Chapter 4:

Evaluating Opportunities in the Changing Marketing Environment

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Chapter 4 Objectives
When you finish this chapter, you should
1. Know the variables that shape the environment of marketing strategy planning. 2. Understand why company objectives are important in guiding marketing strategy planning. 3. See how the resources of a firm affect the search for opportunities. 4. Know how the different kinds of competitive situations affect strategy planning.
4-2

5. Understand how the economic and technological environment can affect strategy planning. 6. Know why you might be sent to prison if you ignore the political and legal environment. 7. Understand how to screen and evaluate marketing strategy opportunities. 8. Understand the important new terms.
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

The Importance of Objectives

Provide Guidelines

Setting Company Objectives

Be Explicit

Coordinate Effort

Lead to Marketing Objectives

4-3
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

A Hierarchy of Objectives
Company Objectives

Production Objectives

Finance Objectives

Marketing Objectives

HR Objectives

R&D Objectives

Product Objectives

Place Objectives

Promotion Objectives

Price Objectives

Personal Selling Objectives

Exhibit 4-1
4-4

Mass Selling Objectives

Sales Promotion Objectives

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Limits on Opportunity Search

????? ????? ????? ????? ?????

4-5

Financial Strength

Producing Capability and Flexibility

Marketing Strengths

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

The Competitive Environment

Kinds of Markets

Competitor Analysis Key Concepts in the Competitive Environment

Competitive Rivals

Competitive Barriers

Information on Competitors
4-6
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

The Economic and Technological Environment

Global Economy Rapid Change

Key Economic Forces

Interest Rates
4-7
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

The Impact of Technology

Technology is the application of science to convert and economys resources to output Technology impacts marketing both through opportunities for new products and new ways (processes) for handling marketing functions
Example: consider the Internet

Products: software for computer users

Process: selling from a web site
4-8
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

The Political and Legal Environment

Nationalism

Consumerism

Characteristics of the Political Environment

Regional Groupings
4-9
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Some Important U.S. Federal Regulatory Agencies

Agencies
Federal Trade Commission (FTC)
Food and Drug Administration (FDA)

Responsibilities
Enforces laws and develops guidelines regarding unfair business practices
Enforces laws and develops regulations to prevent distribution and sale of hazardous consumer products

Consumer Product Safety Commission (CPSC)

Federal Communications Commission (FCC) Environmental Protection Agency (EPA) Office of Consumer Affairs (OCA)

Enforces Consumer Product Safety Act

Regulates interstate wire, radio, and television Develops and enforces environmental protection standards Handles consumer complaints

Exhibit 4-4
4-10
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

The Cultural and Social Environment

Time Poverty

Economic Power

Career Opportunity

Cultural Trend: The Changing Roles of Women

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

4-11

Sales and Cost Curves of Two Strategies

Product A Sales

Total cost

In this graphic, a too-narrow focus on the first years results might cause the marketing manager to abandon this product as too costly.

Dollars 0 1

Years

Exhibit 4-6
4-12
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Sales and Cost Curves of Two Strategies

Product B

In this graphic, a too-narrow focus on the first years results might cause the marketing manager to adopt the product prematurely, since its performance in year one is misleading.

Sales Total cost

Years

Exhibit 4-6
4-13
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Sales and Cost Curves of Two Strategies

Product A
Sales

Product B
Sales Total cost

Dollars

Total cost

Years

Years

Seen together, it is easy to see that Product A offers a vastly better overall return than does Product B
Exhibit 4-6
4-14
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Evaluating Opportunities
Industry Attractiveness
High High Medium Low

Business Strength

Medium

No Growth
Low Borderline Growth

Exhibit 4-7
4-15
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Continuum of Environmental Sensitivity

Insensitive Industrial products Basic commodity-type consumer products

Sensitive Consumer products that are linked to cultural variables

Exhibit 4-8
4-16
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Key Terms
Mission Statement Competitive Environment Competitor Analysis Competitive Rivals Competitive Barriers Economic and Technological Environment Technology Nationalism NAFTA Consumerism Cultural and Social Environment Strategic Business Unit (SBU) Portfolio Management

4-17

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill