1. Part Two The Global Environment and Social and Ethical Responsibilities 3 The Marketing Environment

2. Copyright © Houghton Mifflin Company. All rights reserved.3 | 2 Objectives 1.To recognize the importance of environmental scanning and analysis 2.To understand how competitive and economic factors affect organizations’ ability to compete and customers’ ability and willingness to buy products 3.To identify the types of political forces in the marketing environment

3. Copyright © Houghton Mifflin Company. All rights reserved.3 | 3 Objectives (cont’d) 4.To understand how laws, government regulations, and self-regulatory agencies affect marketing activities 5.To explore the effects of new technology on society and on marketing activities 6.To analyze sociocultural issues marketers must deal with as they make decisions

4. Copyright © Houghton Mifflin Company. All rights reserved.3 | 4 Chapter Outline Examining and Responding to the Marketing Environment Competitive Forces Economic Forces Political Forces Legal and Regulatory Forces Technological Forces Sociocultural Forces

5. Copyright © Houghton Mifflin Company. All rights reserved.3 | 5 Examining and Responding to the Marketing Environment Environmental Scanning –The process of collecting information about forces in the marketing environment Observation Secondary sources Market research

6. Copyright © Houghton Mifflin Company. All rights reserved.3 | 6 Examining and Responding to the Marketing Environment (cont’d) Environmental Analysis –The process of assessing and interpreting the information gathered through environmental scanning Accuracy Consistency Significance

7. Copyright © Houghton Mifflin Company. All rights reserved.3 | 7 Examining and Responding to the Marketing Environment (cont’d) Responding to Environmental Forces –Reactive approach Passive view of environment as uncontrollable Current strategy is cautiously adjusted to accommodate environmental changes –Proactive approach Actively attempts to shape and influence environment Strategies are constructed to overcome market challenges and take advantage of opportunities

8. Copyright © Houghton Mifflin Company. All rights reserved.3 | 8 Competitive Forces Types of Competition CompetitionOther organizations that market products that are similar to or can be substituted for a marketer’s products in same geographic area Brand competitors Firms that market products with similar features and benefits to the same customers at similar prices Generic competitors Firms that provide very different products that solve the same problem or satisfy the same basic customer need Total budget competitors Firms that compete for the limited financial resources of the same customers

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10. Copyright © Houghton Mifflin Company. All rights reserved.3 | 10 Competitive Forces (cont’d) Monitoring Competition –Helps determine competitors’ strategies and their effects on firm’s strategies –Guides development of competitive advantage and adjusting firm’s strategy –Provides ongoing information about competitors –Assists in maintaining a marketing orientation

11. Copyright © Houghton Mifflin Company. All rights reserved.3 | 11 Economic Forces Business Cycle –A pattern of economic fluctuations Prosperity Recession Depression Recovery Positive Economic Indicators Time

12. Copyright © Houghton Mifflin Company. All rights reserved.3 | 12 Economic Forces (cont’d) Stages in the Business Cycle ProsperityLow unemployment and high total income create high buying power RecessionRising unemployment reduces total buying power; consumer and business spending decline DepressionUnemployment extremely high, wages and total disposable income are very low, and there is a lack of consumer confidence RecoveryEconomy is moving out of recession or depression towards prosperity

13. Copyright © Houghton Mifflin Company. All rights reserved.3 | 13 Ranking Products Consumers Would Cut Back on if Spending Decreased

14. Copyright © Houghton Mifflin Company. All rights reserved.3 | 14 Economic Forces (cont’d) Buying Power –Resources, such as money, goods, and services, that can be traded in an exchange –Income Disposable income Discretionary income –Wealth

15. Copyright © Houghton Mifflin Company. All rights reserved.3 | 15 How We Exercise Our Buying Power Is Changing Total In-Store Purchases by Type 1995 2003 Cash 60% Debit cards 2% Credit cards 8% Checks 30% Cash 60% Checks 15% Credit cards 21% Debit cards 31% Prepaid cards 1% Source: Dove Consulting as reported in “How Cards Beat Cash,” Fortune, February 23, 2004, p. 132.

16. Copyright © Houghton Mifflin Company. All rights reserved.3 | 16 Economic Forces (cont’d) Willingness to Spend –An inclination to buy because of expected satisfaction from a product, influenced by the ability to buy and numerous psychological and social forces –Expectations influencing the willingness to spend: Future employment Income levels Prices Family size General economic conditions (e.g., rising prices)

17. Copyright © Houghton Mifflin Company. All rights reserved.3 | 17 American Customer Satisfaction Index Source: “American Customer Satisfaction Index, “ University of Michigan Business School, Nov. 2003, http://www.theacsi.com/April 2004. FIGURE 3.1

18. Copyright © Houghton Mifflin Company. All rights reserved.3 | 18 Political Forces Reasons for Maintaining Relations with Elected Officials and Politicians –To influence the creation of laws and regulations affecting industries and specific businesses –Governments are potentially large customers –Political officials can assist in securing foreign markets –Campaign contributions of corporate-related individuals and political action committees may provide influence –Lobbyists work to communicate businesses’ concerns about issues affecting their industries and markets

