Marketing Management Study Notes

The Situational Analysis

A situational analysis includes a thorough examination of internal

and external factors affecting a business. It creates an overview of
the organization that will lead to a better understanding of the
factors that will influence its future. It includes the company
analysis, market analysis, environmental analysis, and competitive
analysis.
Tool to understand how the company relates to the environment
which it operates in.1
Identify own strength and weaknesses as they relate to external
opportunities and threats.
Select a position in that environment based on known factors and is
the basis of a marketing plan
Understanding the companys position with respect to its market
environment and marketing operations

Environmental Analysis
The marketing environment consists of external forces that directly or
indirectly influence an organizations acquisition of inputs and creation of
outputs. Every organization is vulnerable to changes in the marketing
environment. Assessment of the surrounding environment may improve a
companys strategy to better cope with threats created by changes in the
environment, and to also spot possible opportunities. Monitoring the
environment is therefore crucial to an organizations survival and to the
long-term achievement of its goals.2

An effective way to monitor the environment includes environmental

scanning and environmental analysis. Environmental scanning is the
process of collecting information about forces in the marketing
environment. Environmental analysis is the process of assessing and
interpret the information gathered through the scanning. Evaluation of the
data should reveal threats and opportunities linked to environmental
changes, and thus prove strategic marketing planning.3

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2 Marketing principles (41)

3 Marketing principles (41)

PEST & PESTLE Analysis
A PEST analysis is used to identify the external forces affecting an
organisation/making up its Macro Environment. This is a simple analysis of
an organisations Political, Economical, Social and Technological
environment. A PEST analysis incorporating legal and environmental
factors is called a PESTLE analysis.

Political
The first element of a PEST analysis is a study of political factors. Political
factors influence organisations in many ways. Political factors can create
advantages and opportunities for organisations. Conversely they can
place obligations and duties on organisations. Political factors include the
following types of instrument:

Legislation such as the minimum wage or anti discrimination laws.

Voluntary codes and practices

Market regulations

Trade agreements, tariffs or restrictions

Tax levies and tax breaks

Type of government regime e.g. communist, democratic,

dictatorship

Non conformance with legislative obligations can lead to sanctions such as

fines, adverse publicity and imprisonment. Ineffective voluntary codes and
practices will often lead to governments introducing legislation to regulate
the activities covered by the codes and practices.

Economical
The second element of a PEST analysis in involves a study of economic
factors. All businesses are affected by national and global economic
factors. National (and global) interest rates and fiscal policy is set around
economic conditions. The climate of the economy dictates how
consumers, suppliers and other organisational stakeholders such as
suppliers and creditors behave within society. An economy undergoing
recession will have high unemployment, low spending power and low
stakeholder confidence. Conversely a booming or growing economy will
have low unemployment, high spending power and high stakeholder
confidence.

A successful organisation will respond to economic conditions and

stakeholder behaviour. Furthermore organisations will need to review the
impact economic conditions are having on their competitors and respond
accordingly. In the current business world, organisations are affected by
economies throughout the world and not just the countries in which they
are based or operate from. For example: a global credit crunch originating
in the USA contributed towards the credit crunch in the UK in
2007/08.Cheaper labour in developing countries affects the
competitiveness of products from developed countries. An increase in
interest rates in the USA will affect the share price of UK stocks or adverse
weather conditions in India may affect the price of tea bought in an
English caf.

A truly global player has to be aware of economic conditions across all

borders and needs to ensure that it employs strategies that protect and
promote its business through economic conditions throughout the world.

o Economic forces influence both the marketers and the buyers

decisions and activities
o Buying power is the resources, such as money, goods or
services , that can be traded in exchange. The buying power
depends on the economic conditions and the size of the
resources.
o Disposable income: after tax income used for spending or
saving
o Discreationary income: disposable income available for
spending and saving after an individual has purchased the
basic necessities of food clothing and shelter
o Willingness to spend: an inclination to buy because of
expected satisfaction from a product, influenced by the ability
to buy and numerous psycological and social factors.
Economic uncertainty recession
Economic prosperity
Busniess cycle

Social
The third aspect of PEST focuses its attention on forces within society such
as family, friends, colleagues, neighbours and the media. Social forces
affect our attitudes, interests and opinions. These forces shape who we
are as people, the way we behave and ultimately what we purchase. For
example within the UK people's attitudes are changing towards their diet
and health. As a result the UK is seeing an increase in the number of
people joining fitness clubs and a massive growth for the demand of
organic food. Products such as Fitbit attempt to deal with society's
concern, about lack of exercise.

Population changes also have a direct impact on organisations. Changes in

the structure of a population will affect the supply and demand of goods
and services within an economy. Falling birth rates will result in decreased
demand and greater competition as the number of consumers fall.
Conversely an increase in the global population and world food shortage
predictions are currently leading to calls for greater investment in food
production. Due to food shortages African countries such as Uganda are
reconsidered their rejection of genetically modified foods.

