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The Marketing Environment, Ethics, and Social Responsibility

Chapter 3

Objectives

Identify the five components of the marketing environment.

Explain the types of competition marketers face and the steps necessary for developing a competitive strategy.

Describe how marketing activities are regulated and how marketers can influence the political-legal environment.

Outline the economic factors that affect marketing decisions and consumer buying power.

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Objectives

Identify the five components of the marketing environment.

Explain the types of competition marketers face and the steps necessary for developing a competitive strategy.

Describe how marketing activities are regulated and how marketers can influence the political-legal environment.

Outline the economic factors that affect marketing decisions and consumer buying power.

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Environmental Scanning

Collecting external marketing environment information to identify and interpret potential trends

Trends represent significant opportunities or threats to the company

Example: Consumer Product Safety Commission issued a recall of American Girl Craft Pearly Beads & Ribbon Bracelets kits, citing high levels of lead in some of the beads

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Environmental Management

Attainment of organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social- cultural environments

Strategic alliance - Partnership in which two or more companies combine resources and capital to create competitive advantages in a new market

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Figure 3.1 - Elements of the Marketing Mix within an Environmental Framework

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

The Competitive Environment

Interactive process that occurs in the marketplace among:

Marketers of directly competitive products

Marketers of products that can be substituted for one another

Marketers competing for the consumer’s purchasing power

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

The Competitive Environment

Marketing decisions by individual firms influence:

Consumer responses in the marketplace

Marketing strategies of competitors

Few organizations have monopoly positions

Monopoly - Market structure in which a single seller dominates trade in a good or service for which buyers can find no close substitutes

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

The Competitive Environment

Antitrust laws - Designed to prevent restraints on trade such as business monopolies

Oligopoly - Few number of sellers in an industry with high start-up costs which keep out new competitors

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Types of Competition

Direct

Among marketers of similar products

Example: Alternative suppliers in the cell phone market such as Verizon and AT&T

Indirect

Involves products that are easily substituted

Example: In the fast-food industry, pizza competes with chicken, hamburgers, and tacos

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Types of Competition

Competition among all firms that compete for consumers’ purchases

All firms compete for a limited number of dollars that consumers can or will spend

Example: The purchase of a Honda Accord might compete with a Norwegian Cruise Line cruise

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Developing a Competitive Strategy

Competitive strategy - Methods through which a firm deals with its competitive environment

Should we compete?

Depends on firm’s resources, objectives, and expected profit potential

In what markets should we compete?

Requires marketers to acknowledge their firm’s limited resources

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Developing a Competitive Strategy

How should we compete?

Requires marketers to make product, distribution, promotion, and pricing decisions that give the firm a competitive advantage

Time-based competition - Strategy of developing and distributing goods more quickly than competitors

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

The Political-Legal Environment

Consists of laws and their interpretations that require firms to operate under competitive conditions and to protect consumer rights

All marketers should be aware of the major regulations that affect their activities

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Government Regulation

Falls into four historical phases:

Antimonopoly period of the late 19th and early 20th centuries

Protecting competitors during the Great Depression of the 1930s

The third phase focused on consumer protection

Industry deregulation began in the late 1970s and continues to the present

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Government Regulation

Newest regulatory frontier is cyberspace

Federal and state regulators are investigating ways to police the Internet and online services

Privacy and child protection issues are difficult enforcement challenge

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Government Regulatory Agencies

The Federal Trade Commission (FTC) has the broadest regulatory powers over marketing

Enforces laws regulating unfair business practices and stops false and deceptive advertising

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Government Regulatory Agencies

Other federal regulatory agencies are:

Consumer Product Safety Commission

Federal Power Commission

Environmental Protection Agency

Food and Drug Administration

National Highway Traffic Safety Administration

To enforce laws, The FTC uses

Consent order

Cease-and-desist orders

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Other Regulatory Forces

Consumer interest groups and self-regulatory organizations

Other groups attempt to advance the rights of minorities, senior citizens, and other causes

Self-regulatory groups represent industries’ attempts to set guidelines for responsible business conduct

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

The Economic Environment

Gross domestic product (GDP) - Sum of all goods and services produced by a nation in a year

Economic environment - Factors that influence consumer buying power and marketing strategies

Business cycle - Pattern of stages in the level of economic activity

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Stages in the Business cycle

Prosperity - Consumer spending is brisk; growth in services sector

Recession - Consumers focus on basic, functional products

Depression - Consumer spending sinks to its lowest level

Recovery - Consumer purchasing power increases

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

The Global Economic Crisis

Business cycles take a severe turn and affect consumers and businesses across the globe

