CHAPTER 2

OPERATING
ENVIRONMENT

PhD. Hoàng Thị Thu Hương

AGENDA

2
Strategic Marketing Planning
Strategic
Where are we now? Marketing Audit analysis

Elements
1&2
Where do we Strategic
Objectives and strategies options
want to go?

How might we Designing and implementing

Element 3
get there? the marketing mix
Strategic
implementation

Did we get there? Monitoring and control

 Look at this like a Road Race
Where are we
heading specifically?
Where are we at the Given what I know
Marketing Audit
moment and what’s about my car, the road
going to affect my race? and other people’s
EXTERNAL cars, how tough is my
• Things I can’t control journey going to be?
but they affect Objectives and strategies When will I get to my
everyone else too. destination?
PERFORMANCE What do I need to
• How good other change or adapt to
people’s cars are. Designing and implementing make sure I get there
INTERNAL the marketing mix before others / better
• How good my car, than others?
my driver and my
How did it go? Did
map is.
some wrong turns
Monitoring and control slow me down? Does
my car need some
repairs?
Defining ‘Marketing Audit’
"…a systematic examination of the marketing function’s
objectives, strategies, programmes, organisation and
performance." (Dibb et al., 2012)

"…a systematic examination of a business’s marketing

environment, objectives, strategies and activities, with a view
to identifying key strategic issues, problem area and
opportunities." (Jobber, 2010)
Marketing Audit Purpose
The means by which a brand can:

• Understand how it relates to the environment in which it operates

• Help management to select a position within the environment

• Diagnose reasons for the successes and failures experienced by a brand

• Where are we now?

• How did we get here?

• Where are we heading?

Structure of a Marketing Audit
MACRO Analysis

MICRO Analysis

TOWS Analysis

Identification of
Critical Success
Factors
(CSFs)
 Marketing Audit Outcomes
An effective marketing audit allows organisations to:

1. Carefully watch the business/marketing environment

2. Spot potential opportunities and threats

3. Identify and build upon strengths in relation to external opportunities and threats

4. Exploit new opportunities faster than competitors

5. Rectify weaknesses as they relate to external opportunities and threats

6. Protect against and counter external threats

Environmental Scanning

"...is the internal communication of external information

about issues that may potentially influence an
organisation's decision-making process, focusing on the
identification of emerging issues, situations and potential
threats in the external environment." (Albright, 2004, cited by Baines

et al., 2017, p.105)

The Marketing Environment
MACRO MACRO MICRO
P…POLITICAL Environment Brand/Company
E…ECONOMIC Competitors
S…SOCIOCULTURAL MICRO Customers
Environment
T…TECHNOLOGICAL Suppliers
L…LEGAL Intermediaries
E…ENVIRONMENTAL Publics
(Aguiler, 1967)
The MACRO Environment
A number of broad forces that affect not only the brand, but also the
other factors within the MACRO environment (e.g. a brand’s
competitors, suppliers)

In the main, brands have no influence over the elements

within the MACRO environment
Political Factors
“The political factors in the external environment relate to the
interaction between business, society and government. An
understanding of political factors embraces the conditions that
exist before laws are enacted, when they are still being formed,
or when they are in dispute … important because companies
can detect signals concerning potential legal and regulatory
changes in their industries…” (Baines et al., 2017, p.98)
 Political Factors
• Changes in government, government departments and public policy:
• Locally
• Nationally
• Internationally

Political factors include government policies, leadership,

and change; foreign trade policies; internal political
issues and trends; tax policy; regulation and de-
regulation trends
 Political factors that affect business
1. Legislation – Education, Employment, Discrimination, Data protection, Environmental, Health and
Safety, Intellectual property etc
2. Taxes
3. Bureaucracy
4. Corruption
5. Freedom of the press
6. Tariffs
7. Competition regulation
8. Regulation & deregulation
9. Government stability
[Link] groups / Trade union action
[Link] / export restrictions
 Example – Majestic Wines
“… Majestic Wine, the UK’s largest specialist retailer of wine, is closing its stores in Calais,
France, blaming Brexit regulations destroying the traditional ‘booze cruise’” (Mintel, Dec 2021)

“Our Calais and Coquelles stores are now permanently closed.

