Macro Environment Analysis Example

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An organisation’s marketing environment can be defined as “the actors and forces external to the marketing management function of the firm that impinge on the marketing management’s ability to develop and maintain successful transactions with its customers” (Kotler, 1997). In order to fully analyse Mars’s marketing strategy, it is important to look at its marketing environment first, which is made up of a micro-environment and a macro-environment.

According to Kotler (1984), the macro-environment consists of the larger societal forces that affect micro-environment (internal). The micro-environment, on the other hand, consists of the forces close to the company that affect its ability to serve its stakeholders (external).

Macro-Environmental Analysis

Macro-environment, in Mars’s case, refers to the whole European ice cream market, since it is beyond the immediate environment but can nevertheless affect Mars as a company.

European Ice Cream Market

Selecta Micro Market

Capital requirement in advertising and branding is extremely high in the ice cream market. The spending is responsible for developing brands and generating effect on consumers’ decision-making process. For the premium ice cream where Mars has positioned itself, launching heavyweight advertising is of more importance, in an effort to create particular brand imagery by convincing consumers of its quality.

In the ice cream market, the power of buyers and suppliers has been seen less strong as in other markets, because of the lack of concentration of its buyers and suppliers.

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Instead, buyers of ice cream has spread widely across all ages, although children are always the primary consumers.

The threat of substitution may take forms of product-for-product substitution or substitution of need by a new product or service (Johnson & Scholes, 1997). Ice cream, as a fulfilment of needs such as light hunger, refreshment, indulgence, fun sharing and thirst quenching, might be substituted by biscuits, chocolates, crisps, or some traditional snacks in some European countries.

In competitive terms, there are two leading companies who dominate most shares in the European market, Unilever, headquartered in the UK and Netherlands, and Nestle, a Switzerland-based company. It indicates the unbalance of competitors.

The attractiveness of industry is particularly high when the market growth rate is high (Johnson & Scholes, 1997). Even up to the year 2000, the market was predicted to grow at around 5% per annum, especially in the super premium market where the growth rate is over 15%. This is unusual in mature European food markets. The high level of grow rate intensify the competition among various market players. It might also attract potential entrants, which, on the other hand, result to an even more intensive rivalry.

However, rivalry can be alleviated to some extents through differentiation strategy. According to Naylor (1999), differentiation refers to the added value in which strategic business unit expects its customers to appreciate. The extra value offered by the company must also be valued by customers more than the extra cost it takes to provide it. In the ice cream market, the offerings of premium and super premium ones are regarded as kinds of differentiation. In this way, some companies will aim to gain market share by focusing on premier or super premium segment whereas the rest will fight for economy ice cream segment, thereby reducing the intensity of competition within the market.

Finally, if the exist barrier is high enough, it can increase the competition as well. It is especially a concern of family firms, such as Mars. They tend to not leave the marketplace if this is the only business that they are in (Finlay, 2000).

By taking all this factors listed above into account, the opportunity and threat for Mars can be categorised below.

Opportunity

After looking at the market in the general way, it is time to relate it to Mars company.

Europe is relatively a stable environment, which provides a secure market for business, in terms of political factors. As its market share is spread evenly across Europe, Mars benefits a lot from the trading agreements, including EEC, EC, EEA, as they further lower the tariff and create customs union (Brooks & Weatherston, 2000). Therefore, the prices of Mars Ice Cream tend to uniform all around the Europe.

The expected increase in personal disposable income over a couple of years will also help Mars as consumers will have the necessary funds to realise their desires, and be more likely to go for high quality and more expensive products. The rise in personal disposable income helps the fast expand of Mars’s premium ice cream market, and indicates that this segmentation will still be beneficial to Mars in the future.

As a recent trend, the traditional family meal time has now been challenged. It is largely due to people’s busy working lives. Therefore, it becomes common to find different family members eating different foods at different times. As an easy-to-prepare and ready-to-eat dessert, ice cream has obviously attracted a large number of consumers. Ice cream can be taken back to home and served in flexible portions (take home) or rather consumed immediately (impulse).

Deseasonalisation has considered being a tendency in recent years. It implies the less dependency on the hot weather, which, in some European countries, last for quite a short time. Mars’s Ice Cream has been sold all over the Europe, thus producing deseasonalised items is of more importance on company’s agenda.

The production of the ice cream is subject to the use of advanced technology in areas like prevention of fat accumulation and coarse texture, sweetness, or drawing temperatures. It, in some ways, raises the threshold of entering ice cream industry, thereby protecting the existing companies, including Mars, from a too fierce rivalry competition. Continued innovation is also a key issue here. Unlike a stapler or cigarette, ice cream is the kind of product which needs continued ‘refreshment’ and constant innovation in its taste, flavour, texture or ingredients in order to maintain consumer interest and encourage sales and repurchasing. The ability to conduct it relates to the technology as well, which re-invigorate the product portfolio. This kind of requirement has put Mars onto an advantage position since the company has been well-known for its ability of innovation.

Threat

The biggest threat refers to the counter-offensive defence strategy (Kotler & Singh, 1981) employed by Unilever against Mars, since Unilver has effectively prevented Mars from accessing its freezer cabinets. It is done by supplying smaller outlets with free freezer cabinets, which are exclusive to other brands, thus increasing and enhancing its retail outlets.

Since macro actors are more difficult to manage and control, a proactive action is required in order to survive in the market. Overall, the European ice cream market is a stable, growing, but highly competitive environment. ‘Stale’ always indicates that the low level of changeability, higher level of predictability and visibility. Therefore, a prescriptive strategy can take place.

Micro-Environmental Analysis

Micro-environment is the internal factors that impinge directly on Mars.

Mars Ice Cream

Mars is highly profitable in confectionery and prepared petfood areas, acting like the market leader in these two categories. However, since the growth rates of these two industries are not high enough, its confectionery and petfood can be regarded as cash cows. The profit generated by its cash cows is actually used to support its question mark, namely Mars Ice Cream (see Figure 1).

According to Mars, the ice cream has not generated significant profit since its launch in late 1980s. Mars Ice Cream, enjoying only 5% to 10% market share in Europe, demonstrates an ambiguous future in this growing ice cream market. In this scenario, the company should decide whether to continuously fund it in order to increase market share, or withdraw it from the marketplace as it erodes the company’s profit. Therefore, It is said that Mars Ice Cream is a question mark.

However, in its product portfolio, no star or dog has been observed. It might imply the unbalance of its current product offering.

Strength

Probably the major strength Mars has demonstrated for years is its innovation ability. It refers to what Lynch (1998) calls as distinctive strategic element relevant to competing in the marketplace. However, during the early 1990s, this strategy was borrowed by Nestle, a major competitor of Mars. For that reason, the advantage of being able to innovate is a competitive advantage of Mars instead of a core competence.

By adopting Porter’s (1985) model for generic strategies, Mars’ concentration on a segment of the market is categorised as differentiation (see Figure 2). One of Mars’s strategies was to price the ice cream at a premium level, which proves to be highly successful. By doing so, Mars has implemented a flanking attack by concentrating distinct market segments that are not adequately served by Unilever and Nestle (Kotler, 1997).