services marketing ch.2

7/30/2019 Services Marketing Ch.2

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Environment

AnalysisChapter 2


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1/16/2013 Presentation by Prof. H.Ganguly 2

So businesses are to be vigilant in evaluating prevailingand emerging environmental elements regularly because that is

where changes make their presence felt.

Environmental elements may be broadly classified into

External Environment -- Elements capable of affectingservices and service marketing firms from outside.

Internal Environment -- Strengths and weaknesses of

services and service providing firms.

Marketing management is concerned with harnessingopportunities and ameliorating threats; changes areconstant

in throwing open opportunities and threats

Services Marketing Management


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Principal Dimensions of Environment

1. Political and Legal Environment -- concerned with politico

- legal & regulatory factors.

2. Economic Environment -- related to wealth creation anddemandsupply pattern of services.

3. Socio-Cultural Environment -- pertains to people and their

behaviour about services and their use.

4. Technological Environment -- about level and state oftechnology used in service industries

A. External Environments

B. Competition -- Competitive forces acting on the Service.


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1. Political & Legal Environment

All nations wish to enhance their national sovereignty ; sothey frame their polity and laws to keep business under control.

So a service firm should carefully

* study the government structure

* analyse salient issues of political environment including risks

* avoid sitting in judgment on their acts and structure.

a) Government uses rules, regulations and initial licenses

required to initiate service trade.

b) How liberal the Govt. is in allowing foreign service

providers in the same field.

c) Special legislations like Green Marketing , IPR

protection, cyberlaws etc. if applicable, are to be adhered.


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2. Economic Environment

-- Economic factors of a nation influence service marketing,the most. Without purchasing power, service marketing comes

to a nought. So study ofeconomy is essential.

-- Study of Economic environment comprise of :A. Trend of nations economy

B. Economic systems followed

C. Stages of market development

D. Balance of Payment

E. Income & purchasing powerF. Population distribution and growth rate

G. Infrastructure

H. Other economic factors.


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B. Economic Systems

Based on resource allocation and market trends, economy of

nations are classified into:

* Capitalist system -- when entities of market i.e. people and

companies decide what shall be produced and consumed by

whom ; role of state remain restricted to promote competition

and ensure customer protection e.g. U.S., Japan etc.

* Socialist system -- when people and companies are free to

spend their money on what is available but what shall be

produced and made available is decided by state planners asis the case in China, former U.S.S.R., Cuba etc.

* Mixed system -- A combination of two systems as followedby most nations.


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National economic systems are classified asfree, unfree

or repressedbased on following parameters :Trade Policy

Taxation Policy

Govt. consumption of economic output

Monetary policy

Capital flows and foreign investments

Banking policy

Wage and price controls

Property rights

Rules and regulationsPrevailing black market etc.


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C. Stages of Market development

Using GNP as base, global markets are classified into four

categories :

1. LowIncome Countries

Nations with per capita GNP of less than $786 are called low

income countries. These countries constitute 37% of world

population but produce only 3% of world GNP. These

countries represent limited market.

2. Lower Middle Income Countries

[also called Less-developed countries (LDCs)]These are nations with per capita GNP between $786 to

$3125. These nations constitute 39% of world population

with only 11% of GNP. These are at early stages of

industrialisation.


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3. Upper Middle Income Countries

[also known as industrialising countries]

Per capita GNP of these nations are between $3126 to $9655.These nations comprise of 7% world population and GNP.

Level of urbanisation is high and population engaged in

agriculture is very less. Generally these nations are

accounting for rapid export-driven economic growth.

4. High Income countries [also known as advanced,

industrialised, or First World countries]

These nations have per capita GNP above $ 9655. Thesenations have 16% of world population but 80 % of world

GNP. More than 50% of these nations GNP comes from

services.


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D. Stages of Economic Development

-- Economic developmentof a nation indicates the increase in

national production that leads to increase in average percapita Gross Domestic Product (GDP)**

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**Gross Domestic Product (GDP) is the measure of market value

of all goods and services produced within boundaries of a nation,regardless of asset ownership.

Whereas, Gross National Product (GNP) indicates sum of GDP

with receipt from nations business operation abroad as well as

share of reinvested earnings in foreign affiliates of domestic cos.

-- Walt Rostow in 1971 indicated that economic development

of a nation is function of cost of labour, technical capability of

buyers, scale of operation, interest rate and level of productsophistication.


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-- Walt Rostowsstages of economic development are

Stage 1 : The traditional society -- Countries in this stage lack

capability of increasing productivity, lacks methods ofmodern science and technology.

Stage 2 : Preconditions for take-off -- Those nations in

process of transition to take-off are, where technology,

infrastructure etc. are getting infused.

Stage 3 : Take-off-- Next, nations take growth as normal

condition. Physical and business infrastructures

start growing in steps.

Stage 4: Drive to maturity -- Sustained progress and economyof scale operation is achieved with modern technology.