In summary organisations must be able to offer products and services that

aim to complement and benefit people's lifestyle and behaviour. If
organisations do not respond to changes in society they will lose market
share and demand for their products and services.

Technological
Unsurprisingly the fourth element of PEST is technology, as you are
probably aware technological advances have greatly changed the manner
in which businesses operate. Organisations use technology in many ways,
they have

1. Technology infrastructure such as the internet and other information

exchange systems including the telephone and conference calling.

2. Technology systems incorporating a multitude of software which

help them manage their business.

3. Technology hardware such as mobile phones, computers,

photocopiers and fax machines which transmit and record
information.

Technology has created a society which expects instant results. This

technological revolution has increased the rate at which information is
exchanged between stakeholders. A faster exchange of information can
benefit businesses as they are able to react quickly to changes within
their operating environment. However an ability to react quickly also
creates extra pressure as businesses are expected to deliver on their
promises within ever decreasing time scales. For example the Internet is
having a profound impact on the marketing mix strategy of organisations.
Consumers can shop 24 hours a day from where ever they want and
however they want via smart phones, laptops and tablets.

The pace of technological change is so fast that the average life of a

computer chip is approximately 6 months. Technology is utilised by all age
groups, children are exposed to technology from birth and a new
generation of technology savvy pensioners known as silver surfers have
emerged. Technology will continue to evolve and impact consumer habits
and expectations, organisations that ignore this will hinder their success.

PESTLE
A PEST analysis is sometimes expanded to incorporate legal and
environmental factors; this is known as a pestle analysis. There are many
statutes books containing company law as almost every aspect of an
organisations operation is controlled through legislation from treatment of
employees through to health and safety. Legal factors are important as
organisations have to work within legislative frameworks. Legislation can
hinder business by placing onerous obligations on organisations. On the
other hand legislation, can create market conditions that benefit business.

Market analysis

total market size

growth
size
trends
customer segments
customer needs
buyer behaviour
intermediaries

Company analysis

goals and objectives

market share
service quality
positioning
operations and resources
marketing mix strategies
Hr policies and procedures
Financial status
Competitive analysis

Any organisation that wishes to succeed in their market, needs to analyse

their competitor's strategies. Competitor analysis is a vital part of the
marketing planning process. A strong competitor can hinder business
success, even lead to business failure. Competitor analysis helps firms to
anticipate their competitor's actions and exploit competitor's weaknesses.
It also helps firms to identify their unique selling points, so that these can
be promoted in marketing campaigns. Competitor analysis is an ongoing
task, as successful competitors will continuously develop their marketing
strategies, in response to changes in the market place.

Major competitors + their goals and objectives

marketplace behaviour
market share
growth
service quality
positioning
operations and resources
marketing mix and strategies
indirect competitors
o Gain an understanding of the substance and nature of the
competition within the market.4
o Identify where power lies in the market, who can influence
market trends, how the market is likely to develop, where to
concentrate when seeking new market opportunities and the
basic platforms from which it is possible to compete.
The threat of new entrants
Substitute products or services
The bargaining power of bargaining power of suppliers
The degree of market competition

What Competitor Information Shold be Collated?5

1. Who Are Your Competitors?

The firm should decide on which competitors are likely to impact on

their business and which businesses the firm will be able to compete
with. This will depend on the size of the business and whether it is a
national or local business. For example a local shop will not be able
to compete with a national supermarket but they may need to take

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 a "mini" branch of a supermarket chain into account if it is located
near to the shop. There are a number of models which can be used
to identify competitors including Porters Five Forces model.

2. What Is The Size And Dominance Of Your Competitors Within The

Market?

An understanding of the market share each competitor has, will help

you identify their size and dominance. It will also reveal whether
there is market share available for your business.

3. What Customer Base Do Competitors Have?

This will help you identify if a firm is a competitor. If a firm is aimed

at a different customer base to yours they may not be a competitor.
However if their success is due to their customer base should your
firm reconsider your customer base? And would you like to compete
directly with the competitor?

4. What Are Market Positioning Strategies of Competitors?

This question is about the perceptions customers have about your

competitor's products. Are they quality products? cheap products or
luxury products? Think about how each competitor's positioning
strategy is the same or different to yours?

5. What Objectives Does Each Competitor Have?

This includes future growth plans and company values. For example
are they about to embark on an aggressive growth programme? Or
do they believe in recycling and saving the planet. To gather
information about competitor objectives and plans look at their
websites, company reports, press releases and marketing material.
It is important to analyse competitor objectives so that you get an
idea of their values and likely strategy.

6. What Are Their Strengths And Weaknesses Of Each Competitor?

A SWOT analysis may help you to identify and record the answers to
this question. Each competitor will have strengths that give them a
competitive advantage. They are also likely to have weaknesses
that may give you or other competitors an advantage. Once you
know a competitor's strengths you can think about how to minimise
their impact on your business. Conversely if a competitor has a
weakness your marketing plan should look at how to exploit it and
benefit your firm.