Marketing Environment and Environment Scanning
Transcription
Marketing Environment and Environment Scanning
MARKETING INTRODUCTION Marketing is about identifying and meeting human and social needs. One of the shortest good definitions of marketing is ―meeting needs profitably.‖ The American Marketing Association offers the following formal definition: Marketing is the activity, set of institutions, and process for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. Coping with these exchange processes calls for a considerable amount of work and skill. Marketing management takes place when at least one party to a potential exchange thinks about the means of achieving desired responses from other parties. Thus we see marketing management as the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value. Peter Drucker, defines There will always, one can assume, be need forsome selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer in a customer who is ready to buy. All that should be needed then is to make the product or service available. Marketing Scope Marketers market 10 main types of entities: goods, services, events, experiences, persons, places, properties, organizations, information, and ideas. 1. Goods: Physical goods constitute the bulk of most countries production and marketing efforts. 2. Services: AAs economies advance, a growing proportion of their activities focuses on the production of services. Services include the work of airlines, hotels, car rental firms, etc. 3. Events: Marketers promote time-based events, such as major trade shows, artistic performances, and company anniversaries. 4. Experiences: By orchestrating several services and goods, a firm can create, stage, and market experiences. 5. Persons: Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other professionals all get help from celebrity marketers. 1 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING 6. Places: Cities, states, regions and whole nations compete to attract tourists, residents, factories, and company headquarters. 7. Properties: Properties are intangible rights of ownership to either real property (real estate) of financial property (stock and bonds). The are bought and sold, and these exchanges require marketing. 8. Organizations: Organizations work to build a strong, favorable, and unique image in the minds of their target publics. 9. Information: The production, packaging, and distribution of information are major industries. Information is essentially what books, schools, and universities produce, market, and distribute at a price to parents, students, communities. 10. Ideas: Evert market offering includes a basic idea. Products and services are platforms for delivering some idea or benefit. Parties to Marketing Marketers and Prospects A marketer is someone who seeks a response-attention, a purchase, a vote, a donationfrom another party, called the prospect. Marketers are skilled at stimulating demand for their products, but that’s limited view of what they do. The seek to influence the level, timing and composition of demand to meet the organization’s objectives. Eight demand states are possible. 1. Negative demand- Consumers dislike the product and may even pay to avoid it. 2. Nonexistent demand- Consumers may be unaware of or uninterested in the product. 3. Latent demand- Consumers may share a strong need that cannot be satisfied by an existing product. 4. Declining demand- Consumers begin to buy the product less frequently or not at all. 5. Irregular demand- Consumer purchase vary on a seasonal, monthly, weekly, daily, or even hourly basis. 6. Full demand- Consumers are adequately buying all products put into the marketplace. 7. Overfull demand- More consumers would like to buy the product than can be satisfied. 8. Unwholesome demand- Consumers may be attracted to products that have undesirable social consequences. 2 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING Markets The word ―Market‖ is derived from the Latin word ―Marcatus‖ meaning a place where business is conducted. The different definitions of market are as follows: ―Marketing includes both place and region in which buyers and sellers are in the competition with one another.‖-Pyle. ―Market, for most commodities, may be thought of not as a geographical meeting place but as getting together of buyers and sellers in person, by mail, telephone, telegraph or any other means of communications.‖-Mitchell. Market Classification I. Area based market 1. Family Market: The business transactions are confined to family members and close relatives, such markets are called family market. 2. Local Market: A market in a village, town, city etc. specify an area for a market and these are referred to as local markets. This categorization is very meaningful for perishable goods (agro produce) which have variety of durability from one day to one year. Local markets are more meaningful for daily used goods. 3. National Market: The products that are used throughout the country are covered by the national market. Normally industrial goods, consumer goods, facilities etc., are covered throughout the nation. These goods will have to face completion for price and quality at national level. 4. World Market: Global marketing involves selling the products outside the country for which an entrepreneur has to have world class manufacturing and should be able to complete in quality and price at global standards. II. Goods based market 1. Commodity Market: These are the markets specialised based on the goods. Kanpur is known for Leather goods market and Bangalore is known for Silk Sarees and Silk Cloth market. Thus various locations and places are identified for different products. This will mean consumers can get variety of same product in different sizes, volumes and prices. 