This section looks at the environment from the product/market perspective. Environmental scanning at the macro level is the job of a staff person positioned at the corporate, division, group, or business unit level. The person concerned may go by any of these titles: corporate planner, environmental analyst, environmental scanner, strategic planner, or marketing researcher. Monitoring the environment from the viewpoint of products/markets is a line function that should be carried out by those involved in making marketing decisions because product/market managers, being in close touch with various marketing aspects of the product/market, are in a better position to read between the lines and make meaningful interpretations of the environment. The constituents of the product/market environment are social and cultural effects, political influences, ethical considerations, legal requirements, competition, economic climate, technological changes, institutional evolution, consumerism, population, location of consumers, income, expenditure patterns, and education. Not all aspects of the environment are relevant for every product/market. The scanner, therefore, should first choose which parts of the environment influence the product/ market before attempting to monitor them. The strategic significance of the product/market environment is well illustrated by the experience of Fanny Farmer Candy Shops, a familiar name in the candy industry. Review of the environment in the mid-1980s showed that Americans were watching their waistlines but that they were also indulging in chocolate. In 1983, the average American ate nearly 18 pounds of confections up from a low of 16 pounds in 1975. Since the mid-1980s, the market for upscale chocolates has been growing rapidly. Chocolates are again popular gifts for dinner parties, providing a new opportunity for candy makers, who traditionally relied on Valentine’s Day, Easter, and Christmas for over half of their annual sales. Equipped with this analysis of the environment, Fanny Farmer decided to become a dominant competitor in the upscale segment. It introduced rich, new specialty chocolates at $14 to $20 per pound, just below $25-per-pound designer chocolates (a market dominated by Godiva, a subsidiary of Campbell Soup Co., and imports such as Perugina of Italy) and above Russell Stover and Fannie May candies, whose chocolates averaged $10 per pound. The company thinks that its new strategic thrust will advance its position in the candy market, though implementing this strategy will require overcoming a variety of problems.

ANALYZING STRENGTHS AND WEAKNESSES

The study of competition, current strategic perspectives, past performance, marketing effectiveness, and marketing environment provides insights into information necessary for designating strengths and weaknesses. It should be noted that most areas of strength relate to the excellence of personnel or are resource based. Not all factors have the same significance for every product/market; therefore, it is desirable to first recognize the critical factors that could directly or indirectly bear on a product’s performance. For example, the development of an improved product may be strategic for drug companies. On the other hand, in the case of cosmetics, where image building is usually important, advertising may be a critical factor. After-sale service may have significance for products such as copying machines, computers, and elevators. From among the critical factors, an attempt should be made to sort out strengths. It is also desirable to rate different strengths for a more objective analysis. An example from the personal computer business illustrates the measurement of strengths and weaknesses. In 1987, Apple, IBM, Tandy, and imports from Taiwan and South Korea were the major competitors. In 1990, the major firms in the industry included Apple, IBM, Tandy, Compaq Computers, Zenith Electronics, and imports from Taiwan and South Korea. In 1998, the front-runners in the business were IBM, Compaq, Apple, Dell, and Packard-Bell. Among these, Compaq Computer Corp. was the leader in worldwide PC shipments, followed by IBM. As a matter of fact, in the important U.S. market IBM ranked fourth, trailing even the late-entrant Packard Bell Electronics Inc. Success in the personal computer business depends on mastery of the following three critical areas:

• Low-cost production As personal computer hardware becomes increasingly standardized, the ability to provide the most value for the dollar greatly influences sales. The most vertically integrated companies have the edge.

• Distribution Retailers have shelf space for just two or three brands; only those makers that are able to keep their products in the customer’s line of sight are likely to survive.

• Software Computer sales suffer unless a wide choice of software packages is offered to increase the number of applications.

Without these three strengths in place, a company cannot make it in the personal computer business. Thus, Texas Instruments withdrew from the field in 1983 because it did not have enough applications software. Fortune Systems dropped out in 1984. Zenith Electronics left the field in the early 1990s; Tandy became an insignificant contestant. Even imports from Taiwan and South Korea could not cope with changes in the fast-moving PC business, in which prices fall more than 20 percent a year, and product life cycles have shortened to as little as six months. Introducing a new generation of PCs just three months behind schedule can cost a company 40 percent to 50 percent of the gross profit it had planned to make on the new line. Both IBM and Apple appeared to be in trouble in 1995. By 1998 however, both of them had been able to overcome their weaknesses in logistics, manufacturing, and research and development. IBM reorganized the PC division and hired seasoned executives to fix the problems. In addition, the company shifted the focus to push for market share instead of profit to realize production efficiencies and lower parts costs. IBM hopes that with these measures, and the company’s unrivaled assets the IBM name and the brand equity built over many years in its favor, it can create a solid position to enter the next century. Apple wrought remarkable changes, remaking Apple’s products, structure, personnel, manufacturing, distribution, and marketing to once again reemerge as a major factor in the PC industry. The IBM and Apple stories illustrate the importance of analyzing strengths and weaknesses to define objectives and strategies for the future. As another example, consider the Walt Disney Company strengths. Its theme parks offer a genuinely distinctive experience built around universally recognized animated characters or brand name. The brand is supported by near-flawless delivery in every element of the business, coupled with a full range of marketing communications, all reinforcing the “childhood at any age” theme that Disney represents worldwide. Customers have powerful associations with the brands that often go back generations. These strengths offer the following benefits in developing future strategy:

• Substantial, often dominant, and sustained market share. Disney occupies the dominant market position in animated features and theme parks, and is a leading producer of feature films.