19. Copyright © Houghton Mifflin Company. All rights reserved.3 | 19 Legal and Regulatory Forces Sherman Antitrust Act (1890) Clayton Act (1914) Federal Trade Commission Act (1914) Robinson-Patman Act (1936) Wheeler-Lea Act (1938) Lanham Act (1946) Celler-Kefauver Act (1950) Fair Packaging and Labeling Act (1966)

20. Copyright © Houghton Mifflin Company. All rights reserved.3 | 20 Legal and Regulatory Forces (cont’d) Magnuson-Moss Warranty (FTC) Act (1975) Consumer Goods Pricing Act (1975) Antitrust Improvements Act (1976) Trademark Counterfeiting Act (1980) Trademark Law Revision Act (1988) Nutrition Labeling and Education Act (1990)

21. Copyright © Houghton Mifflin Company. All rights reserved.3 | 21 Legal and Regulatory Forces (cont’d) Telephone Consumer Protection Act (1991) Federal Trademark Dilution Act (1995) Digital Millennium Copyright Act (1996) Children’s Online Privacy Protection Act (2000) Do Not Call Implementation Act (2003)

22. Copyright © Houghton Mifflin Company. All rights reserved.3 | 22 Legal and Regulatory Forces (cont’d) Procompetitive Legislation –Preserve competition –Prevent restraint of trade and monopolizing of markets –Prevent illegal competitive trade practices

23. Copyright © Houghton Mifflin Company. All rights reserved.3 | 23 Legal and Regulatory Forces (cont’d) Consumer Protection Legislation –Adulterated and mislabeled food and drugs –Deceptive trade practices and the sale of hazardous products –The invasion of personal privacy and the misuse of personal information by firms

24. Copyright © Houghton Mifflin Company. All rights reserved.3 | 24 Legal and Regulatory Forces (cont’d) Encouraging Compliance with Laws and Regulations –Movement is toward greater organizational accountability for misconduct of employees Regulatory Agencies –FTC influences marketing activities most; can seek civil penalties and require corrective advertising Self-Regulatory Forces –Better Business Bureau –National Advertising Review Board (NARB)

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26. Copyright © Houghton Mifflin Company. All rights reserved.3 | 26 Debate Issue Is self-regulation an effective way to control and maintain good marketing practices?

27. Copyright © Houghton Mifflin Company. All rights reserved.3 | 27 Technological Forces Technology –The application of knowledge and tools to solve problems and perform tasks more efficiently Impact of Technology –Dynamic means constant change –Reach refers to how technology quickly moves through society –The self-sustaining nature of technology as the catalyst for even faster development

28. Copyright © Houghton Mifflin Company. All rights reserved.3 | 28 Technological Forces (cont’d) Adoption and Use of Technology –Failing to adopt new technology can cause a loss of market leadership –Protecting the firm’s inventions is critical –Using a technology assessment allows the firm to foresee the effects of new products and processes on the firm

29. Copyright © Houghton Mifflin Company. All rights reserved.3 | 29 Top Ten Activities for Wireless Web Device Users FIGURE 3.2 Source: “New Survey Indicates Wireless Web Penetration Highest Among Young Affluent Males,” TNS Intersearch, press release, Feb. 7, 2001, http://www.intersearch.tnsofres.com/.

30. Copyright © Houghton Mifflin Company. All rights reserved.3 | 30 Percent of Kids Who Have Technology in Their Bedrooms Technology20002003 Radio 83% TV5961 VCR3542 Video Game3435 Telephone3831 PC1417 DVD Player314 Own cell phone713 PC Online99 Source: Knowledge Networks/SRI as reported in American Demographics, February 2004, p. 13.

31. Copyright © Houghton Mifflin Company. All rights reserved.3 | 31 Adoption and Use of Technology Would You Like to Buy a Fuel-Cell Car? Why or Why Not? Courtesy of American Honda Motor Co., Inc.

32. Copyright © Houghton Mifflin Company. All rights reserved.3 | 32 Adoption and Use of Technology Would You Bank at an Online Bank? Why or Why Not? Courtesy of NetBank.

33. Copyright © Houghton Mifflin Company. All rights reserved.3 | 33 Sociocultural Forces –The influences in a society and its culture(s) that change people’s attitudes, beliefs, norms, customs, and lifestyles Demographic Diversity and Characteristics –Increasing proportion of older consumers –Rising number of single adults –Entering another baby boom –Increasingly multicultural U.S. society

34. Copyright © Houghton Mifflin Company. All rights reserved.3 | 34 U.S. Population Projections by Race Source: Bureau of the Census, Statistical Abstract of the United States, 2000 (Washington, DC: Government Printing Office, 2002), p. 16. FIGURE 3.3

35. Copyright © Houghton Mifflin Company. All rights reserved.3 | 35 The Proportion of Households in America with Married Couples Has Declines Over the Last Four Decades Year Number of Married Couples % of All Households 2003 57.3 million 51.5% 199353.155.1 198349.959.5 197346.367.8 196340.974.0 Source: U.S. Census Bureau as reported in American Demographics, April 2004, p. 41.