3 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING 2. Capital Market: The capital is divided as money market, foreign exchange market and stock exchange market. Nowadays the old method of lending is reduced and banking sector is doing issue of loan against securities and therefore money market in the present area is widely distributed. Similarly foreign exchange market is guided and controlled by RBI and channelized through various nationalised banks. The stock markets are the places where shares, debentures and bonds are traded. Bombay, Calcutta, Madras and Delhi are the biggest share markets. III. On the basis of Economics 1. Perfect Market: A market is called perfect market if there are large number of buyers and sellers, prices are uniform, there is freedom for movement of goods and both buyer and seller are supposed to be having full knowledge of the market. This speaks of idealistic situation which is rare to be seen in practice. 2. Imperfect Market: Whenever prices are not uniform, there is lack of communication about price, quality and restrictions for movement of goods the situation is called as Imperfect market. IV. On the basis of Transaction 1. Spot Market: Goods are purchased by paying on the spot and goods are moved physically to complete the transactions. 2. Future Market: In this case the dealing, despatching and completion of transactions may take over a period of time. The contract on price and terms is made for a commodity to be possessed on a future date. This means price is prefixed for a future purchase which will have to be honoured irrespective of the prevailing rate at that time. V. On the basis of Regulation 1. Regulated Market: Regulated market refers to commodities which are controlled by statutory rules for price, quantity and region criteria. For a long time in India sugar, kerosene, gas, rice and wheat were under regulated market. 2. Open Market: Open Market refers to free or unregulated market where there are no restrictions of any kind for sale and purchase of goods. 4 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING VI. On the basis of Time 1. Perishable Goods market: Some goods are having very short life and have to be moved and sold in a very short time. The examples are vegetables, fruits, and milk. The price is not only determined on the basis of demand but also considering the duration they have been stored before sale. 2. Shore Period Market: Certain goods have a longer span of life say 1 months to 3months and these have to be stored and sold within that time. Some of the examples are: pickles, ghee, dalda, fruit jams and food preparations like jamun mix etc. 3. Long Period Market: This covers goods which can be kept for even upto 1 year and some more than 1 year. Only care has to be taken for likely damages due to environment problems, transportation, handling and storage. VII. On the basis of Volume 1. Wholesale Market: This is a place where goods are transacted in bulk quantities and mainly such buyers attend these markets. The wholesale markets are located in cities and big towns. Here again some places are specialised or famous for certain category of goods. 2. Retail Market: Retail markets are the places like traders, big and small stores where the goods are directly sold to the consumers. Marketplaces, Marketspaces, and Metamarkets The marketplace is physical, such as a store you shop in; the marketspace is digital, as when you shop on the Internet. Northwestern University’s Mohan Sawhney has proposed the concept of a metamarket to describe a cluster of complementary products and services closely related in the minds of consumers, but spread across a diverse set of industries. Metamarkets are the result of marketers packaging a system that simplifies carrying out these related product/service activities. THE EVOLUTION OF EARLIER MARKETING IDEAS 5 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING The Production Concept The production concept is one of the oldest concepts in business. It holds that consumers prefer products that are widely available and inexpensive. Managers of productionoriented business concentrate on achieving high production efficiency, low costs and mass distribution. Marketers also use the production concept when they want to expand the market. The Product Concept The product concept proposes that consumers favor products offering the most quality, performance, or innovative features. A new or improved product will not necessarily be successful unless it’s priced, distributed, advertised, and sold properly. The Selling Concept The selling concept holds that consumers and business, if left alone, won’t buy enough of the organization’s products. It is practiced most aggressively with unsought goods-goods buyers don’t normally think of buying such as insurance and cemetery plots-and when firms with overcapacity aim to sell what they make, rather than make whatthe market wants. Marketing based on hard selling is risky. It assumes customers coaxed into buying a product not only won’t return or badmouth it or complain to consumer organizations but might even buy it again. The Marketing Concept The marketing concept emerged in the mid-1950s as a customer-centered, sense—andrespond philosophy. The job is to find not the right customers for your products, but the right products for your customers. The marketing concept holds that the key to achieving organizational goals is being more effective than competitors in creating, delivering, and communicating superior customer value