meaning of the business environment.

• Describe the environmental forces that affect the company’s ability to serve its customers.

• Explain how changes in the demographic and economic environments affect business decisions.

• Identify the main trends in the firm’s natural and technological environments

• Explain the key changes that occur in the political and cultural environments.

• Discuss how companies can react to the marketing environment.         • Recognise the importance of building relationships with relevant stakeholders.             • Identify and interpret the business implications of significant changes in an

organization's wider environment.            

• Understand the complex, dynamic and uncertain nature of the external environment and how it might be best managed in marketing terms.

The Corporate environment

The factors that affect business ability to developand maintain successful relationships with itstarget customers

DEFINITION

THE CORPORATE ENVIRONMENT/ BUSINESS ENVIRONMENT

THE COMPANY AND ITS

ENVIRONMENT

MICRO ENVIRONMENT

MACRO ENVIRONMENT

CompanyDepartments: e.g. Financial, marketing, HR, Production etc.•Management/Board of directors•Shareholders•Employees

Marketing IntermediariesSuppliersDistributors/transportersMediaRetailersWholesalersAgents/brokers

Financial IntermediariesBanksCredit InstitutionsBuilding SocietiesInsurance companies

Customers

Local communityPressure groups

Think-tank consultancy

Political

Economic Social DemographicSocial ClassReference groupsHealthEducationCommunicationCulture

Technological

Ecological

Legal

Unemployment, wages, Interest rates, Tax, deflation, trade cycle, exchange rates, Energy prices economic growth Per Capita Income, competitors

GDP,GNP,NI,Employment,

Inflation,

PolusionClimate changeScarcity of oil

Natural disasters

Recycling

Polusion law ,Alcohol law,consumer protection lawEmployment law, product safety law Human rights law, Business law

Internet, digital, ATM EPSS, mobile, SMS,

Government policies Rules and regulationsLaws, taxes, political stability/instability,regime in government

Law firm

Competitors:Direct and Indirect.

THE MICRO ENVIRONMENT

The forces close to the company that affect its abilityto serve its customers – the company, market channelfirms, customer markets, competitors, marketingintermediaries, supplies, which combine to make upthe firm’s value delivery system.

DEFINITION

THE MICRO ENVIRONMENT:

THE COMPANY AND ITS

ENVIRONMENT

MICRO ENVIRONMENTCompany -

Management/BODShareholdersEmployeesDepartments: Finance, human resource, marketing, production.

Marketing IntermediariesSuppliersDistributors/transportersMediaRetailersWholesalersAgents/brokers

Financial IntermediariesBanksCredit InstitutionsBuilding SocietiesInsurance companies

Customers

Local community

Pressure groups

Think-tank consultancy

Law firm

NB: Financial intermediary is still part of the marketing intermediary • Jude

•Created by

Publics

PRINCIPAL ACTORS IN THE COMPANY’S

MICRO ENVIRONMENT

Suppliers

Competitors

Customers

CompanyMarketingintermediar

ies

Publics

• Jude• Asongwe

•Created by

THE MACRO ENVIRONMENT

The larger societal forces that affect theWhole microenvironment – Political,economic, social, technological, ecologicaland legal factors

DEFINITION

THE MACRO MARKETING ENVIRONMENT

MACRO ENVIRONMENTAL FACTORS

Political

Economic

DemographicSocial ClassReference groupsHealthEducationCommunicationCulture

Technological

Ecological

Legal

Unemployment, wages, Interest rates, Tax, deflation, trade cycle, exchange rates, Energy prices economic growth Per Capita Income, competitors

GDP,GNP,NI,Employment,

Inflation,

PolusionClimate changeScarcity of oil

Natural disastersRecycling

Polusion law ,Alcohol law,consumer protection lawEmployment law, product safety law Human rights law, Business law

Internet, digital, ATM APSS, mobile, SMS,

Government policies Rules and regulationsLaws, taxes, political stability/instability,regime in government

Social

Political uncertainties/instability: E.g. in the middle east, in Iraq, Afghanistan etc. This can seriously disrupt businesses and economic activities. Business will hardly survive in such politically unstable regions and countries.

Government regulations and policies: e.g. alcohol and cigarette advertising regulations, policy on environment , prices, employment etc

•Legislative structure- they regulate businesses: This includes all the laws which the government use to control businesses. This will be fully examined under the legal environment.

•Monopoly restrictions: Government may pass laws to control monopolists for the interest of the public

• Political and government stability: The more stable a country is politically, the more investment can take place.

• Political orientations: different political parties and their different political and economic policies.

