Assignment 3

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Ch3TheMarketingEnvironment.pptx

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The Marketing Environment

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Objectives

To recognize the importance of environmental scanning and analysis

To understand how competitive and economic factors affect organizations’ ability to compete

To recognize the customers’ ability and willingness to buy products

To identify the types of political forces in the marketing environment

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Objectives (cont’d)

To understand how laws, government regulations, and self-regulatory agencies affect marketing activities

To explore the effects of new technology on society and on marketing activities

To analyze sociocultural issues marketers must deal with as they make decisions

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Chapter Outline

Examining and Responding to the Marketing Environment

P-E-S-T + C & L/R Forces

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Examining and Responding to the Marketing Environment

Environmental Scanning

- Collecting information about forces in the marketing environment through

Observation

Secondary sources

Market research

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Examining and Responding to the Marketing Environment (cont’d)

Environmental Analysis

Assessing and interpreting the information gathered through environmental scanning

Accuracy

Consistency

Significance

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Examining and Responding to the Marketing Environment (cont’d)

Responding to Environmental Forces

Reactive approach

“The environment is uncontrollable.” Passive

Current strategy is cautiously adjusted to accommodate environmental changes

Proactive approach

“We will actively attempt to shape and influence environment.” Lobbyists and media efforts

Strategies are constructed to overcome market challenges and take advantage of opportunities

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Environmental Forces

Strategic

Planning

Competition

Economic forces

Political forces

Legal and Regulatory forces

Technological

forces

Sociocultural

forces

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Competitive Forces

Types of Competition
Product competitors	Other organizations that compete in the same class but market products with different features, benefits, prices.
Brand competitors	Firms that market products with similar features and benefits to the same customers at similar prices, e.g., Coke and Pepsi
Generic competitors	Firms that provide very different products that satisfy the same basic customer need, e.g., water instead of Coke
Total budget competitors	Firms that compete for the limited financial resources from the same customers

Competitive Forces

	Brand	Product	Generic	Total Budget
Chevrolet Tahoe	Other pickup trucks	Sedans, SUVs	Car rental agencies, moving companies	Houses, computers, other large purchases
Levi’s jeans	Other affordable jeans	Designer jeans	Other clothes	Other small purchases
Travelocity	Other travel websites like Expedia	Travel websites like Hotwire (less certainty)	Travel agency, booking directly	Computers, dining, entertainment purchases

SELECTED CHARACTERISTICS OF COMPETITIVE STRUCTURES

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Economic Forces

Business Cycle

A pattern of economic fluctuations

Prosperity

Recession

Depression

Recovery

Positive Economic Indicators

Time

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Prosperity:

low unemployment

high total income

Marketers should expand product offerings

to take advantage of increased buying power

Economic Forces

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In a prosperous economy...

As wages rise and taxation remains stable, disposable income increases.

This gives Americans more after-tax income to spend which leads to more discretionary income…money left over after necessities are met.

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Recession -

unemployment rises

total buying power declines

customers are price and

value conscious

Marketers should emphasize

value and utility.

Depression -

high unemployment

low wages

minimum income

Economic Forces

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Economic Forces

Recovery

Economy moves to

prosperity

High unemployment

begins to decline

Disposable income

increases

Ability and willingness to

buy rises

Marketers should be flexible in their marketing strategies.

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Economic Forces (cont’d)

Buying Power

Resources, such as money, goods, and services, that can be traded in an exchange

1. Income

Disposable income

after-tax income used to

purchase necessities

Discretionary income

entertainment, vacations

Wealth

The accumulation of past income, natural resources, and financial resources.

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Economic Forces (cont’d)

Credit

It allows us to spend future income

now or in the near future.

It increases current buying power at

the expense of future buying power.

What are some of the factors

affecting credit use?

4. 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

Decisions are based on:

Future employment

Income levels

Prices

Family size

General economic conditions (e.g., rising prices)

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Political Forces

Reasons for Maintaining Relations with Elected Officials and Politicians

To influence the creation of laws and regulations affecting businesses

Governments are potentially large customers

Political officials can assist in securing foreign markets

Campaign contributions of corporate-related individuals and PACs may provide influence

Lobbyists communicate businesses’ concerns about issues affecting their industries and markets

How do the discussion of gun control, oil drilling, tax law reformation, and the Patient Protection and Affordable Care Act (PPACA) fit into this?