to your target markets. The Holistic Marketing Concept 6 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING The holistic marketing concept is based on the development, design, and implementation of marketing programs, processes, and activities that recognise their breadth and interdependencies. Holistic marketing acknowledges that everything matters in marketingand that a broad, integrated perspective is often necessary. It provides a chematic overview of four broad components characterizing holistic marketing: relationship marketing, integrated marketing, internal marketing, and performance marketing. (a) Relationship Marketing Increasingly, a key goal of marketing is to develop deep, enduring relationships with people and organizations that directly or indirectly affect the success of the firm’s marketing activities. Relationship marketing aims to build mutually satisfying long-term relationship with key constituents in order to earn and retain their business. Four key constituents for relationship marketing are customers, employees, marketing partners, and members of the financial community and balance the returns to all key stakeholders. To develop strong relationships with them requires understanding their capabilities and resources, needs, goals, and desires. (b) Integrated Marketing Integrated marketing occurs when the marketer devises marketing activities and assembles marketing programs to create, communicate, and deliver value for consumers such that ―the whole is greater than the sum of its parts.‖ Two key themes are that (1) many different marketing activities can create, communicate, and deliver value and (2) marketers should design and implement any one marketing activity with all other activities in mind. All company communications also must be integrated. Using an integrated communication strategy means choosing communication options that reinforce and complement each other. A marketer might selectively employ television, radio, and print advertising, public relations and events, and PR and Web site communications so each contributes on its own as well as improving the effectiveness of the others. (c) Internal Marketing 7 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING Internal marketing an element of holistic marketing, is the task of hiring, training, and motivating able employees who want to serve customers well. It ensures that everyone in the organization embraces appropriate marketing principles, especially senior management. Smart marketers recognize that marketing activities within the company can be as important-or even more important-than those directed outside the company. It makes no sense to promise excellent service before the company’s staff is ready to provide it. (d) Performance Marketing Performance marketing requires understanding the financial and nonfinancial returns to business and society from marketing activities and programs. Top marketers are increasingly going beyond sales revenue to examine the marketing scorecard and interpret what is happening to market share, customer loss rate, customer satisfaction, product quality, and other measures. They are also considering the legal, ethical, social, and environmental effects of marketing activities and programs. Marketing Mix Marketing mix is the set of marketing tools the firm uses to pursue its marketing objectives in the target market. The Four P Components of the Marketing Mix McCarthy classified these tools into four broad groups that he called the four Ps of marketing: product, price, place, and promotion. 8 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING Marketing-mix decisions must be made for influencing the trade channels as well as the final consumers. The company preparing an offering mix of products, services, and prices, and utilizing a promotion mix of sales promotion, advertising, sales force, public relations, direct mail, telemarketing, and Internet to reach the trade channels and the target customers. The firm can change its price, sales force size, and advertising expenditures in the short run. It can develop new products and modify its distribution channels only in the long run. Thus the firm typically makes fewer period-to-period marketing-mix changes in the short run than the number of marketing-mix decision variables might suggest. The four Ps represent the seller’s view of the marketing tools available for influencing buyers. From a Buyer’s point of view, each marketing tool is designed to deliver a customer benefit. Robert Lauterborn suggested that the sellers’ four Ps correspond to the customers’ four Cs. Four Ps Four Cs Product Customer Solution Price Customer cost Place Customer Promotion Communication Winning companies will be those that can meet customer needs economically and conveniently and with effective communication. Updating the Four Ps Given the breadth, complexity, and richness of marketing, however-as exemplified by holistic marketing-clearly these four Ps are not the whole story anymore. If we update them to reflect the holistic marketing concept, we arrive at a more representative set that encompasses modern marketing realities: people, processes, programs, and performance. 1. People reflects in part, internal marketing and the fact that employees are critical to marketing success. Marketing will only be as good as people inside the organization. It also reflects the fact that marketers must view consumers as people to understand their lives more broadly, and not just as they shop for and consume products and services. 