Case Study ONE

ADDITIONAL CASE STUDY
THE MARKETING ENVIRONMENT
CONSUMERS CONFOUND MARKETERS
Household spending by all UK households amounted to over £500 billion in 1997, or

63% of gross domestic product. This level of expenditure is very closely related to
conditions in the country's macro-economic environment. For marketers, it is crucial
to be able to read the macro-economic environment and to predict the effects of
change in demand for their goods and services. Identifying turning points in the
economic cycle has become a work of art as well as science, as consumers
frequently confound experts by changing their expenditure levels in a way which
could not have been predicted on the basis of past experience.
During the Autumn of 1998, mortgage rates in the UK were falling; unemployment
was close to its lowest level for two decades; pay rises were keeping ahead of
inflation; and share prices were recovering from their recent falls. Yet expenditure
by British households was falling sharply. For three consecutive months’ retail sales
fell in value, with retailers such as Marks and Spencers and Storehouse reporting
below expected levels of sales. Retailers have traditionally found excuses to justify
poor sales to their shareholders, including weather which is too cold/too hot. Even
the death of Diana Princess of Wales was widely blamed for keeping people out of
the shops.
Throughout 1998, prices of consumer goods had fallen significantly, with consumer
durables down in price by an average of 2% in a year and clothing by 5%.
Economic theory would have suggested that lower prices would have resulted in
higher sales, especially considering the other favourable elements of the macro-
environment. However, this did not appear to be happening.
What else could have been happening in the marketing environment to explain
falling household expenditure? At the time, the media was full of reports of an
impending global economic crisis, triggered by difficulties in the Asian economies.
Consumer confidence is crucial to many high value household purchases such as
houses and cars, with consumers reluctant to commit themselves to regular monthly
repayments when their source of income is insecure. Even this may be only a
partial solution, as a survey of consumer confidence carried out in October 1998 by
GFK on behalf of the European Commission showed that although consumers were
pessimistic about the state of the national economy, they were quite upbeat about
their personal financial situation.
One possibility was that consumers had become cannier. If prices are falling, why
not wait longer until prices have fallen further? Consumers had also witnessed the
effects of previous over-borrowing and had been more cautious during the recent
period of economic growth, resulting in a historically low level of personal sector
indebtedness. In 1997, 9% of disposable household income was saved, compared
with just 3% at the height of the economic boom of 1988.
For companies who need to commit resources a long while in advance in order to
meet consumers’ needs, an accurate understanding of the market environment is
crucial if stock surpluses and shortages are to be avoided. But this case shows that
getting it right can still be very difficult.
CASE STUDY REVIEW QUESTIONS
1. Identify all of the environmental factors that can affect the demand for consumer
durables and assess the magnitude and direction of their impact. (20 Marks)
2. In what ways can a manufacturer of consumer durables seek to gain a better

understanding of its marketing environment? (20 Marks)
3. How can a manufacturer of consumer durables seek to respond to environmental

change as rapidly as possible? (20 Marks)
ANSWER:
1. The term "environmental factors" refers to all of the elements outside of a firm that
might have an impact on it. There are four environmental elements that have the
potential to effect consumer durables in the consumer durable business. The
following are the factors and their magnitudes:
 Technological factors –
In today's world, technology is the backbone of any industry in this world. In
an economy, it entails research, pace, and direction. In the case of consumer
durables, the size of technical aspects is the greatest. This is largely due to the
fact that technology is the foundation of consumer durables such as
refrigerators, automobiles, electric heaters, and so on. The path of technical
factors is toward industrial invention, production, transfer, and automation. A
little shift in technical trends can have a significant influence on the consumer
durable industry's budget and productivity.
 Social factors –
Social elements are the most prevalent aspects found in any corporate
environment; they are influenced by the country's demography, population,
health, and living standards. In the case of consumer durables, the importance
of social considerations is quite minor. In the corporation, social variables
influence brand value, demand, and income distribution. These variables also
include the organization's social corporate responsibility. Customers in the
provided scenario were more concerned with their financial situation, even if
the country was struggling; this is an example of a social element.
 Economic factors
Economic factors are those that influence the economy, such as interest rates,
tax rates, laws, policies, wages, and governmental activities. These factors are
not directly related to the business, but they have an impact on the investment
value in the future. There are numerous economic considerations to consider,
some of them are as follows as tax rate, exchange rate, inflation, labour,
demand/supply, wages, law and policies, governmental activity and the last
one is recessions. Economic issues that affect business, as well as some of the
other methods connected to business and influence the drive of company, such
as labour and its cost, are always a contentious economic element. Many
countries have begun to hire workers from other countries. The interest rate is
a major determinant of cash liquidity in the economy. Investors will be
attracted by a larger return on investment. Though it is not an economic
factor, management plays a critical role in the company's growth. It is a factor
that is influenced by economic factors and drives the business to generate
maximum revenue.
2. Unpredictable trends characterise the market environment. It is extremely difficult for

any organisation to predict these trends. A consumer durables manufacturer, on the
other hand, can choose from any of these analyses to get a close prediction of the
environment. Such as a SWOT analysis.
i. SWOT Analysis
As we know, SWOT is an acronym that stands for strengths, weaknesses,
opportunities, and threats. It informs the organisation about the forces that
may have an impact on the company. A SWOT analysis of the consumer
durable industry can give us the following exact results.
o Strength – Technological advancement, an increase in disposable
income, market stocks, and other factors all contribute to the consumer
durable industry.
o Weakness – A poor conversion rate, a lack of devoted consumers,
internal disputes, and other factors would characterise the consumer
durable business.
o Opportunity – For the industry who includes the market growth,
increased investment, and other factors.
o Threats – It can include a cultural change, poor inventory
management, inflation, and other factors all have a role.
3. The objective here is to build an adaptable organisation. When signs of change are
detected, an organization's resources should be mobilised to meet the new
environmental challenge. It is critical to have flexible labour practises, just-in-time
production systems, and the ability to rapidly downsize/upsize. To ensure that
changes are implemented quickly and effectively, leadership is required.
o Adding up a new value -

The company will use these changes to increase the value of their
company. This can be accomplished by either introducing new
products and services or by reducing unnecessary spending. All
operations that do not bring value to the organisation will be phased
out. According to the case study, customers were found to be
optimistic about their own financial status, despite the country's
predicament; in such instances, enterprises should focus on offering
high-quality products and services to gain customer loyalty.
o Increasing the pace of the product -

The manufacturer must guarantee that the organisation moves in
lockstep with new trends. The manufacturer must be able to respond
quickly to such modifications. This prevents the firm from incurring
unneeded costs.

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ADDITIONAL CASE STUDY

THE MARKETING ENVIRONMENT

CONSUMERS CONFOUND MARKETERS

Household spending by all UK households amounted to over £500 billion in 1997, or

CASE STUDY REVIEW QUESTIONS

2. In what ways can a manufacturer of consumer durables seek to gain a better

3. How can a manufacturer of consumer durables seek to respond to environmental

2. Unpredictable trends characterise the market environment. It is extremely difficult for

o Adding up a new value -

o Increasing the pace of the product -

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