SOSTAC & Situation Analysis (External)

Situation Analysis is the first part of the Strategic Planning Framework, known as SOSTAC.

The SOSTAC framework uses the Outside-In analysis method to form a marketing plan, starting with Situation Analysis, which enables marketers to analyse the external and internal environment. This external analysis will highlight and threats and opportunities to the company before they continue with the rest of their marketing plan.

So what counts as internal and external? And how can we break the environment up into smaller chunks to analyse efficiently?  Well, I've conveniently laid it out in a diagram for you below...

The external environment is shown in light blue, and the internal in dark blue.  As you can see, the external environment can be split into two major sections; the macro environment, and the micro environment.  The macro covers a much wider area, including political legislation and social issues and can be analysed using the PEST/PESTEL method to establish market constraints.  The 5 Forces (Porter, 1980) method can also be used to establish the dynamics of the industry, though this is not generally used organisation-wide, but at a strategic business unit (SBU) level (Drummond et al., 2008) .  The micro environment covers the sectors much closer to home and could lie within the company's sphere of influence, i.e. the direct competition, the wider sector and the consumers.  The internal environment looks at the organisation as a whole and allows thorough internal analysis using tools such as the resource based view (RBV).

Macro Analysis Tools

PEST:
Political - e.g. tax, legislation, foreign trade agreements
Economical - e.g. interest rates, inflation rates
Social - e.g. education levels, attitudes and values
Technological - e.g. rate of technological advancement, materials development

5 Forces:
Buyers - powerful when a small number of buyers control a large number of smaller producers/ have a large market share
Suppliers - powerful when there are few suppliers (companies cannot switch suppliers easily)
Potential Entrants - the threat of new companies entering your market (depends on ease of entry e.g. high monetary costs etc)
Subsitutes - indirect competition may drive reduce your sales (e.g. a car or a holiday)
Competitive Rivalry - intensity of competition industry-wide

Micro Analysis Tools

Industry - industry life cycle
Market - consumer analysis, trends, distribution channels, market size (actual & potential)
Competitors (incl. strategic groups) - market share, sales turnover, capabilities, product range, distribution, brand image

Once the situation has been analysed, it is possible to place a company's competitors in a perceptual map (often covering quality or price vs another factor) or positioning triangle showing cost leadership, focus and differentiation, as defined by Porter (1980).

The analysis then turns inward, continuing with the internal situational analysis within the SOSTAC framework.

Bibliography

Drummond, G.  Ensor, J.  Ashford, R. (2008) Strategic Marketing: Planning and control. 3rd Edition., USA:Butterworth-Heinemann
Porter, M. E. (1980) Competitive strategy: techniques for analyzing industries and competitors. Free Press

Market Orientation & Outside-In

Outside-In market orientation looks at the market and consumers and tailors the business to their needs.  As such, change is driven by competitors (competitor orientation), consumers (customer orientation) and technology.  With some organisational learning thrown in, the business can get a competitive advantage.

While learning about marketing orientation strategies, I've noticed that the theory is pretty straightforward, its just marketers use specific words to describe it.  If the market changes (market needs), you have to change.  If you don't, you'll fall behind (strategic wear-out).  How do you find out if the market is changing (strategic analysis)? You look at the market (market intelligence), you analyse whats happening (information dissemination) and you interpret your results (shared interpretation) to work out the best way to go forward (organisational learning).


So, if you need to change, how do you change? Well, according to Slater and Narver (1995), there are 4 major options, all with their own pros and cons.  You could change your behaviour to increase your performance (organisational learning) or you could come up with something completely different (entrepreneurship).  You could also take more flexible changes a baby step at a time (decentralised strategic planning), or you could bring some experts in to work on a variety of tasks and share the learning for a more 'organic' information flow (organic structure).