36. Copyright © Houghton Mifflin Company. All rights reserved.3 | 36 Net Sights The U.S. government compiles a staggering amount of demographic data on American citizens that marketers can mine for information about specific target markets. Much of this information is available in the annual Statistical Abstract of the United States (www.census.gov/statab/www/). Marketers also eagerly await the latest results of the decennial U.S. census survey, much of which is accessible at www.census.gov.www.census.gov/statab/www/www.census.gov

37. Copyright © Houghton Mifflin Company. All rights reserved.3 | 37 Sociocultural Forces (cont’d) Cultural Values –Primary source of values is the family –Values influence Eating habits Alternative health and medical treatment choices Attitudes toward marriage Concern for the natural environment Consumerism –Organized efforts by individuals, groups, and organizations to protect consumers’ rights

38. Copyright © Houghton Mifflin Company. All rights reserved.3 | 38 Changes in Cultural Values About Health Affect Meat Consumption Patterns Per Capita Meat Consumption Type of Meat19702001 Percentage Change Chicken27.4 lbs52.4 lbs91% Fish and shellfish 11.714.726% Pork48.146.9-2% Beef79.663.1-21% Source: USDA/Economic Research Service as reported in American Demographics, February 2004, p. 11.

39. Copyright © Houghton Mifflin Company. All rights reserved.3 | 39 Class Exercise With which environmental force (competitive, economic, political, legal and regulatory, technological, or sociocultural) is each of the following most directly associated? 1.Prosperity 2.Federal Trade Commission 3.Personal computers that understand human speech 4.Development and widespread use of cellular phones

40. Copyright © Houghton Mifflin Company. All rights reserved.3 | 40 Class Exercise (cont’d) 5.People’s willingness to spend 6.Contributions to campaign funds 7.A society’s high material standard of living 8.Sherman Antitrust Act 9.Better Business Bureau 10.Consumerism 11.Discretionary income 12.Food and Drug Administration 13.A monopoly

41. Copyright © Houghton Mifflin Company. All rights reserved.3 | 41 Class Exercise (cont’d) 14.Government purchases of goods and services 15.Group of people threatening to boycott the sponsors of a television program that they believe contains too much sex and violence

42. Copyright © Houghton Mifflin Company. All rights reserved.3 | 42 Class Exercise Although Wal-Mart Supercenters have generated great customer satisfaction, they have also prompted questions about their impact on communities. What impact are these Supercenters likely to have on: –Competitive forces –Economic forces –Political forces –Legal and regulatory forces –Technological forces –Sociocultural forces

43. Copyright © Houghton Mifflin Company. All rights reserved.3 | 43 After reviewing this chapter you should: Recognize the importance of environmental scanning and analysis. Understand how competitive and economic factors affect organizations’ ability to compete and customers’ ability and willingness to buy products. Be able to identify the types of political forces in the marketing environment.

44. Copyright © Houghton Mifflin Company. All rights reserved.3 | 44 After reviewing this chapter you should: Understand how laws, government regulations, and self-regulatory agencies affect marketing activities. Know the effects of new technology on society and on marketing activities. Be able to analyze sociocultural issues that marketers must deal with as they make decisions.

45. Copyright © Houghton Mifflin Company. All rights reserved.3 | 45 Chapter Quiz 1.If M&M Mars Candies found a magazine article that provided key information on the television viewing habits of major candy consumer groups, this would be an example of information obtained through environmental a.scanning. b.forces. c.analysis. d.strategizing. e.management.

46. Copyright © Houghton Mifflin Company. All rights reserved.3 | 46 Chapter Quiz (cont’d) 2.Which of the following would represent a brand competitor for Ford’s Expedition sports utility vehicle? a.Dodge Caravan b.Chevrolet Suburban c.Ford Ranger d.Taxi ride e.Chevrolet Blazer rented from Avis

47. Copyright © Houghton Mifflin Company. All rights reserved.3 | 47 Chapter Quiz (cont’d) 3.To move toward greater organizational accountability, the U.S. Sentencing Commission introduced guidelines that mitigate penalties for developing compliance programs called the a.Organizational Compliance Guidelines for Organizations. b.Federal Sentencing Guidelines for Organizations. c.Federal Trade Guidelines. d.Antitrust Guidelines. e.Consumer Protection Guidelines.

48. Copyright © Houghton Mifflin Company. All rights reserved.3 | 48 Chapter Quiz (cont’d) 4.Mixed concrete cannot be shopped farther than twenty-five miles because the concrete might harden in the truck. Citrus County Concrete Company is the only supplier of mixed concrete to customers within a thirty-mile radius. Citrus County Concrete is an example of which competitive structure? a.Monopoly b.Oligopoly c.Monopolistic competition d.Pure competition e.Monopsony