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Analysing the marketing environment

Session 3
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Environment analysis

 A firm gathers all relevant information from the environment.

 Analyses it in details in order to extract the required insights.

 Analyses both the mega environment as well as the environment that

is specific to the business concerned.

Strategic Planning
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Environment analysis
 Mega/macro environment : Firm studies the technological, socio-
cultural, demographic, economic, political and legal environments.

 Environment specific to the firm: Firm studies the consumers and

factors relating to demand; industry and competition, supplier related
factors, distribution factors etc.

Strategic Planning
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Environment analysis
 Mega/macro environment

• Technology environment- crucial to understand for the following

three reasons:

 Rapid change is taking place in technologies.

 Something new is coming up all the time.

 Breakthroughs are happening in several spheres of technology.

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Environment analysis
 Mega/macro environment

• Spheres where “Breakthroughs” in technology are happening need to

be watched.

 Firms desiring high growth need to harness technology.

 The rapidly changing technological environment provides challenges

and opportunities for firms.
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Environment analysis
 Mega/macro environment

• Examples of spheres where ‘Breakthroughs’ in technology are

happening:

 Information and Communication technologies Revolution:

 Mobile as the platform for TV- live TV on mobile is now a reality.

People are comfortable watching live TV and movies on demand
while on the go e.g. customers of Tata Teleservices high-speed
wireless broadband service ‘Photon Plus’ subscribe to live TV feed
and watch recorded shows and movies. Multiple channels available
under different subscription models.
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Environment analysis
 Mega/macro environment

• Examples of spheres where ‘Breakthroughs’ in technology are happening:

 Information and Communication technologies Revolution:

 Mobile as the platform for internet access- mobile search traffic has
increased by leaps and bounds in recent years.

 In India, the number of people owning mobiles is significantly higher than

the ones owning laptops- thus it is imperative that the share of mobile
phone usage for internet search will increase. The challenge is to make it
easier for people to access internet using mobile- example is Google
transcoder which reduce the time required to load a page.
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Environment analysis
 Mega/macro environment

• Examples of spheres where ‘Breakthroughs’ in technology are

happening:

 Information and Communication technologies Revolution:

 Mobile poised to rule social networking – with the increasing

affordability of smartphones, within the next few years majority of
phones will be mobile computers combining real time data, social
network and applications.

 Mobile banking, M-commerce and pay by Mobile is now a reality.

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Environment analysis
 Mega/macro environment

• Examples of spheres where ‘Breakthroughs’ in technology are

happening:

 Explosion in Software Applications is another Information and

Communication Technology Revolution.

 Handset vendors feel that applications will build customer loyalty to a

brand.

 Mobile operators believe that as voice rates drop, operators owning

application stores will stand out as market differentiators and will
boost data usage and hence non-voice revenues.
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Environment analysis
 Mega/macro environment

• Examples of spheres where ‘Breakthroughs’ in technology are

happening:

 Explosion in Software Applications is another Information and

Communication Technology Revolution.

 For software vendors, mobile applications are an important source of

revenue from both users ( paid and subscription) as well as in-
application advertising.

 For mobile users. app makes it easier for consumers to access

information through fewer clicks and at lower cost.
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Environment analysis
 Mega/macro environment

• Examples of spheres where ‘Breakthroughs’ in technology are happening:

 Explosion in Software Applications is another Information and

Communication Technology Revolution.

• Mobile companies like Airtel, Aircel, Reliance Com, Vodafone have

launched their own app stores from where mobile users with data
connectivity can download software applications for a range of services.

• This is to replicate the tremendous success of Apple’s iTunes app store.

Since the opening of the iTunes app store, I phone and I Pod touch users
have recorded billions of application downloads till date.
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Environment analysis
 Mega/macro environment

• Economic Environment:

 Indian car industry

 Increase in fuel prices.

 Increase in duties and taxes.

 Increase in interest rates and costlier loans.

 Increase in EMIs.

 Weakening Indian Rupee

 Sluggish market condition for cars.

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Environment analysis

 Mega/macro environment

• Economic Environment:

 Indian car industry

 Weaker Indian rupee

 Big ticket exports

 Maruti Suzuki, Hyundai, Nissan- high volume orders from Europe,

Latin America, West Asia.
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Environment analysis
 Mega/macro environment

• Economic Environment:

 Infosys

 In recent times, its financials took a substantial beating compared to

the projections the company made..

 Could be accounted to the global slowdown.

 Infosys derives a relatively high proportion of revenue from the

BFSI vertical ( banking, financial services and insurance).
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Environment analysis
 Mega/macro environment

• Economic Environment:

 Infosys

 BFSI is the first to be affected during financial slowdowns.

