1. 1 CHAPTER TWO THE MARKETING ENVIRONMENT AND MARKETING ETHICS © 2001 South-Western College Publishing Prepared by: Jack Gifford Miami University (Ohio)

2. © 2001 South-Western College Publishing 2 EXTERNAL ENVIRONMENT

3. © 2001 South-Western College Publishing 3 UNDERSTANDING THE EXTERNAL ENVIRONMENT The external environment is largely not controllable by the marketer In the unusual circumstance where the marketer is large enough to influence the external environment, it is referred to as environmental management. Must be anticipated and understood Identify future opportunities and threats

4. © 2001 South-Western College Publishing 4 UNDERSTANDING THE EXTERNAL ENVIRONMENT: SOCIAL CHANGE Attitudes, values and lifestyles –Environmentalists –Poverty of time –Experiences over materialism –Role of work –Two income families –Component lifestyles –Changing roles of families and working women –Cultural changes Cultural creatives Traditionalism Modernism

5. © 2001 South-Western College Publishing 5 UNDERSTANDING THE EXTERNAL ENVIRONMENT: DEMOGRAPHICS Study of people’s vital statistics (age, gender, race, etc.) –Age Generation Y Generation X Baby boomers Older consumers Geographic mobility –Within the United States and between cities –Immigration and migration Growing ethnic markets –African Americans –U.S. Hispanics –Asian-Americans Multiculturalism

6. © 2001 South-Western College Publishing 6 THE EXTERNAL ENVIRONMENT FACING MARKETERS : DEMOGRAPHICS (continued) DEMOGRAPHICS –Size of middle class –Per capita income –Education –Birth rate –Housing market –Population density In underdeveloped nations, secondary data is often bad or nonexistent!

7. © 2001 South-Western College Publishing 7 THE EXTERNAL ENVIRONMENT FACING MARKETERS : ECONOMIC FACTORS Distribution of consumer incomes Inflation rate Recessions

8. © 2001 South-Western College Publishing 8 THE EXTERNAL ENVIRONMENT FACING MARKETERS: TECHNOLOGICAL & RESOURCE FACTORS Technological –Role of R & D –Rate of technological change –The computer and the Internet Resources –Physical –Human capital –Intellectual capital

9. © 2001 South-Western College Publishing 9 THE EXTERNAL ENVIRONMENT FACING MARKETERS: POLITICAL & LEGAL FACTORS Balance between government and private enterprise is essential for the survival of a democracy. –Decentralization of power –Political stability

10. © 2001 South-Western College Publishing 10 THE EXTERNAL ENVIRONMENT FACING MARKETERS: POLITICAL & LEGAL FACTORS Federal legislation –Sherman Act of 1890 –Clayton Act of 1914 –Federal Trade Commission Act of 1914 –Robinson-Patman Act of 1936 –Wheeler-Lea Amendments to the FTC Act of 1938 –Lanhma Act of 1946 –Celler-Kefauver Antimerger Act of 1950 –Hart-Scott-Rodino Act of 1976

11. © 2001 South-Western College Publishing 11 THE EXTERNAL ENVIRONMENT FACING MARKETERS: POLITICAL & LEGAL FACTORS (continued) Regulatory Agencies – Consumer Product Safety Commission Set mandatory safety standards for many consumer products –Federal Trade Commission Prevent unfair methods of competition in commerce Investigate business competitions Regulate advertising found to be deceptive –Food and Drug Administration Enforce regulations against selling and distributing adulterated, misbranded, or hazardous food and drug products

12. © 2001 South-Western College Publishing 12 THE EXTERNAL ENVIRONMENT FACING MARKETERS: COMPETITION Amount and strength of competition The relative size of the competition Degree of interdependence within the industry

13. © 2001 South-Western College Publishing 13 COMPETITION FOR MARKET SHARE Increased competition for market share More companies offering more products aimed at the same customers Increased market share often results in economies of scale and domination of supply chains

14. © 2001 South-Western College Publishing 14 GLOBAL COMPETITION U.S. companies compete in the United States with many foreign companies. U.S. companies also market their products and services throughout the world, resulting in increased global competition!

15. © 2001 South-Western College Publishing 15 MORALITY AND BUSINESS ETHICS Today’s business ethics actually consist of a subset of major life values learned since birth. The values businesspeople use to make decisions have been acquired through family, educational and religious institutions. –Ethical values are situation specific and time oriented

16. © 2001 South-Western College Publishing 16 MORALITY AND BUSINESS ETHICS Developing an ethical base for business and personal conduct –Examine consequences of a particular act Who is helped or hurt? How long lasting are the consequences? Greatest good for the greatest number? –Create personal universal decision rules Always treat others as you would like to be treated. It is wrong to lie, bribe, or exploit If it is against the law, it should not be done.

17. © 2001 South-Western College Publishing 17 ETHICAL DEVELOPMENT THREE STAGES –PRE-CONVENTIONAL MORALITY: calculating, self-centered, measure reward versus punishment, egocentric –CONVENTIONAL MORALITY: loyalty and obedience to organization or society, legality, how viewed by others; “When in Rome, do as the Romans do.” –POST-CONVENTIONAL MORALITY:inner- directed, mature judgement

18. © 2001 South-Western College Publishing 18 UNETHICAL PRACTICES MARKETING MANAGERS MAY HAVE TO DEAL WITH INCLUDE... Gift giving Misleading advertising or warranties Manipulation of data Invasion of customer privacy Price deception Inaccurate statements about competition Stereotypical portrayals of … Exploitation of disadvantaged Unsafe products or services

19. © 2001 South-Western College Publishing 19 ETHICAL DECISION MAKING Factors that tend to influence ethical decision making in business Extent of ethical problems within the organization Top-management actions of ethics Potential magnitude of consequences Social consensus Probability of harmful outcome(s) Length of time between the decision and the onset of consequences Number of people to be affected

20. © 2001 South-Western College Publishing 20 ETHICAL GUIDELINES AND CODES OF ETHICS ADVANTAGES –Helps employees and management identify acceptable business behavior –Effective internal control of behavior –Provides guidelines for making decisions –The process of developing a code of ethics facilitates discussion and “buy-in” by all parties

21. © 2001 South-Western College Publishing 21 CORPORATE SOCIAL RESPONSIBILITY (CSR) Economic responsibility, PLUS Legal responsibility, PLUS Ethical responsibility, PLUS Philanthropic responsibilities CSR

22. © 2001 South-Western College Publishing 22 THE MYTH OF E-MAIL PRIVACY SLICE-OF-LIFE INSERT Should corporate email be private? Should Michael Smyth have been fired? What would you do if you were told by your boss to monitor another employee’s e-mail and report your findings to the boss?

23. © 2001 South-Western College Publishing 23 GLOBAL PERSPECTIVE SCORING BIG IN CHINA INSERT Do you think the FedEx or the UPS will be more successful in the long run in China? Why? Which company is taking more risk? OR ?