Marketing Management: Brief edition ha 6. There has been a substantial decrease in the birth rate over the last ten years 7. In general people are liv ing longer and there are more local residents aged over fifty-five now than ever before 8. After a heated argument with the manager of a competing leisure center, the leader of a respected local scuba club is looking for a new venue 9. The local authority is considering privatizing all local leisure centers by the year 2000 2.3 Five Forces Analysis Five Forces Analysis Barga < dapted from M. E Porter, Competitive Strategy, Free Press, 1980. Five forces analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PEst analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit)rather than a single product or range of products. For example, Dell would analyze the market for Business Computers i.e. one of its SBUs Five forces looks at five key areas namely the threat of entry, the power of bi power of suppliers, the threat of substitutes, and competitive rivalry
Marketing Management: Brief edition 6 have more money to spend on leisure activities. 6. There has been a substantial decrease in the birth rate over the last ten years. 7. In general people are living longer and there are more local residents aged over fifty-five now than ever before. 8. After a heated argument with the manager of a competing leisure center, the leader of a respected local scuba club is looking for a new venue. 9. The local authority is considering privatizing all local leisure centers by the year 2000. 2.3 Five Forces Analysis Five forces analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PEST analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products. For example, Dell would analyze the market for Business Computers i.e. one of its SBUs. Five forces looks at five key areas namely the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry
Marketing Management: Brief edition 2.3.1 the threat of entry Economies of scale e.g. the benefits associated with bulk purchasi The high or low cost of entry e. g. how much will it cost for the latest Ease of access to distribution channels e.g. Do our competitors have the distribution channels sewn up? Cost advantages not related to the size of the company e. g. personal contacts or knowledge that larger companies do not own or learning curve effects Will Government action e. g. will new laws be introduced that will weaken our rtant is differentiation? e.g. The Champagne brand cannot be copied This desensitizes the influence of the environment 2.3. 2 the power of buyers This is high where there a few, large players in a market e. g. the large grocery If there are a large number of undifferentiated, small suppliers e.g. small farming businesses supplying the large grocery chains The cost of switching between suppliers is low e.g. from one fleet supplier of trucks to another 2.3.3 the power of suppliers The power of suppliers tends to be a reversal of the power of buyers Where the switching costs are high e. g. switching from one software supplier to another Power is high where the brand is powerful e.g. Cadillac, Pizza Hut, Microsoft There is a possibility of the supplier integrating forward e.g. Brewers buying Dars Customers are fragmented(not in clusters) so that they have little bargaining power e.g. Gas/Petrol stations in remote places
Marketing Management: Brief edition 7 2.3.1 the threat of entry • Economies of scale e.g. the benefits associated with bulk purchasing. • The high or low cost of entry e.g. how much will it cost for the latest technology? • Ease of access to distribution channels e.g. Do our competitors have the distribution channels sewn up? • Cost advantages not related to the size of the company e.g. personal contacts or knowledge that larger companies do not own or learning curve effects. • Will competitors retaliate? • Government action e.g. will new laws be introduced that will weaken our competitive position? • How important is differentiation? e.g. The Champagne brand cannot be copied. This desensitizes the influence of the environment. 2.3.2 the power of buyers • This is high where there a few, large players in a market e.g. the large grocery chains. • If there are a large number of undifferentiated, small suppliers e.g. small farming businesses supplying the large grocery chains. • The cost of switching between suppliers is low e.g. from one fleet supplier of trucks to another. 2.3.3 the power of suppliers • The power of suppliers tends to be a reversal of the power of buyers. • Where the switching costs are high e.g. switching from one software supplier to another. • Power is high where the brand is powerful e.g. Cadillac, Pizza Hut, Microsoft. • There is a possibility of the supplier integrating forward e.g. Brewers buying bars. • Customers are fragmented (not in clusters) so that they have little bargaining power e.g. Gas/Petrol stations in remote places
Marketing Management: Brief edition 2.3. 4 the threat of substitutes Where there is product-for-product substitution e. g. email for fax where there is substitution of need e. g. better toothpaste reduces the need for dentist Where there is generic substitution(competing for the currency in your pocket) We could always do without e.g. cigarettes 2.3.5 competitive rivalry This is most likely to be high where entry is likely there is the threat of substitute products, and suppliers and buyers in the market attempt to control This is why it is always seen in the center of the diagram Exercise: The market for on-line education Place the following eight points onto the five forces model 1. Start up costs is very low 2. Students have access to books, videos, and paper-based distance learning packs 3. Companies, governments, and self-funding students invest huge amounts in their education 4. There are very few high quality web sites available 5. Traditional colleges and universities are adapting their products for on-line learning 6. Government legislation in the US and Europe encourages on-line learning 7. The more innovative learning sites give lesson for free just for the love of it 8. More people with access to the web every second 2. 4 PEST Analysis It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning. The organizations marketing environment is made up from 1. The internal environment e.g. staff (or internal customers), office technology
