Corporate strategy

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- Cost vs. Differentiation Model, types of costs: Fixed (premium products, equipment), variable (food).

CHAPITRE 3: PESTEL (MACRO-ENVIRONMENTAL ANALYSIS)

Markets change, tastes change, so the companies & the individuals who choose to compete in those markets must change.

- Identifies Opportunities & threats portion of SWOT

- Identify & understand key factors driving change

- Identify and understand an environment’s constraints

- Decide where to allocate resources & why

PESTEL analysis

Political factors

Economic factors

Government stability, Corruption, Tax policy (rates and incentives), protectionism, Import restrictions, Tariffs, Competition, trade unions and agreements, laws Copyright, patents / Intellectual property

Growth, inflation, interest, Xch rates, Unemployment, Labor costs, Credit availability, business cycles, access to capital, income, monetary é fiscal policies, Price fluctuations,

Socio-cultural factors / demographics

Technological factors

Changing cultures, attitudes & demo. Health, Education level, Lifestyles Buying habits, Religion and beliefs, Immigration and emigration rates, age, sex, average income.

Basic infrastructure level, Spending on research & development, Technology incentives, Legislation regarding technology, Communication infrastructure, newest technology, Internet infrastructure and penetration

Environmental (ecological)

Legal

Weather, Climate change, Laws environment pollution, Recycling, wildlife and people

Anti-trust law, Discrimination law, Copyright, patents / Intellectual property law, Consumer protection and e-commerce, Employment law, Health and safety law, Data Protection

Identify > Categorize > Qualify (threat or opportunity)

Ex: Due to a congestion in big cities urbanities are using more public transportation > City congestion is an infrastructure issue = Technological > Few urbanities buying cars can mean few cars sold so the market could be shrinking = this is a threat.

The Product life cycle (PLC) Pestel factors impact the PLC.

- Introduction Stage – Small market => sales are low, although they will be increasing. [pic 2]

++ Promotion > Build awareness, stimulate D, explain how the P is used. Money will likely be lost in this stage. + Possible first mover advantage.

- Growth Stage – Strong growth in sales and profits. Firms watch & decide to enter or not > First mover advantage may evaporate. Growth will continue until competitors produce enough P to meet demand.

- Maturity Stage – Supply meets D thus levelling profits.

Market becomes more transparent & P differentiation becomes increasingly hard as features, adv & benefits all seem equals.

Customers > price sensitive forcing firms to lower prices to sell -> profits decrease.

Competition intensifies (promotion, cost & price cutting intensifies -> sell to a mature / sutured market

- Decline Stage – Market is shrinking:

- More attractive P become diffused

- P have become obsolete

- Industry has excess capacity due to over forecasting.

Options:

- Consolidation via merger or acquisition

- Segment the market

Introduction

Growth

Maturity

Decline

Sales

Low

Rapidly rising

Sales level

Declining

Costs

High / customer

Average / custom

Low cost / custom

Low cost / custom

Profits

Negative

Highest

Level off

Decline

Marketing obj

Create awareness & trial

Maximize market share

Maximize profit while defending market share

Reduce expenditures and milk brand

Product

Basic

Offer P extensions

Divers brand & models

Phase out weak items

Price

Cost plus

Penetrate market

Price to match or beat competitors

Lower price

Distribution

Selective

Extend distrib

Intensive distrib

Go selective - phase out unprofitable sites

Advertising

Target early adopters

Awareness