1. Chapter Objectives The Marketing Environment, Ethics, and Social Responsibility CHAPTER 3 1 2 3 4 6 7 8 Identify the five components of the marketing environment. Explain the 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. 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. 5

2. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility ENVIRONMENTAL SCANNING AND ENVIRONMENTAL MANAGEMENT Environmental scanning Process of collecting information about the external marketing environment to identify and interpret potential trends.. Environmental management Attainment of organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social- cultural environments. Firms often create strategic alliances to combine resources and capital to compete more effectively.

3. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility THE COMPETITIVE ENVIRONMENT 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, and marketers competing for the consumer’s purchasing power. Companies with a monopoly usually accept regulation in exchange for the exclusive right to serve a market segment. Oligarchy—Limited number of sellers in an industry with high start-up costs. TYPES OF COMPETITION Direct—among marketers of similar products. Indirect—involves products that are easily substituted for each other. Competition among all firms that compete for consumers’ purchases.

4. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility DEVELOPING A COMPETITIVE STRATEGY Should we compete? Depends on firm’s resources, objectives, and expected profit potential. If so, in what markets should we compete? Allocate firm’s limited resources to the areas of greatest opportunity. 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.

5. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility THE POLITICAL-LEGAL ENVIRONMENT Political-legal environment Component of the marketing environment consisting of laws and their interpretations that require firms to operate under competitive conditions and to protect consumer rights. GOVERNMENT REGULATION Antimonopoly period of the late 19th and early 20th centuries. Protecting competitors during the Great Depression. Consumer protection in past 40 years. Industry deregulation began in the 1970s and continues today. Newest regulatory frontier is cyberspace.

6. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility GOVERNMENT REGULATORY AGENCIES Federal Trade Commission has broadest regulatory powers over marketing. Others include Consumer Product Safety Commission, the Federal Power Commission, the EPA, and FDA.EPAFDA OTHER REGULATORY FORCES Consumer interest organizations. Self-regulatory groups. CONTROLLING THE POLITICAL-LEGAL ENVIRONMENT Complying with laws and regulations serves customers and avoids legal problems. Influencing the outcome of legislation through lobbying or boycotts.

7. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility THE ECONOMIC ENVIRONMENT Consumer spending accounts for 70 percent of the gross domestic product. Economic environment Factors that influence consumer buying power and marketing strategies, including stage of the business cycle, inflation and deflation, unemployment, income, and resource availability. STAGES IN THE BUSINESS CYCLE Prosperity, recession, depression, and recovery. INFLATION AND DEFLATION Inflation—Rising prices caused by some combination of excess demand and increases in the costs of one or more factors of production. Deflation—Falling prices. Can decrease profits, lower investment returns, and bring widespread job layoffs.

8. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility Unemployment—proportion of people actively seeking work who do not have jobs. Income—many marketers focus on discretionary income, amount of money people have to spend after buying necessities. Resource availability—shortages can result from lack of raw materials, component parts, and energy, or labor. Demarketing Process of reducing consumer demand for a good or service to a level that the firm can supply. THE INTERNATIONAL ECONOMIC ENVIRONMENT Changes in consumer and business buying habits, in exchange rates, in labor costs, and other factors around the world influence the decisions marketers make. Global political changes affect international marketplace.

9. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility THE TECHNOLOGICAL ENVIRONMENT Technological environment Application to marketing of knowledge based on discoveries in science, inventions, and innovations. Government and not-for-profits often contribute to research and development, which can be very costly. APPLYING TECHNOLOGY Marketers monitor new technology to gain competitive edge.

10. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility THE SOCIAL-CULTURAL ENVIRONMENT Social-cultural environment Component of the marketing environment consisting of the relationship between the marketer, society, and culture. Increasing importance of cultural diversity and submarkets with unique values, preferences, and behaviors. CONSUMERISM Consumerism Social force within the environment that aids and protects the consumer by exerting legal, moral, and economic pressures on business and government. Basic consumer rights: to choose freely, to be informed, to be heard, and to be safe.

11. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility ETHICAL ISSUES IN MARKETING Marketing is the interface between the firm and the external world. How marketing deals with external issues has a significant impact on the firm’s success. 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.

12. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility ETHICS IN MARKETING RESEARCH Consumers are concerned about privacy, and Internet has increased privacy concerns. FTC provides consumer information about privacy online.consumer information about privacy The U.S. government also maintains a Do Not Call registry to prevent unwanted telemarketing.Do Not Call registry ETHICS IN PRODUCT STRATEGY Example: Package strategy. Larger packages are more noticeable on the shelf. Oddly sized packages make price comparison difficult.

13. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility 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? ETHICS IN PROMOTION Truth in advertising is the bedrock of ethics in promotion. Marketing to children has come under increased scrutiny. Marketing beer to college students, including through providing promotional items such as shirts and hats, raises ethical questions. ETHICS IN PRICING Most regulated aspect of a firm’s marketing activities.

14. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility SOCIAL RESPONSIBILITY IN MARKETING Social responsibility Marketing philosophies, policies, procedures, and actions that have the enhancement of society’s welfare as a primary objective.

15. CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility MARKETING’S RESPONSIBILITIES Marketing decisions must involve consideration of general well-being and even potential global effects. Some organization help promote social causes or practice socially responsible investing. MARKETING AND ECOLOGY Ecology is the study of the relationship between natural things and their environment. Protection of the environment influences all areas of marketing decision making. Marketing system produces billions of tons of packaging materials annually. Green marketing Production, promotion, and reclamation of environmentally sensitive products.