Marketing Environmental Analysis

PEST, SWOT and Porter’s five forces analysis are three very useful tools for both identifying the threats and opportunities in general and competitive environment and setting up company’s marketing strategy.

PEST

PEST is an acronym for political, economic, social and technologic.

• The political area has huge impact on the operation of the firms (e. g. tax, business law, political stability)
• The economic condition can also directly influence the general performance of the company (e. g. economy depression, interest rate, exchange rate, inflation rate)
• As for social factors, by fundamentally determining the target market, it can also be essential for the success or failure of strategies. (e. g. religion, culture, demographic issue)
• Finally, the technological factors are becoming the majority for mostly organization, which can increasing the benefit as well as decreasing the time and cost. (e. g. the pace of technologies change, incentive of technology)

Usually prior to competing SWOT, PEST helps to spot the four elements for better understanding the macroenvironment faced by firms.

After analyzing the four factors, it is important for company to identify the key drivers for change, thus focus on that to shape its strategies. Meanwhile, by scanning the general environment, co. can therefore also detect weak signals that make the discontinuity of the environment, which may fundamentally change the competitive environment (Johnson et al, 2011). Ginter and Duncan (1990) argue that macro-environment analysis can act as an early-warning system by giving org. time to anticipate opportunities and threats and develop appropriate response.

SWOT

SWOT is structured planned method used to evaluated strengths, weakness, opportunities and threats. By using matching and converting, company can either find or develop their competitive advantages. Matching is used to find competitive advantages by matching the strengths to opportunities. Converting is to apply conversion strategies to convert weaknesses or threats into strengths or opportunities.

Porter’s Five Forces Analysis

Porter’s five forces analysis is a framework for industry analysis and business strategy development formed by Michael E. Porter at 1979. More precise than PEST, it helps the industrial organization to illustrate the competition intensity in competitive environment (microenvironment) thus decide the attractiveness of specific market.

Combining Three Analysis

In corporate strategies level, all three of them can be used to audit the marketing environment in order to get a systematic, critical and unbiased appraisal of its operation. (where is the co. now, where does the co. want to go and how should the company organize its resources to get there) In business strategy level, it also important that because of the increasingly rate of change in market environment, three of the analysis need to achieve contingent approach to shape the strategies to avoid overcome by competitors. Example: PEST e. g. construction firm: operating on narrow profit margin, react to change I interest rate. Johnson&Johnson: baby-care product, react to change in birth rate, thus change the target market to adult female(being kind and gentle to woman’s skin as well as that of babies)

SWOT: A consultancy firm

• S: Reputation, expertise
• W: Unable to deal with multi-disciplinary assignments because of size or lack of ability
• O: Well established position with a well defined market niche
• T: Other small consultancies looking to invade the marketplace

According to research, benefit positioning and user position is more effective than feature positioning and direct benefit positioning is more effective than indirect benefit positioning (Fuchs et al, 2009). d. To keep the brand equity, repositioning is very important. We need to realize that positioning is a ongoing process. Competitive advantage is positioning of a single offering in relation to a unique set of potential customers and competitors. For an organization to achieve consistently above-normal market performance, it must create a sustainable competitive advantage (Aaker, 1989).

The logic of SCA is that a buyer to purchase offering X, the buyer must perceive the expected utility to him of that offering exceeds the value to him of any alternative solution, that is it must create superior value for its customers. The basis of competitive advantage is increasing the benefit receive by the customers or decreasing the cost. Which lead to different strategic focus on either low cost or differentiation (additional product benefits). So competitive advantages can be porter’s generic strategies or market orientation.