1. Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

2. Chapter Objectives
Identify the five components of the marketing environment.
Explain the types of competition marketers face and the steps necessary for developing a competitive strategy.
Describe how marketing activities are regulated and how marketers can influence the political-legal environment.
Outline the economic factors that affect marketing decisions and consumer buying power.
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3. Chapter Objectives
Discuss the impact of the technological environment on a firm’s marketing activities.
Explain how the social-cultural environment influences marketing.
Describe the ethical issues in marketing.
Identify the four levels of the social responsibility pyramid.
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4. Environmental Scanning
Collecting external marketing environment information to identify and interpret potential trends
Trends may represent significant opportunities or threats to the company
Example: CPSC issued a recall of The Princess and the Frog-themed pendants, citing high levels of cadmium in the children’s necklaces
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5. Environmental Management
Attainment of organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social- cultural environments
Strategic alliance - Partnership in which two or more companies combine resources and capital to create competitive advantages in a new market
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7. The Competitive Environment
Interactive process that occurs in the marketplace among:
Marketers of directly competitive products
Marketers of products that can be substituted for one another
Marketers competing for the consumer’s purchasing power
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8. The Competitive Environment
Marketing decisions by individual firms influence:
Consumer responses in the marketplace
Marketing strategies of competitors
Few organizations have monopoly positions
Monopoly - Market structure in which a single seller dominates trade in a good or service for which buyers can find no close substitutes
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9. The Competitive Environment
Some pharmaceutical firms have temporary monopolies provided by patents on drugs
Antitrust laws - Designed to prevent restraints on trade such as business monopolies
Oligopoly - Few number of sellers in an industry with high start-up costs which keep out new competitors
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10. Types of Competition Direct Indirect
Among marketers of similar products
Example: Alternative suppliers in the cell phone market such as Verizon and AT&T
Indirect
Involves products that are easily substituted
Example: In the fast-food industry, pizza competes with chicken, hamburgers, and tacos
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11. Types of Competition
Competition among all firms that compete for consumers’ purchases
All firms compete for a limited number of dollars that consumers can or will spend
Example: The purchase of a Honda Accord might compete with a Norwegian Cruise Line cruise
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12. Developing a Competitive Strategy
Competitive strategy - Methods through which a firm deals with its competitive environment
Should we compete?
Depends on firm’s resources, objectives, and expected profit potential
In what markets should we compete?
Allocate firm’s limited resources to the areas of greatest opportunity
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13. Developing a Competitive Strategy
How should we compete?
 Includes product, promotion, distribution, and pricing decisions that maximize competitive advantage
Time-based competition - Strategy of developing and distributing goods more quickly than competitors
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14. Key Environments Marketing Environment
The actors and forces that affect a firm’s ability to build and maintain successful relationships with customers.

15. Key Environments Aspects of the marketing environment:
Microenvironment:
Actors close to the company
Macroenvironment
Larger societal forces

16. Actors in the Microenvironment
Figure 4-1:
Actors in the Microenvironment

17. The Microenvironment
Departments within the company impact marketing planning.

18. The Microenvironment
Suppliers help to create and deliver customer value.
Treat suppliers as partners.

19. The Microenvironment
Marketing intermediaries help to sell, promote, and distribute goods.
Intermediaries take many forms.
Resellers
Physical distribution firms
Marketing services agencies
Financial intermediaries

20. The Microenvironment Customer markets must be studied. Market types
Consumer
Business
Government
Reseller
International

21. The Microenvironment
Successful companies provide better customer value than the competition
Size and industry position help to determine the competitive strategy.

22. The Microenvironment Various publics must also be considered. Local
Government
Media
Financial
Citizen action groups
Local
General
Internal

23. Major Macroenvironmental Forces
Figure 4-2:
Major Macroenvironmental Forces

24. The Macroenvironment Key Demographic Trends World population growth
Now 6.2 billion
Projected to reach 7.9 billion by 2025

25. Seven U.S. Generations

26. The Macroenvironment Key Demographic Trends
Changing American household
Geographic population shifts
Better-educated, more white-collar workforce
Increasing Diversity

27. The Economic Environment
Gross domestic product (GDP) - Sum of all goods and services produced by a nation in a year
Economic environment - Factors that influence consumer buying power and marketing strategies
Business cycle - Pattern of stages in the level of economic activity
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28. Chapter 1
Economic Cycles

29. Stages in the Business cycle
Prosperity - Consumer spending is brisk; growth in services sector
Recession - Consumers focus on basic, fundamental products
Depression - Consumer spending sinks to its lowest level
Recovery - Consumer purchasing power increases
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30. The Global Economic Crisis
Business cycles take a severe turn and affect consumers and businesses across the globe
Marketers must reevaluate their strategies and concentrate on their most promising products
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31. Inflation and Deflation
Inflation: The devaluation of money by reducing what it can buy through persistent price increases.
Deflation: Falling prices, better?
Unemployment
The proportion of people in the economy who do not have jobs and are actively looking for work.

32. Resource Availability
Income
Discretionary income: the amount of money people have to spend after paying for necessities such as food, clothing, and housing.
Resource Availability
Demarketing: the process of reducing consumer demand for a good or service to a level that the firm can supply.

33. The International Economic Environment
Marketers must monitor the economic environment of other nations
Global political changes affect international marketplace
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34. The Macroenvironment The Natural Environment
Concern for the natural environment has grown steadily, increasing the importance of these trends:
Shortage of raw materials
Increased pollution
Increased governmental intervention

35. Many companies use recycling to help protect natural resources
The Macroenvironment
Many companies use recycling to help protect natural resources

36. The Technological Environment
The technological environment represents the application of knowledge in science, inventions, and innovations to marketing.
Applying technology helps Fidelity improve customer service

37. The Macroenvironment Key Technological Trends
The technological environment is characterized by rapid change.
New technologies create new opportunities and markets but make old technologies obsolete.
The U.S. leads the world in research and development spending.

