CIM REVISION CARDS Marketing Environment 04/05 PROFESSIONAL CERTIFICATE IN MARKETING 2004 –2005 SYLLABUS Key concepts for revision ● ● ● Relevant! Succinct! Compact! The Chartered Institute of Marketing Helping you to pass your CIM exam CIM REVISION CARDS Marketing Environment Mike Oldroyd AMSTERDAM l BOSTON PARIS l SAN DIEGO l HEIDELBERG SAN FRANCISCO l l l LONDON l SINGAPORE l NEW YORK SYDNEY l l OXFORD TOKYO Elsevier Butterworth-Heinemann Linacre House, Jordan Hill, Oxford OX2 8DP 30, Corporate Drive, Burlington, MA 01803 First published 2004 Copyright ß 2004, Elsevier Ltd All rights reserved No part of this publication may be reproduced in any material form (including photocopying or storing in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, England W1T 4LP Applications for the copyright holder’s written permission to reproduce any part of this publication should be addressed to the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone: (+44) 1865 843830, fax: (+44) 1865 853333, e-mail: permissions@elsevier.co.uk You may also complete your request on-line via the Elseiver homepage (http://www.elsevier.com), by selecting ‘Customer Support’ and then ‘Obtaining Permissions’ British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalogue record for this book is available from the Library of Congress ISBN 07506 62832 For information on all Elsevier Butterworth-Heinemann publications visit our website at http://books.elsevier.com Printed and bound in Great Britain TABLE OF CONTENTS Preface iv The nature of the organization The microenvironment 18 Analysis of the competitive environment 30 The macroenvironment 44 The demographic social and cultural environment 55 The economic and international environment 68 The political and legislative environment 82 The technical and information environment 94 Environmental information systems 107 PREFACE Welcome to the CIM Revision Cards from Elsevier/Butterworth–Heinemann We hope you will find these useful when coming to revise for your CIM exam The cards are designed to be used in conjunction with the CIM Coursebooks from Elsevier/Butterworth–Heinemann, and have been written specifically with revision in mind They also serve as invaluable reviews of the complete modules, perfect for those studying via the assignment route n Learning outcomes at the start of each chapter identify the main points n Key topics are summarised, helping you commit the information to memory quickly and easily n Examination and revision tips are provided to give extra guidance when preparing for the exam n Key diagrams are featured to aid the learning process n The compact size ensures the cards are easily transportable, so you can revise any time, anywhere To get the most of your revision cards, try to look over them as frequently as you can when taking your CIM course When read alongside the Coursebook they serve as the ideal companion to the main text Good luck – we wish you every success with your CIM qualification! THE NATURE OF THE ORGANIZATION Unit LEARNING OUTCOMES KEY REVISION POINTS å Appreciation of the marketing environment å Classification and comparison of organizations å Understanding mission statements and the significance of objectives å Recognition of business as an open system å Identification of drivers for change å The interrelated and ever-changing nature of a dynamic environment å Strengths and weaknesses of various forms of organization å Differing missions and objectives and the forces that influence them å Organizations as systems within the wider environment å Flexible response to contingencies with marketing orientation as a success factor Syllabus reference: 1.1–1.9 š Study past questions on each main area and plan out brief key word answers š Plan/answer time-frame is 30–35 minutes MARKETING ENVIRONMENT THE NATURE OF THE ORGANIZATION } Marketing Environment (1.1) CIM defines marketing as: } The management process which identifies, anticipates and supplies customer requirements efficiently and profitably ~ n Marketer must understand external environment n Recognize implications of changes n Must take into account changing tastes, preferences and spending power, as well as competitor offerings n Identify impact of broader environment on markets A main aim of the syllabus is: To explain the nature of the marketing environment and its relevance for organizations and marketing practice The firm is a creature of its environment Its resources, its income, its problems, its opportunities and its very survival are generated and conditioned by the environment (Ansoff) ~ – Organizations operate in an environment of constraints, threats and opportunties – Need to monitor for and understand significant changes – Organizations must adapt to survive – The environment as the source of key inputs, revenues, pressures, competitors, allies: relationships are critical – Organizations possess differing strengths/ weaknesses – Survival demands marketing strategy and planning š Types of Organization (1.2) Public sector organizations n n n n n n n n n State-provided goods or services Driven by government objectives Socially desirable goals, e.g equity Supply public goods to all, e.g defence Ensure supply of merit goods, e.g education/ health Funded by taxation, fees or government borrowing Recent privatizations/deregulation (encourage marketing orientation) Shift from direct providers to service facilitators Public/private partnerships – marry strengths of each Private sector organizations Marketable output and exports Privately owned and controlled Businesses compete to satisfy consumer wants Profit drives effective and efficient use of scarce resources n Includes global multinationals n Shareholder concerns may override social concerns n n n n Voluntary sector organizations • Normally non-profit-making • Rely on voluntary contributions and dedicated staff • Compete for funds/public attention for causes MARKETING ENVIRONMENT THE NATURE OF THE ORGANIZATION Business Classifications (1.2) Advantages Disadvantages Sole Trader – characteristics – Maximum privacy – Unlimited liability for n n n n n n Simple to form Individual owns and controls Unincorporated