A study on Environmental Variables affecting Marketing

Introduction:
A marketing plan is a powerful tool used by businesses who want to get ahead and plan for the future
of their company. If a company is looking to manufacture and sell cellular phones then they would
need a marketing plan to stay above the competition and other varying factors. There are several
variables that go into creating a marketing plan. The main variables are economic, demographic,
technological, political and cultural and they are to be included in the marketing plan. Successful
companies both big and small most often have a marketing plan (Marketing plans, !"#$. It starts
out months in advance before being e%ecuted, typically. If I were to e%ecute a marketing plan, I
would definitely start out at least a month in advance. &ven though some businesses are very private
about their marketing plans for competitive reasons, it is important for every member of the firm to
be able to view details of the marketing plan (Marketing plans, !"#$.
Internal and External environmental factors
There are two different types of environmental factors and those are internal and e%ternal factors.
The type of factor that a company has control over would be the internal factors, because those
things are happening internally. 'hat are internal environmental factors( They are) management,
finance and accounting, research and development, manufacturing, purchasing, company image, and
brand e*uity (ebstudies, !"$. The firm is responsible for their own management team as well as
the financing and accounting departments. The research and development takes place within the
firm and with everybody involved with the firm. The manufacturing and purchasing is all a product
of what goes on inside of the firm.
External Factors
Some e%ternal factors, factors that the firm doesn+t necessarily have control over are the customers,
the government, competitors, and the public. It would be difficult to keep track of each one of those
things when drawing up a marketing plan. 'ith the competition it is likely that they have their own
marketing plan and want to keep that information away from the firm ,ust as the firm wants to keep
the information away from them. The e%ternal factors also include the macro and micro environment
(ebstudies, !"$. The macro environment factors are very much uncontrollable.
Macro environmental factors
The macro environment factors are the demographics, economics, physical forces, technological
factors, political and legal forces, and social and cultural forces (ebstudies, !"$. Marketers would
be interested to know the demographics of the market that they+re in. They can include it into the
plan but have no control over the demographics of the environment. The economic factors relate to
the production and manufacturing and could have an effect on both of those things (ebstudies,
!"$. -hysical forces refer to natural renewable resources and those things can also affect the
production and manufacturing as well as the availability of such necessary resources (ebstudies,
!"$. Technology affects a business because the machinery affects the production and
manufacturing of products and materials (ebstudies, !"$. Marketing decisions, sound marketing
decisions cannot be made without taking into account the political and legal forces in their
environment which greatly shape the decision making (ebstudies, !"$. The social and cultural
forces affect marketing because these forces demand that products be made available and benefit
everybody in society (ebstudies, !"$.
Social and Cultural environmental factors
The most important environmental factors are the social and cultural factors. The social and cultural
factors of the environment help to decide what type of customers there are going to be and the types
of customers that need to be targeted (.inton, !"#$. The culture of the customers also shapes their
preference (.inton, !"#$. If their preference is shaped by the environment than it would be good for
marketers to look into what those preferences are. /ertain cultural groups may prefer distinctive
colors so it is important to remember those colors when it comes to packaging of the products that
customers prefer (.inton, !"#$.
Competition
/ompetition is also another big influence and people might disagree that social and cultural factors
are the most important for that reason. /ompetition sets the tone for whole environment.
/ompetitors always want to have that competitive edge over the other firms in the environment. A
marketer must always be aware of the factors that are present in another company that is competing
with them. This way they can ad,ust their present plan accordingly and gain their competitive edge.
The competition wouldn+t matter at all if the competitor was well aware of the cultural and social
factors surrounding them and this company wasn+t. It is important for marketers to understand their
target market as well as their preferences. These preferences are based on what the target market
prefers as well as their culture. To better understand the culture of the environment it would be
beneficial to observe what is necessary and what might be needed in the current environment that
people are living. This would be the solution to discovering where the marketing plan should go.
Compromise
/ompromises are often feasible when drawing up a marketing plan and both factors could be taken
into consideration when drawing up the marketing plan. To some degree both of the important
outside factors go hand in hand. A competitor could have a vast knowledge of cultural and social
standing of the world around them whereas a marketer within their own firm may not.
The environmental factors that are affecting marketing function can be classified into :
1) Internal environment and
2) External environment
Internal Environment of Marketing :
This refers to factors existing within a marketing firm. They are also called as controllable factors,
because the company has control over these factors :
a) it can alter or modify factors as its personnel, physical facilities, organiation and function means, such
as marketing mix, to suit the environment.
