Essentials of Marketing Planning
MARK 3009
Topic 2– Analysing the internal and
external environments
1
Reminder: A marketing planning process
2
“Know thy self, know thy enemy. A thousand
battles, a thousand victories”
Sun Tzu: Chinese General & Strategist 544-496 BC
3
Topics
1. Analysing internal situation
• BCG matrix
• GE/McKinsey Grid
• RBV (Resource-based View)
2. Analysing external environment
• SWOT and environmental scanning
• Porter’s 5-forces model
• Competitor analysis
4
How to manage the portfolio in a firm?
• Synergy of strategic
business Units
• Resource allocation
• Investment management
• Balance in revenue
5
BCG Matrix
• Created by Mr. Bruce Henderson in Boston Consulting Group (BCG) in 1968
• One of the most famous tools of portfolio analysis
• To manage strategic business units (SBUs) or product lines
• To make investment decision
• To guide marketing strategy development in each SBU
Desired path
BCG Matrix
Death path
Investment flow
Revenue: + + +
Investment: - Balance: +
Revenue: +
Investment: - - Balance: - • Portfolio analysis
• Investment management
Revenue: + + +
Investment: 0
Balance: +++
Revenue: +
Investment: Balance: 0
• Marketing strategy development
An example: Samsung
Balancing the business portfolio
Hooley et al (2020) marketing strategy & competitive positioning (7e) Fig 2.5
BCG matrix

Useful for planning and strategy involving companies with a portfolio of different
products, business units

Simplistic e.g., assumes that cash flow is more important than return of investment
(ROI)

Assumes relative market share and growth rate are the only factors affecting cash flow.
GE (General Electric) Grid
 Also called GE/McKinsey Grid
 Market Attractiveness, e.g.:
market size, industry profit margin, amount of competition, seasonality of
demand, energy requirements and industry cost structure
 Competitive Strength, e.g. :
price competitiveness, product quality, unit costs, customer and market
knowledge, sales effectiveness, distribution network, customer satisfaction,
brand reputation, and geographical advantages
 You choose the criteria, and their relative weights, and their scores.
GE Grid: General Electric/McKinsey Grid
Market
Attractiveness
New market entry
Improve position
Invest to grow
Improve position
Protect position
Invest to grow
Protect position
Optimise position
Improve position
Harvest
Optimise position
Improve position
Invest to grow
Optimise position
Improve position
Harvest
Divest
Monetize
Harvest
Divest
Monetize
Harvest
Divest
Competitive Strength
= Offensive strategy
= Defensive strategy
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An example: GE Grid for Office Star
Industry Attractiveness
• Overall market size
Office supplies
Furniture
Computers
Software
Ink & Toner
Marketing weights
Finance weights
Product Fit
4
4
3
2
5
5
3
Brand Reputation
5
3
2
1
4
5
2
Market Share
3
2
1
3
3
3
5
Competitive Advantage
4
5
3
2
3
5
1
Business Strength
• Annual growth rate
Business Strength:
•
Product fit
•
Brand reputation
•
Marketing share
•
Competitive advantage
Vertical Axis (ratings, weights)
• Competitive intensity
• Historical margins
On a scale from 1 to 5, rate Products on each factor, and weight the importance of each factor.
Industry Attractiveness
Office supplies
Furniture
Computers
Software
Ink & Toner
Marketing weights
Finance weights
Overall Market Size
4
4
5
3
2
2
5
Annual Market Growth Rate
1
2
4
3
4
2
4
Competitive Intensity
2
4
5
2
2
4
2
Historial Margins
2
2
1
3
4
3
5
Market Size
On a scale from 1 to 20, please enter market size for each item.
Office supplies
Furniture
Computers
Software
Ink & Toner
8
6
8
9
5
Market Size
Source: Lilien et at (2003) Marketing Engineering
An example: GE Grid for Office Star
Topics
Why can some companies outperform others in a
competitive market?
1. Analysing internal situation
• BCG matrix
• GE/McKinsey Grid
• RBV (Resource-based View)
2. Analysing external environment
• SWOT and environmental scanning
• Porter’s 5-forces model
• Competitor analysis
© Richard Lee, School of Marketing
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Resource-based View (RBV) : Barney 1991
Resources:
• Valuable (created to customers)
• Rare
• Inimitable (not easily be copied by rivals)
• Organised (wisely used)
RBV: Barney, Jay 1991). "Firm Resources and
Sustained Competitive Advantage". Journal
of Management. 17 (1): 99–120.
