What is PEST analysis?

http://www.marketingteacher.com/lesson-store/lesson-pest.html

In connection with our studying international markets I decided to choose a video that explains how PEST analysis works. PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in strategic management.
PEST analysis is used to concider the features of the market we are breaking into, especially if it is located overseas. PEST analysis includes examination of the following factors:

Political / Legal Factors
The politishians make the laws so there is very close collusion between political and legal factors - it is sometimes difficult to separate them out.
Political factors require analysing the following matters:

• monopolies and mergers rules

It is important to understand from the beginning that if monopolies are present on the market, they not only own the largest market share, but they will definetely look to growing their market share. Example of that could be Tesco - the largest retail company in the UK

• local, national and supra national legislation

To t your business in a foreign country you have to look thoroughly through all the legislation

• taxation

It's changing all the time. That's why it is important to keep an eye on it. In England, according to the speaker, they have the whole issue of non-dom situations when politishians are interested in making the country more attractive for foreign investors but still are raising taxes.

• employment laws

This involeves the working week - you had better find out how many hours people work a week

• government policy and initiatives

Many goverments are moving towards green initiative and actually are investing a lot in green technology

• unions / pressure groups

It varies greatly all around the world. Just in UK recently they have had train strikes and since the strikes are having a great impact on all of the business this point is very important

Economical Factors

• business cycles growth, recession, depresion

Before entering a market we should define the stage of the cycle. We should clearly bear in mind that from one scenario of growth we will go into recession, it is just a question of way and time.

• inflation / interest / exchange rate

These will vary from each country to country and from market to market

• (un)employment rate

It will also have a huge impact on your goods or servises through the level of consumprion

• disposable income

It is one of the most important points because it helps in assessing the potential of the market and also is crucial point in establishing prices
While making such economic review we have to use the exact figures, otherwise it will be a genaral statement without any proof

Sociocultural Factors

• demographics
• diversity
• lifestyle

Who are our customers, what do they live like? Are they going under different lifestyles?

• distriburion of wealth

We need to examine if the wealth people are getting wealthier and the poor are getting poorer or we have a middle class emerging into the market.

• culture-belief values

People make our market, so we have to take this point into consideration

• consumerism

How are we consuming? As a marketing ploy Tesco have recently decided to change 'bogof' conception (buy one, get one free) into 'buy one, get one free later' because a lot of consumer didn't want to buy more than they actually needed.

• population size

It becomes hugely important because countries are becoming bigger and bigger because in connection with migration shift. That could have great impact on our particuliar market.

Technological Factors

• new discoveries and innovations

We should make sure that our product is meeting the requirements in that area (the version of our product is the latest on this market)

• the issue of obsolescence

Companies are building their products because they want customers to be able to buy the new ones

• Internet / mobile

Internet is the fabulous environment of where we can access information but the problem is how we access it, when we want it. So you must make a research if consumers on this particular market have access to Internet anytime, anyplace anywhere and if the mobile phones with access to Internet are common.

Among all of the factors mentioned above, the speaker tells that while entering a market we also should pay attention to ethics.  We should find out how to become a good citizen of the country we are making budiness in (How much do corporations put in charities?).

It took me 3 times watching the video to catch this information. There still are several words in the speech that I didn' t understand, but the main conception of the video is clear.

Malcolm Gladwell on spaghetti sauce

http://www.ted.com/talks/malcolm_gladwell_on_spaghetti_sauce.html

The reason for choosing this particular  video is that Malcolm Gladwell is one of my most favorite writers. A New Yorker staff writer since 1996, he visits obscure laboratories and infomercial set kitchens as often as the hangouts of freelance cool-hunters -- a sort of pop-R&D gumshoe -- and for that has become a star lecturer and bestselling author.
It took me 3 times to watch the video and unerstand the whole speech.

