Chapter 2: The Marketing Environment

Marketing environment

environment in which companies operate

consists of external, exogenous forces (eg. climate change) = uncontrollable factors

The business and its marketing environment

Components of the marketing environment

Components of the (macro-)marketing environment

5 exogenous forces in the marketing environment (Forces + impact + how to cope with it)

Forces

1. Economic forces (Eg. inflation, interest rate…)

2. Structural forces

3. Political forces (Eg. government, changes in leadership…)

4. Social forces (Eg. cultural trends and patterns in society)

5. Technological forces (Eg. innovation, scientific breakthroughs…)

Impact on

• individual firms

• competitors

• whole industry

How to cope with it

• Keep informed

• Act collectively

• Develop contingency plans

• Beware of the Boiled Frog Syndrome

Boiled frog syndrome

Literally

• You place a frog directly in a pot of boiling water → the frog will scramble out

• You place a frog in room temperature water → the frog will stay in the pot → you heat up the water → the frog enjoys it → you heat up the water further → the frog becomes groggier and is unable to climb out of the pot → the frog stays in the pot and boils to death

Message

• Everybody notices revolutionary changes in the environment

• Slow gradual changes are the most dangerous ones

• Conclusion: you have to constantly monitor changes in the environment and also slow and gradual changes because they are the most dangerous oones

Forces: Economic forces

• Performance of the economy = facts

  • gross national product

  • economic growth vs recession

  • family income

  • un(employment) rate

  • business investments

• Consumer confidence = perception of the facts

  • Disposable income

  • inflation rate

  • media information

  • internal and national events

• Impact of economic forces

  • “good” vs “bad” times

Forces: Structural forces

• market structure of an industry

  • Eg. farms → slaughter house → process → retail → consumer

• vertical and horizontal integration

• Market entry barriers

Market entry barriers (Porter): attractive industry vs unattractive industry

unattractive industry	attractive industry
Low entry barriers (Eg. a lot of newcomers can start something similar because of the low entry barriers) Suppliers and buyers have strong positions Strong threats from substitute products intense rivalry among competitors → Low profit potential	High entry barriers Suppliers and buyers have weak positions Few threats from substitute products intense rivalry among competitors → High profit potential
	Monopoly = market where 1 single company has developped a unique product

Forces: Political forces

• Domestic politics

  • Consumerism: safe, informed, choice, voice

  • Legal/Regulatory environment

    • Consumer protection regulations

    • Competition regulation

    • Information regulations

• International politics

  • situations of cooperation ←> situations of conflict

Forces: Social forces

• Social values / factors

  • Environmental consciousness, Animal welfare

  • Health consciousness, Quality orientation

  • Involvement in labour force

  • Less time for leisure/ But interest in quality time

  • Religion

• Demographics

  • Age structure: « double-ageing » evolution

  • Population growth or decline

  • Emigration / Immigration

Forces: Technological forces

• At different stages in the agro-food chain

  • Fertilizer and seeds (innovation)

    • Biotechnology - Genetic modification

  • Harvest and processing technologies

  • Packaging and preservation technologies

  • New methods of sales and distribution

    • Direct sales

    • Internet sales

• Consumer acceptance? To be monitored

SWOT-analysis (components and how to rank them)

• Mainly descriptive analysis

• Strategic planning tool

Opportunities

• Outside the company, external factors/forces

• Offers new perspectives, chances

Threats

• Outside the company, external factors/forces

• Can cause problems, losses

Strengths

• Inside the company, internal factors

• Enable the company to

  • Benefit from opportunities

  • Cope with threats

Weaknesses

• Inside the company, internal factors

• Prevent the company to

  • Benefit from opportunities

  • Cope with threats

Strengths/ Weaknesses: Examples

1) Marketing

• Company image and reputation

• Market share

• Own sales force

• Own distribution channels

• Research & Development

2) Financial

• Cost of capital

• Financial stability

• Profitability

3) Manufacturing

• Facilities, technical and manufacturing skills

• Economies of scale

• Own work force

4) Organisatorial

• Visionary leadership

• Managing capability

• Flexibility

• Dedicated workers

• Entrepreneurial orientation

SWOT-grid

	O (eg. international networking)	T (eg. language)
S (eg. you’re easy with learning languages)	Does this strength enable us to benefit from this opportunity? To what extent Strategic choice = ATTACK	Does this strength enable us to cope with this threat? To what extent? Strategic choice = DEFEND
W (eg. sociability)	Does this weakness prevent us to benefit from this opportunity? To what extent? Strategic choice = CLEAN UP	Does this weakness prevent us to cope with this threat? To what extent? Strategic choice = CRISIS

How to implement new strategy

SWOT examples:

You are the marketing manager of a start-up company that produces plant-based meat alternatives with protein from microalgae. Your case looks as follows:

(1) You do not produce microalgae yourself but source microalgae protein from a multinational food ingredient supplier.

(2) The production of microalgae and the extraction of protein thereof are expensive processes.

(3) The plant-based meat alternatives that you produce have a lower carbon footprint than animal-based meat.

(4) An increasing number of consumers care about the environment and make environmentally conscious decisions.

(5) Food price inflation is still high and it is expected to remain high throughout 2024.

(6) As a start-up company, your company has a substantial amount of outstanding bank loans.

(7) You managed to bring together and employ a team of food scientists and technologists with excellent skills.

(8) Due to climate change, the environmental conditions in the area where you are located are becoming more suitable for microalgae production.

1) Threat

2) Threat

3) Strength

4) Opportunity

5) Threat

6) Weakness

7) Strength

8) Opportunity

More explanation → see ppt