The problems with the Outside-In market orientation is that it's a very costly and lengthy thing to assess how another company is gaining success and how you can appropriate their methods (or do it differently).  It also relies on there being a market to study, and if you choose to do something other than diversify then you could end up playing catch-up. [See also: Morrisons local convenience shops, now having problems as they were years behind Tesco's entrepreneurial move, which is now also faultering, (Ruddick, 2015)]

Bibliography
Slater, S.F. Narver, J.C. (1995) 'Market Orientation and the Learning Organization.' Journal of Marketing, 59(3) 63-74.

Ruddick, G. (2015) 'Morrisons to close 23 stores as it posts £792m loss.' Telegraph. [Online] 12/03/15. Accessed 25/03/15. http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11466259/Morrisons-to-close-23-stores-as-it-posts-792m-loss.html

Customer Analysis and Segementation

Part of the Commercial Aspects of Product Design module.

In the early stages of market segmentation, marketers find it useful to analyse the customer and create a customer profile. This analysis is split into four major groups; culture, social, personal and psychological (Kotler, Armstrong, 2014).

Having studied marketing briefly before, I was aware of segmentation methods and customer profiling, but hadn't considered the four consumer buyer behaviour groups individually.  Although individually the categories seem quite distinct, there's a big overlap between them when you consider them all together.  For example, culture covers your nationality, any subcultures you might be part of, as well as your social class, but personal also covers your social class as it is part of your economic background and occupation and thus your spending power and lifestyle.  In turn, social, which cover any aspirational or members groups you might be part of, is also dictated by the lifestyle you choose to have, and therefore your economic and class standing.  In my mind, psychological, is the only category which can be truly separated from the rest as it covers much more nuanced and personal details such as motivation, beliefs and attitude.

Consumer behaviour can also be split into the slightly more defined titles of social, personal, psychological and situational (Drummond, Ensor, Ashford, 2008).  This merges the social and culture categories of the previous method, and adds the situational category, where the buying situation is also taken into account - ie. perceived risk and hedonic factors.

On the whole, I feel that this kind of consumer buyer behaviour analysis overgeneralises far too much and ends up categorising people into demographics - its this heavy handed approach that means that all products for girls are designed in pink.  It's a fairly unsophisticated method of putting people in boxes.

Outside of demographic analysis, market segmentation can provide a more accurate method of categorising and targeting certain consumers.

Geographic/Locational (region, city, countryside, wifi zone, website, in store) - Where are they when they need your product?

Behavioural (social media, websites, forums, google keywords) - What do they search for to find your product?

Occasional/ Situational (routine, special occasion, time of day) - What are they doing when they need your product?

Psychographic (lifestyle, personality) - What interests do they have that you could target?

The product I am using to develop a marketing scheme in this module is The Big Book of Calm (from my Advanced Digital Design module).

Because my product is innovative and there aren't any others like it in the market at the moment, there is no pre-existing market, so I would need to define my own.  The Big Book of Calm could easily be targeted at people who are interested in holistic remedies,  and already enjoy meditation techniques, but I think a larger and more sustainable gap in the market would be people who suffer from anxiety, whether they are predisposed to the condition or have particularily stressful lives.

Inspirational Imagery - found on Pinterest from Free People: Source

To target this new market I could use a locational segment, for example, using billboards by the side of the road which suffer from heavy traffic.  People in traffic often feel bored and stressed and so an advert for a calming device may stick in their minds and could trigger need recognition.  For behavioural segmentation, I could target the flow of "inspirational" images on social media (e.g. those with beautiful scenery and a motivational phrase) on pinterest, twitter and tumblr.  Alternatively I could use situational segmentation, putting the product into public sector schools and hospitals, which would then create product interest in the private sector through word-of-mouth.

Bibliography
Drummond, G.  Ensor, J.  Ashford, R. (2008) Strategic Marketing: Planning and control. 3rd Edition., USA:Butterworth-Heinemann
Kotler, P. Armstrong, G (2014) Principles of Marketing. 15th Edition., Essex:Pearson Education Limited