Following the changes to personal allowances enacted on us by the
UK government post-Brexit we have had no choice but to make the
regrettable decision to close these stores.”
Economic Factors
"The economic environment consists of factors that affect
consumer purchasing power and spending patterns …
Marketers must pay close attention to trends and consumer
spending patterns..." (Armstrong et al., 2015, p.89)

"Organisations usually have little impact on the wider economic

environment, because they have little control over
the macroeconomic variables … The challenge ... is to foresee
changes in the environment and how they might affect firms."
(Baines et al., 2017, p.101)
Economic Factors
• Economic cycles – boom versus recession:
• National
• Global (e.g. US recession 2007-2009/Covid-19 2020-???)
• Competitor nations (e.g. BRIC countries)
• ‘Linked’ nations (e.g. through trade agreements)

Brazil, Russia, India, and China

Economic Factors
• Employment rates
• Consumer spending
• Price inflation (impact on disposable income)
• Gross domestic product (GDP)
• Income, sales (e.g. VAT) and corporation taxes
• Interest rates
• Exchange rates
• Export quota controls and duties

• Recent article: UK economic outlook for 2021: Covid surge deepens the gloom
(The Guardian, 2021)
Discretionary Spending
“In November 2024, 27% of consumers said they were better off than a year ago, 30% said they
were worse off and most (43%) said their situation was about the same..”
(Mintel, 2024)

“Around 6 in 10 adults are spending less on non-essentials because of cost-of-living increases”

1. (Office National Statistics, 2024)
Sociocultural Factors
"The cultural environment is made up of institutions and other
forms that affect a society’s basic values, perceptions,
preferences and behaviours. People grow up in a particular
society that shapes their basic beliefs and values." (Armstrong et al.,
2012)

"Lifestyles are constantly changing and, over time, consumers'

preferences shift. Companies that fail to recognise changes in
the socio-cultural environment and to adapt or change their
offerings often fail." (Baines et al., 2017, p.101)
Sociocultural Factors
• Demographic changes
• Aging population
• Changes in family structure
• Geographic shifts in population
• Increasing diversity/multiculturalism
• A better educated, more 'white-collar’/unemployment,
professional population

(Adapted from Armstrong et al., 2015)

Sociocultural Factors
• Changes in values and lifestyles:
• Environmentalism vs consumerism
• Experience economy
• Health consciousness
• Work/life balance
• Religious observation
• Individualism vs collectivism

(Adapted from Armstrong et al., 2015; Baines et al., 2017)

Example – Cultural Inclusivity
Cycling brand Rapha has created a women’s cycling Hijab - cycling performance
gear for Muslim women in collaboration with London’s Cycle Sisters.”
(Mintel, 2025)

A one-piece close-fitting
performance hijab made from
100% recycled polyester for a
variety of cycling and outdoor
conditions.
Technological Factors
"New technologies create new markets and opportunities.
However, every new technology replaces an older technology …
When old industries fought or ignored new technologies, their
businesses declined." (Armstrong et al., 2015, p.94)

"New technologies can substantially affect not only high-

technology businesses, but also non-technology businesses.
Examples include those aspects of technology that impact upon
productivity and business efficiency." (Baines, Fill and Page, 2013)
Technological Factors
• Social media and the rise of video
• Mobile technology
• Wearable technology
• Virtual Reality/Augmented Reality
• Wireless technology and “smart objects”
• AI ChatGPT, CoPilot, Claude
Technological Factors
• Artificial intelligence
• Recent article: How artificial intelligence in retail and e-commerce
help deliver the right products to consumers (British Retail
Consortium, 2020)
• Biosecurity (e.g. fingerprint recognition software)
• Automation
• Big Data
Example – Food Service Delivery
1. The online shopping giant Amazon Prime says they will be delivering small
packages in the UK within an hour of an order being placed. It already offers
drone deliveries in the US, in Lockeford, California and College Station,
Texas.