Hooley et al (2020) marketing strategy & competitive positioning (7e) Fig 6.3
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RBV: Foundation behind sustainable competitiveness
Can Bunnings Warehouse open its stores in China?
RBV: Foundation behind sustainable competitiveness
• High power distance culture
• DIY is not valued in China
• Products are made in China
• Prevalence of materialism
• Availability of local cheap labours
• Different life style in China
Resource-based View (RBV)
Marketing assets
• Market share
• Brand awareness
• Customer loyalty
• Unique selling point (USP)
• Firm’s reputation
• Support from business partners
Hooley et al (2020) marketing strategy & competitive positioning (7e) Fig 6.5
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1. Analysing internal environment
• BCG matrix
• GE/McKinsey Grid
• RBV
2. Analysing external environment
• SWOT and environmental scanning
• Porter’s 5-forces model
• Competitor analysis
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Topics
1. Analysing internal environment
• BCG matrix
• GE/McKinsey Grid
• RBV
2. Analysing external environment
• SWOT and environmental scanning (PEST analysis)
• Porter’s 5-forces model
• Competitor analysis
© Richard Lee, School of Marketing
21
SWOT and environmental scanning
External
Internal
SWOT Analysis

It comprises two fundamental areas of analysis, the Internal (S&W) and External
(O&T) Environment.

It helps us to identify where strategies are required to pursue opportunities and
defend against threats.

One of the most misused tool in marketing and business planning.
SWOT analysis: Definition
S: Internal capabilities/factors that may help in
• achieving objectives;
• addressing opportunities;
• deflecting competition, other threats.
W: Internal capabilities/factors that may prevent firm from
• achieving objectives;
• making the most of opportunities;
• addressing competition, other threats.
O: External circumstances/factors that may be exploited for higher
performance
T: External circumstances/factors that may inhibit performance if not addressed
SWOT strategic implications
Hooley et al (2020) marketing strategy & competitive positioning (7e) Fig 2.9
An example: SWOT analysis of Starbucks
Source: Euromonitor (Through “ Passport” in UniSA Library database )
External environment – PEST factors
External environment – PEST factors
•
•
•
•
Political (instability, leadership, law and regulations)
Economic (recession or recovery, buying power)
Social–cultural (demographics, attitudes, perceptions)
Technological (innovation, standards, marketing uses)
Political (instability, leadership, law and regulations)
External environment – PEST factors
External environment – PEST factors
•
•
•
•
•
•
•
•
•
Political (instability, leadership, law and regulations)
Economic (recession or recovery, buying power)
Social–cultural (demographics, attitudes, perceptions)
Technological (innovation, standards, marketing uses)
Increase in living cost
Appreciation in Australian dollar
Inefficiency in production
Increase in labour costs
Competition in Australian car market
Global chocolate confectionary: challenges, opportunities and risks
•
Sales of chocolate still predominantly
stem from Western markets
•
Chocolate remains the snacks of the
wealthy
•
Value growth has been spectacular in
India and China (25% and 7% CAGRs,
respectively) and steady in Western
markets (3% and 2% CAGRs in the US
and the UK, respectively).
•
India & China will be the largest
emerging markets for chocolate
•
Australian market is stagnant
Source: Euromonitor (Through “ Passport” in UniSA Library database )
GLOBAL OVERVIEW
Consumption slowdown but opportunities in Middle East and Asia
• Per capital consumption is declining
in the Western European and the US
• Opportunities come from Middle
East and Asia
• Consumers are now more wary of
the adverse health affects of
excessive consumption
Source: Euromonitor (Through “ Passport” in UniSA Library database )
External environment – PEST factors
•
•
•
•
Political (instability, leadership, law and regulations)
Economic (recession or recovery, buying power)
Social–cultural (demographics, attitudes, perceptions)
Technological (innovation, standards, marketing uses)
Expressions of Culture - Values
• Value influences the way people perceive the meaning of life and how to pursue happiness;
• Value serves as a norm to guide behaviours and
• Value provides the predisposition to judge what is
An example: Diversity in marriage
• Romantic v pragmatic
• Egalitarianism v hierarchy
• Polygamous v sole loyalty (a husband could have up to 4 wives in some
countries)
• Sexual behaviour before marriage
• Legitimacy of Same-sex marriage
• Who pays for the house and fees of wedding ceremony (must buy a
house to set a family in China)
• Legitimacy of same sex marriage (should girls get married before 28 ?)
• Taboos in marriage (No wedding in the year of the sheep in China)
An example: IKEA removed the image of women from its catalogue in Middle East
The picture in the catalogue in Sweden (L)
The picture in the catalogue in Saudi Arabia (R)
An example: IKEA Post in Denmark v China
• The room is smaller
• The room is bigger
• One child policy
• Brother & sister
• Go higher!
