ABSTRACT
Appreciation of the marketing environment Classification and comparison of organizations Understanding mission statements and the
significance of objectives Recognition of business as an open system Identification of drivers for change
Syllabus reference: 1.1-1.9
Study past questions on each main area and plan out brief key word answers
Plan/answer time-frame is 30-35 minutes
KEY REV IS ION PO INTS
The interrelated and ever-changing nature of a dynamic environment
Strengths and weaknesses of various forms of organization
Differing missions and objectives and the forces that influence them
Organizations as systems within the wider environment
Flexible response to contingencies with marketing orientation as a success factor
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
} 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
n State-provided goods or services n Driven by government objectives n Socially desirable goals, e.g. equity n Supply public goods to all, e.g. defence n Ensure supply of merit goods, e.g. education/
health n Funded by taxation, fees or government
borrowing n Recent privatizations/deregulation (encourage
marketing orientation) n Shift from direct providers to service facilitators n Public/private partnerships – marry strengths
of each
n Marketable output and exports n Privately owned and controlled n Businesses compete to satisfy consumer wants n Profit drives effective and efficient use of
scarce resources n Includes global multinationals n Shareholder concerns may override social
concerns
• Normally non-profit-making
• Rely on voluntary contributions and dedicated staff
• Compete for funds/public attention for causes
n Simple to form n Individual owns and controls n Unincorporated n No separate legal existence n Self-employed n Individual is the business
– Maximum privacy – Unlimited liability for
– Minimum formalities debts
– Favourable taxes – Specialized and high
– Least cost to form risk
– Focused/motivated – Jack of all trades/
– Close to customers narrow view
– Close to employees – Burden plus lack of
– Flexible/responsive continuity
– Hard work and long hours
– A lot of competition
– Lack of management skills
n Unincorporated n Two or more partners n By agreement/law n Legal maximum, e.g. 20 n Jointly liable for debt n Share profits/losses n ‘Limited partnership’ but one is liable
– 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
n Dominant form n Public (plc) and private limited n Incorporated by law n Shareholders contribute capital n Regulated by Memorandum (external scope)
and Articles (internal administration) of Association
n Submit independent audited accounts/ directors’ report
• Short-termism, take-over threat
• ‘Fat cat’ remuneration levels
– Separate legal form – Complex/costly to
– Limited liability form
– Finance raising – Disclosure
– Easy share transfer requirements
– Fund development – Government
– Customer confidence regulations
– Operational inflexibility
– Size may breed impersonality
– Ownership/ management divide
This involves transferring ownership of 51% or more of shares in a public sector organization to private hands
Political considerations l Poor record of efficiency l Susceptible to pressure groups like unions and
political interference l Limited by government funding l Privatization reduced state role l Led to deregulation/cut red tape l Encouraged wider share ownership – notably
customers and workforce l Greater freedom to market services l Sale cuts government borrowing l Regulators appointed with powers to enforce
change, e.g. Oftel l Examples: water; gas; electricity; telecoms;
lotteries
l Limited competitve pressure when nationalized
l Significant efficiency improvements
l Increased competition and consumer choice
l Pressure to become marketing orientated
l Improved industrial relations
l Freedom to exploit diverse opportunities
l Lower prices and steep rise in productivity
Questions set on organizations often call for comparison of types or sectors
To focus on such questions use a grid for point by point comparison/to earn format marks
l Cater closely for local customers l Sensitive to buying habits/tastes l Able to focus on a niche market l Owns business/attention to detail l Flexible/adaptable organization l Attract ‘quality’ staff unwilling to work in large
firm l Finger on pulse as needs change l Tend to be inventive/innovative
– See disadvantages of sole traders and partnerships
– Reverse of large/global strengths*
l Economies of scale, e.g. discounts l Risk spread across various markets l Justify use of specialized skills, etc. l Secure cheaper finance l Exploit best practice l Transfer technology and ideas l Vast bargaining power re suppliers l Ability to centralize strategy l Advantage from brand leadership
– See registered company drawbacks – Reverse of small firm strengths*