• Taxation policies: Government policy towards taxes: Some governments favour high taxes while others favour low taxes. This is true for some political parties who may favour tax increases and other may favour low taxes.

• Employment legislation: Government pass employment laws when it comes to recruitment and selection of staff, equal opportunities, contract laws, redundancy laws, wage laws etc to control businesses.

• Foreign trade regulations: Government may regulate international trade especially imports of certain kinds of products for the interest of home infant industries.

• Environmental protection legislation: Governments of most countries pass environmental protection laws to protect the environment against pollution. Pollution law is being passed by governments to curb the rate of pollution, recycling laws are being passed by some governments for the above purpose.

• Interest rate control: Government controls the rate of interest to regulate the value of a currency and to control inflation.

• Price control: Government implement price controls to protect customers from business exploitation and to regulate the economy especially during an inflationary situation. Prices for houses, electricity, gas, and other products may be controlled by the government to prevent customers from exploitation especially from the private sector as a result of competition.

• Growth of public interest groups: There is the growth of public interest groups who now are part of the government body formed to fight for the rights of the consumers and also some are fighting to protect the environment: Food standard Agency for instance is fighting to protect customers from consuming protects that may damage their health.

• Increased emphasis on ethics and socially responsible actions: There is now an increase in the emphasis on ethics and socially responsible actions by governments. Government is putting pressure on most companies to be ethically responsible and to provide goods and services under social and environmentally friendly conditions.

ANALYSIS OF THE MACRO ENVIRONMENT

ECONOMIC

Employment/unemployment: The higher the unemployment rate, the lower the demand and this has an effect on businesses.

Inflation/deflation rates: Inflation is the persistent and continuous rise in the prices of goods and services. The inflation rate affects the value of a currency and this can seriously affect demand, and will eventually affect business. For example in Zimbabwe the inflation rate is almost a 1000% and this has seriously affected demand, production and the value of the currency. It also has scared foreign investors. Therefore as a businesses, it is necessary to investigate the inflation rates of different countries because they affect the demand and production of goods and services.

ANALYSIS OF THE MACRO ENVIRONMENT

• Government economic objectives: • NI,GDP,&GNP trends• The Business /trade Cycle• BOP & BOT• Exchange rate• The impact of international trade• Interest rate• Prices• Competition• Demand• Money supplyMoney supply• Investment ratesInvestment rates• Investment levelsInvestment levels• Energy costsEnergy costs• Patterns of ownershipPatterns of ownership• Economic stability/instabilityEconomic stability/instability• Exchange rateExchange rate• Income distribution and changes in purchasing power• Changing consumer spending pattern.• Economic growth and development

ECONOMIC

Social analysis1. Demographics: population size and growth trends,

changing age structure of the population, the changing family, pressures for migration, rising number of educated people, & increasing diversity

2. Lifestyles3. Education levels4. Attitudes5. Consumerism6. Health7. Reference groups8. Culture – persistence of cultural values, shift in

secondary cultural values( people’s views of themselves, people’s view of others, peoples views of organisations, peoples view of society, people’s view of nature, people’s view of the universe)

ANALYSIS OF THE MACRO ENVIRONMENTSOCIAL

Demographic:

This is the study of the composition of a country’s population in terms of age, gender, sex, occupation.•Population•Age composition•Gender composition•Marital status and household structure•Income•Migration: Immigration & Emigration (Net migration)•Birth rate & Death rate•Fertility rate.•Trends in population•The dependency ratio

• World population• Aggregate population• Population structure• Regional distribution of population• Ethnic groups• Occupational structure• The workforce in employment: some important

trends• The changing role of women in work and society

SOCIAL • Social class• Culture• Reference groups• The family• Lifestyle• Education• Health• Communication• demographic factors such as: 1. population size and distribution 2. age distribution 3. education levels 4. income levels 5. ethnic origins 6. religious affiliations 7. Gender composition. • Jude• Asongwe

•Created by

ANALYSIS OF THE MACRO ENVIRONMENTTECHNOLOGICAL environment• New technologies : Digital, Internet.New technologies : Digital, Internet.• The importance of New technology.The importance of New technology.• CommunicationCommunication• efficiency of infrastructure, including: roads, ports, airports, rolling stock, efficiency of infrastructure, including: roads, ports, airports, rolling stock,

hospitals, education, healthcare, communication, etc. hospitals, education, healthcare, communication, etc. • industrial productivity industrial productivity • new manufacturing processes new manufacturing processes • new products and services of competitors new products and services of competitors • new products and services of supply chain partners new products and services of supply chain partners • any new technology that could impact the company any new technology that could impact the company • cost and accessibility of electrical power cost and accessibility of electrical power • Fast pace of technological changeFast pace of technological change• High research and development budgetsHigh research and development budgets• Increased regulationIncreased regulation

