1. The Marketing Environment, Social Responsibility, and Ethics
Part One Strategic Marketing and Its Environment
Chapter 03
The Marketing Environment, Social Responsibility, and Ethics

2. Chapter Learning Objectives
To recognize the importance of environmental scanning and analysis
To explore the effects of competitive, economic, political, legal and regulatory, technological, and sociocultural factors on marketing strategies
To understand the concept and dimensions of social responsibility
To differentiate between ethics and social responsibility

3. Chapter Outline The Marketing Environment
Responding to the Marketing Environment
Competitive forces
Economic forces
Political forces
Legal and Regulatory forces
Technological forces
Sociocultural forces

4. Chapter Outline (cont’d)
Social Responsibility and Ethics in Marketing
Economic Dimension
Legal Dimension
Ethical Dimension
Philanthropic Dimension
Incorporating Social Responsibility and Ethics into Strategic Planning

5. The Marketing Environment
Environmental Scanning
The process of collecting information about forces in the marketing environment
Observation
Secondary sources
Market research
Environmental Analysis
The process of assessing and interpreting the information gathered through environmental scanning
Accuracy
Consistency
Significance

6. 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

7. Types of Competitors Competition
other firms that market products similar to or that can be substituted for its products in the same geographic area
Brand competitors—market products with similar features and benefits to the same customers at similar prices
Product competitors—compete in the same product class, but their products have different features, benefits, and prices
Generic competitors—provide very different products that solve the same problem or satisfy the same basic customer need
Total budget competitors—compete for the limited financial resources of the same customers

8. Competitive Environment
Monopoly
A competitive structure in which an organization offers a product that has no close substitute, making it the sole source of supply
Oligopoly
A competitive structure in which a few sellers control the supply of a large proportion of a product
Monopolistic competition
A competitive structure in which a firm with many potential competitors attempts to develop a marketing strategy to differentiate its product
Pure competition
A competitive structure involving a large number of sellers, no one of which could significantly influence price or supply

10. Competitive Forces Monitoring Competition
Helps determine competitors’ strategies and their effects on firm’s own strategies
Guides development of competitive advantage and adjusting firm’s strategy
Provides ongoing information about competitors
Assists in maintaining a marketing orientation

11. Economic Forces Buying Power
Resources, such as money, goods, and services, that can be traded in an exchange
Income
Disposable income—after tax income
Discretionary income—disposable income available for spending and saving beyond the basic necessities of life
Credit
Wealth

12. 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)

13. Figure 3.1: American Customer Satisfaction Index
Source: American Customer Satisfaction Index, University of Michigan Business School, May 16, 2006,

14. Positive Economic Indicators
Business Cycle
A pattern of economic fluctuations that has four stages:
Prosperity
Recession
Depression
Recovery
Positive Economic Indicators
Time

15. Stages in the Business Cycle

16. Political Forces
Some organizations respond to political forces reactively.
Some firms respond proactively:
Campaign contributions, often as “soft money”
Political action committees (PACs)
Lobbying elected officials

20. Regulation Regulatory Agencies Self-Regulatory Forces
Federal Trade Commission (FTC) influences marketing activities most; can seek civil penalties and require corrective advertising
Self-Regulatory Forces
Better Business Bureau
National Advertising Review Board (NARB)

21. Major Regulatory Agencies

22. Major Regulatory Agencies (cont’d)

23. Technological Forces Technology Impact of 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

24. Sociocultural Forces 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
Increasing number of people living alone
Entering another baby boom
Increasingly multicultural U.S. society

25. Sociocultural Forces Cultural Values
Primary source of values is the family
Values influence:
Eating habits (healthier foods) Alternative health and medical treatment choices

26. Figure 3.2: U.S. Population Projections by Race
Source: U.S. Census Bureau, “U.S. Interim Projections by Age, Sex, Race, and Hispanic Origin,” March 18, 2004,

27. Social Responsibility and Ethics in Marketing
An organization’s obligation to maximize its positive impact and minimize its negative impact on society
Stakeholders
Constituents who have a “stake” or claim in some aspect of the company’s products, operations, markets, industry, and outcomes
Marketing citizenship
The adoption of a strategic focus for fulfilling the economic, legal, ethical, and philanthropic social responsibilities expected by stakeholders

28. Figure 3.3: The Pyramid of Corporate Social Responsibility
Source: Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” adaptation of Figure 3, p. 42. Reprinted from Business Horizons, July/Aug Copyright © 1991 by the Trustees at Indiana University, Kelley School of Business. Used with permission.

29. Ethical Dimension Marketing Ethics Ethical Issue
Principles and standards that define acceptable marketing conduct as determined by various stakeholders
Ethical Issue
An identifiable problem, situation, or opportunity requiring a choice among several actions that must be evaluated as right or wrong, ethical or unethical

30. Influence Factors of Ethical Standards
Company
Industry
Government
Customers
Interest Groups
Society
Influence Factors
Ethical Standards

32. Philanthropic Dimension
Cause-Related Marketing
The practice of linking products to a particular cause on an ongoing or short-term basis
Strategic Philanthropy
The synergistic use of organizational core competencies and resources to address key stakeholders’ interests and achieve both organizational and social benefits

33. Green Marketing
The specific development, pricing, promotion, and distribution of products that do not harm the natural environment

34. Foundations of Consumerism
The organized efforts of individuals, groups, and organizations to protect the rights of consumers
Lobbying government officials and agencies
Letter-writing campaigns and boycotts
Kennedy’s Consumer “Bill of Rights”
Right to safety
Right to be informed
Right to choose
Right to be heard

35. Incorporating Social Responsibility and Ethics into Strategic Planning
Ethics Individual and
group decisions
Social Responsibility
The total effect of marketing decisions on society
Overall Strategic Marketing Planning

36. Benefits of Codes of Conduct and Social Responsibility
Codes of Conduct (Ethics)
Formalized rules and standards that describe what the company expects of its employees
Social responsibility and ethics improve marketing performance.
Socially responsible companies (and their employees) can better respond to stakeholder demands.
A company’s reputation for social responsibility is important to consumers’ buying decisions.
Social responsibility and ethical behavior reduce the costs of legal violations, civil litigation, and damaging publicity.

37. Source: “Survey Documents State of Ethics in the Workplace,” Ethics Resource Center, press release, Oct. 12, 2005,

38. After reviewing this chapter you should:
Recognize the importance of environmental scanning and analysis.
Explore the effects of competitive, economic, political, legal and regulatory, technological, and sociocultural factors on marketing strategies.
Understand the concept and dimensions of social responsibility.
Differentiate between ethics and social responsibility.