38. The Political-Legal Environment
Consists of laws and their interpretations that require firms to operate under competitive conditions and to protect consumer rights
Ignorance or non-compliance can result in fines, negative publicity, and civil damage suits
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39. Government Regulation
Falls into four historical phases:
Antimonopoly period of the late 19th and early 20th centuries
Protecting competitors during the Great Depression of the 1930s
The third phase focused onConsumer protection
Industry deregulation began in the late 1970s
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40. Government Regulation
Newest regulatory frontier is cyberspace
Federal and state regulators are investigating ways to police the Internet and online services
Privacy and child protection issues are difficult enforcement challenge
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44. Government Regulatory Agencies
The Federal Trade Commission (FTC) has the broadest regulatory powers over marketing
Enforces laws regulating unfair business practices and stops false and deceptive advertising 
The FTC uses several procedures to enforce laws
Consent order
Cease-and-desist orders
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45. Other Regulatory Forces
Consumer interest organizations
Other groups attempt to advance the rights of minorities, senior citizens, and other causes
Self-regulatory groups set guidelines for responsible business conduct
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46. The Social-Cultural Environment
The relationship between the marketer, society, and culture
Marketers must be sensitive to demographic shifts and changing values
Increasing importance of cultural diversity
Example: Univision and Telemundo face growing competition in Spanish-language television programming
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47. The Cultural Environment
The Macroenvironment
The Cultural Environment
Core beliefs are persistent
Passed from parents to children; reinforced by society
Shape attitudes and behavior
Secondary cultural values change and shift more easily
Society’s cultural values are expressed through people’s views of:
Themselves
Others
Organizations
Society
Nature
The Universe

48. Responding to the Marketing Environment
Reactive: Passive Acceptance and Adaptation
Companies design strategies that avoid threats and capitalize upon opportunities.
Proactive: Environmental Management
Use of lobbyists, PR, advertorials, lawsuits, complaints, and contractual agreements to influence environmental forces.

49. Consumerism
Social force within the environment that aids and protects the consumer by exerting legal, moral, and economic pressures on business and government
Consumer rights:
The right to choose freely
The right to be informed
The right to be heard
The right to be safe
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50. Ethical Issues in Marketing
Marketing ethics - Marketers’ standards of conduct and moral values
Many companies create ethics programs to train employees to act ethically
Employees’ personal values sometimes conflict with employers’ ethical standards
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51. SOCIAL RESPONSIBILITY IN MARKETING
SOCIAL RESPONSIBILITY IN MARKETING
• Social responsibility Marketing philosophies, policies, procedures, and actions that have the enhancement of society’s welfare as a primary objective.

52. Social Responsibility and Ethics
Ethical = morally right
Socially Responsible = society views as best
Promote well-being
Promote harmony, stability
Influence
elections
Draw
crowds to events
Responsible marketing
can...

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55. Ethics in Marketing Research
Consumers are concerned about privacy
Proliferation of databases
Selling of address lists
Ease with which consumer information can be gathered
Several agencies offer assistance to Internet consumers
The U.S. government maintains a Do Not Call registry to prevent unwanted telemarketing
Consumers are concerned about privacy
Proliferation of databases
Selling of address lists
Ease with which consumer information can be gathered
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56. Ethics in Product Strategy
Product quality, planned obsolescence, brand similarity, and packaging raise ethical issues
Example: Packaging strategy
Larger packages are more noticeable on the shelf
Oddly sized packages make price comparison difficult
Bottles with concave bottoms appear to have more liquid in them than they do
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57. Ethics in Distribution
What is the appropriate degree of control over the distribution channel?
Should a company distribute its products in marginally profitable outlets that have no alternative source of supply?
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58. Ethics in Promotion
Truth in advertising is the bedrock of ethics in promotion
Marketing to children has come under increased scrutiny
Promoting specific products to college students can raise ethical questions
Another issue involves firms paying universities for the use of their logo, team name, or mascot to advertise products and services to students
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59. Ethics in Pricing
Most regulated aspect of a firm’s marketing activities
Example: Credit-card companies target consumers with poor credit ratings and offer them what industry observers call “subprime” or “fee-harvesting” credit cards
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60. Source: The Four Step Pyramid of Corporate
Social Responsibility from Business Horizons,
Vol. 34, 1991, page 92, Freeman & Liedtka,
“Corp. Social Responsibility.” Reprinted from
Business Horizons © 1991 with permission
From Elsevier.
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61. Marketing’s Responsibilities
Corporate responsibility covers the entire framework of society
Marketers must consider:
The global effects of their decisions
The long-term effects of their decisions
The well-being of future generations
Entire communities can benefit through socially responsible investing
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62. Marketing and Ecology
Ecology - The relationship between organisms and their natural environments
Environmental issues influence all areas of marketing decision making
Green marketing - Production, promotion, and reclamation of environmentally sensitive products
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63. Video Watch The Marketing Environment, Ethics,
and Social Responsibility at Scholfield Honda
How does Scholfield Honda rate on the social responsibility pyramid? Do they meet all the criteria for a socially responsible company?
What social and cultural changes have affected the way car manufacturers design and market their products?
Should governmental regulations be placed on companies’ claims that their products are green? Should official classifications for environmental friendliness be defined?
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