2. The drones will be able to fly out to about 12 kilometres from their base,
which will be located in one of the UK’s fulfilment centres
(Independent, 2020)
Legal Factors

“…legal factors in the external environment span every aspect

of an organisation’s business … relating to issues ranging from
transparency of pricing, through product safety, the promotion
of good practice in packaging and labelling … trade practices
[and] codes of advertising.” (Baines et al., 2013, p.104)
Legal Factors
• Changes in legislation and regulation:
• UK and worldwide
• Anti-trust, acquisitions and mergers legislation
• Bans, import/export restrictions
• Employment law
• National living wage increase in April 2020
 Example – Influencer Marketing
“When a brand gives an influencer a payment, any posts then
promoting or endorsing the brand or its products/ services become
subject to consumer protection law. Payment means any form of
monetary payment; commission; a free loan of a product/ service; a
free product/service (whether requested or received out of the blue);
or any other incentive.”
(Advertising Standards Authority, 2020)
Environmental Factors

"Increasingly customers are worried about the impact of companies on their

ecological environments. Companies need to decide how to incorporate
changing trends in sustainability into their organisational processes." (Baines, Fill
and Page, 2013)
Environmental Factors
• Climate change
• Pollution (air, water and plastic)
• Waste (household and industrial)
• Deforestation
• Overpopulation (and urbanisation)
 Example: Grocery retail sector
• Recent article: UK households waste 4.5m tonnes of food each year (The Guardian,
2020)

• The Waste and Resources Action Programme (WRAP) website

• Aldi
• Asda
• Lidl
• Morrisons
• Sainsburys
• Tesco
• Waitrose
Application to the Assessment
• This research relates to the MACRO section of your Marketing Audit

• You need to apply the PESTLE framework to the sector in which your brand operates:

Political
Economic
Your research Sociocultural
Your Technological
brand’s
sector Legal
Environmental
The Marketing Environment
External Micro-Environment
(macro) made up of:
P…POLITICAL Macro Performance &
E…ECONOMIC
Environment Internal
Company / Organisation
S…SOCIOCULTURAL itself
Micro
T…TECHNOLOGICAL Environment Competitors
L…LEGAL Customers
E…ENVIRONMENTAL Suppliers
(Aguiler, 1967)
Intermediaries
Publics / Masses
The Micro-Environment

Macro Micro
Internal
External Environment
Environment • Organisation itself

Performance
Environment
• Competitors
• Customers
• Suppliers
• Intermediaries
• Masses

(Adapted from Baines et al., 2017)

 The Performance Environment

"…consists of those organisations that either directly or

indirectly influence an organisation’s operational
performance … Knowledge of the performance arena
allows organisations to choose how and where to operate
and compete, given limited resources, … [and] allows
adaption and development in complex and increasingly
turbulent markets." (Adapted from Baines, Fill and Page, 2013., p.51)
Industry Analysis
Porter’s Five
Forces

Competitors

(Adapted from Porter, 1979)

Porter’s Five Forces

Baines [Link], 2021 p.99

Competitor Analysis
• Who are the main direct competitors?
o Size
o Market share
o Strengths (i.e. competencies)
o Weaknesses (i.e. vulnerabilities)
o Objectives and strategies

• Are there any substitute products/services (i.e. indirect competitors)?

• Is there a threat of new entrants to the market or are there significant barriers to entry?

