Scanning the

Environments
Faisal Qureshi

Macro-Environment
Economic
GDP trends
Interest rates
Money supply
Inflation rates
Unemployment
levels
Wage/price
controls
Devaluation/reval
uation of
currency
Energy
availability and
cost
Disposable and
discretionary
Prentice Hall, 2000
income

Technologica PoliticalLegal
l
Total government
spending for R&D

Antitrust
regulations

Total industry
spending for R&D

Environmental
protection laws

Focus of
technological
efforts

Tax laws

New products
New developments
in technology
Productivity
improvements
through
automation

Special incentives
Foreign trade
regulations
Attitudes toward
foreign
companies
Laws on hiring and
promotion
Stability of
government
Copy3
Chapter

rights

Sociocultural
Lifestyle changes
Career
expectations
Consumer
activism
Rate of family
formation
Growth rate of
population
Age distribution of
population
Regional shifts in
population
Life expectancies
Birth rates

Competitive Environment

Market size and growth rate

Number of rivals
Scope of competitive rivalry
Buyer needs and wants
Degree of product differentiation
Level of product innovation
Supply and demand conditions
Rate of technological change
Level of integration or disintegration
Economies of scale
Learning and experience curve effects

The Five Forces Model of Industry

Competitiveness

Strategic Groups

A strategic group is a set of business units or

firms that pursue similar strategies with
similar resources

A firms competitive domain can be identified

with the concept of strategic group

The strategic group map consists of two sets

of dimensions
I. Depth of Breadth of Product Lines
II. Price

Strategic Groups in the Pakistan

Retail Industry

Generalized Department Stores

Specialized Department Stores
Specialty Stores
Sub-specialty Stores
Boutiques
Discount Stores
Flea Markets

Why Study of External

Environment is Necessary?
Opportunities and threats come from
the environment
Marketing, more than any other
function or department, has the
responsibility to carry out
environment scanning
The Marketing department acts like a
boundary spanner

Factors in the External

Ever-Changing
Environment
Marketplace
Marketing
Mix

Demographics
Demographics

Natural
Natural

Competition
Competition
Product
Product
Place
Place
Promotion
Promotion
Price
Price

Economic
Economic
Conditions
Conditions

Target
Market
Technology
Technology

Environmental
Scanning

Social
Social &
&
Cultural
Cultural

Political
Political &
&
Legal
Factors
Legal Factors

What is an Opportunity?

Opportunity
Defined

An opportunity is a favorable
set of circumstances that
creates a need for a new
product, service or business.

Hallmarks of an Opportunity?
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An opportunity has four essential traits

Three Ways to Identify an Opportunity

First Approach: Observing Trends

1 of 2

Observing Trends
Trends create opportunities for companies to pursue.
The most important trends are:
Economic forces.
Social forces.
Technological advances.
Political action and regulatory change.
It is important to be aware of changes in these areas.

First Approach: Observing Trends

2 of 2

Environmental Trends Suggesting Business

or Product Opportunity Gaps

Trend 1: Economic Forces

Economic trends help

determine the spending
patterns and priorities of
different customer groups

Economic Trends Create

Opportunities
A weak economy favors
products that help consumers
save money.
Affluent economies are
receptive to the idea of unique
or differentiated offerings.

Trend 2: Social Forces

Social trends alter how
people and businesses
behave and set their
values. These trends
provide opportunities for
new businesses to
accommodate the
changes.

Examples of Social Trends

The increasing diversity of
food products and restaurants.
Increasing interest in health,
fitness, and wellness.
Emphasis on alternative forms
of medicine and treatment.
New forms of music and other
types of entertainment.

Trend 3: Technological Advances

Advances in technology
frequently create business
opportunities.

As technology advances at a
breath-taking pace, the market
forces move towards
technology-integration:
blurring of boundaries and
merging of different
technology-based industries;
e.g. telecommunicationinternet-television-digital
photography

Trend 4: Political Action and Regulatory

Changes
Example:

Political action and

regulatory changes also
provide the basis for
opportunities.

The establishment of ISO

created opportunities for
entrepreneurs to start firms that
helped other firms comply with
environmental laws and other
regulations.

Second Approach: Solving a Problem

Solving a Problem
Sometimes identifying opportunities simply involves
noticing a problem and finding a way to solve it.
These problems can be pinpointed through observing
trends and through simpler means, such as intuition,
serendipity, or change.

Second Approach: Solving a Problem

A problem facing the U.S. and

other countries is finding
alternatives to fossil fuels.
A large number of
new firms, like
this wind farm, are being
launched to solve this problem.

Third Approach: Finding Gaps in the

Marketplace
Gaps in the Marketplace
A third approach to identifying opportunities is to find a
gap in the marketplace
A gap in the marketplace is often created when a product or
service is needed by a specific group of people but doesnt
represent a large enough market to be of interest to
mainstream retailers or manufacturers.

Third Approach: Finding Gaps in the

Marketplace
Example:

Product gaps in the

marketplace represent
potentially viable
business opportunities.

In 2000 Tish Cirovolv

realized there were no guitars
in the market made
specifically for women. To
fill this gap, she started Daisy
Rock Guitars, a company that
makes guitars just for women.

2-22

Personal Characteristics of the Marketer

Characteristics that tend to make some people better
at recognizing opportunities than others

Prior Experience

Social Networks

Cognitive Factors

Creativity

Prior Experience
Prior Industry Experience
Several studies have shown that prior experience in an
industry helps a marketer recognize business opportunities.
By working in an industry, an individual may spot a market niche
that is underserved.
It is also possible that by working in an industry, an individual
builds a network of social contacts who provide insights that lead
to recognizing new opportunities.
The Off-Pricer model in the apparel industry was found based on
the personal experience of its founder as a professional buyer in the
same industry

Cognitive Factors
Cognitive Factors
Studies have shown that opportunity recognition may be an
innate skill or cognitive process.
Some people believe that successful marketers have a
sixth sense that allows them to see opportunities that
others miss.
This sixth sense is called market alertness, which is
formally defined as the ability to notice things without
engaging in deliberate search.

Social Networks
Social Networks
The extent and depth of an individuals social
network affects opportunity recognition.
People who build a substantial network of social
and professional contacts will be exposed to more
opportunities and ideas than people with sparse
networks.

Creativity
Creativity
Creativity is the process of generating a novel or useful
idea.
Opportunity recognition may be, at least in part, a creative
process.