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Analyzing situation prior a strategic decision is critical for generating or sustaining competitive advantages, especially when facing the dynamic environmental trend which can affect corporations’ performance positively or negatively. The main task for a situation analysis is to explore the external factors (that can imply what opportunities a firm should seize and what threats it has to pay caution to) and internal factors (that can tell what a firm can do to develop its strengths and to avoid its weaknesses). And as Sally, Lyndon & John (1996: 3) defined, the terminal object of a marketing plan is to achieve particular marketing strategy. And a marketing strategy, which expressed clearly by Subash (2004: 26), requires a corporation using its relative corporate strengths to better satisfy customer needs and finally achieve maximum positive differentiation over its competitors in a numbers of internal and external variables. While Malcolm (2006: 376) concluded that the main concern of a strategic marketing plan is to establish, defend and maintain competitive advantage. However, the market environment today is changing quickly, followed by the increasing keen competition. To maintain a certain competitive advantage is impossible in such situation and the only way to earn above-average return is to react rapidly with updated information from environmental scanning. Thus, no matter what the purpose of a marketing plan is, situation analysis is crucial to provide an overall understanding of existing competitive position, organizational capabilities and market trends which is ever-changing.
For example, soused from Malcolm (1989: 75), a company found itself competing unsuccessfully and unprofitably in motor components market in Europe. Its strategy is to compete against a European giant on price, which had been implemented for a while without analyzing its market situation previously. The fact in such market is that only can a firm focus on investing certain equipments thrive. That is, when there was a strong competitor who dominated major market shares with a strategy of cost leadership, it is not wise to beat it on price. And if this company could firstly conduct a situation analysis, it would found that there were many opportunities for motor-products manufactured to very high technical specifications where technical reputation, rather than price, was the major concern.
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When conducting a situation analysis, there is a set of variables needed to consider carefully. George (1999: 65) depicted a standard structure for situation analysis, which consists of two main parts, external factors and internal factors. External factors, which can not be controlled, are related to opportunities or threats. These include macro-environment (political, economic, social, and technological dimensions) and industry environment (market size and potential, customer behavior, segmentation, benefits sought, suppliers, distributors, substitutes, potential entrants and industry profit trends). However, internal factors reflect a corporation’s strengths and weaknesses, which include dimensions of resources, capabilities and current strategies in the firm. Besides, direct competition is considered relating to both external factors and internal factors which includes competitor’s performance, capabilities, strategies and intentions.
An example of the European market for 35mm cameras, provided by Sally et al (1996: Foreword xx-xxi), is an effective practice that bring all these factors together into situation consideration.
Leica is a German company that made the first 35mm camera in 1912 and was once the market and technological leaders but in 1980s survived via occupying high-priced niche market. The 35mm camera market was dominated by Japanese manufacturers.
Large, complex, fast-developing market for 35mm-camera manufacture
During the 1960s and 1970s, the 35mm single lens reflex became increasingly popular. By 1980s, the trend turned to automatic rangefinder type that called ‘point and shoot’ and the disposable plastic was welcome to be used in cameras.
Situation Analysis – External Factors
Legislation dimension: international tariffs are removed by GATT agreement
Social dimension: people in Europe have income and leisure time increased as well as the environmental concerns arisen in terms of chemical waste and disposal
Economic dimension: currency fluctuations of Yen would impact the price of Japanese products including camera, while manufacturing costs in German factory 15% higher than in UK
Technological dimension: automatic ‘point and shoot’ technology and cheap plastic disposable models were still popular in 1980s
New entrants: Chinese and Korean manufactures that can provide low price
Supplier power: Lens manufacturers tend to forward integrate into cameras and films making
Threat of substitutes: Digital camera is replacing traditional camera
Buyer power: not dominated by certain distributors
Situation Analysis – Direct Competitor
Japanese manufacturers such as Nikon and Canon which have good reputation of ‘high tech’ and dominate the market of 35mm camera
Situation Analysis – Internal Factors
Technical resources: competence in plastics
Financial resources: adequate financial resources to fund R&D
Have well established European distribution network
Physical resources: manufacturing facilities
Innovation resources: R&D with spare capacity
Reputation resources: long-historical brand name
Implication from the situation analysis
What Leica should do?
There are two main trends for the development of camera which Leica should focus in the future. First is the transformation of camera from film based to digital imaging. The other change is from plastic tech to ‘green’ tech. These are the main threats as well as opportunities for Leica and may required further investment in R&D and intelligent. Competition from Asian countries especially Japan is another issue for Leica.
What Leica can do?
Using the excellent network Leica established as well as spare financial resource to increase volume of products in market in order to increase its economies of scale. Utilizing R&D and manufacturing facilities to research high-tech products that can compete with Japanese manufacturers.
To build an effective situation analysis for J Boag & Son Brewery, there is a logical step-by-step guide that referenced to Reed (2003, 83-85).
Define what this marketing plan is concern on, what industry and core business J Boag & Son is in, and the nature of the market.
Justification: This step comes first because in the major assignment, one of four categories that J Boag & Son has ongoing ventures in is needed to select out, so it is vital to define the scope of this marketing plan.
Internal Environment Analysis
Justification: This step should describe strengths and weaknesses. Usually, it comes before the external environment analysis in order to avoid irrelevant external factors being analyzed and then to help market planner to save time when moving on to the next step.
A. Review of marketing strategy and performance:
Justification: Identify J Boag & Son’s current marketing strategy and performance. This step helps to assess whether the current strategy fit the firm according to its performance.
B. Review of the company’s capabilities:
Justification: Identify what strengths J Boag & Son possess, how well the below factors can be used to fulfill the strategy and what is the core competency.
1. non-marketing capabilities
management and leadership capabilities
human resource capabilities
research and development capabilities
into functional coordination and responsiveness
and competitive position
2. marketing capabilities
the firm's competitive position
its brand recognition and loyalty
its intelligence gathering capabilities
and marketing control strategies
Review of the external environment:
Justification: This step should describe opportunities and threats. Factors which analyzed need to be relevant, and after scanning the industrial environment, a conclusion should be conduct to illustrate whether it is an attractive industry or not.
1. macro level
2. industrial level
buyers (intermediate customers) review
customer (end user) analysis
Major competitor analysis:
Justification: This step helps to justify J Boag & Son’s relative strengths and weaknesses after comparing it with its competitors. It also needs to define the core business of the major competitors which will make sure the suitable scope of comparison.
1. Basis for competition: brand, product, generic, and total budget
2. Core business
3. Apparent strategy
4. Performance: size, growth, profitability, target markets, and products
George, S. D., 1999. Market Driven Strategy: Processes for Creating Value. New York, the Unites States of America: Free Press
Malcolm, H.B. 1989. Marketing Plans: How to prepare them: How to use them. Jordan Hill, Oxford: Butterworth-Heinemann.
Malcolm, M. 2006. Strategic Marketing Planning: Theory and Practice1. The Marketing Review, 4: 375-418
Reed, P. 2003. Strategic Marketing Planning. Australia: Thomson.
Sally, D., Lyndon S., & John, B., 1996. The Marketing Planning Workbook: Effective Marketing for Marketing Managers. London: Routledge
Subash, J. 2004. Marketing: Planning & Strategy. Belmont CA, Australia: Cengage South Western.