REMEMBERVision is the ability to imagine or foresee the future prospects/potential for an organization. Mission is the statement of the organization’s overall purpose that expresses what it stands for and seeks to accomplish in the wider environment
– Vision is the responsibility of top management
– Anticipates how markets, tastes, technologies evolve
– Critical importance in formulating marketing strategy
– Triggers the mobilization of resources to achieve it
– Drives organizational behavior
– Key to securing a competitive edge
PC with Windows software on every desk (Microsoft)
Example of mission: To organize the world’s information (Google)
l Fundamental reason for organization’s existence
l Establishes what business it should be in
l Distinguishes uniqueness from other organizations
l Identifies competences, customers, relationships
l Enables sense of direction, unity, common purpose
l Provides a set of corporate values and priorities
l Clear statement for external stakeholders
l Provides a benchmark for assessing performance
Specific ends or achievements to be realized at a future time to fulfil the mission of the organisation
l Strategic objectives are long-term goals set by senior management, e.g. achieve market leadership
l Tactical objectives are set by middle managers and are more measurable, e.g. open 10 new outlets
l Operational objectives are short-term and set by first line managers, e.g. cut customer complaints by 5%
l Objectives should be SMART¼ specific, measurable, achievable, relevant and time-limited
l Objectives vary by sector:
– Charity: Alleviate suffering/raise contributions
effectiveness
– Private: Maximize profit/growth/maket share
l Reason why organizations exist l Drive organizational behavior l Supply motivation/sense of purpose l Time-limited targets provide control l Survival/profit stimulate competition l Profit maximizing (revenue – cost) ensures that
firms supply what consumers are prepared to pay for, using methods that minimize cost
l Rapid response to changing tastes/innovation of more efficient method
l Marketing may pursue market share/sales max. þ profit constraint
l Growth provides opportunities
l Memorandum of Association limits business scope
l Personal values/goals of directors/senior managers
l Aversion to risk and future expectations
l Resource limitations
l Inertia and past success may prevent review
l Must match internal strengths/weaknesses with external opportunites and threats
l Present/future expectations of shareholders
l Interests of connected and external stakeholders
l Competitive forces
l Changes in government policy and legislation
l Pressure groups
Organizations must periodically review their aims: – renew objectives once achieved – reality of a dynamic environment – control process shows variances – respond to forces pushing it off-course – anticipate change in wants – meet emerging technical change – proactive to threats/opportunities – change in top management – as part of a formal corporate planning system
l View organizations as part of a wider system l Inputs are drawn from environment and
converted into outputs l Positive (goods, services) and negative (wastes)
outputs are returned l Organizations made up of subsystems
(e.g. marketing, production) l Boundary between systems represents
interface l Feedback corrects deviations in outcomes
vs. aims l Interdependent with environment l Scan/adapt to threats/opportunities
n Organizations often split into various functions so efficient conversion needs effective coordination
n Departments must ‘optimize’ not ‘maximize’ by pursuing the best ‘organizational’ outcome
n Marketing critical: bridges the boundary between the wider environment and internal departments
n Must establish/maintain relationships across and within the organizational boundary, e.g. production
n Demands a marketing orientation: focus on satisfying the needs of the buyer via the product/ things associated with creating, delivering and finally consuming it. (T. Levitt)
Marketing environments are in constant change Many environments are turbulent and subject to unpredictable and often uncontrollable forces: n Increasingly competitive markets are in flux,
e.g. stock, currency, ICT and energy markets
n Technological forces, political discontent, variable prosperity, fundamentalism also disturb stability
n Even the natural environment appears unstable with freak weather conditions
Dynamic conditions suggest powerful forces are driving change, e.g. IT developments or a catalyst, e.g. new entrant or deregulation
l Creates ambiguity over future patterns
l Can create opportunities if managed well
l The environment must be monitored and analysed to identify threats and potential impacts
l Prioritize on most significant developments
l A proactive response is demanded
l Reduce resistance in favor of a ‘culture of change’
l Requires flexible, decentralized, organic structures
l Associated costs may be transferred to customers (higher price); workers (redundancy); competitors (lower sales); government (subsidies), etc.