• Enjoy freedom
• Long term
orientation
• Equality
• High power distance
• Books on the self
• Have fun!
• Indulgence
The picture in the IKEA catalogue in Denmark (L) vs Shanghai (R).
Climbing, jumping and
balancing can develop
intelligence of children
Source: Case Study 7.2 :Hollensen (2014) Global Marketing 6th Edition pp266
External environment – PEST factors
•
•
•
•
Political (instability, leadership, law and regulations)
Economic (recession or recovery, buying power)
Social–cultural (demographics, attitudes, perceptions)
Technological (innovation, standards, marketing uses)
External environment – PEST factors
•
•
•
•
Political (instability, leadership, law and regulations)
Economic (recession or recovery, buying power)
Social–cultural (demographics, attitudes, perceptions)
Technological (innovation, standards, marketing uses)
External environment – Environmental factors
External environment – PEST factors
https://i0.wp.com/www.business-to-you.com/wp-content/uploads/2016/09/PESTEL.jpg
External environment – Political & Economic factors
Political factors
Economic factors
•
•
•
•
•
•
Economic growth rate
•
Interest rate
•
Inflation rate
•
Exchange rate
•
Availability of credit
•
Level of disposable income
•
Propensity of people to spend
•
Federal government budget deficits
•
Gross domestic product trend
•
Unemployment trend
•
Stock market trends
•
Price fluctuations
•
Degree of urbanisation
•
•
•
•
•
•
•
•
•
•
•
•
•
Government stability/instability
Corruption level
Tax policies
Freedom of press
Government regulation and
deregulation
Special tariffs
Political action committees
Government involvement in trade
unions and agreements
Competition regulation
Voter participation rates
Amount of government protests
Defence expenditures
Level of government subsidies
Bilateral relationships
Import-export regulation/restrictions
Trade control
Lobbying activities
Size of government budgets
Source: https://www.business-to-you.com/scanning-the-environment-pestel-analysis/
Source: https://www.business-to-you.com/scanning-the-environment-pestel-analysis/
External environment – Societal and Technical factors
Societal factors
•
Population size and growth rate
•
Birth rates
•
Death rates
•
Number of marriages
•
Number of divorces
•
Immigration and emigration rates
•
Life expectancy rates
•
Age distribution
•
Wealth distribution
•
Social classes
•
Family size and structure
•
Lifestyles
•
Health consciousness
•
Average disposable income
•
Attitude towards government
•
Attitude towards work
•
Buying habits
•
Ethical concerns
•
Cultural norms and values
•
Sex roles and distribution
•
Religion and beliefs
•
Racial equality
•
Use of birth control
•
Education level
Technical factors
• Technology incentives
• Automation
• R&D activity
• Technological change
• Access to new technology
• Level of innovation
• Technological awareness
• Internet infrastructure
• Communication infrastructure
• Life cycle of technology
Source: https://www.business-to-you.com/scanning-the-environment-pestel-analysis/
Source: https://www.business-to-you.com/scanning-the-environment-pestel-analysis/
External environment – PESTLE
Environmental factors
• Weather
• Climate
• Environmental policies
• Climate change
• Pressures from NGO’s
• Natural disasters
• Air and water pollution
Legal factors
• Government regulation and
deregulation
• Discrimination laws
• Antitrust laws
• Employment laws
• Consumer protection laws
• Copyright and patent laws
• Recycling standards
• Health and safety laws
• Attitudes towards green products
• Education laws
• Support for renewable energy
• Consumer protection laws
• Data protection laws
Source: https://www.business-to-you.com/scanning-the-environment-pestel-analysis/
Topics
1. Analysing internal environment
• BCG matrix
• GE/McKinsey Grid
2. Analysing external environment
• SWOT and environmental scanning
• Porter’s 5-forces model
• Competitor analysis
© Richard Lee, School of Marketing
47
Porter’s five forces model
Source: Porter (1980) Competitive strategy: Techniques for analyzing Industries and competitors The Free Press New York
Porter’s five forces model: An example of Airline industry
Threat of new entrants (Low to
medium)
• Number of suppliers (fuel and aircraft: Boeing and Airbus)
• Economies of scale
• Size of suppliers (large)
• Product differentiation (little)
• Supplier concentration (very high)
• Brand identity/loyalty (Low)
• Availability of substitutes for the supplier’s products (none)
• Access to distribution channels
• Uniqueness of supplier’s products or services
• Capital requirements (very high)
Bargaining power of suppliers (Very high)
(differentiation)
• Access to latest technology
• Switching cost for supplier’s products
• Access to necessary inputs