2. Processes reflects all the creativity, discipline, and structure brought to marketing management Marketers must avoid ad hoc planning and decision making and ensure that state-of-the-art marketing ideas and concepts play an appropriate role in all they do. Only by instituting the right set of processes to guide activities and programs can a firm engage in mutually beneficial long term relationships. 9 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING 3. Programs reflects all the firm’s consumer-directed activities. It encompasses the old four Ps as well as a range of other marketing activities that might not fit as neatly into the old view of marketing. Regardless of whether they are online or offline, traditional or nontraditional, these activities must be integrated such that their whole is greater than the sum of their parts and they accomplish multiple objectives for the firm. 4. Performance as in holistic marketing, to capture the range of possible outcome measures that have financial and nonfinancial implications (profitability as well as brand and customer equity), and implications beyond the company itself (social responsibility, legal, ethical, and community related). Marketing Environment: Competition represents only one force in the environment in which the marketer operates. The marketing environment consists of the task environment and the broad environment. The task environment includes the immediate actors involved in producing, distributing, and promoting the offering. The main actors are the company, suppliers, distributors, dealers, and the target customers. Included in the supplier group are material suppliers and service suppliers such as marketing research agencies, advertising agencies, banking and insurance companies, transportation, and telecommunications companies. Included with distributors and dealers are agents, brokers, manufacturer representatives, and others who facilitate finding and selling to customers. The broad environment consists of six components: demographic environment, economic environment, natural environment, technological environment, political – legal environment, and social-cultural environment. These environments contain forces that can have a major impact on the actors in the task environment. Market actors must pay close attention to the trends and developments in these environments and make timely adjustments to their marketing strategies. 10 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING Elements of Marketing Environment Macro Environment It includes social and cultural factors, technological factors, economic factors, political and governmental factors, international factors and natural factors. Environmental protection received greater attention in order to protect the lives of the people, animals, plants and to maintain ecological balance. Social and Cultural Environment: a. Social and cultural factors in various countries of the globe affect the international business. These factors include attitude of the people to work, attitude to wealth, family, marriage, religion, education, ethics, human relations, social responsibilities etc. b. Culture: Derived mostly from the climatic conditions of the geographical region and economic conditions of the country. A set of traditional beliefs and values which are transmitted and shared in a given society A total way of life and thinking patterns that are passed from generation to generation. Norms, customs, art, values etc. Technological Environment: A given set of technologies available for the conduct of business determines the technological environment of business. Technology is the application of science, art and other fields of knowledge in various activities such as designing tools and equipments, producing goods and supplying services, communicating information and enhancing productivity. Technological advancements are driving force behind the global developments for centuries, but they are much more rapid in the present era, making the global environment highly dynamic and challenging. Economic Environment: Economic environment of a country is affected by the economic system, planning process, economic structure, business fluctuations, trends in macroeconomic variables, economic policies and international economic environment. These various constituents of economic environment are detailed as follows: 11 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING a. Economic System: It is a set of institutions, principles and mechanisms created by a society to facilitate economic units to address their basic economic problems of allocation of scarce resources and perform their basic economic activities. Every organised society follows some or the other economic system. On the basis of ownership of resources, economic systems are classified into capitalism, socialism and mixed economies. Whereas on the basis of market mechanism, the systems are classified as market economies, planned economies and mixed economies. b. Planning Process: Planning is needed for an efficient allocation of resources, which are limited in supply, among alternative uses. The planning process is an integral part of communist and socialist states. However, retaining their basic free market structure, even capitalist economies use planning to some extent. At present, all countries have mixed economic systems and follow planning, to a smaller or greater extent, to stimulate the level of investment, encourage technological innovations, use the resources as per national priorities and evolving economic situation, and reconcile the process of economic growth with the overall socioeconomic development of the country. c. Economic Structure: Economic System defines the institutional framework, whereas economic structure defines