Retrenchment

This sort of response deals with efficiency problems but disregards effectiveness issues. As sales and profits decline, the management cuts costs; this leads to a period of higher profits but does nothing to stem declining sales. Costs (and capacity) are reduced once more, but the fundamental strategic problems remain. Retrenchment policies only delay the inevitable.

Gradual strategic repositioning

This approach involves a gradual, planned and continuous adaptation to the changing marketing environment. Marks 8c Spencer is a company that has continually repositioned itself in response to changing demographic and economic trends (connoisseur convenience foods, financial ser­vices and European expansion, for example) in order to maintain a fit between the organization, its strategies and the environment. Failure to respond to environmental change, which resulted in its clothing products being perceived as old-fashioned, meant a significant downturn in the company's fortunes in the late 1990s. A series of boardroom battles saw the removal of a number of senior management personnel. As we saw in the previous chapter, a new team under the direction of a Belgian, Luc Vandevelde, is seeking to restore Marks & Spencer's position in the marketplace.

Radical strategic repositioning

If its procrastination results in a crisis, a company could have to consider a radical shift in its strategic positioning - the direction of the entire business is fundamentally changed. For example, the UK clothing retailer Hepworths was radically repositioned as Next a more upmarket outlet for women's wear targeted at 25-35-year-old working women. Radical strategic repositioning is much riskier than gradual repositioning because, if unsuccessful, the company is likely to fold.

Summary

In this chapter, we have seen that the marketing environment can be divided into two sections: the microenvironment, which consists of suppliers, distributors, customers and competitors; and the macroenvironment, which can be grouped under economic, social, political and legal, physical, and technological forces. We have reviewed the major types of macroenvironmental forces that can create opportunities and threats for marketing companies; not all companies are likely to be affected by all forces, but it is important for managers to be aware of those that are particularly relevant for their businesses. Environmental scanning is the process of monitoring and analysing the marketing environment. It provides the essential infor­mational input to create strategic fit between strategy, organization and the environment. Response to change can vary from no change through ignorance, delay, retrenchment and gradual repositioning, to radical repositioning.

Study questions

1. Choose an organization (if you are in paid employment use your own organization) and identify the major forces in the environment that are likely to affect its prospects in the next five to ten years.

2. Assess the impact of the introduction of the Euro on the prospects for motor car dealers.

3. What are the major opportunities and threats to EU businesses arising from the move to market-driven economies of Eastern bloc countries?

4. Discuss five business opportunities arising from the growth in the proportion of the population that might be classed as 'time poor and cash rich'.

5. Evaluate the marketing opportunities and threats posed by the growing importance of the socially conscious consumer.

Key terms
marketing environment	the actors and forces that affect a company's capability to operate effectively in providing products and services to its customers
microenvironment	the actors in the firm's immediate environment that affect its capability to operate effectively in its chosen markets- namely, suppliers, distributors, customers and competitors
macroenvironment	a number of broader forces that affect not only the company but the other actors in the environment, e.g. social, political, technological and economic
social responsibility	the ethical principle that a person or an organization should be accountable for how its actions might affect the physical environment and the general public
cause-related marketing	the commercial activity by which businesses and charities or causes form a partnership with each other to market an image, product or service for mutual benefit
ethics	the moral principles and values that govern the actions and decisions of an individual or group
environmental scanning	the process of monitoring and analysing the marketing environment of a company