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Chapter 4: The Marketing Environment

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Learning Outcomes

4-1 Discuss the external environment of marketing and explain how it affects a firm 42–44

4-2 Describe the social factors that affect marketing 44–46

4-3 Explain the importance to marketing managers of current demographic trends 46–48

4-4 Explain the importance to marketing managers of growing ethnic markets 49–50

4-5 Identify consumer and marketer reactions to the state of the economy 50–52

4-6 Identify the impact of technology on a firm 52–53

4-7 Discuss the political and legal environment of marketing 53–56

4-8 Explain the basics of foreign and domestic competition 56–57

After you finish this chapter go to p57 for STUDY TOOLS

4-1: THE EXTERNAL MARKETING ENVIRONMENT

Perhaps the most important decisions a marketing manager must make relate to the

creation of the marketing mix. Recall from Chapters 1 and 2 that a marketing mix is the

unique combination of product, place (distribution), promotion, and price strategies. The

marketing mix is, of course, under the firm’s control and is designed to appeal to a specific

group of potential buyers, or target market. A target market is a group of people or

organizations for which an organization designs, implements, and maintains a marketing

mix intended to meet the need of that group, resulting in mutually satisfying exchanges.

target market

a group of people or organizations for which an organization designs, implements,

and maintains a marketing mix intended to meet the need of that group, resulting in

mutually satisfying exchanges

Although managers can control the marketing mix, they cannot control elements in the

external environment.

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Managers must alter the marketing mix because of changes in the environment in which

consumers live, work, and make purchasing decisions. Also, as markets mature, some new

consumers become part of the target market; others drop out. Those who remain may have

different tastes, needs, incomes, lifestyles, and buying habits than the original target

consumers. Technology, and the resulting change in buying habits, meant that consumers

no longer have those “Kodak Moments” when taking pictures of a birthday party or an

exceptional sunset. Digital photography has sent thirty-five-millimeter film the way of the

horse and buggy. Unfortunately, shifting technology ultimately led to the bankruptcy of

Eastman Kodak.

Although managers can control the marketing mix, they cannot control elements in the

external environment that continually mold and reshape the target market. Controllable

and uncontrollable variables affect the target market, whether it consists of consumers or

business purchasers. The uncontrollable elements in the center of the environment

continually evolve and create changes in the target market. In contrast, managers can shape

and reshape the marketing mix to influence the target market. That is, managers react to

changes in the external environment and attempt to create a more effective marketing mix.

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This ad targets upwardly mobile customers by suggesting that owning the Baby Phat product offers upward mobility and a reward for hard work.

4-1a: Understanding the External Environment

Unless marketing managers understand the external environment, the firm cannot

intelligently plan for the future. Thus, many organizations assemble a team of specialists to

continually collect and evaluate environmental information, a process called environmental

scanning. The goal in gathering the environmental data is to identify future market

opportunities and threats.

4-1b: Environmental Management

No single business is large or powerful enough to create major change in the external

environment. Thus, marketing managers are basically adapters rather than agents of

change. For example, despite the huge size of firms like General Electric, Walmart, Apple,

and Caterpillar, they don’t control social change, demographics, or other factors in the

external environment.

Just because a firm cannot fully control the external environment, however, doesn’t mean

that it is helpless. Sometimes a firm can influence external events. For example, extensive

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lobbying by FedEx has enabled it to acquire virtually all the Japanese routes it has sought.

When a company implements strategies that attempt to shape the external environment

within which it operates, it is engaging in environmental management.

environmental management

when a company implements strategies that attempt to shape the external

environment within which it operates

The factors within the external environment that are important to marketing managers can

be classified as social, demographic, economic, technological, political and legal, and

competitive.

4-2: SOCIAL FACTORS

Social change is perhaps the most difficult external variable for marketing managers to

forecast, influence, or integrate into marketing plans. Social factors include our attitudes,

values, and lifestyles. Social factors influence the products people buy; the prices paid for

products; the effectiveness of specific promotions; and how, where, and when people expect

to purchase products.

4-2a: American Values

A value is a strongly held and enduring belief. During the United States’ first 200 years, four

basic values strongly influenced attitudes and lifestyles:

SELF-SUFFICIENCY: Every person should stand on his or her own two feet.

UPWARD MOBILITY: Success would come to anyone who got an education, worked

hard, and played by the rules.

WORK ETHIC: Hard work, dedication to family, and frugality were moral and right.

CONFORMITY: No one should expect to be treated differently from everybody else.

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