1. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

2. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-2 Chapter Objectives 1.Identify the five components of the marketing environment. 2.Explain the types of competition marketers face and the steps necessary for developing a competitive strategy. 3.Describe how government and other groups regulate marketing activities and how marketers can influence the political –legal environment. 4.Outline the economic factors that affect marketing decisions and consumer buying power. 5.Discuss the impact of the technological environment on a firm’s marketing activities. 6.Explain how the social-cultural environment influences marketing. 7.Describe the role of marketing in society and identify the two major social issues in marketing. 8.Identify the four levels of the social responsibility pyramid.

3. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-3 Environmental Scanning and Environmental Management Environmental Scanning Environmental Scanning is the process of collecting information about the external marketing environment to identify and interpret potential trends Environmental Management Environmental Management involves marketers’ efforts toward achieving organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social-cultural environments.

4. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-4 The Competitive Environment Competitive Environment Competitive Environment: The 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. Monopoly Deregulation movement Oligopoly

5. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-5 Types of Competition Types of Competition Directly Competitive Products Indirectly Competitive Products  Involves products than can be substituted for one another All Consumer Purchases  Occurs in the sense that all firms compete for the buyers’ purchases

6. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-6 Developing a Competitive Strategy Developing a Competitive Strategy Should we compete? If so, in what markets should we compete? How should we compete? Time-based competition Time-based competition is a strategy of developing and distributing goods and services more quickly than competitors

7. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-7 The Political-Legal Environment Component of the marketing environment consisting of laws and interpretations of laws that require firms to operate under competitive conditions and to protect consumer rights.

8. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-8 Government Regulation Government Regulation Maintaining a Competitive Environment  Began in the late 19th century  Aimed at to maintaining a competitive environment by reducing the trend toward monopolies  Included: Sherman Antitrust Act Clayton Act Federal Trade Commission

9. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-9 Government Regulation Government Regulation Regulating Competition  Began during the depression era of the 1930s  Meant to protect independent merchants against competition from larger chain stores

10. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-10 Government Regulation Government Regulation Protecting Consumers  Began mainly in the 1960s  Increased focus on consumer protection  Newest regulatory frontier is cyberspace  Included: Consumer product safety Electronic Signature Aviation security

11. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-11 Government Regulation Government Regulation Deregulating Specific Industries  Began in the late 1970s  Focused on deregulating specific industries  Included: Airline Deregulation Act Motor Carrier Act Telecommunications

12. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-12 Other Regulatory Forces Other Regulatory Forces Consumer interest groups  National Coalition Against Misuse of Pesticides Special-interest groups  American Association of Retired People (AARP) Self-regulatory groups  Direct Marketing Association

13. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-13 Controlling the Political-Legal Environment Controlling the Political-Legal Environment Companies fight unjust regulations Regulations can present new opportunities Political lobbying Boycotts Political action committees

14. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-14 The Economic Environment Factors that influence consumer buying power and marketing strategies, including stage of the business cycle, inflation, unemployment, resource availability and income Stages in the Business Cycle Stages in the Business Cycle Cyclical patterns consisting of the stages of prosperity, recession, depression, and recovery.  Wealth effect

15. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-15 Inflation and Deflation Inflation and Deflation Inflation: The devaluation of money by reducing what it can buy through persistent price increases. Deflation: Falling prices, better? Unemployment Unemployment The proportion of people in the economy who do not have jobs and are actively looking for work.

16. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-16 Income Income Discretionary income: the amount of money people have to spend after paying for necessities such as food, clothing, and housing. Resource Availability Resource Availability Remarketing: the process of reducing consumer demand for a good or service to a level that the firm can supply.

17. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-17 The International Economic Environment The International Economic Environment Marketers must consider the economic environment of other nations Changes in foreign currency rates may affect marketing decisions Recessions in one part of the world may be offset by prosperity in another

18. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-18 The Technological Environment Represents the application of knowledge in science, inventions, and innovations to marketing. Applying technology helps Fidelity improve customer service

19. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-19 The Social-Cultural Environment The relationship between marketing and society and its culture GardenBurger is a leader in marketing meatless products that satisfy demands of vegetarians and health-conscious consumers

20. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-20 Importance in International Marketing Decisions The social-cultural context often exerts a more pronounced influence on marketing decision-making in the international sphere than in the domestic arena

21. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-21 Consumerism Consumerism A social force within the environment designed to protect the consumer by exerting legal, moral, and economic pressures on business and government. John F. Kennedy’s Statement of Consumer Rights  The right to choose freely  The right to be informed  The right to be heard  The right to be safe

22. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-22 Ethical Problems in Marketing research Ethical Problems in Marketing research Alleged invasions of personal privacy Gathering marketing information in exchange for money or free offers Ethical Problems in Product Strategy Ethical Problems in Product Strategy Product quality Planned obsolescence Brand similarity Packaging Ethical Issues in Marketing

23. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-23 Ethical Problems in Distribution Strategy Ethical Problems in Distribution Strategy Determining the appropriate degree of control over a channel Determining whether a company should distribute its products in marginally profitable outlets that have no alternative source of supply Ethical Problems in Pricing Ethical Problems in Pricing Probably the most regulated aspect Most unethical pricing behavior is also illegal

24. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-24 Ethical Problems in Promotional Strategy Ethical Problems in Promotional Strategy The source of the majority of ethical questions Ethically questionable personal selling  Gifts and bribes Questionable advertising Promotion of questionable features Questionable WWW related promotional practices

25. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-25 Social Responsibility in Marketing Social Responsibility Social Responsibility Marketing philosophies, policies, procedures, and actions that have the enhancement of society’s welfare as a primary objective

26. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-26 The Four-Step Pyramid of Corporate Social Responsibility The Four-Step Pyramid of Corporate Social Responsibility 1.Philanthropy 2.Ethics 3.Legality 4.Economics

27. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-27 Marketing’s Responsibilities Marketing’s Responsibilities Traditionally concerned managers’ relationships with customers, employees, and stockholders Extended to relations with government and the general public Today, corporate responsibility has expanded to cover the entire societal framework in the US and throughout the world

28. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3-28 Marketing and Ecology Marketing and Ecology Ecology Planned obsolescence Pollution Recycling Green Marketing