Stage 5 : Age of high mass consumption -- Per capita real

income rises with mass consumption of durable goods.


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E. Balance of Payments

-- Balance of payment of a nation is an important cause andeffect of activities of the nation.

F. Income and Purchasing Power

-- For most products including services, successfulmarketing needs sufficient level of income of customers.

-- Per capita GNP (in US dollars) is generally used for

comparing incomes i.e. purchasing power of customers in

various nations.


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G. Populationits Distribution and Growth

People have inhabited the earth for over 2.5 million years.During Christs time, the population was much small about 300

million (approx. onefourth of Indias present population)

Every individual of population is a potential customer ; so

it is essential to learn their growth, distribution and othercharacteristics for efficient marketing.

For low-priced products and services, population and its

distribution is a more important than income.

In 2000, top 10 populous nations had 59% of world

population. And their total GNP was 52% of world GNP. Present

population of world is about 7.2 trillion and is projected to rise to

8.5 trillion by 2020.


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H. Infrastructure

-- Presence of suitable infrastructure facilitate efficient

service marketing operations.

-- Infrastructure are facilities that serve and support

activities of a number industries and businesses e.g., power

supply, roads, banks, transport companies etc.

-- Quality of a nations infrastructure pave its way for

economic development through trade, commerce and industry.

-- Infrastructures may be classified into :

* Physical Infrastructure - like roads, railways, seaports,telecom networks, hospitals, power generation systems, etc.

* Business Infrastructure - like banks, insurance

companies, stock exchanges, advertising agencies, market

research firms, advisers, consultants etc.


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I. Other Economic Factors

-- The manner in which economic policies are planned and

implemented decide following factors* Inflation Rate

* Exchange Rate

* Nature and trend of foreign investments

* Role of govt. in trade and commerce* Influence of trade unions etc.

-- In an integrated manner these factors and their comparison

with other comparable nations indicate the state of economicgrowth of the country.


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3. Socio-Cultural Environment

-- Politico-legal and economic factors may indicate ability ofcustomers to buy.

-- But actual act of buying (or not) depends upon Social and

cultural environment factors.

-- So to understand consumer behaviour , service marketershould study the culture of host countries.

Culture

Culture is integrated sum oflearned behavioural traits

shared by members of a society.

In simple terms, Cultureis the behaviour pattern of people of

a country that they have learned from other members of society.


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Fundamentals of Culture

1. Culture is learned not inborn.

2. Culture depends upon environment and not heredity.3. Culture is the approved and shared behaviour of a group of

people called Society.

MajorElements of CultureA. Material Culture and Technology

-- These are related to the way, a society organises its

economic activities of generating wealth.

-- The way members of society work and how effectivelythey work is determined by technology and material culture.

-- Material culture of societies using different technologies

are different; e.g. culture of societies usingBicycles and

automobiles as mode of transport are obviously different.


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B. Language

-- Language is the mirror of culture. It reflects nature and

value system of the culture.-- Hindi as spoken by Amitabh Bachchan, Amir Khan

(Thanda matlab Coca-Cola), Laloo Yadav, Mulayam Singh

Yadav depict their culture (i.e. pattern of their behaviour).

BIMARU states divorced English long back; today it is

detected as a major cause of their backwardness in industry

and business; Hindi has rich legacy of literature but profile ofindustry and business is different.

-- Knowledge and fluent conversation in English is

considered to be a majorcompetitive advantage in most of

countries including India.


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-- In Congo (Zaire), they have four important tribal languages for

communication among themselves, but they have retained

French, the language of their erstwhile rulers as NationalLanguage and they are prospering fast.

-- Americans not only retained the language of their rulers, but

in two centuries adapted the language in a way that world today

calls it American English.-- Indications are that by Twenty-second century world culture

shall adopt Chinese and Hinglish languages as it has adopted

English, French, German or American English.

C. Aesthetics -- Ideas, principles that depict beauty and good

taste as in arts, music, drama, dances, architecture, colour-

selection, literature etc. is called aesthetics.


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-- Aesthetic aspect of culture have immense application in

Service marketing in

* Product or any creative designing* Selection of brand and corporate names

* Selection of colours

* Choosing right words for expressing ideas etc.

D. Education

-- It is the process of transmitting skills, ideas, attitudes, culture

and traditions of a society beside training in different

disciplines (and not just cramming some books and notes topass examinations).

-- Nature ofrighteducation is to help in harnessing different

skills for success in service, other trade and commerce.


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E. Religion

-- Dimension that provides insight into human behaviour is

Religion.

-- So service marketing, PR policies and strategies should be in

consonance with local religious sensitivities.

F. Attitudes and Values

-- Our thinking about what is right , appropriate or desirable

are conditioned by our attitudes and concept of values.

-- According to Douglas North, People act on the basis oftheir ideologies and religious views. So a study of these is

essential.