the physical framework under which an economy and business units operate. The economic structure is determined by the factors such as total population size, per capita income, demographic profile, factor endowment, technological advancement, and is reflected in the sectoral composition of output and employment, fiscal, financial and trade structure, and population structure. d. Business Fluctuations and Cycles: Countries, world over, face wide cyclical fluctuations in output, prices, employment, and other macroeconomic variables due to the fluctuations in various components of aggregate demand and supply. Business fluctuations are recurrent, occur around a long-term growth and of short duration, but without a fixed periodicity. There are broadly three approaches – conventional business cycles, growth cycles and growth rate cycles that are used for measuring these fluctuations. Legal Environment / Political Environment: 12 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING The functioning of a company impacts its internal stakeholders such as shareholders, managers and workers as well as external stakeholders such as suppliers, consumers and the community at large. organisation. Different stakeholders have different interest in the working of an At times, these interests may conflict with each other. For example, textile industry, trying to maximize its profit, may not internalize the cost of pollution of the nearby water bodies where its used chemicals are discharged. Such discharges may affect the livelihood of those who are dependent on marine life for their earnings. Hence, world over, the governments enact laws to resolve conflicting interests and minimise the harmful impacts of the functioning of companies. Demographic Environment: Demographic environment is determined by population size, density, age composition, gender composition, occupation pattern, education level, family size and structure, and many such attributes of the population. Demographic environment affects both demand and supply sides of a market. It affects the demand side as human beings are consumers of most of the products sold in a market. The total size of the population affects the total demand for a product, whereas many other attributes of the population such as age and gender composition and economic stratification affect product mix. For example, age composition in favour of the child population creates demand for educational material, toys and baby products. Similarly, gender composition in favour of females signifies that there is a likelihood of more demand for cosmetic and other products demanded by the female population. On the supply side, population size, migration and mobility, and age structure determine the supply of labour, which is an important factor of production, whereas education profile affects the labour quality and productivity. Natural Environment: It consists of all natural resources such as raw material, and energy sources such as water, air and climate. The business has two way relationships with the natural environment. First of all, natural environment is a source of many raw materials of almost all business organisations. A region, prosperous in the natural environment, can provide natural resources in abundance and at a cheaper rate; and thus, becomes attractive for business units. For example, in the recent period, many multinational organisations are attracted towards the African Continent primarily because of its natural resource abundance. Second, natural environment itself is affected by business activities adversely. Often, in their drive to maximize 13 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING profit, business units exploit natural resources without bothering about the environmental damage their activities may be causing. The damage is not only due to the unhindered extraction of natural resources but also due to emission of hazardous pollutants in the air and discharge of toxic waste in the water. Environmental damage is not only harmful for human beings but also for other sources of life. 14 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING Macro Environment Social and Cultural Factors Micro Environment Technological Factors Economic Factors Political Factors Demographic Factors Natural Factors Market Intermediaries Customers ALL STAKE HOLDERS Public Suppliers Bankers & Financial Institutions Competitors 15 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING Micro Environment It includes competitors, customers, market intermediaries, suppliers of raw materials, bankers and other suppliers of finance, shareholders, and other stakeholders of the business firm. 1. Public: It consists of all those parts of society which can directly or indirectly influence an organisation’s ability to achieve its objectives. Public opinion is important for a company as it can either strengthen or weaken its brand image. For example, satisfied customers are a public that spread good image about the products through word of mouth. On the contrary, activist, consumer forums, non-government agencies and even media protesting against the environmental damage done by a company is a public that can tarnish the image of a company, and weaken its brand image. Thus, managing public opinion is a crucial task for any company. 2. Suppliers: They are the agents who supply inputs, such as raw materials and intermediate goods to an organisation. They play an important role in operational efficiency. A delay in the supply of inputs can delay all the subsequent operations and the firm may fail in timely delivery of its products to customers, resulting in consumer dissatisfaction and even losing them forever. Therefore, managers need to assess the ability of suppliers for their ability to supply inputs in the required quantities in a given time frame. 