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Legal and Regulatory Forces Federal LAWS that influence marketing decisions and activities

Sherman Antitrust Act (1890)

Clayton Act (1914)

Federal Trade Commission Act (1914)

Robinson-Patman Act (1936)

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Legal and Regulatory Forces (cont’d)

Procompetitive Legislation

Preserve competition (Sherman Antitrust Act of 1890).

Prevent restraint of trade and monopolizing of markets

Prevent illegal competitive trade practices

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Legal and Regulatory Forces (cont’d)

Consumer Protection Legislation

Adulterated and mislabeled food and drugs

Deceptive trade practices and the sale of hazardous products

The invasion of personal privacy and the misuse of personal information by firms

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Legal and Regulatory Forces (cont’d)

Regulatory Agencies…have the power to enforce laws and can establish operating rules and regulations to guide industry practices.

FTC influences marketing activities most; can seek civil penalties and require corrective advertising

Self-Regulatory Forces

Better Business Bureau

National Advertising Review Board (NARB)

Texas Alcohol Commission

Texas State Board of Pharmacy

Political and regulatory forces take the form of

Trade policy: NAFTA, tariffs on Chinese, Canadian and German products

Tax policy: Tax Cuts and Jobs Act and

Environmental regulations: Trump’s loosening of EPA environmental regulations.

Federal Trade Commission Enforcement Tools

Technological Forces

Constant change

It moves quickly through society

It’s a catalyst for even faster development

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Technological Forces (cont’d)

Mobile devices and consumers’ increasing use of the Internet have changed:

How people communicate

How marketers reach consumers

Technology can improve productivity

Expanding opportunities for e-commerce

Negative impacts of technology include:

Concerns over privacy

Intellectual property protection issues

Sociocultural Forces

The influences in a society and its culture(s) that change people’s:

Attitudes

Beliefs

Norms

Customs

Lifestyles

They determine what, where,

how, and when people buy

products.

Sociocultural forces include demographics,

cultural values, and consumerism

U.S. Population Projections by Race

America’s Changing Demographics

New Census Projections

Demographic Terms: Immigration, fertility rates, age

www.census.gov

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The Proportion of Households in America with Married Couples Has Declined Over the Last Four Decades 2013: 48%; 2014: 53%

Year	Number of Married Couples	% of All Households
2003	57.3 million	51.5%
1993	53.1	55.1
1983	49.9	59.5
1973	46.3	67.8
1963	40.9	74.0

Source: U.S. Census Bureau as reported in American Demographics, April 2004, p. 41.

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Sociocultural Forces (cont’d)

Cultural Values

Primary source of values is the family

Values influence

Eating habits

Alternative health and medical treatment choices

Attitudes toward marriage; changing definition of the family

Concern for the natural environment

Diversity

Changes in cultural values alter people’s needs and desires for products. Examples?

Consumerism

The organized efforts of individuals, groups, and organizations to protect consumers’ rights

Lobbying government officials and agencies

Letter-writing/e-mail sending campaigns and boycotts

Marketing critics think that consumers are being exploited in the marketplace.

Ralph Nader

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Class Exercise

With which environmental force (competitive, economic, political, legal and regulatory, technological, or sociocultural) is each of the following most directly associated?

Prosperity

Federal Trade Commission

IPad

Development and widespread use of cellular phones

The goal of this exercise is to help students realize the differences among the six marketing environmental forces. Answers:

1. Prosperity economic

2. Federal Trade Commission regulatory

3. Personal computers that understand human speech technological

4. Development and widespread use of cellular phones technological

5. People’s willingness to spend economic

6. Contributions to campaign funds political

7. A society’s high material standard of living sociocultural

8. Sherman Antitrust Act legal

9. Better Business Bureau regulatory

10. Consumerism sociocultural

11. Discretionary income economic

12. Food and Drug Administration regulatory

13. A monopoly competitive

14. Government purchases of goods and services political

15. Group of people threatening to boycott the sponsors of a television program that they believe contains too much sex and violence sociocultural

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Class Exercise (cont’d)

People’s willingness to spend

Citizens United

A society’s high material standard of living

Legalization of marijuana in Colorado

Better Business Bureau

Women in the military

Discretionary income

Food and Drug Administration

Selfies

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Class Exercise (cont’d)

Government purchases of goods and services

Adult children living with their parents

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After reviewing this chapter you should:

Recognize the importance of environmental scanning and analysis.