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G. Social Organisations

-- Social organisation refers to the manner in which people

relate to other people. It differs from society to society.-- There may be special interest groups of caste, creed, religion,

hobby, profession etc. which may have influence in different

kinds of decision making.

-- Four social organisations cast strongest influence on people

* Family -- Members of family and extended family extend

safety and security .* School -- Education influences culture considerably.

* Religion -- It influences value system and also consumerbehaviour.* Media -- With increase in literacy rate and radios & TV ,

influence of this institution is very much on rise more than

their parents and family members.


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H. Dimensions of Culture

-- Hofstede and Bond have identified dimensions ofcultural as

1. Individualism vs. Collectivism

-- In many nations, prominence is observed in culture and

goal achievement of individuals and immediate families; it is

termed as individualistic culture e.g. in India, Bangladesh,

Pakistan etc.-- Whereas, some cultures emphasise upongroups goalover

that of individuals and people think that they belong to a

group. It is calledcollective culture e.g. in Japan.

2. Power Distance -- Distribution of power in many

societies is considered to be uneven, it is called PowerDistance.


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-- Nations like India, Japan, Mexico, Brazil etc. are high

powerdistance societies where people accept that superior

shall not consider subordinates as equal.-- Thus, subordinates tend to prefer autocratic or paternalistic

behaviour from leaders.

-- Whereas, in low power distance societies like US,

Germany, Canada etc. superiors and subordinates have a sense

of equality among them.

-- So subordinate may approach superior for consultation

easily in these nations.

3. Gender of Society-- Rigidity in role played by members of

society decide its gender.


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-- Those nations where men are more assertive, competitive,

ambitious and achievement-oriented whereas, women are

modest, tender and concerned with life are termed asmasculine culture.

-- Whereas, in Feminine cultures both men and women are

found to be modest, tender and concerned with quality of

life.

-- In masculine cultures like Japan, Germany, UK, US,

Mexico etc. employees live in order to work. But in

feminine cultures like in Sweden, Norway, Denmark,

Thailand etc. employees work in order to live.


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4. Uncertainty Avoidance

-- The extent of tolerance of uncertainty and ambiguity by a

society indicates its uncertainty avoidance culture.

-- Generally, rules and norms are not very clear-cut or rigid in

low uncertainty avoidance societies like India, Hong Kong,

Singapore, Great Britain etc.. These nations are more open and

willing to explore anything new and foreign.

-- Whereas, high uncertainty avoidance cultures are more

formal in rules and regulations and less tolerant to deviant ideas

and behaviour e.g. Japan, Portugal, Greece etc.

5. Cultural Homogeneity

-- It indicates the manner in which communications and

commitments are viewed in the nation.


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-- Inhigh context societies, implicit communications are

viewed as important i.e. verbal commitments are given

greater sanctity as in China, Korea or Japan.

-- Whereas, in low context societies, communications are

more explicit i.e. they rely more on written ones like

Germany, Switzerland, Scandinavia etc.

6. Cultural Homogeneity

-- Nations where people share same beliefs, speak same

language, practice same religion are said to have

Homophilous Culture as in Japan, Korea and Scandinaviancountries

-- Countries having appreciable difference in belief, religion

and language are calledHeterophilous Culture, as exists in

India, China etc.


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IV. Technological Environment-- Todays trade, commerce and industries are

technology-driven. So marketers should study :* Type of technology used in services, manufacture and

commerce

* State of technological development in the country and

abroad* Extent of adaptation of technology

* Technology policy of nation

* Labour content of technologies used

* Prevalence of technology and economy of scale.

-- Schumacher introduced the concept of combining

traditional technology with elements of modern technology

calledAppropriate technology. Developing nations are fast

adapting capital intensive modern technologies for labour

intensive purposes.


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Technology in Service Offering & Delivery

Technology has substantially aided Service industry of

the country. Imagine the case of payment of bills, withdrawl of

cash from banks or retrieving information from obscure journals.

Today, newer services are designed where these aspects oflife have become more livable. Further, these aspects of service

are poised to be more customer friendly through innovations.

Process of service delivery has also been made morecustomer-friendly, convenient and cost-efficient through BPOand IT-enabled services.


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B. Competition

In addition to environmental factors, Service marketer has to

identify and manage Competition-forces acting upon theService and Service-providing company.

Major Competition-forces are :

Direct CompetitionForce of competition of one hotelupon another in the town.

Alternative CompetitionForce exerted by different type

of service-providers e.g., videoconferencing with airlines.

Bargaining power of customers

Bargaining power of suppliers

Threats paused by new entrants


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Internal Environment

Internal attributes like strength, weakness etc. of

other service-providers keep on changing dynamically

these are to be actively managed along following lines :

1. Industry

* Extent of Service differentiation* Economies of scale

* Strategy followed etc.

2. Operation & Operating Environment

* Customer and Suppliers profile

* Quality of available human resources3. Value-chain Analysis

* Primary activities

* Secondary activities

services marketing ch.2

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