• Supplier’s threat of forward integration
• Absolute cost advantages
• Industry threat of backward integration
• Experience and learning effects
• Supplier’s contribution to quality or service of the industry
• Government policies (Licence required)
products
• Switching costs
• Importance of volume to supplier
• Expected retaliation from existing
• Total industry cost contributed by suppliers
players
https://www.business-to-you.com/porters-five-forces/
• Importance of the industry to supplier’s profit
Porter’s five forces model: An example of airline industry
Bargaining power of buyers (High)
Threat of substitute products or services (medium to high)
• Buyer volume (number of customers)
• Number of substitute products available (many)
• Size of each buyer’s order
• Buyer’s propensity to substitute (high for short-distance trips)
• Buyer concentration
• Relative price performance of substitutes
• Buyer’s ability to substitute (high)
• Perceived level of product differentiation
• Buyer’s switching costs (low)
• Switching costs (low)
• Buyer’s information availability (easy to compare price)• Substitute producer’s profitability & aggressiveness
• Buyer’s threat of backward integration
• Industry threat of forward integration
• Price sensitivity ( very high)
https://www.business-to-you.com/porters-five-forces/
Porter’s five forces model
Rivalry among existing competitors (very high)
• Number of competitors (many)
• Diversity of competitors (hard, only different in price)
• Industry concentration and balance
• Industry growth (stagnant)
• Industry life cycle
• Product differentiation
• Brand identity/loyalty (Low, no barrier of entry)
• Switching costs (High)
• Intermittent overcapacity (yes)
• Barriers to exit
https://www.business-to-you.com/porters-five-forces/
Porter’s five forces model: An example of Airline industry
• The threat of new entrants: Low to medium
• The bargaining power of suppliers (Fuel and aircraft): very high
• Bargaining power of buyers: high.
• Threat of substitute products (Hype loop): medium to high
• Rivalry among existing competitors: high.
Limitations in Porter’s model
• Over-stress the analysis at the industry level;
• Oversimplifies industry value chains e.g., invariably ‘buyers’ may be differentiated
between channels, intermediate buyers vs end consumers;
• Fails to link directly to possible management action e.g., companies may have a
disruptive influence over any of the five forces (e.g. Tesla);
• Assumes industry operates within fixed boundaries (e.g., airlines may own hotels)
• Self-contained e.g., no dynamic PESTLE factors
• Assumes independence among factors
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A dynamic system approach to the model
Encourage new
entrants
Threat of new
entrants
Bargaining power
of suppliers
Industry
Rivalry
Bargaining power
of buyers
Threat of
substitutes
Grundy, T. (2006), Rethinking and reinventing Michael Porter's five forces model. Strat. Change, 15: 213–229
Competitor profiling
Corporate : History, location and presences, key personalities, ownership
organizational structure
Financials: P-E ratios (Share price-earning), dividend policy, and profitability, cash
flow, organic or acquisitive growth
Products: depth and breadth of product line, new products developed, R&D
strengths, strength of brand portfolio
Customers: Segments served, customer loyalty
Marketing: Promotional mix, budgets, distribution channels used (direct & indirect),
alliances
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Competitor array - PC Manufacturer example (data reduction)
Factor
Weighting
Me
Score
Competitor 1
Score
Competitor 2
Score
Speed of processor
0.10
6
0.60
9
0.90
4
0.40
Amount of memory
0.20
7
1.40
9
1.80
6
1.20
Graphics card
0.15
5
0.75
6
0.90
7
1.05
Hard disk size
0.25
5
1.25
5
1.25
5
1.25
USB ports
0.05
10
0.50
8
0.40
7
0.35
Sound card
0.10
8
0.80
5
0.50
4
0.40
Price
0.15
6
0.90
4
0.60
3
0.45
Total
1.00
47
6.20
46
6.35
36
5.10
56
Analysis by strategic grouping
Hooley et al (2020) marketing strategy & competitive positioning (7e) Fig 3.11
Source: Hollesen (2017) Global marketing
57
The components of competitor analysis
Hooley et al (2020) marketing strategy & competitive positioning (7e) Fig 5.2
58
In summary
1. Before strategies can be developed, it is important to have in-depth and honest
assessments of one’s own organisation;
2. Then research and obtain insights into external factors that may directly or indirectly
affect one’s organisation; and
3. Various tools are available to aid this process; they overlap and can be used
simultaneously to give a more comprehensive and clear picture.
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END OF TOPIC
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