Understand how competitive and economic factors affect organizations’ ability to compete and customers’ ability and willingness to buy products.

Be able to identify the types of political forces in the marketing environment.

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Understand how laws, government regulations, and self-regulatory agencies affect marketing activities.

Know the effects of new technology on society and on marketing activities.

Be able to analyze sociocultural issues that marketers must deal with as they make decisions.

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Chapter Quiz

If M&M Mars Candies found a magazine article that provided key information on the television viewing habits of major candy consumer groups, this would be an example of information obtained through environmental

scanning.

forces.

analysis.

strategizing.

management.

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Chapter Quiz

Which of the following would represent a brand competitor for Ford’s Expedition sports utility vehicle?

Dodge Caravan

Chevrolet Suburban

Ford Ranger

Taxi ride

Chevrolet Blazer rented from Avis

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Chapter Quiz

Mixed concrete cannot be shopped farther than twenty-five miles because the concrete might harden in the truck. Citrus County Concrete Company is the only supplier of mixed concrete to customers within a thirty-mile radius. Citrus County Concrete is an example of which competitive structure?

Monopoly

Oligopoly

Monopolistic competition

Pure competition

Monopsony

Economic forces

Economic forces in the marketing environment influence both marketers’ and customers’ decisions and activities. Changes in general economic conditions affect (and are affected by) supply and demand, buying power, willingness to spend, consumer expenditure levels, and the intensity of competitive behavior.

Fluctuations in the economy follow a general pattern often referred to as the business cycle, which traditionally consists of four stages:

Prosperity is a stage of the business cycle characterized by low unemployment and relatively high total income, which together cause buying power to be high. Marketers often expand their product offerings to take advantage of increased buying power.

ECONOMIC FORCES

Economic forces in the marketing environment influence

both marketers’ and customers’ decisions and activities.

Changes in general economic conditions affect (and are

affected by) supply and demand, buying power, willingness

to spend, consumer expenditure levels, and the intensity of

competitive behavior.

Fluctuations in the economy follow a general pattern

often referred to as the

business cycle

, which tradi-

tionally consists of four stages:

Prosperity

is a stage of the business cycle character-

ized by low unemployment and relatively high total

income, which together cause buying power to be

high. Marketers often expand their product offerings

to take advantage of increased buying power.

Recession is a stage of the business cycle during which unemployment rises and total buying power declines, stifling both consumer and business spending.

Marketers should focus on marketing research during a recession to determine precisely what functions buyers want and integrate these functions into their product.

Promotion efforts should emphasize value and utility.

Depression is a business cycle stage in which unem-ployment is extremely high, wages are very low, total disposable income is at a minimum, and consumers lack confidence in the economy.

Recession

is a stage of the business cycle during which

unem

ployment rises and total buying power declines,

stifling both consumer and business spending.

Marketers should focus on marketing research during

a recession to determine precisely what functions

buyers want and integrate these functions into their

product.

Promotion efforts should emphasize value and utility.

Depression

is a business cycle stage in which unem-

ployment is extremely high, wages are very low, total

disposable income is at a minimum, and consumers lack

confidence in the economy.

Recovery is a stage of the business cycle in which the economy moves from depression or recession to prosperity. Marketers should be as flexible as possible to be able to adjust their strategies as economic gloom subsides and buying power increases.

Recovery

is a stage of the business cycle in which the

economy moves from depression or recession to prosperity.

Marketers should be as flexible as possible to be able to

adjust their strategies as economic gloom subsides and

buying power increases.