2. 3 | 2Copyright © Houghton Mifflin Company. All rights reserved. Part Two Environmental Forces, Social Responsibility, And Ethics 3.The Marketing Environment 4.Social Responsibility And Ethics In Marketing

3. Chapter 3 The Marketing Environment

4. 3 | 4Copyright © Houghton Mifflin Company. All rights reserved. Objectives Recognize importance of environmental scanning and analysis Understand how competitive/economic factors affect organizations’ ability to compete and customers’ ability/willingness to buy products Identify political forces in marketing environment Understand how laws, government regulations, and self- regulatory agencies affect marketing Explore effects of new technology on society and on marketing Analyze sociocultural issues marketers must deal with as they make decisions.

5. 3 | 5Copyright © Houghton Mifflin Company. All rights reserved. Environmental Scanning The process of collecting information about the forces in the marketing environment.

6. 3 | 6Copyright © Houghton Mifflin Company. All rights reserved. Scanning Involves: Observation Secondary Sources –Business –Trade –Government –General-interest publications –Marketing research Cautions –Know how to use information –Don’t gather too much information

7. 3 | 7Copyright © Houghton Mifflin Company. All rights reserved. Environmental Analysis The process of assessing and interpreting the information gathered through environmental scanning.

8. 3 | 8Copyright © Houghton Mifflin Company. All rights reserved. Responding To Environmental Forces Accept as uncontrollable- passive and reactive Attempt to influence and shape them-proactive –Constructive –Bring desired results –Are limits

9. 3 | 9Copyright © Houghton Mifflin Company. All rights reserved. Competition Other organizations that market products that are similar to or can be substituted for a marketer’s products in the same geographic area.

10. 3 | 10Copyright © Houghton Mifflin Company. All rights reserved. Types Of Competitors Brand- products with similar features and benefits for same customers at similar prices Product- same product class but products with different features, benefits, and prices Generic- different products that solve same problem or satisfy same basic customer need Total Budget- compete for limited financial resources of same customers

11. 3 | 11Copyright © Houghton Mifflin Company. All rights reserved. Monopoly A competitive structure in which an organization offers a product that has no close substitutes, making that organization the sole source of supply. Royal Mail Monopoly

12. 3 | 12Copyright © Houghton Mifflin Company. All rights reserved. Oligopoly A competitive structure in which a few sellers control the supply of a large proportion of a product.

13. 3 | 13Copyright © Houghton Mifflin Company. All rights reserved. Monopolistic Competition A competitive structure in which a firm has many potential competitors and tries to develop a marketing strategy to differentiate its product.

14. 3 | 14Copyright © Houghton Mifflin Company. All rights reserved. Pure Competition A market structure characterized by an extremely large number of sellers, none strong enough to significantly influence price or supply.

15. 3 | 15Copyright © Houghton Mifflin Company. All rights reserved. Types Of Competitive Structures

16. 3 | 16Copyright © Houghton Mifflin Company. All rights reserved. Monitoring Competition Price- most competitors monitor Do more than analyze information Develop ongoing system for gathering information Understand market - customer needs Helps in recognition of own strategy flaws

17. 3 | 17Copyright © Houghton Mifflin Company. All rights reserved. Economic Forces Economic Conditions Buying Power Willingness to Spend

18. 3 | 18Copyright © Houghton Mifflin Company. All rights reserved. Business Cycle A pattern of economic fluctuations that has four stages: prosperity, recession, depression, and recovery.

19. 3 | 19Copyright © Houghton Mifflin Company. All rights reserved. Economic Conditions Prosperity- low unemployment, high total income, ensure buying power Recession- unemployment rises, total buying power declines, stifling consumer/business spending Depression- unemployment high, wages are low, total disposable income at a minimum, consumers lack confidence in the economy Recovery- economy moves from recession/depression to prosperity

20. 3 | 20Copyright © Houghton Mifflin Company. All rights reserved. Buying Power Resources, such as money, goods, and services that can be traded in an exchange.

21. 3 | 21Copyright © Houghton Mifflin Company. All rights reserved. Income For an individual, the amount of money received through wages, rents, investments, pensions, and subsidy payments for a given period.

22. 3 | 22Copyright © Houghton Mifflin Company. All rights reserved. Types Of Income Disposable - after-tax Discretionary - disposable income available for spending and saving after an individual has purchased the basic necessities of food, clothing, and shelter

23. 3 | 23Copyright © Houghton Mifflin Company. All rights reserved. Wealth The accumulation of past income, natural resources, and financial resources. As people’s wealth increases: 1.Make current purchases 2.Generate income 3.Acquire large amounts of credit

24. 3 | 24Copyright © Houghton Mifflin Company. All rights reserved. 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.

25. 3 | 25Copyright © Houghton Mifflin Company. All rights reserved. Political Forces Legislation enacted Legal decisions interpreted by courts Regulatory agencies created and operated Marketers – Adjust to conditions – Influence through contributions

26. 3 | 26Copyright © Houghton Mifflin Company. All rights reserved. Top Corporate Donors By Political Party

27. 3 | 27Copyright © Houghton Mifflin Company. All rights reserved. Legal And Regulatory Forces Procompetitive legislation- preserves competition Consumer Protection legislation – Protect people from harm – Prohibit hazardous products – Information disclosure – Particular marketing activities Encourage compliance Regulatory Agencies Self-Regulatory forces

28. 3 | 28Copyright © Houghton Mifflin Company. All rights reserved. Major Laws Affecting Marketing Decisions

29. 3 | 29Copyright © Houghton Mifflin Company. All rights reserved. Federal Trade Commission An agency that regulates a variety of business practices and curbs false advertising, misleading pricing, and deceptive packaging and labeling.

30. 3 | 30Copyright © Houghton Mifflin Company. All rights reserved. Federal Trade Commission Enforcement Tools Federal Trade Commission Website Source: www.ftc.gov.

31. 3 | 31Copyright © Houghton Mifflin Company. All rights reserved. Major Federal Regulatory Agencies

32. 3 | 32Copyright © Houghton Mifflin Company. All rights reserved. Direct-To-Consumer Pharmaceutical Guidelines

33. 3 | 33Copyright © Houghton Mifflin Company. All rights reserved. Self-Regulatory Forces Trade Associations Better Business Bureau National Advertising Review Board Advantages – Less expensive – More realistic Limitations – Nonmember firms do not have to abide – Lack of enforcement tools – Often less strict

34. 3 | 34Copyright © Houghton Mifflin Company. All rights reserved. Technology The application of knowledge and tools to solve problems and perform tasks more efficiently.

35. 3 | 35Copyright © Houghton Mifflin Company. All rights reserved. Effects Of Technology Dynamics- constant change Reach- moves throughout society Self-sustaining- catalyst to spur faster development

36. 3 | 36Copyright © Houghton Mifflin Company. All rights reserved. Sociocultural Forces The influences in a society and its culture(s) that change people’s attitudes, beliefs, norms, customs, and lifestyles.

37. 3 | 37Copyright © Houghton Mifflin Company. All rights reserved. Issues Of Sociocultural Forces Demographic and diversity characteristics – Age, gender, race, ethnicity – Marital/parental status, income, education Cultural values – Health – Family – Environment Consumerism- efforts to protect consumers’ rights

38. 3 | 38Copyright © Houghton Mifflin Company. All rights reserved. U.S. Population Projections By Race Source: U.S. Bureau of the Census, Statistical Abstract of the United States, 2000; Reed Business Info, July 11, 2005.