Marketing Environment Analysis with the 5 Forces Model

accounting, material supply, etc. and cannot be separated from that function. The basic task of Marketing is to create customers for the business, just like production activities create products. However, if the business only focuses on Marketing activities without paying attention to the actual capacity of the business, the production situation, etc., the business will also fail.

Thus, in terms of functional relationships, Marketing both governs and is governed by other functions. In other words, when a business determines its Marketing strategy and sets strategic goals, it must consider its own capabilities.

In short, Marketing is one of the business functions, but more fundamentally, it is a function that covers all business activities. Marketing strategy will decide what products the business produces, sells in which market, by what method, to whom and at what price, as well as Marketing activities have the task of promoting the consumption of goods in the market through its trade promotion tools.

II. BASIS FOR BUILDING MARKETING STRATEGY

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Before a business can carry out any marketing strategy plan, it must base its marketing environment analysis on the basis of its own. In fact, the environmental analysis must be conducted continuously and in all aspects of the plan.

There are 3 models that businesses often use to analyze the Marketing environment, from which they build a Marketing strategy: the SWOT model, the 5 forces model and the PEST model.

1. Analyze the Marketing environment with the SWOT model

SWOT analysis is a very powerful analytical technique in identifying strengths and weaknesses to find out the opportunities and challenges of the business, it helps the business to plan the market firmly.

Figure 1. SWOT matrix analysis model

Source: www.nghiencuumarketing.com

SWOT is an acronym for Strengths , Weaknesses , Opportunities and Threats . SWOT provides a strategic analysis tool, reviewing and evaluating the position and direction of a company or a business project.

Strengths and Weaknesses are internal factors of the company while Opportunities and Threats are external factors. SWOT allows to analyze different factors that have a relative impact on the company's competitiveness. SWOT is often combined with PEST (Political, Economic, Social, Technological analysis), a model for analyzing the market and evaluating potential through external factors in the political, economic, social and technological aspects.

SWOT analysis is a subjective assessment of data arranged in a SWOT format in a logical order that is easy to understand, present, discuss and decide, and can be used in any decision-making process. SWOT templates allow for stimulating thinking rather than relying on habitual or instinctive reactions.

Furthermore, SWOT can be applied to analyze the situation of competitors. The topic of SWOT analysis needs to be described precisely so that others can perform the analysis well and understand, correctly interpret the assessments and implications of the analysis results.

To conduct a SWOT analysis for a business's competitive position, people often ask themselves the following questions:

+ Strengths: What are my advantages? What jobs do I do best? What resources do I need and can use? What advantages do others see in me? You have to consider the issue from your perspective and that of others. Advantages are often formed when comparing with competitors. For example, if all competitors provide high-quality products, a production process with such quality is not an advantage but a necessity to survive in the market.

+ Weaknesses: what can be improved? What do I do worst? What should I avoid doing? We must consider the problem from both an internal and external perspective. Why can competitors do better than us? At this point we must be realistic and face the truth.

+ Opportunities: Where are the good opportunities? What interesting trends do I know? Opportunities can come from changes in technology and markets, whether international or local, from changes in government policies related to the business's field of operation, from changes in social patterns, population structure or fashion structure, from events taking place in the region... The most useful way to search is to review your strengths and ask yourself: do those strengths open up any new opportunities?

+ Threats: What are the obstacles facing the business? What are the competitors doing? What risks does technological change pose to the business? Are there any problems with overdue debt or cash flow? What weaknesses are threatening the business?... These analyses often help to find out what needs to be done and turn weaknesses into prospects.

The quality of SWOT analysis depends on the quality of information collected. Information should avoid subjective views from one side, information should be sought from all sides: board of directors, customers, partners, suppliers, partners.

strategy, consulting... SWOT also has some limitations when arranging information with a tendency to simplify. This makes it possible for a lot of information to be forced into a position that is not suitable for the nature of the problem. Many topics can be neutralized or confused between the two extremes of SW and OT due to the analyst's point of view.

2. Analyze the Marketing environment with the 5 forces model

Michael Porter - a famous strategic manager of Harvard University (USA) in the book " Competitive Strategy: Techniques Analyzing Industries and Competitors " gave his opinion on competitive pressures in all manufacturing and business industries, including the following 5 pressures:

Figure 2. Diagram of the 5 forces model in the development of the Marketing environment

Source: www.saga.vn

Competitive pressure of suppliers

Number and size of suppliers: the number of suppliers will determine the competitive pressure, their negotiating power over the industry and over the business. If there are only a few large suppliers in the market, it will create competitive pressure, affecting the entire production and business activities of the industry.

