CIM revision cards marketing environment by mike oldroyd

CIM

REVISION CARDS

Marketing Environment
04/05
PROFESSIONAL CERTIFICATE IN MARKETING
2004 –2005 SYLLABUS

Key concepts for revision
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Relevant!
Succinct!
Compact!
The Chartered
Institute of Marketing

Helping you to pass your CIM exam


CIM REVISION CARDS
Marketing Environment
Mike Oldroyd

AMSTERDAM l BOSTON
PARIS l SAN DIEGO l

HEIDELBERG

SAN FRANCISCO

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LONDON l
SINGAPORE

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NEW YORK
SYDNEY

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OXFORD
TOKYO


Elsevier Butterworth-Heinemann
Linacre House, Jordan Hill, Oxford OX2 8DP
30, Corporate Drive, Burlington, MA 01803
First published 2004
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Printed and bound in Great Britain


TABLE OF CONTENTS
1.
2.
3.
4.
5.
6.
7.
8.
9.

Preface ............................................................................ iv
The nature of the organization .................................................. 1
The microenvironment ........................................................... 18
Analysis of the competitive environment ...................................... 30
The macroenvironment .......................................................... 44

The demographic social and cultural environment ........................... 55
The economic and international environment ................................. 68
The political and legislative environment ...................................... 82
The technical and information environment ................................... 94
Environmental information systems ............................................ 107


PREFACE
Welcome to the CIM Revision Cards from Elsevier/Butterworth–Heinemann. We hope you will find these useful
when coming to revise for your CIM exam. The cards are designed to be used in conjunction with the CIM
Coursebooks from Elsevier/Butterworth–Heinemann, and have been written specifically with revision in mind.
They also serve as invaluable reviews of the complete modules, perfect for those studying via the assignment
route.
n Learning outcomes at the start of each chapter identify the main points
n Key topics are summarised, helping you commit the information to memory quickly and easily
n Examination and revision tips are provided to give extra guidance when preparing for the exam
n Key diagrams are featured to aid the learning process
n The compact size ensures the cards are easily transportable, so you can revise any time, anywhere
To get the most of your revision cards, try to look over them as frequently as you can when taking your CIM
course. When read alongside the Coursebook they serve as the ideal companion to the main text. Good luck
– we wish you every success with your CIM qualification!


THE NATURE OF THE
ORGANIZATION

Unit 1

LEARNING OUTCOMES

KEY REVISION POINTS

å Appreciation of the marketing environment
å Classification and comparison of organizations
å Understanding mission statements and the
significance of objectives
å Recognition of business as an open system
å Identification of drivers for change

å The interrelated and ever-changing nature of a
dynamic environment
å Strengths and weaknesses of various forms of
organization
å Differing missions and objectives and the forces
that influence them
å Organizations as systems within the wider
environment
å Flexible response to contingencies with
marketing orientation as a success factor

Syllabus reference: 1.1–1.9
š

Study past questions on each main area and plan
out brief key word answers

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Plan/answer time-frame is 30–35 minutes

MARKETING ENVIRONMENT

1


THE NATURE OF THE ORGANIZATION

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Marketing Environment (1.1)
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

The firm is a creature 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

2

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Types of Organization (1.2)
Public sector organizations

n
n
n
n
n
n
n
n
n

State-provided goods or services
Driven by government objectives
Socially desirable goals, e.g. equity
Supply public goods to all, e.g. defence
Ensure supply of merit goods, e.g. education/
health
Funded by taxation, fees or government
borrowing
Recent privatizations/deregulation (encourage
marketing orientation)
Shift from direct providers to service facilitators
Public/private partnerships – marry strengths
of each

Private sector organizations
Marketable output and exports
Privately owned and controlled
Businesses compete to satisfy consumer wants
Profit drives effective and efficient use of
scarce resources

n Includes global multinationals
n Shareholder concerns may override social
concerns
n
n
n
n

Voluntary sector organizations
• Normally non-profit-making
• Rely on voluntary contributions and dedicated staff
• Compete for funds/public attention for causes

MARKETING ENVIRONMENT

3


THE NATURE OF THE ORGANIZATION

Business Classifications (1.2)

Advantages

Disadvantages

Sole Trader – characteristics

– Maximum privacy

– Unlimited liability for

n
n
n
n
n
n

Simple to form
Individual owns and controls
Unincorporated
No separate legal existence
Self-employed
Individual is the business

– Minimum formalities
– Favourable taxes
– Least cost to form
– Focused/motivated
– Close to customers
– Close to employees
– Flexible/responsive

debts
– Specialized and high
risk
– Jack of all trades/
narrow view
– Burden plus lack of

continuity
– Hard work and long
hours
– A lot of competition
– Lack of management
skills

4


Partnerships – characteristics
n
n
n
n
n
n
n

Unincorporated
Two or more partners
By agreement/law
Legal maximum, e.g. 20
Jointly liable for debt
Share profits/losses
‘Limited partnership’ but one is liable