Marketers must reevaluate their strategies and concentrate on their most promising products

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Inflation and Deflation

Inflation devalues money by reducing the products it can buy through persistent price increases

Deflation can cause:

A freefall in business profits

Lower returns on most investments

Widespread job layoffs

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Inflation and Deflation

Unemployment - Proportion of people in the economy actively seeking work but do not have jobs

Rises during recession and declines during recovery and prosperity

Income - Influences consumer buying power

Marketers focus on discretionary income, the amount of money people have to spend after buying necessities

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Resource Availability

Resources are not unlimited

Shortages result from several conditions, including political instability and lack of raw materials, component parts, or labor

Demarketing - Reducing consumer demand for a good or service to a level that the firm can supply

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

The International Economic Environment

Marketers must monitor the economic environment of other nations

Politics in other countries affects the international economic environment as well

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

The Technological Environment

Represents application of knowledge based on discoveries in science, inventions, and innovations to marketing

Technology leads to:

New products

Improvements in existing products

Better customer service

Reduced prices

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

The Technological Environment

Technology addresses social concerns

Sources of technology:

Industry

Educational institutions

Not-for-profit institutions

Federal government

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Applying Technology

Marketers monitor new technology to gain a competitive edge and to enhance customer service

VoIP (voice over Internet protocol) - A phone connection through a personal computer with any type of broadband Internet connection

Internet Protocol Multimedia Subsystem (IMS) will offer new opportunities to marketers

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

The Social-Cultural Environment

The relationship between the marketer, society, and culture

Marketers must be sensitive to demographic shifts and changing values

Increasing importance of cultural diversity

Example: Univision and Telemundo face growing competition in Spanish-language television programming

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Consumerism

Social force within the environment

Aids and protects the consumer

Exerts legal, moral, and economic pressures on business and government

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Consumerism

Consumer rights:

The right to choose freely

The right to be informed

The right to be heard

The right to be safe

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Ethical Issues in Marketing

Marketing ethics - Marketers’ standards of conduct and moral values

Some industries are required by law to maintain corporate-level positions responsible for ethics and legal compliance

Workplace may generate serious conflicts when individuals discover that their ethical beliefs don’t match those of their employer

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Figure 3.2 - Ethical Questions in Marketing

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Figure 3.3 - Ten Steps for Corporations to Improve Standards of Business Ethics

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Figure 3.4 - Test Your Workplace Ethics

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Ethics in Marketing Research

Consumers are concerned about privacy

Proliferation of databases

Selling of address lists

Ease with which consumer information can be gathered

Several agencies offer assistance

The U.S. government maintains a Do Not Call registry to prevent unwanted telemarketing

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Ethics in Product Strategy

Product quality, planned obsolescence, brand similarity, and packaging raise ethical issues

Example: Packaging strategy

Larger packages are more noticeable on the shelf

Oddly sized packages make price comparison difficult

Bottles with concave bottoms appear to have more liquid in them than they do

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Ethics in Distribution

What is the appropriate degree of control over the distribution channel?

Should a company distribute its products in marginally profitable outlets that have no alternative source of supply?

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Ethics in Promotion

Truth in advertising is the bedrock of ethics in promotion

Marketing to children has come under increased scrutiny

Promoting specific products to college students can raise ethical questions

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Ethics in Pricing

Most regulated aspect of a firm’s marketing activities

Example: Credit-card companies target consumers with poor credit ratings

Offer them what industry observers call “subprime” or “fee-harvesting” credit cards

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Social Responsibility in Marketing

Marketing philosophies, policies, procedures, and actions that have the enhancement of society’s welfare as a primary objective

Four dimensions of social responsibility:

Economic

Legal

Ethical

Philanthropic

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Figure 3.5 - The Four Step Pyramid of Social Responsibility

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Marketing’s Responsibilities

Corporate responsibility covers the entire framework of society

Marketers must consider:

The global effects of their decisions

The long-term effects of their decisions

The well-being of future generations

Entire communities can benefit through socially responsible investing

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Marketing and Ecology

Ecology - The relationship between organisms and their natural environments

Environmental issues influence all areas of marketing decision making

Green marketing - Production, promotion, and reclamation of environmentally sensitive products

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Strategic Implications of Marketing in the 21st Century

With the Internet and rapid changes in technology, competition is even more intense than before

Marketers face new regulations as the political and legal environment responds to changes in the United States and abroad

Ethics and social responsibility must underlie everything that marketers do in the 21st century

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

Zappos Video

http :// www.cengage.com/marketing/book_content/boone_9781133628460/videos/ch03.html

Chapter 3 The Marketing Environment, Ethics, and Social Responsibility