3. Bankers and Financial Institutions: Financial Intermediaries include bank insurance companies and credit agencies that help companies raise finance as well as insure against various types of risks involved in production and other business operations. 4. Competitors: Competitors are rivals who compete with an organisation in the market place. Except monopoly market structure, firms in all other market structures have one or more competitors for their products. As the number of competitors increases the competition becomes intense. Competitors not only compete for customers but also for talented staff. To prevent customers and employees from shifting to the competitors, a company needs to continuously assess consumer taste and preferences, and design the products accordingly. It also needs to design retention strategies so that the talented staff can be retained for a longer time. 16 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING 5. Market Intermediaries: Marketing Intermediaries consists of service agencies and financial intermediaries. Service agencies include marketing research and consultancy firms, advertising agencies and media firms. These agencies help consumers identify the target population and market products in most efficient and influential manner. 6. Consumers: Consumers comprise individuals and households that buy goods and services for personal consumption. Consumers are the most important constituents of the micro business environment as they are the demand side of the market. Without them companies cannot do their business. Identifying customer needs, retaining customers, and extending products and services to them throughout their lives are important challenges for business organisations. Marketing Environment Analysis: It is the assessing of opportunities and / or threats that are present in the environment and can significantly affect the business organisation. A firm gathers relevant information relating to the environment, studies them in detail, takes note of changes in each factor that is constituting the environment and forecasts the future course of action for the organisation. SWOT Analysis: The overall evaluation of a company’s strengths, weaknesses, opportunities, and threats is called SWOT analysis. External Environment Analysis (Opportunity and Threat Analysis): In general, a business unit has to monitor key macro environment forces (demographic economic, technological, political-legal, and social-cultural) and significant (microenvironment actors (customers, competitors, distributors, suppliers) that affect its ability to each profits. The business unit should set up a marketing intelligence system to tract trends and important developments. For each trend or development, management needs to identify the associated opportunities and threats. Market Opportunity: A major purpose of environmental scanning is to discern new marketing opportunities. A marketing opportunity is an area of buyer need or potential interest in which a company can perform profitably. Identification of market opportunity is critical before the management of a firm takes a decision to launch or diversify in any product area. It involves an analysis of the following: 1. Demand Conditions / Demand Analysis 17 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING 2. Market Segment / Segmentation Analysis 3. Industry Analysis 4. Competitor Analysis 1. Demand Conditions / Demand Analysis: The core aspect of market opportunity analysis is demand analysis. The market consists of existing and potential buyers. It is important that these individuals should not only have the desire to buy, but also the means to buy a product / service. This implies that the market demand will come from only those customers who have the willingness and purchasing power to buy a product or service at a given price level. 2. Segmentation Analysis: Segmentation is the process of dividing the market into homogeneous subunits. Homogeneity in the market is brought about on the basis of the demographic, geographic, and psychographic characteristics of consumers. Besides, this is also brought about on the basis of product usage. Dividing the market into segments helps the firm to sharply focus its attention and also examine the viability of satisfying market demand. 3. Industry Analysis: The way an industry is structured also affects the size of the market and, in turn, the market opportunity. To analyse the industry, Michael Porter, in his book, Competitive Advantage, mentions that barriers to entry and exit of firms and also intensity of rivalry in the industry must be examined. Besides the above analysis, the firm also needs to study industry trends during the time period covered by the market opportunity analysis (MOA). Information to be looked for is industry growth rate in terms of sales, production, return on investment (ROI), and so forth. Industry analysis should also identify common practices characterizing the entire industry. 4. Competitor Analysis: Analysis of competition and how well the market is serviced tells us if the market is attractive enough to enter. For example, if a market is well served and customers are satisfied with what they are getting, then very little opportunity exists for any new entrant. In short, dissatisfaction with a competitor’s products and services provides an opportunity for a firm to enter the market and make profits. 18 COMMERCE – UNIT VI – CHAPTER 1 - MARKETING ENVIRONMENT AND ENVIRONMENT SCANNING