Advantages

Disadvantages

– 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

MARKETING ENVIRONMENT

5

THE NATURE OF THE ORGANIZATION

Registered Companies – characteristics
Dominant form
Public (plc) and private limited
Incorporated by law
Shareholders contribute capital
Regulated by Memorandum (external scope)
and Articles (internal administration) of
Association
n Submit independent audited accounts/
directors’ report
n
n
n
n
n

Issues
• Short-termism, take-over threat
• ‘Fat cat’ remuneration levels

Advantages

Disadvantages

– Separate legal form

– Complex/costly to

– Limited liability
– Finance raising
– Easy share transfer
– Fund development
– Customer confidence

form
– Disclosure
requirements
– Government
regulations
– Operational inflexibility
– Size may breed
impersonality
– Ownership/
management divide

6


The case for privatizing

Economic considerations

This involves transferring ownership of 51% or more of
shares in a public sector organization to private hands

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Limited competitve pressure when nationalized

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Significant efficiency improvements

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Increased competition and consumer choice

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Pressure to become marketing orientated

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Improved industrial relations

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Freedom to exploit diverse opportunities

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Lower prices and steep rise in productivity

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Poor record of efficiency
Susceptible to pressure groups like unions and
political interference
Limited by government funding
Privatization reduced state role
Led to deregulation/cut red tape
Encouraged wider share ownership – notably
customers and workforce
Greater freedom to market services
Sale cuts government borrowing
Regulators appointed with powers to enforce
change, e.g. Oftel
Examples: water; gas; electricity; telecoms;
lotteries

Questions set on organizations often call for
comparison of types or sectors

š

l

š

Political considerations

To focus on such questions use a grid for point
by point comparison/to earn format marks

MARKETING ENVIRONMENT

7


THE NATURE OF THE ORGANIZATION

Strengths of SMEs (1.3)
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Cater closely for local customers
Sensitive to buying habits/tastes
Able to focus on a niche market

Owns business/attention to detail
Flexible/adaptable organization
Attract ‘quality’ staff unwilling to work in large
firm
Finger on pulse as needs change
Tend to be inventive/innovative

Relative weaknesses
– See disadvantages of sole traders and partnerships
– Reverse of large/global strengths*

Strengths of large/global firms
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Economies of scale, e.g. discounts
Risk spread across various markets
Justify use of specialized skills, etc.
Secure cheaper finance
Exploit best practice
Transfer technology and ideas
Vast bargaining power re suppliers
Ability to centralize strategy

Advantage from brand leadership

Relative weaknesses
– See registered company drawbacks
– Reverse of small firm strengths*

8


REMEMBER

-

Vision 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

Example of vision: a PC with Windows software on
every desk (Microsoft)
Example of mission: To organize the world’s
information (Google)

Mission statements (1.4)

Meaning: Describes core activities
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Fundamental reason for organization’s existence

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Establishes what business it should be in

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Distinguishes uniqueness from other organizations

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Identifies competences, customers, relationships

Importance: Shapes corporate culture
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Enables sense of direction, unity, common purpose

– Triggers the mobilization of resources to achieve it

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Provides a set of corporate values and priorities

– Drives organizational behavior

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Clear statement for external stakeholders

– Key to securing a competitive edge

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Provides a benchmark for assessing performance
MARKETING ENVIRONMENT

9


THE NATURE OF THE ORGANIZATION

Organizational Objectives (1.4)

– Public: Public service/equity/cost effectiveness

Specific ends or achievements to be realized at a
future time to fulfil the mission of the organisation

– Private: Maximize profit/growth/maket share

NATURE
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Strategic objectives are long-term goals set by
senior management, e.g. achieve market
leadership
Tactical objectives are set by middle managers
and are more measurable, e.g. open 10 new outlets
Operational objectives are short-term and set by
first line managers, e.g. cut customer complaints
by 5%

SIGNIFICANCE
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Objectives should be SMART ¼ specific,
measurable, achievable, relevant and time-limited

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Objectives vary by sector:

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– Charity: Alleviate suffering/raise contributions

10

Reason why organizations exist
Drive organizational behavior
Supply motivation/sense of purpose
Time-limited targets provide control
Survival/profit stimulate competition
Profit maximizing (revenue – cost) ensures that
firms supply what consumers are prepared to
pay for, using methods that minimize cost
Rapid response to changing tastes/innovation of
more efficient method
Marketing may pursue market share/sales max.
þ profit constraint
Growth provides opportunities


Internal influences on aims
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Memorandum of Association limits business scope

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Personal values/goals of directors/senior managers

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Aversion to risk and future expectations

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Resource limitations

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Inertia and past success may prevent review

External influences on aims
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Must match internal strengths/weaknesses with
external opportunites and threats

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Present/future expectations of shareholders

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Interests of connected and external stakeholders

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Competitive forces

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Changes in government policy and legislation

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Pressure groups

Drivers for Change (1.5)
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

MARKETING ENVIRONMENT

11


THE NATURE OF THE ORGANIZATION

Organizations as Systems (1.6)

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View organizations as part of a wider system
Inputs are drawn from environment and
converted into outputs
Positive (goods, services) and negative (wastes)
outputs are returned
Organizations made up of subsystems
(e.g. marketing, production)
Boundary between systems represents
interface
Feedback corrects deviations in outcomes
vs. aims
Interdependent with environment
Scan/adapt to threats/opportunities