Mr. Gladwell tells us a story of one of  great American market reseachers named Howard Moskowitz. Howard is most famous for reinventing the spaghetti sauce. He graduated from Harward University with the degree in phychophysists (which is about measuring things) and set up a small consulting shop in New York. This was back in the early seventies. One of his first clients was Pepsi.  So the representatives of Pepsi came to Howard and said: "You know, there's this new thing called aspartame and we would like to make diet pepsi. We woould like you to figure out how much aspartame we should put in each can of diet pepsi in order to have the perfect drink."
More than that, Pepsi gave him particuliar borders: they were working with a band between 8 and 12%. Anything below 8% sweetness isn't sweet enough and everything above 12% sweetness is too sweet. So Pepsi would like to find out the sweet spot between 8 and 12.
At first this task seems to be very simple. We could make up a big experimental batch of Pepsi at every degree of sweetness, beginning from 8% - 8.1, 8.2, 8.3...all way up to 12% , then try it out with thousands of people, plot the results on a curve and take the most popular concentration.
Howard does the whole experiment, but when he plots the results on the curve he suddenly realizes it isn't a nice bell curve, it's a mess.
Most specialists in that kind of situation wouldn't worry too much about the results and would simply choose 10% - the middle result. However, Howad was't so easily placated. He is a man of certain degree and intellectual standards. The results weren't good enough for him and this matter bedeviled him for years. He would think it through and through, what would guess what was wrong.
One day he was sitting in a diner, when suddenly like a bolt of lightning the answer came to him. When they were analyzed the Diet Pepsi data, they were asking the wrong question. They were looking for the perfect Pepsi and they should have been looking for the perfect Pepsies. This was one of the most brilliant breakthroughs in all of food science.
Howard immediately went on the road, visited conferences around the country and shared his relevation. He would stand up and tell: You have been looking for the perfect Pepsi. You're wrong. You should have looking for the perfect Pepsies. People would look at him with a blank look and ask him what he was talking about. However, Howard was obsessed with this idea and when Campbell's Soup came to him,  he expressed the same point. Campbell's Soup is where Howard made his reputation. Campbell's made Prego, which in early eighties was struggling next to Ragu, that was the dominant spaghetti sauce of the seventies and eighties. Technically speaking, Prego is a better sauce than Ragu. Despite this fact, Ragu was winning the competiotion. That's when Campbell's Soup asked Howard to fix them.
Howard did just the same he did in Pepsi case - he got to the Campbell's citchen, made 45 varieties of spaghetti sauce and varied them according to every conceivable way (by sweetness, by level of garlic, ect...). He took all raft of 45 spaghetti sauces and went on the road to New York, Chicago, ect. He brought in people by the truckload into big halls, set them down for 2 hours and gave them 10 bowls of pasta with a different sause on each one. After eating each bowl people had to rate from 0 to 100. After the end of this process, Howard had a mountain of data about how the american people feel about the spaghetti sauce.
When he analyzed the data this time he did't look for the most popular brand spaghetti sauce. Instead, he grouped different data points into clusters. Finally he realised that all the Americans divide into one of three groups:
- people who like their spaghetti sauce plain
- people who like their spaghetti sauce spicy
- people who like it extra chunky
Of those 3 facts the last one was most signigicant, because at that time (early 1980s) there weren't any extra chunky sauces in supermarkets. When Prego saw the results and  realized that 1/3 of Americans crave extra chunky sauce and noone is satisfying their need, they completely reformulated their spaghetti sause that immediately and completely took over spaghetti sause business in US.
Other companies noticed Howard's succes and that's when the variety of food items started to appear on the shelves in supermarkets.

Although the name of the video is quite obvious, the story, which Malcolm Gladwell tells us is not only about spaghetti sauce. It has several interesting conclusions:
- Asking people what makes them happy not always help in achieving the success. People don't know what they want. (For years and years and years Ragu and Prego would have focus groups, they would sit people down and ask what they want in spaghetti sauce. For all those years through all those sessions noone ever said they wanted extra chunky - even 1/3 of them, deep in their hearts, actually did)
- Howard made us realize the importance of what he likes to call horizontal segmentation. Different kinds of goods serve different kinds of people.

What physics can teach us about marketing

http://www.ted.com/talks/dan_cobley_what_physics_taught_me_about_marketing.html

For my first review I have chosen a video talk with Dan Cobley, who is a marketing director in Google. His duty is to connect customers and businesses, helping to satisfy their needs. Before Google, Mr. Cobley was the vice president of branding and marketing for Capital One and the marketing director of Ask Jeeves. He has worked in both the UK and US, but always in marketing although his first degree from Oxford is in physics.

In his speech, Dan explains what physics taught him about marketing. He gives examples of the main physical laws and transfers his knowledge from physics to marketing.

It took me 4 times to watch the video, because at first I couldn’t make head or tail of Dan’s speech, especially when he was describing the connection between formulas and marketing rules. However, Mr. Cobley’s speech is coherent, persuasive, articulate and engaging.

I’ll try to put some of Dan’s key points in a nutshell:

Newton’s Law: For a larger particle of larger mass requires more force to change its direction. It’s the same with brands: the bigger the brand, the more force is needed to change its positioning.

Example: This rule explains why companies like Uniliver and P&G keep brands like Oreo, Arial and Pringles and Dove separate rather than having one giant parent brand.

Heisenberg’s Uncertainty Principle: You can never accurately and exactly measure the particle, because observation changes it.
The message for marketing is that try to measure what consumers actually do, rather than what they say they’ll do, or anticipate they’ll do.

Example: Think about of the group of moms who are talking about their wonderful children and mentioning that almost none of them buy junk food. And yet, McDonalds sells hundreds of millions of burgers every year.

The fundamental axiom of physics: you can’t prove a hypothesis through observation, it’s easier to disprove it.

As to marketing: no matter how much is invested in your brand, one bad week can undermine decades of good work.

Example: physics: Ptolemy had dozens of data points to support his theory the planets rotate around the Earth. However, it took only one robust observation from Copernicus to blow that idea out of the water.

Marketing: BP. They have spent millions of pounds over many years building up its credibility as an environmentally friendly brand, but then one little accident happened…

The second law of thermodynamics: Entropy will always increase.

Message for marketing: your brand is more dispersed than you suppose.

 Example: If we go back to 20 years the one message was pretty much controlled by one marketing manager. But today things have changed. You can get a strong brand image or a message and put it out, but then you will lose control of it. Your brand gets more chaotic.

From my point of view, Dan’s speech is very informative. I guessed that all of the sciences were related together, but I didn’t imagine such a close connection between physics and marketing. The rules that Dan mentioned above could also be very useful when we talk about international marketing. We should take them into consideration while doing a market research not only on the domestic market but on the worldwide one, too.