Supplier information: in the present era, information is always a factor promoting the development of trade, supplier information has a great influence on the selection of input suppliers for businesses.

In all industries, suppliers exert certain pressures if they have scale, concentration and possession of rare resources. Therefore, small, unorganized suppliers of input products such as farmers, craftsmen... will have very little bargaining power over businesses.

Competitive pressure from customers

Customers are a competitive pressure that can directly affect the entire production and business activities of the industry.

Customers are divided into two groups.

+ Retail customers

+ Distributor

Both groups put pressure on businesses on price, product quality, and accompanying services, and they are the ones who control competition in the industry through purchasing decisions.

Especially when analyzing distributors, we must pay attention to their importance, they can directly penetrate into the internal threats of the enterprise.

Competitive pressure from potential competitors

According to M-Porter, potential competitors are businesses that are not currently present in the industry but may influence the industry in the future. The number of potential competitors, their pressure on the industry, will depend on the following factors:

+ Industry attractiveness: this factor is shown through indicators such as profit margin, number of customers, number of businesses in the industry.

+ Barriers to entry: are factors that make entering an industry more difficult and costly.

Competitive pressure from substitute products

Substitute products and services are products and services that can satisfy the same needs as products and services in the industry.

The main competitive pressure of substitute products is the ability to meet demand compared to products in the industry. In addition, factors such as price, quality, and other environmental factors such as culture, politics, and technology will also affect the threat of substitute products.

Internal competitive pressure in the industry

Businesses operating in the industry will compete directly with each other, creating pressure on the industry, creating a competitive intensity. In an industry, the following factors will increase competitive pressure on competitors:

+ Industry status: demand, growth rate, number of competitors...

+ Industry structure: concentrated or decentralized industry.

 A fragmented industry is an industry where many businesses compete with each other but no business has the ability to dominate the remaining businesses.

 A concentrated industry is an industry in which only one or a few businesses hold a dominant role (Controlling competition - can be considered a monopoly).

+ Exit Barriers: Like barriers to entry, exit barriers are factors that make it difficult for a business to exit the industry.

3. Analyze the Marketing environment with the PEST model

While M-Porter's 5 forces model delves into the analysis of factors in the business environment, PEST studies the impact of factors in the macro environment. Those factors are Political (Institutional-Law); Economics (Economics); Sociocultural (Culture-Society); Technological (Technology).

These are four factors that have a direct impact on economic sectors. These factors are external factors of the business and the sector must bear the impacts it brings as an objective factor. Businesses based on the impacts will come up with appropriate policies and business activities.

Institutional and Legal Factors

This is a factor that affects all business sectors in a territory, institutional and legal factors can threaten the survival and development of any sector. When doing business in an administrative unit, businesses will be required to comply with the institutional and legal factors in that area.

+ Stability: consider the stability in the political and diplomatic conflict factors of the legal institution. Institutions with high stability will be able to create favorable conditions for business activities and vice versa, unstable institutions with conflicts will have a negative impact on business activities in its territory.

+ Tax policy: export and import tax policies, consumption taxes, income taxes... will affect the revenue and profits of the business.

+ Related laws: investment law, business law, labor law, anti-monopoly law, anti-dumping law...

+ Policy: State policies will affect businesses, they can create profits or challenges for businesses, such as trade policies, industry development policies, economic development, taxes, competition regulation policies, consumer protection...

Economic Factors

Businesses need to pay attention to economic factors both in the short term and long term and government intervention in the economy.

Normally, businesses will base on economic factors to decide to invest in industries and regions.

+ Economic status: any economy has a cycle, in each certain stage of the economic cycle, businesses will have appropriate decisions for themselves.

+ Factors affecting the economy: interest rates, inflation...

+ Government economic policies: basic wage law, economic development strategies, preferential policies for industries: tax reduction...

+ Future economic prospects: growth rate, GDP growth rate, GDP to investment ratio...

Sociocultural factors

Each country and territory has its own cultural values and social factors, which are characteristics of consumers in those areas.

Cultural values are the values that make up a society, and can foster the existence and development of that society. Therefore, cultural elements are often protected on a large scale and strictly, especially spiritual culture.

Besides culture, social characteristics also make businesses interested when researching the market. Social factors will divide the community into customer groups, each group has different characteristics, psychology, and income.

Technology factor

The whole world is still in the revolution of technology, a series of new technologies are born and integrated into products and services.

+ Investment by the government and businesses in R&D. The combination of businesses and the government to research and develop new technologies, new materials... will have a positive effect on the economy.

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