12

Marketing Interface (1.6/7)
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 ENVIRONMENT

13


THE NATURE OF THE ORGANIZATION

14

Dynamic Environment (1.8)

Importance to marketing

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

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Creates ambiguity over future patterns

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Can create opportunities if managed well

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The environment must be monitored and analysed
to identify threats and potential impacts

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Prioritize on most significant developments

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A proactive response is demanded

n Even the natural environment appears unstable
with freak weather conditions

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Reduce resistance in favor of a ‘culture of change’

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Requires flexible, decentralized, organic structures

Dynamic conditions suggest powerful forces are
driving change, e.g. IT developments or a catalyst,
e.g. new entrant or deregulation

l

Associated costs may be transferred to customers
(higher price); workers (redundancy); competitors
(lower sales); government (subsidies), etc.

l

Complex markets involve many interdependent
causual factors producing non-routine problems

n Technological forces, political discontent, variable
prosperity, fundamentalism also disturb stability


Managing the Environment (1.8)

Organizations of the future

A contingency approach:

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Flexible dynamic structures

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Organic and fluid

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Focused but adaptable

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Lateral networked relationships

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Task, skill and relationship focused

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Flexitime for effective task completion

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Customer orientated

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Employee involvement/participation

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Shared benefits

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Wider share ownership

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Marketing secures collaboration and integration of
key functions

Appropriate marketing action depends on the
particular circumstances of the situation rather
than predetermined rules or policies
Marketers must recognize there are no certainties in
a global economy-tailor response to an evolving
situation
Even McDonalds must modify its universal formula
to match competitive/cultural realities – India’s
sacred cow
Logical development of the systems perspective to
determine appropriate responses in the face of
multi-faceted change

MARKETING ENVIRONMENT

15


THE NATURE OF THE ORGANIZATION

16

Emerging Challenges (1.9)

Significance for marketing

E-commerce

n Rising on-line sales challenge traditional retailers

Implies radical restructuring/culture shifts for organizations and will demand a systems-driven response

n Source of competitive advantage for supply chain

Globalization

n Need to monitor the global market-place

Rise of multinationals treating the world as an
integrated market place for resources and products
and developing relatively standardized products to
meet customer needs

n Threat of competition in domestic market

Increasing competition

n Price must be comparable even when
differentiating

Product of improved access to information;
deregulation; more discerning customers

Digitalization
Allows seamless integration of IT (text/sound/vision)
into all aspects of life, e.g. mobiles and broadband TV

n Large reduction in transactions cost

n Small firms must exploit niches

n Action on monopoly abuse – Microsoft E497m fine
n Broadband allows tailored promotion and
interaction
n Mobiles becoming a critical marketing resource


Hints and Tips

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Identify ‘organizational’ questions – Q2 or Q3

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Read through Unit 1 of the Marketing
Environment Coursebook

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*Note the potential overlap of points from different
parts of this syllabus section

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Seldom the main focus of a mini case or even case
questions

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Have a vision of e-commerce, e.g. based on PCs,
digital TV or 3G mobile phones

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Normally at least one full optional question per
paper but may overlap with other sections

š

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Many optional questions are set in a specific
organizational context

Fix academic ideas by relating them to your own
situation: Do you review your own goals, how
have they changed, by what forces?

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Your revision provides an example of an open
system – you draw knowledge from lectures/
readings; convert it into understanding to yield
output as coursework and get feedback

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Focus to ensure you answer the question

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Breakdown different components of the questions
to ensure you address all of the issues

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Make outline plans of all the exam questions

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Go to www.cimvirtualinstitute.com and
www.marketingonline.co.uk for additional support
and guidance

MARKETING ENVIRONMENT

17


THE MICROENVIRONMENT

Unit 2

LEARNING OUTCOMES

KEY REVISION POINTS

å Appreciation of interconnected environments
å Importance of stakeholders and their
interaction
å Significance and impact of pressure groups
å Role of marketing in managing these groups

å Complex nature of the environment
å Internal, connected and external stakeholder
groups – their importance to the organization
å Pressure groups and their influence on
decision-making
å Management of stakeholders and pressure
groups

Syllabus reference: 2.1, 2.2, 2.5

Microenvironment Context (2.1)
Includes the groups and organizations close to the
business that affect its ability to satisfy customers.
They have a two-way operational relationship with
the business and may be influenced by it to some
degree.
n Refer back to systems theory
n All organizations aim to make resources
productive
n Resources are scarce and diverse
n They must be attracted from the environment

n Ineffectiveness or inefficiency threatens survival
n Resource providers are stakeholders

Classifying the environment
n Organizations face a confusion of environment
factors
n They need to sort and classify these factors
n They may or may not represent threats/
opportunities for marketers
n Represent jigsaw pieces for grasping the
bigger picture
n Include all factors/forces with significant
impact on organization

n Inputs are transformed in time, place or form to
create utility, value and satisfaction for the
customer

MARKETING ENVIRONMENT

19


THE MICROENVIRONMENT

The Microenvironment

20