• Jude• Asongwe

•Created by

ANALYSIS OF THE MACRO ENVIRONMENT

ECOLOGICAL

• Jude• Asongwe

•Created by

• Scarcity of resources e.g. petrol• Over dependence on oil (petrol)• Environmental pollution• Climate change• Natural disasters e.g. earthquakes, • hurricane, Tsunami, floodsetc

ANALYSIS OF THE MACRO ENVIRONMENT

LEGAL ENVIRONMENT

• This deals with Legislation imposed by governments• The legal framework is made up of laws imposed by

government of a particular country or region to control business and economic activities. Examples of laws can be seen below;

• Fair trading laws• Laws Protecting the consumer• minimum wage laws • environmental protection laws • worker safety laws : Health and safety laws• Trade union laws • copyright and patent laws • anti- monopoly laws

• Sunday closing laws • municipal licences • laws that favour business investment • Equal opportunity law.• Marketing laws: advertising laws.• Immigration laws• Production and consumption laws : e.g.

law on alcohol production and consumption, laws controlling or even banning smoking in public places.

The aim of imposing laws is to control business and economic activities, to protect customers from business exploitation, to prevent unfair trading, to protect the health of customers, to encourage the production, distribution and consumption of goods under social and environmentally friendly conditions.

The above laws have Implications to the marketer.• As a marketer, an entrepreneur or a business; it is

wise enough to always • Monitor these various legislations and respect them

because of far reaching• Consequences which may arise as a result of total

neglect.

DIFFERENCES IN CULTURE

• What is culture?

Culture is sum total of belief, rituals, custom, tradition, norms etc that characterizes a

particular group of people, society, or organization.

• The sum total of learned beliefs, values

and custom that serve to direct

customer behaviour in a particular country

market• Jude• Asongwe

•Created by

Social environment

Differences in culture:• There exist cultural differences in different

continents across the world with respect to the following:

1. Language: People speak different languages e.g. English, Chinese, Malaysian, Russian, Polish etc

2. Norms3. Values4. Rituals5. Custom and tradition also differs in different

culture:In Most Muslim countries, Pork, alcohol and otherproducts are not consumed because of their cultural

andreligious beliefs.

What may be consumed in one part of the world, may not be consumed in another.

What may be preferred by one country, may not be preferred by another.

The business language used in one country may be different from another

The way people behave in one country may be different from another

The kind of cars people prefer may vary in different countries Values, norms and rituals vary across the world. Therefore, it is vital for marketers and businesses to study the

customer market and examine the cultural composition and differences and try to produce goods to suit different cultures.

Green MarketingThis is concerned with the marketing of productsunder social and environmentally friendlyconditions:

Ethics• Ethics (from the Ancient Greek ἠθικός or "ethikos" meaning

"Theory of living") is one of the five major branches of philosophy, which attempts to understand the nature of morality; to distinguish that which is right from that which is wrong. The Western tradition of ethics is sometimes called moral philosophy. Ethics in plain words means studying and analyzing right from wrong; good from bad.

• Business ethics is a form of applied ethics that examines ethical rules and principles within a commercial context; the various moral or ethical problems that can arise in a business setting; and any special duties or obligations that apply to persons who are engaged in commerce.” Generally speaking, business ethics is a normative discipline, whereby particular ethical standards are advocated and then applied. It makes specific judgements about what is right or wrong, which is to say, it makes claims about what ought to be done or what ought not to be done. While there are some exceptions, business ethicists are usually less concerned with the foundations of ethics (metaethics), or with justifying the most basic ethical principles, and are more concerned with practical problems and applications, and any specific duties that might apply to business relationships.

Marketing ethics

• Marketing ethics deals with the moral principles which marketers should follow: These principles determine what is right from what is wrong.

• Marketing which goes beyond the mere provision of information about (and access to) a product may seek to manipulate our values and behaviour. To some extent society regards this as acceptable, but where is the ethical line to be drawn?

• Pricing: price fixing, price discrimination, price skimming. • Anti-competitive practices: these include but go beyond pricing

tactics to cover issues such as manipulation of loyalty and supply chains. See: anti-competitive practices, antitrust law.

• Specific marketing strategies: greenwash, bait and switch, shill, viral marketing, spam (electronic), pyramid scheme, planned obsolescence.

• Content of advertisements: attack ads, subliminal messages, sex in advertising.

• Children and marketing: marketing in schools. • Black markets, grey markets.

Advertising regulations and ethics.

