All this information is then used from the swot analysis to help the company evaluate itself and make educated business decisions.
PEST Analysis
A PEST analysis is used to evaluate the business environment by looking at economic issues, trends etc. It is used to help make short-term and longer-term decisions that could affect the company greatly if made wrongly.
The word pest stands for:
- Privatisation
- Trade Unions
- Licences
- Legislation
- Change In Taxes
Government decisions in these areas could have an impact on businesses such as a change in demand if there was a change in tax rates.
- Unemployment
- Exchange Rates
- Interest Rates
- Inflation
A rise in unemployment, interest rates or inflation would mean a decrease in disposable income which would mean that people would want cheaper goods or buy less, giving an overall loss in profits for a business.
- Environmental Issues
- Demographic Issues
- Education
- Lifestyles
- Trends Such As Increase In Health Awareness And Exercise
A recent increase in ethnic minorities could affect many issues within the business environment, for example the recent increase in the level of polish in the UK has meant an increase in the number of polish shops and goods.
- New Product Development
- New Technology
- Energy Saving Techniques
- Environmentally Friendly Equipment/Processes
Technology change in the last 20 years has meant a drastic change in the business environment, with e-commerce being part of everyday life now businesses have had to adapt to fit this demand.
All this information in the PEST analysis is used to make up an external analysis of the company, to see if there are any gaps in the present market, or anything that the business can be doing differently to increase profits.
Product Life Cycle
All products go through a life cycle, however some may stay in this cycle for a lot longer than others, staying in the maturity section can be very profitable for a company as this is when the product sales peak. For example mars bar is still as popular today as it was 20 years ago, where as products such as toys, or the latest craze have a very short life cycle.
Product Life cycle:
Introduction – this is where the product has first been introduced into the market, and has not really built up much of a reputation for itself, as people don’t really know about it.
Growth – this the part of the cycle where the product has been discovered by the public and they are developing a taste for it where sales just keep going up and up.
Maturity – this is the peak part of a products life, companies try and keep there product in this area for as long as possible as this is where the most sales are achieved.
Saturation – this is when a product may start to lose its novelty value and people begin to lose interest. There are now many competitors and the market is saturated.
Declining – The final stage in a product life is the decline, this may because the product has gone out of fashion or the novelty has completely worn off, it could be for any number of reasons but the final outcome is always the same, with a decrease in sales.
The Boston Matrix is another marketing tool used to help look at the position of the product in the market. Used with the product life cycle it can help to confirm the results.
This is the Boston box and this when used in sync with the product life cycle can be a very strong set of marketing tools to define where a product stands within a market. The Boston matrix is a portfolio analysis that assists with decision making. This portfolio is a collection of products or services that a business offers and the analysis looks at the position of these products or services in their relevant markets.
Stars – this area of the Boston box Is the high profitability, good market share with a high growth rate.
Question marks – low market share in a high growth market, this means that cash in required to maintain or increase their market share to become stars or they will lose their share of the market.
Cash cows – these produce a lot of cash and have a high market share but have a fairly low growth rate.
Dogs – these have a low market share and a low growth rate and need to be withdrawn as they will only end up losing the business money.
Ansoff Matrix
- The Ansoff Matrix is a tool that helps businesses decide upon which product to use as well their new market growth strategies.
- Ansoff’s product/market growth matrix suggests that a business’s attempts to grow depend upon whether it markets new or existing products in new or existing markets.
Different forms of marketing:
- Market Penetration is a strategy for growth as it is when a business focuses on selling existing products into already developed market places’.
- Market development is a growth strategy where a business tries to sell it existing products into new markets.
- Product development is a growth strategy where a business aims to introduce new products into existing markets
- And the final one is where a business takes a new product and introduces it into a new market.
These are the only four types of marketing a product and no matter what a business does to marketing; it will always fall into one of these categories.
