Strategic decision making - Marketing Management

We have seen that by definition the ‘environment’ encompasses all events and trends outside the boundaries of the marketing function. A key problem in environmental appraisal is the identification of the most significant of these trends for further analysis. Jain suggests there are no ‘hard and fast rules’ for distinguishing between what is relevant and irrelevant. A useful approach to identifying what to scan and which environmental trends and changes are relevant is the business definition for a strategic business unit.

For example, imagine that a strategic business unit of a large insurance company has defined its part of the business as being ‘the provision of peace of mind insurance solutions to the private motor car owner’. The following might be some of the more important environmental trends and changes for the strategic business unit to monitor:

  • trends and changes in levels and types of private car ownership together with the factors affecting these;
  • trends and changes in car usage levels and patterns together with the factors affecting these;
  • strategies of major competitors;
  • potential new entrants to the market;
  • changes in legislation that might affect the types of insurance cover legally required;
  • technological developments which might affect the way in which, say, customers purchase private car insurance.

These are examples but they illustrate the potential range and complexity required in environmental scanning. Although business definition provides the key to isolating relevant trends (any one of the environmental factors just described would give rise to major environmental opportunities and threats) identifying relevant areas requires a considerable degree of creativity and foresightedness. Some trends or changes are obviously significant, e.g. the emergence of a new and potentially strong competitor, but the environmental scanning process also requires judgement and experience in spotting opportunities and threats. Often a seemingly unrelated trend or change can be highly significant in the long run.6

Who would have thought that one of the most significant threats to the publishers and distributors of books would have come from the Internet? After all, traditionally the book-buying public has selected and purchased books by browsing through them on the booksellers’ shelves. From nothing in this market, the Internet bookseller Amazon has taken a substantial market share in next to no time. Initially, probably considered as simply an upstart in the industry by the large publishing and book distributing organizations, Amazon has, through its success, forced these more traditional companies in the market to consider them as a powerful competitive force.

This example not only shows the need for constant vigilance in environmental scanning, but in addition illustrates the need to think creatively about what is relevant.

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