Marketing Management: Brief edition 8 2.3.4 the threat of substitutes • Where there is product-for-product substitution e.g. email for fax where there is substitution of need e.g. better toothpaste reduces the need for dentists. • Where there is generic substitution (competing for the currency in your pocket) e.g. Video suppliers compete with travel companies. • We could always do without e.g. cigarettes. 2.3.5 competitive rivalry • This is most likely to be high where entry is likely; there is the threat of substitute products, and suppliers and buyers in the market attempt to control. This is why it is always seen in the center of the diagram. Exercise: 'The market for on-line education' Place the following eight points onto the five forces model 1. Start up costs is very low 2. Students have access to books, videos, and paper-based distance learning packs 3. Companies, governments, and self-funding students invest huge amounts in their education 4. There are very few high quality web sites available. 5. Traditional colleges and universities are adapting their products for on-line learning. 6. Government legislation in the US and Europe encourages on-line learning. 7. The more innovative learning sites give lesson for free just for the love of it. 8. More people with access to the web every second. 2.4 PEST Analysis It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning. The organization's marketing environment is made up from: 1. The internal environment e.g. staff (or internal customers), office technology
Marketing Management: Brief edition wages and finance. et 2. The microenvironment e.g. our external customers, agents and distributors suppliers, our competitors, etc 3. The macro-environment e.g. Political(and legal) forces, Economic forces, Socio-cultural forces and Technological forces These are known as pest factors 2. 4.1 political factors The political arena has a huge influence upon the regulation of businesses, and the spend ing power of consumers and other businesses. You must consider issues such as 1. How stable is the political environment? 2. Will government policy influence laws that regulate or tax your business? 3. What is the government's position on marketing ethics? 4. What is the government's policy on the economy? 5. Does the government have a view on culture and religion? 6. Is the government involved in trad ing agreements such as EU, NAFTA, AsEAN, or others? 24.2 economic factors Marketers need to consider the state of a trading economy in the short and long-terms This is especially true when planning for international marketing. You need to look at I Interest rates 2. The level of inflation Employment level per capita 3. Long-term prospects for the economy Gross Domestic Product(GDP)per capita and so on 2.4.3 socio-cultural factors The social and cultural influences on busine ss vary from country to country. It is very important that such factors are considered. Factors include 1. What is the dominant religion? 2. What are attitudes to foreign products and services? 3. Does language impact upon the diffusion of products onto markets? 4 How much time do consumers have for leisure?
Marketing Management: Brief edition 9 wages and finance, etc. 2. The microenvironment e.g. our external customers, agents and distributors, suppliers, our competitors, etc. 3. The macro-environment e.g. Political (and legal) forces, Economic forces, Socio-cultural forces, and Technological forces. These are known as PEST factors. 2.4.1 political factors The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as: 1.How stable is the political environment? 2.Will government policy influence laws that regulate or tax your business? 3.What is the government's position on marketing ethics? 4. What is the government's policy on the economy? 5. Does the government have a view on culture and religion? 6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others? 2.4.2 economic factors Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at: 1. Interest rates 2. The level of inflation Employment level per capita 3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on 2.4.3 socio-cultural factors The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include: 1.What is the dominant religion? 2.What are attitudes to foreign products and services? 3.Does language impact upon the diffusion of products onto markets? 4.How much time do consumers have for leisure?
Marketing Management: Brief edition 5. What are the roles of men and women within society? 6. How long are the population living? Are the older generations wealthy? 7. Do the population have a strong/weak opinion on green issues? 2. 4. 4 technological factors Technology is vital for competitive advantage, and is a major driver of global ization Consider the following points 1. Does technology allow for products and services to be made more cheaply and to a better standard of quality? 2. Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc? 3. How is distribution changed by new technologies e. g. books via the Internet, flight kets. auctions. etc? 4. Does technology offer companies a new way to communicate with consumers e. g banners, Customer Relationship Management(CRM), etc? Malaysia.Exercise PEST Analysis aB时hanu South chire .st borneo INDONESIA INDONESIA Sourcewww.odci.go /October 2000 Consider the following OdCI information and conduct a pest analysis. Government type: constitutional monarchy note: Malaya(what is now Peninsular Malaysia) formed 31 August 1957; Federation of Malaysia(Malaya, Sabah, Sarawak, and Singapore) formed 9 July 1963(Singapore left the federation on 9 August 1965); nominally headed by the paramount ruler and a bicameral Parliament consisting of a
Marketing Management: Brief edition 10 5.What are the roles of men and women within society? 6.How long are the population living? Are the older generations wealthy? 7.Do the population have a strong/weak opinion on green issues? 2.4.4 technological factors Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points: 1. Does technology allow for products and services to be made more cheaply and to a better standard of quality? 2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc? 3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc? 4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc? Malaysia - Exercise PEST Analysis Source: www.odci.gov/ October 2000 Consider the following ODCI information and conduct a PEST analysis. Government type: constitutional monarchy note: Malaya (what is now Peninsular Malaysia) formed 31 August 1957; Federation of Malaysia (Malaya, Sabah, Sarawak, and Singapore) formed 9 July 1963 (Singapore left the federation on 9 August 1965); nominally headed by the paramount ruler and a bicameral Parliament consisting of a