Importance of analysing the environment - Marketing Management

Consider the following:

  • Problems with processing nuclear waste at the Sellafield plant in Cumbria in the UK has had a profound effect on attitudes towards the nuclear power industry.
  • The future of the pound sterling remains uncertain whilst Britain decides whether or not it will ultimately recommend adoption of the Euro currency.
  • The near collapse of the banking system in 2009 had worldwide repercussions.
  • Global warming and the melting of the ice caps has had a profound effect on attitudes towards ‘green issues’.
  • In the UK more than half of homes have access to the Internet and the percentage is growing.
  • Discussions about expanding the European Union to include more former Eastern European bloc countries and Turkey continues.
  • Marketers have been faced with an expansion in the ‘grey market’ where their products and brands are bought and sold in international markets outside conventional channels and therefore their control.

These are a small selection of ‘environmental’ forces and factors that have had (or will have) an impact upon the marketing strategies of many companies. Not every company will be affected by these specific trends and changes, nor will all companies be affected equally. What is certain is that changes and trends in the environment of a company, such as those listed, give rise to some of the most significant opportunities and threats that an organization faces. Companies that have failed to recognize and take account of changes in their environment have failed to capitalize on opportunities or have realized that their markets have disappeared with the closure of factories and redundancies.

The importance of environmental analysis is self-evident, but if further confirmation of this importance is required this can be underlined by tracing through an example of failure to identify and respond to environmental change.

Marks & Spencer were, until the late 1990s, one of the most successful clothing and food retailers in the United Kingdom. Since then, the company has faced increasing problems with regard to sales and profits. Marks & Spencer are still faced with sluggish sales and reduced market share. There are several reasons for this, but it has been suggested that the company has not kept pace with changing market and customer needs. In particular, critics have argued that many of its product ranges are not fashionable enough. Certainly, over the past decade the company has faced increasing competition both from domestic and overseas retailers who have entered the UK with exciting merchandising and retail formats. In the food area, the competitive advantages which Marks & Spencer once had, such as being amongst the first to offer good quality ready-made/chilled foods, are being eroded.

The company now recognizes that it is operating in a different trading environment and has embarked on a series of major changes in its approach to sourcing, merchandising and marketing. It is experimenting with new formats for its stores, new merchandising and ranges and major television advertising campaigns. In addition the company has made several major changes to its management structure from the chief executive down. It remains to be seen whether these changes will be sufficient to restore its former market position.

This example illustrates the negative effects or threats posed to companies by changes in their marketing environment, or rather their failure to respond to these changes. Equally, environmental trends and changes can give rise to major marketing opportunities, even to the extent of spawning whole new industries.

An example of major opportunities arising out of technological, economic and social changes has been the growth of the Internet. Technological developments linked to social and economic changes such as a desire to work more from home, have combined to facilitate the growth of new companies, using Internet technologies to market their products and services direct to customers. Companies like Amazon have shown exceptional growth. This illustrates that environmental trends and changes are important in posing major opportunities or threats to organizations.

Some of these environmental trends and changes are long term and take place gradually, but some take place extremely rapidly and are more difficult to predict. The environment comprises a wide range of factors, the relationships between which are complex. Our first step in analysing the environment, therefore, is to identify and classify environmental influences.

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