No separate legal existence Self-employed Individual is the business – Minimum formalities – Favourable taxes – Least cost to form – Focused/motivated – Close to customers – Close to employees – Flexible/responsive debts – Specialized and high risk – Jack of all trades/ narrow view – Burden plus lack of continuity – Hard work and long hours – A lot of competition – Lack of management skills Partnerships – characteristics n n n n n n n Unincorporated Two or more partners By agreement/law Legal maximum, e.g 20 Jointly liable for debt Share profits/losses ‘Limited partnership’ but one is liable Advantages Disadvantages – Raise more funds – Unlimited liability – Pool expertise – No legal identity – Can specialize more – Potential disagreements – Suits professions – Frozen investment – No company tax – Dissolve on partner’s – Privacy high death – Vulnerable if malpractice MARKETING ENVIRONMENT Resistance to Change MARKETING CHANGE Technical change has always been resisted: å Identifying and anticipating the likely impacts of the proposed change å Timely communication with affected stakeholders å Consultation over proposed change å Securing the participation of those affected in driving the change process å Promoting ‘change’ as the norm – Double-edged by its nature: has goods and bads – Process innovations ¼ short-term unemployment – Product innovations ¼ long-term growth – Internal resistance from managers/employees – External resistance of customers, suppliers, etc Causes of resistance include: l Force of habit l Social and economic needs threatened l Culture of complacency l Legislation, custom and practice l Pressure from interest groups l Negative experience of past change MARKETING ENVIRONMENT 105 THE TECHNICAL AND INFORMATION ENVIRONMENT 106 Hints and Tips n Be as up-to-date as possible n Read through Unit of the Marketing Environment Coursebook n Candidates from developing economies suffer weakness in this area so must work harder to make it a strength n Be aware of the ICT used by your own organization (or college) n Prepare examples that link new technology to stakeholders and to improving marketing mix effectiveness n CIM views using information communication technologies and the internet as one of the ‘key skills’ of the complete marketer n Has been the subject of a full mini case but part question more likely n Questions might be linked with Unit n Prepare plans or outline answers for each of the specimen exam questions and get it checked by a tutor or past student n Go to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance ENVIRONMENTAL INFORMATION SYSTEMS Unit LEARNING OUTCOMES KEY REVISION POINTS å Understand the importance of information and the concept of a marketing information system å Appreciate the role of market research å Explain the techniques for forecasting future demand å Assess the importance of information systems in meeting the challenge of change å The distinction between marketing data and marketing information å The contribution of market research to the development of strategy and planning å The role and importance of information systems to marketing decision-making å Information technologies that enhance marketing effectiveness å Methods of analysing environmental information Syllabus reference: 4.1, 4.2, 4.3, 4.6, 4.7 MARKETING ENVIRONMENT 107 ENVIRONMENTAL INFORMATION SYSTEMS n Lifeblood of the organization What is ‘quality’ information? n Control over information provides power over competitors and the environment – – – – – – – – n Informed and effective decisions need information n Information is data that is collected, ordered, processed and analysed in time for relevant decisions to be taken n An input in SWOT analysis for strategy purposes n Fundamental to control by comparing actual to planned achievement of objectives right sources sufficent for purpose timely cross-referenced communicated clearly available to appropriate decision-makers cost-effective concise, avoiding overload 108 Smart Marketers l Recognize the importance of information l Realize that knowledge is power l Understand the need to manage information l Develop the necessary information skills such as networking and the effective use of ICT l Build a network of business environment contacts l Use quality information to make better decisions l Form strategies to cope with information explosion A personal information system – Daily scanning of news media – Review of trade press – Network of organizational and stakeholder contacts – Personal database – Online to central database – Electronic diary – E-mail/fax/internet connection – Mobile communications – Skill in video/teleconferencing – Ability in desktop publishing MARKETING ENVIRONMENT 109 ENVIRONMENTAL INFORMATION SYSTEMS Marketing Information System } The people, equipment and procedures to gather, sort, analyse, evaluate and distribute needed, timely and accurate information to marketing decision-makers (P Kotler) ~ 110 ‘To manage a business well is to manage its future – to manage its future is to manage information’ (Harper Jr) Marketing intelligence – distilled from stakeholders and market/competitor research Subsystems Marketing research – – – – – – – lack of secondary sources – to identify threats and marketing opportunities – monitor effectiveness of the marketing process a a a a a a sensing/monitoring system classification system processing system database and retrieval system control system communication system An Integrated Internal and External Information System MARKETING ENVIRONMENT 111 ENVIRONMENTAL INFORMATION SYSTEMS Online Information An information service that is in active and continuous communication with a central system that is frequently updated — allows the marketer to access, for example, current prices, competitor data, supplier status, economic and financial context, specific product and market information Online positives – – – – – – – – – Real time Remote access via mobile or laptop Interactive Time-saving Flexible Sales support Quality; information on tap Competitive edge Falling cost 112 Online access to the changing environment Search engines facilitate access to external databases Enables