• Advertising regulation refers to the laws and rules defining the ways in which products can be advertised in a particular region. Rules can define a wide number of different aspects, such as placement, timing, and content. In the United States, false advertising and health-related ads are regulated the most. Many communities have their own rules, particularly for outdoor advertising. Sweden prohibits domestic advertising that targets children. Some European countries don’t allow sponsorship of children’s programs, no advertisement can be aimed at children under the age of twelve, and there can be no advertisements five minutes before or after a children’s program is aired. In the United Kingdom advertising of tobacco on television, billboards or at sporting events is banned.

• It is also prohibited to advertise cars on the basis of how fast they can go and the relationship which the event has with the sport seen as a healthy pursuit, unlike smoking. Similarly alcohol advertisers in the United Kingdom are not allowed to discuss in a campaign the relative benefits of drinking, in most instances therefore choosing to focus around the brand image and associative benefits instead of those aligned with consumption. There are many regulations throughout Europe as well. In many non-Western countries, a wide-variety of linguistic (Bhatia 2000, pp. 217-218) and non-linguistic strategies (e.g. religion; Bhatia 2000, pp 280-282) are used to mock and undermine regulations.

• Two of the most highly regulated forms of advertising are tobacco advertising and alcohol advertising.

• In the UK, advertising regulation is governed by the Advertising Standards Authority. In the United States, the Federal Trade Commission is the highest authority on the subject. States and more local political divisions can have their own laws on the subject.

The quality Movement

Quality circus:This is an association of workers in a particular organisation who decide to unite in

orderto find solutions to the quality problems facing the organisation. This is very

important inorgananistions because these groups play a key role in helping the company sort

outsome of its problems:

Quality and customers• Quality is very vital in so far as the market is concerned. Poor

quality products can affect the health of customers. • It is the responsibility of businesses to make sure the products

there are producing is safe for customers.• Customers are becoming more and more concerned with what

they eat. --- there have been an increase in the amount of quality conscious customers because of health reasons.

• The government is also doing much work to protect the health of consumers by sensitising people about the dangers of junk food.

• The Food standards agency, the International organisation for standardisation (ISO) and other non-governmental organisations and pressure groups are putting pressure on companies to produce healthy products for their customers.

• Businesses should aim at delivering quality for their customers.

• The higher the quality the higher the price and the lower the quality the lower the price therefore businesses should try to provide value for money for its customers. To provide high quality also cost money so many businesses cover up the cost involved in proving quality by charging high price. The price charge for products should be reasonable enough and should also be affordable.

• Most fast food outlets and restaurants e.g. Nnados, KFC, Burger King, McDonalds etc are now seeing the importance of providing healthy options such as salads and vegetables because of the growing concern about the health related risk of consuming junk food. The government is also putting pressure on caterers to provide healthy options for customers.

• Therefore the production and distribution of goods should be done under a health environment. If the input is unhealthy, then the output will likely be unhealthy.

Corporate strategy 06/07/2006

Key terms and definitionsMarketing environment: The actors and forces that affect marketing

management’s ability to develop and maintain successful relationships with its target customers.

Cultural Environment: Institutions and other forces that affect society’s basic values, perceptions, preferences and behaviours.

Political Environment: Laws, government agencies and pressure groups that influence and limit various organisations and individuals in a given society.

Technological Environment: Forces that create new technologies, creating new product and market opportunities:

Natural / Ecological environment: Natural resources that are needed as inputs by marketers or that are affected by marketing activities.

Economic Environment: Factors that affect consumer buying power and spending patterns.

Demography: The study of human populations in terms of size, density, location, age, sex, race, occupation and other statistics.

Public: Any group that has an actual or potential interest in or impact on an organisation’s ability to achieve its objectives.

KEY TERMS AND DEFINITIONSSuppliers: Firms and individuals that provide the resources needed by

the company and its competitors to produce goods and services.Marketing Intermediaries: Firms that help the company to promote,

sell and distribute its goods to final buyers; they include physical distribution firms, marketing –service agencies and financial intermediaries.

Resellers – The individuals and organisations that buy goods and services to resell at a profit

Physical distribution firms – Warehouse, transportation, and other firms that help a company to stock and move goods from their point of origin to their destinations.

Marketing services agencies – Marketing research firms, advertising agencies, media firms, marketing consulting firms and other service providers that help a company to target and promote its products to the right markets.

Financial Intermediaries – Banks, credit companies, insurance companies and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.

QUESTIONS FOR REVISION

1. Explain how the corporate environmental factors affects today’s businesses?

2. How is the study of ethics important to a business?3. How can the corporate environment affect businesses and

how can businesses affect the corporate environment?