Scribd
Upload
27 views5 pages

CHAPTER 2 LESSON 1 (Analyzing The Environment)

The document outlines the importance of understanding the marketing environment before launching a product, emphasizing the need for information on competitors, market behaviors, and regulations. It distinguishes between the internal environment, which includes the company's resources and structure, and the competitive environment, which focuses on industry rivals and substitutes, referencing Michael Porter's 5 Forces Model. Additionally, it introduces the macro environment and suggests using PEST Analysis to categorize its complexities into political, economic, social, and technological factors.

Uploaded by

EYYO
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
27 views5 pages

CHAPTER 2 LESSON 1 (Analyzing The Environment)

The document outlines the importance of understanding the marketing environment before launching a product, emphasizing the need for information on competitors, market behaviors, and regulations. It distinguishes between the internal environment, which includes the company's resources and structure, and the competitive environment, which focuses on industry rivals and substitutes, referencing Michael Porter's 5 Forces Model. Additionally, it introduces the macro environment and suggests using PEST Analysis to categorize its complexities into political, economic, social, and technological factors.

Uploaded by

EYYO
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

ANALYZING THE ENVIRONMENT

OBJECTIVES:
At the end of this topic, the student will:
1. Know the different layers of the marketing environment, and
2. Be able to perform elementary environmental analysis.

THE MARKETING ENVIRONMENT

The elements that make up the world around you

You cannot just launch a product without first knowing anything


about the world at large. In fact, you need quite a bit of information
before you can even begin to roll out your product idea: information
about competitors’’ products and strategies the market and its
behaviors, government regulations regarding your proposed
product, alternative options, economic trends, distributors and their
behaviors, and more.
The internal environment refers to the business itself: what are
you selling, how your organization is set up, what your
organization’s strengths and weakness are, what your resources
happen to be, what your company’s core values and mission are,
and essentially anything about your company that matters.
Here is a checklist of things that you may want to asses in your
company’s internal environment:

 Company Cash Flow


 Organizational Structure
 Assets and other Resources
 Strategic Alliance
 Product and Services
The competitive environment, on the other hand, refers to the
immediate industry in which company is doing business. If you
are running a bank, for instance, then your competitive
environment may consists of all the competing bank branches in
your territory and possibly even substitutes such as pawnshops
and even sketchy loan sharks who lend money to small
entrepreneurs in your area.
Here is a checklist of what to look out for in your competitive
environment:
 Competitors
 Competing Products and Services
 Substitutes
Micheal Porter’s classic 5 Forces Model (Porter 1979) is a
popularly used framework for understanding the competitive
structure of an industry.

The above model implies that it is not just rivalry from


competitors that threaten a firm’s existence, but even suppliers,
buyers, new players, and product substitutes. In fact, Porter notes
that the buyers and suppliers can be potential entrants themselves

The risk also faces by a firm due to its competitors is the most
obvious form of operational risk. Competitors can spend sums of
money to steal market share from the firm or even alter the
market’s perceptions about the firm’s products.

A firm also faces risks from new entrants possibly joining the
industry, especially if the attractive growth prospects.

A firm also faces risk due to substitutes that threaten to steal


market share from its industry.
The firm’s own suppliers can pose a threat as well if the firm is too
dependent on these suppliers and supplier knows it. The suppliers
can decide to increase their prices or even become potential
entrants to industry as well.

If the firm is too dependent on its buyers, the buyers may sense
this. They might band together and threaten the firm though
additional demands.

The internal and the competitive environment form what is often


referred to as the micro environment of a business? But looming
even larger would be the macro environment, which is composed of
environment variables that are typically beyond the control of any
organization.
There are far too many elements in the macro environment. That is
why there are memories which can help break down this complexity
into more digestible parts. One of the most popular mnemonic is
PEST Analysis.
 POLITICAL
 ECONOMIC
 SOCIAL
 TECHNOLOGICAL

You might also like