telecommuting and enriches sales and executive effectiveness in the field Must be combined with human judgement Must balance cost/avoid information overload Importance of Marketing Research } The process of collecting and analysing information in order to solve marketing problems ~ • Provides specific information not available from secondary sources • Provides quality information when it is needed Benefits of marketing research l l l l l l Organization specific Defines problems Future orientated Potential competitive edge Tailored to providing solutions Informs strategy and planning • Helps to define the customer/their future needs • Identifies opportunites and threats • Calculates market potential, assesses trends, analyses competitors and feeds in to forecasts • Prerequisite to marketing mix decisions MARKETING ENVIRONMENT 113 ENVIRONMENTAL INFORMATION SYSTEMS Forecasting: Problems Meeting the forecasting challenge } A Abandon forecasts Quantitative and qualitative estimates of the future ~ 114 – Impractical: marketing is planning n The future is essentially unknowable, yet marketing concerns anticipating needs and wants – Clear view of the future required even in day-today decisions n The longer the time horizon the greater the uncertainty, yet future planning is essential B Flexible response n Uninsurable business risk of producing in anticipation of demand – Only possible if short planning horizons n Which are the ‘right’ forecasts? When does a pattern become a trend? When are the turning points? What is the pace of change? – Aim for rapid adaptation to environment change C Improve conventional forecast – Obtain quality data input – Apply statistical methods to extrapolations – Based on past relationships/historical data Qualitative forecasts Delphi: Combined view of experts – Relies on human judgement and expertise, not statistical technique – May be functional specialists, academics or consultants – Each makes an independent forecast, then all feed back for comment and refinement – Informed consensus results – But costly, time-consuming, may reflect common mindset Scenarios: Alternative views of the future – Need more than one to compare – Describes possible futures using different assumptions regarding key variables – A tool for understanding context of strategic decision-making – Places responsibility on the decision-taker, not the forecast – Based on belief that the future cannot be measured or controlled MARKETING ENVIRONMENT 115 ENVIRONMENTAL INFORMATION SYSTEMS Techniques for Analysing Information A Environmental audit A formal means of taking stock of an organization’s marketing environment It involves examination of markets, competitors, external environments, opportunities and threats l l l l l l Systematic assessment Current situation Input to strategy Complements marketing audit Means of control Respond and adapt to any deviation from realization of objectives B Environmental set A ranking of the key environmental factors currently impacting on the organization and specific to it • Starting point for envionmental assessment • Focus on critical impacts • Set factors change in importance over time • A threat for one organization may be an opportunity for another 116 C Impact Grids l l l l Assesses likely impacts of changing environmental parameters on the organization/ rivals Allows visual comparative analysis Cross impact analysis recognizes that the impact of a change in one variable may affect others, causing positive or negative feedback effects Influence diagrams also seek to classify cause and effects of key environmental factors D SWOT Analysis n Internal strengths and weaknesses compared to competitors n Identify and assess external threats and opportunities n Uses output from internal and external audit and forms input into strategy/planning n Use matrices to rank opportunities by degree of attractiveness/probability of success and to rank threats by probability of occurrence/ degree of impact MARKETING ENVIRONMENT 117 ENVIRONMENTAL INFORMATION SYSTEMS Continuing Impact of ICT Convergence of information technology and digital communication advances 118 ICT Effects on Organizations l l l Driver of change in a dynamic information society l l Precisely targeted communication l l Ultimate information source for marketers l Development of digital broadband via cable, satellite, TV aerial and 3G mobiles l Exponential growth in developing countries l Interactive internet facilitates networks and relationships: connected stakeholders l Better connectivity to stakeholders Two-way communication to customers — opens up opportunities E-business to business having dynamic effects New intermediaries emerge, e.g infomediaries in marketing research Scope for virtual organizations Hints and Tips n Read through Unit of the Marketing Environment Coursebook n Combine revision with that of information sources in Unit and Unit n Element of the syllabus is relatively new and very important, so optional questions continue to be posed relatively frequently n Also expect at least part questions in the mini case n Revise all aspects but particularly MIS, SWOT, forecasting techniques and ICT n To manage your exam you must manage your information, i.e organize revision notes n Environmental information systems may be linked with other aspects of the syllabus n Important: prepare outline answers for all the exam questions at the end of the unit n A common cause of not passing the exam is failure to answer the question posed: so practise on past questions; follow key word instructions; provide format and context n Go to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance MARKETING ENVIRONMENT 119 .. .CIM REVISION CARDS Marketing Environment Mike Oldroyd AMSTERDAM l BOSTON PARIS l SAN DIEGO l HEIDELBERG SAN FRANCISCO l... political and legislative environment 82 The technical and information environment 94 Environmental information systems 107 PREFACE Welcome to the CIM Revision Cards from Elsevier/Butterworth–Heinemann... questions l Go to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance MARKETING ENVIRONMENT 17 THE MICROENVIRONMENT Unit LEARNING OUTCOMES KEY REVISION POINTS