(Adapted from Fahy and Jobber, 2019)

• Competitors:
o Direct competitors – these are businesses offering a similar product or
service, which is aimed at the same customer group. (For hotels, a three-star
provincial business hotel could have a local competitor set including all three-
star hotels, and possibly some two- and four-star hotels)
o Competitors offering substitute products – these are offers that potential
consumers can choose instead of a hospitality product and which satisfies the
same need ([Link] at home and cooking a meal instead of going out to a
restaurant).
o Indirect competition – this includes all those companies and non-profit
organizations that are competing for consumers’ disposable income (e.g.
choosing between buying a new car or going on an exotic holiday).
Customers We’ll talk about
this more next
week!
• Who are your existing customers?
• Do they group together?
• What’s their motivation (e.g. needs, wants, problems)?
• What benefits or solutions are they seeking?
• What are their criteria (e.g. value, convenience, quality, choice)?
• How, when and where do they buy?
• How do they currently rate the brand (e.g. reviews, ratings)?

(Adapted from Fahy and Jobber, 2019)

Customers vs Consumers
“The difference is subtle, but real. A customer is a buyer, a
purchaser, a patron, a client, or a shopper, and therefore
someone who buys from a shop, a website, a business … The
consumer is someone who uses the offering (or eats it, in the
case of food).” (Baines et al., 2017., p.6)
Suppliers
• Who are they?
• Where are they?
• What are their competencies and shortcomings?
• Who has the best relationships / exclusivity etc?
• What are the trends and outlook for the future?
• Supply shortages can:
o Increase prices
o Impact quality
o Impact sales
o Influence customer
satisfaction

(Adapted from Fahy and Jobber, 2019)

Suppliers
• An average car contains 15,000
components and the industry is
served by three layers of suppliers:
o Layer 1 – Complete systems, e.g. electrical or braking
systems, served by…
o Layer 2 – Producing cables etc., served by…
o Layer 3 – Supplying plastic shields or metals

Industry opinions:
• The supply chain trends shaking up 2023 (KPMG, 2023)
• What’s Behind The Global Supply Chain Crisis? ([Link], 2023)
• Where Is The Global Supply Chain Heading In 2023? (Forbes, 2023)
We are…Royal Canin
Suppliers to the Dog Food industry
Suppliers in the dog care market include those providing and manufacturing raw materials
such as plastic, steel, chemicals, meat, agro products and packaging materials. (Marketline,
2024)

Companies offering raw materials are generally small; therefore, supplier power is
correspondingly reduced. (Marketline, 2024)

([Link], 2024)
Intermediaries
• Help the organisation to promote, sell and distribute its goods/services to
the customer:
o Resellers
o Physical distribution firms
o Marketing services agencies
o Financial intermediaries
• Marketing intermediaries:

o Help the company to promote, sell, and distribute its goods to

final buyers

o Intermediaries are important links in the distribution channel

from the customer to the hospitality outlets
• Delivering
• Connecting
• Distributing
• Promoting/Marketing
• Selling
• Financing
• Negotiating
• Matching
• Introducing
• Sharing the Risks
3-52
Intermediaries
• Power changes
• Channel attractiveness
• Growth potential, e.g. online channels
• Changes in physical distribution methods
• The roles and interests of decision-makers and influencers
• Example: Amazon utilising drone technology

[Link]
om/business/article/2024/
aug/15/clear-for-takeoff-
amazon-gets-green-light-
to-test-fly-delivery-drones-
in-uk

(Adapted from Fahy and Jobber, 2019)

The Masses - ‘Stakeholders’ vs ‘Publics’
“Stakeholder … A person or organisation with an interest – that
is a ‘stake’ – in the levels of profit that an organisation
achieves, its environmental impact, and its ethical conduct in
society.” (Adapted from Baines, Fill and Page, 2013., p.400)

“‘Publics’ arise from stakeholders when they recognise an issue

and decide to do something about it. A public is a group of
people who face a similar problem; recognise that the problem
exists; organise to do something about the problem.” (Adapted
from Grunig and Hunt, 1984)
0PPORTUNITIES FOR
GROWTH: ANSOFF'S
MATRIX

55
 TEAM-WORK
Analyze situation of TK/VT/C&K/TS...
- PESTEL
- Porter’s 5 Forces
- SWOT

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THANK YOU