• Premium prices. Disney theme parks, hotels, and merchandise command significantly higher prices than competitors’ offerings.

• A track record of extending the brand to new products. The Disney brand was launched in 1923 with the first Mickey Mouse cartoon and has since been extended to films, network and cable television programs and studios, theme parks, hotels, merchandise, and a National Hockey League team, the Mighty Ducks.

• New markets. From its original focus on children, the brand has been extended to the full range of demographic groups (“ages 8 to 80”).

• New geographic areas. Disney’s films and products are distributed worldwide. Theme parks are open or planned in the United States, Europe, and Asia.

Strengths should be further examined to undertake what may be called opportunity analysis (matching strengths, or competencies, to opportunity). Opportunity analysis serves as an input in establishing a company’s economic mission. Opportunity analysis is also useful in developing an individual product’s objectives. . The objectives were to produce a premium product for an unscored segment and to develop a new channel outlet. In other words, at the product level, the opportunity analysis seeks to answer such questions as: What opportunity does the company have to capitalize on a competitor’s weaknesses? Modify or improve the product line or add new products? Serve the needs of more customers in existing markets or develop new markets? Improve the efficiency of current marketing operations? Opportunities emerge from the changing environment. Thus, environmental analysis is an important factor in identifying opportunities. The concept of opportunity analysis may be illustrated with Procter & Gamble’s moves in the over-the-counter (OTC) drug business. There is an increasing sense in the drug industry that the OTC side of the drug business will grow faster than prescription sales will grow.

Consumers and insurers are becoming more interested in OTC medications, partly because of the steep cost of prescription drugs. Further, with the patents of many major medicines expiring, generic drugs will pose an even greater threat to prescription products. Consequently, drugmakers are taking another look at the OTC business, where a well-marketed brand can keep a franchise alive long after exclusive rights have expired. A case in point is the success of Advil, an ibuprofen-based painkiller. To participate in the growing OTC market, Procter & Gamble has been making inroads into the industry. As a matter of fact, Procter & Gamble is already one of the largest marketers of OTC drugs. But to expand its position in the field, Procter & Gamble decided to speed things up by entering into partnerships with drugmakers and technology companies. By linking its formidable marketing strength with emerging technological advances in medicine, Procter & Gamble hopes to propel itself to the forefront of the health market. Thus, the company is working on new formulations for minoxidil, a baldness remedy, and other new products promoting hair growth with UpJohn. It joined with Syntex to market Aleve, a nonprescription version of Anaprox, an antiinflammatory drug that is popular with arthritis sufferers. It hopes to sell De-Nol, a gastrointestinal medicine made by Dutch drugmaker Gist-Brocades, as an ulcer treatment. It may use technology from Alcide, a Connecticut maker of disinfectants, in its toothpaste or mouthwash business.

Finally, Procter & Gamble has an agreement with Triton Biosciences and Cetus to use Betaseron, a synthetic interferon, that it hopes will fight the common cold. In this case, it was Procter & Gamble’s marketing strength that led it to enter the OTC drug industry. The opportunity was furnished by the environment a concern for increasing health care costs and many drug companies were glad to form alliances with this established OTC marketer. In recent years flavored coffees have become popular and companies like Starbucks have established a new style of coffee drinking. Considering this as an opportunity to expand, Dunkin’ Donuts expanded into coffee trendiness by offering four or more blends of fresh-brewed coffee, even hot and cold specialty drinks all at a fraction of the Starbucks price. Value, together with no-nonsense service, has made Dunkin’ Donuts a favorable place for coffee lovers. To continue to ride on this opportunity, the chain has decided to be the latest in fast-food cool, offering in addition to specialty coffee, oven-baked bagels and fat-free muffins. In its redone stores, the tacky old pink décor is giving way to a more upscale “ripe raisin” hue. And not content to stop at morning munchies, the company has set its sights on the lunch crowd. An interesting observation with regard to opportunity analysis, made by Andrews, is relevant here: The match is designed to minimize organizational weakness and to maximize strength. In any case, risk attends it. And when opportunity seems to outrun present distinctive competence, the willingness to gamble that the latter can be built up to the required level is almost indispensable to a strategy that challenges the organization and the people in it. It appears to be true, in any case, that the potential capability of a company tends to be underestimated. Organizations, like individuals, rise to occasions, particularly when the latter provide attractive reward for the effort required. In the process of analyzing strengths, underlying weaknesses should also be noted. Some weaknesses have SBU-wide bearing; others may be weaknesses of a specific product. SBU weaknesses must be examined, and necessary corrective action must be incorporated into the overall marketing strategy. These must be addressed by the chief marketing strategist. The remaining three weaknesses can be corrected by the person in charge of the product/market with which these weaknesses are associated.