Marketing Strategy and Competitive Positioning pdf ebook

CHAPTER 3 THE CHANGING MARKET ENVIRONMENT
comprise an industry – companies that make refrigerators, washing machines and so on. 
On the other hand, laundry products constitute a market – the products and services 
customers use to clean their clothes. This distinction is important for two reasons. First, 
if we only think about the conventional industry we may ignore the potential for compe-
tition for our customers from companies with different products and technologies that 
meet the same need, not to mention the so called ‘disruptors’. For example, conventional 
taxi companies were wrong-footed by Uber’s entry into the market, building upon the 
sharing economy. 
Second, there are signs that many companies are having to abandon traditional industry 
definitions under pressure from distributors and retailers. For example, category management
in grocery retailing is fundamental, the retailers being concerned with managing a category of 
products that meet a particular need, such as laundry, meal replacement or lunch, not with 
individual products or brands. The effects of category management can be bizarre – Walmart 
discovered, for example, a relationship between the purchase of disposable nappies and beer 
on Friday evenings. The explanation was that young fathers were being told by their part-
ners to stock up on nappies on the way home from work. They reasoned this was a good 
opportunity (or reason?) to stock up on beer as well. These products are now merchandised 
together on Fridays. The point is that we should temper any conclusions we draw about 
the industry by recognising that markets may change in ways that invalidate conventional 
industry definitions. 
Systematic analysis of the business environment typically commences at the macro level, 
highlighting aspects of the broader environment that may impinge on the specific markets 
the firm operates in. At a more specific industry level, however, the identification of the 
forces driving competition within industries can be a useful starting point. We then go on 
to discuss strategic groups, which provide a useful basis for understanding opportunities 
and threats facing individual firms. It is within those strategic groups that firms compete 
to grow, survive or decline.
3.1 
A framework for macro-environmental analysis 
Here we deal with the nature of change in the macro-environment and examine its impact 
on organisational marketing strategies. 
The importance of understanding the macro-environment is twofold. First, we should 
recognise the marketing impact of change in the business environment and be in a position 
to respond. But, second, we should also be alert to the fact that the nature of the change 
facing organisations is itself changing. For example, Haeckel (1997) already noted in the 
1990s that of all the pressures driving companies to revitalise their marketing processes: 
the leading candidate is a change in the nature of change: from continuous (but incre-
mental) to discontinuous [because] when discontinuous change makes customer requests 
unpredictable, strategic leverage shifts from efficiency to flexibility and responsiveness – 
and to investments that enable a firm to sense unanticipated change earlier and co-ordinate 
an unprecedented response to it faster.
Many changes are taking place in the environment in which marketing operates, and 
some important examples are summarised briefly in the text that follows (see also Kotler 
et al. , 2017 ). However, this can never be a comprehensive list for the reasons Haeckel iden-
tified previously. For our purposes, change is discussed under three main headings. Taken 
together these are often referred to as PEST analysis (see Figure 3.1 ) – political and economic, 
social (including legal, cultural and environmental) and technological environments. We 
discuss the political and economic environments together as the interplay between the two 
often makes it difficult to disentangle their individual impacts. A political change here can 

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59
THE ECONOMIC AND POLITICAL ENVIRONMENT
create an economic effect there, and changes in the economy may well precipitate political 
action or change.
3.2 
The economic and political environment 
The global economic recession of 2008–10 was the deepest since the Great Depression of 
the 1930s, and its impact is still felt today. Triggered by a financial crisis brought about 
through unsustainable lending practices by banks, the credit crunch rapidly spread to the 
‘real’ economy as firms of all sizes in developed economies found it increasingly difficult to 
raise operating funds. Similarly, consumer credit dried up significantly, reducing spending 
power of consumers. In the UK, the Financial Times index of 100 leading shares (the FTSE 
100) plunged from a high of 6,500 before the recession to a low of 3,500 in March 2009. As 
businesses struggled to survive and unemployment rose, government tax takings fell signifi-
cantly and governments around the world found that they had to increase their borrowing 
to record levels to keep services operating. 
In attempts to bolster their economies, governments adopted massive fiscal stimulus 
packages and reduced interest rates to record-low levels. In November 2008, China had 
pumped $586bn into a stimulus package and in April 2009 Japan followed suit with a 
$153bn package. In 2009, the USA passed the American Recovery and Reinvestment Act, 
committing £787bn to boosting the US economy. 
The impact of these economic shocks was to be felt for many years to come. While the 
private sector recession may have been declared officially over by January 2010 in most 
developed countries, the public sector recession was just starting. In attempts to rebalance 
the books and reduce national debt levels, governments began to raise taxes, cut public 
sector spending, or combinations of these actions. 
Even before the credit crunch, however, many of the developed economies were experienc-
ing a slowing of economic growth. While economic growth is undoubtedly cyclical, the indica-
tions are that the developed economies are unlikely to see again the rates of growth experienced 
in the first few decades after the Second World War. Many organisations will have to learn to 
live with low growth in their once-buoyant markets. Where growth objectives once dominated 
management thinking, other criteria (such as profitability) are now becoming more important. 
Economic growth is of particular concern to companies. In April 2019 the IMF cut its global 
growth to its lowest pace since the 2008 crisis, to just 3.3 per cent. Other measures of economic 
activities have softened (illustrated by Figure 3.2 ), thus creating challenges for business.
Figure 3.3 shows a number of key considerations of which firms need to be aware when 
assessing the political and economic environments in which they operate.