 Additionally, Infosys was dependent on Europe to a considerable

extent and Europe was hit badly by the economic slowdown.

 Cancellation/deferment of projects hit Infosys badly.

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Environment analysis

 Mega/macro environment

• Political Environment:

 Is a major component of the mega- environment.

 Economic environment is often a by-product of the political

environment since economic policies of nation depend on political
setup.

 Political environment has several aspects.

 Form of government, stability of government is an essential requisite

of economic growth.
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Environment analysis

 Mega/macro environment

• Political Environment:

 Elements like economic and social orientation of the main political

parties, nature and strength of religious, cultural and social
organisations, role of media, influence of pressure groups/lobbies of
various kinds are all parts of political environment.
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Environment analysis

 Mega/macro environment

• Political Environment in India:

 Country settling firmly down to democratic government.

 Settled political stability.

 First time in many years that a single party has won majority.

 Political consensus of sort has emerged on the general need for

reforms though in certain issues, the reform consensus has ben
eluding.
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Environment analysis

 Mega/macro environment

• Legal Environment:

 Businesses have to operate within the framework of the prevailing

legal environment.

 In recent times, the world over, legislation regulating businesses has

been steadily increasing, India being no exception.

 Over the last few decades, a great deal of legislation concerning

business and industry has entered the statute books.
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Environment analysis

 Mega/macro environment

• Legal Environment:

 Business legislations can be classified into the following:

 Corporate affairs

 Tax laws

 Competition fairness

 Consumer protection.
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Environment analysis

 Mega/macro environment

• Legal Environment:

 Business legislations can be classified into the following:

 Employee protection.

 Sectoral protection.

 Environmental protection.

 Regulations on products, packaging, prices.

 Protecting national firms against the onslaught of foreign firms.

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Environment analysis

 Mega/macro environment

• Regulatory Environment:

 Most countries have many regulatory bodies backed by legislations.

 In India SEBI, Competition Comission, IRDA, TRAI are some

examples of regulatory bodies.

 A business firm must have the required knowledge about the overall
regulatory environment.
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Environment analysis

 Mega/macro environment

• Regulatory Environment:

 Today capital is globalized and there are competing demands for it.

 Usually, capital likes flowing into countries with a legal and

regulatory environment that facilitates the functioning of business.

 Complex legal and regulatory environment drives capital away.

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Environment analysis

 Mega/macro environment

• Regulatory Environment:

 Legal and capital environment determines competitiveness of a

country in terms of attracting capitals.

 Recently, India and China have both laid out red carpets for investors
and are constantly aiming at providing them with a comfortable legal
and regulatory environment.
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Environment analysis

 Mega/macro environment

• Natural Environment:

 Business firms depend on natural resources.

 The extent to which the country/region under reference is endowed

with these resources impacts the functioning of the firm.

 Firms are concerned about the availability and cost of of raw

materials, energy required for their business.
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Environment analysis

 Mega/macro environment

• Natural Environment:

 Business firms are concerned with ecology.

 In modern times, all societies are concerned about issues like

environmental pollution, protection of wild life and ocean wealth.

 Governments are becoming active bargainers in environmental

issues.

 Business firms need to know to what extent the environmental factors

affect their business.
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Environment analysis

 Mega/macro environment

• Natural Environment:

 Green marketing and concerns for ecology are related.

 Modern consumers are willing to purchase green products even by

paying a higher price if they have high purchasing power.

 In order to grow, businesses need to reduce the adverse impacts of

their practices on society.
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Environment analysis

 Mega/macro environment

• Natural Environment:

 Modern firms adopt green practices with the aim of protecting,

sustaining and enhancing the human resources that will be needed in
future, even while meeting the needs of enterprises and stakeholders.

 Green and sustainability management is associated with reduction of

carbon emissions, thus minimizing the use of energy by improving
processes and efficiency.
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Environment analysis

 Mega/macro environment

• Natural Environment:

 Volkswagen has integrated green practices as a part of their

manufacturing process- the Volkswagen cars have Brake Energy
Recuperation such that every time the car brakes, the kinetic energy is
converted into electric energy and stored in the battery, which means
just the act of braking recharges the battery.

 Whenever you stop at a red light, the engine is turned off automatically
when you take your foot off the clutch. Thus, when you depress the
clutch, the engine restarts automatically, thus saving precious fuel.
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Environment analysis

 Mega/macro environment

• Socio Cultural Environment:

 Culture is the combined result of factors like religion, language,

education, upbringing.

 Social class is determined by income, occupation, location of

residence.

 Each class has its own lifestyle, consumption habits and buying
behavior.