There are many internal factors that influence the marketing function, they are :
Top Management : The organiational structure, !oard of "irector, professionaliation of
management..etc..#actors like the amount of support the top management en$oys from different levels of
employees, shareholders and !oard of "irectors have important influence on the marketing decisions and
their implementation.
Finance and Accounting: %ccounting refers to measure of revenue and costs to help the marketing and
to know how well it is achieving its ob$ectives.#inance refers to funding and using funds to carry out the
marketing plan. #inancial factors are financial polices, financial position and capital structure.
Research and Development : &esearch and "evelopment refers to designing the product safe and
attractive. They are technological capabilities, determine a company ability to innovate and compete.
Manufacturing : 't is responsible for producing the desired (uality and (uantity of products.#actors which
influence the competitiveness of a firm are production capacity technology and efficiency of the productive
apparatus, distribution logistics etc.,
Purchasing : )urchasing refers to procurement of goods and services from some external agencies. 't is
the strategic activity of the business.
ompan! Image and "rand E#uit! : The image of the company refers in raising finance, forming $oint
ventures or other alliances soliciting marketing intermediaries, entering purchase or sales contract,
launching new products etc.
'n organiation, the marketing resources like organiation for marketing, (uality of marketing, brand e(uity
and distribution network have direct bearing on marketing efficiency. They are important for new product
introduction and brand extension, etc..
External Environment of Marketing$
*xternal factors are beyond the control of a firm, its success depends to a large extent on its adaptability
to the environment.
The external marketing environment consists of :
a) +acro environment, and
b) +icro environment
a) Micro environment: The environmental factors that are in its proximity. The factors influence the
company,s non-capacity to produce and serve the market.The factors are :
1) %uppliers: The suppliers to a firm can also alter its competitive position and marketing capabilities.
These are raw material suppliers, energy suppliers, suppliers of labor and capital.%ccording to michael
)orter, the relationship between suppliers and the firm epitomies a power e(uation between them. This
e(uation is based on the industry condition and the extent to which each of them is dependent on the
other.
The bargaining power of the supplier gets maximied in the following situations:
a) The seller firm is a monopoly or an oligopoly firm.
b) The supplier is not obliged to contend with other substitute products for sale to the buyer group.
c) The buyer is not an important customer.
d) The suppliers, product is an important input to the buyer,s business and finished product.
e) The supplier poses a real threat of forward integration.
2) Market Intermediaries : *very producer has to have a number of intermediaries for promoting, selling
and distributing the goods and service to ultimate consumers. These intermediaries may be individual or
business firms. These intermediaries are middleman .wholesalers, retailers, agent,s etc. ), distributing
agency market service agencies and financial institutions.
/) ustomers : The customers may be classified as :
1) &ltimate customers: These customers may be individual and householders.
2) Industrial customers: These customers are organiation which buy goods and services for producing
other goods and services for the purpose of other earning profits or fulfilling other ob$ectives.
/) Resellers: They are the intermediaries who purchase goods with a view to resell them at a profit. They
can be wholesalers, retailers, distributors, etc.
0) 'overnment and other non(profit customers: These customers purchase goods and services to
those for whom they are produced, for their consumption in most of the cases.
1) International customers: These customers are individual and organiations of other countries who
buy goods and services either for consumption or for industrial use. 2uch buyers may be consumers,
producers, resellers, and governments.
3 )ompetitors: 4ompetitors are those who sell the goods and services of the same and similar
description, in the same market. %part from competition on price, there are like product differentiation.
Therefore, it is necessary to build an efficient system of marketing. This will bring confidence and better
results.
5) Pu)lic: 't is duty of the company to satisfy the people at large along with its competitors and the
consumers. 't is necessary for future growth.The action of the company do influence the other groups
forming the general public for the company. % public is defined as 6any group that has an actual or
potential interest in or impact on a company,s ability to achieve its ob$ective., )ublic relations are certainly
a broad marketing operation which must be fully taken care of.
Macro Environment:
+acro environment factors act external to the company and are (uite uncontrollable. These factors do not
affect the marketing ability of the concern directly but indirectly the influence marketing decisions of the
company.
These are the macro environmental factors that affect the company,s marketing decisions :
a) Demographic Forces: 7ere, the marketer monitor the population because people forms markets.
+arketers are keenly interested in the sie and growth rate of population in different cities, regions, and
nations 8 age distribution and ethnic mix 8 educational levels8 households patterns8 and regional
characteristics and movements.
b)Economic Factors: The economic environment consists of macro-level factors related to means of
production and distribution that have an impact on the business of an organiation.
c) Ph!sical Forces: 4omponents of physical forces are earth,s natural renewal and non-renewal
resources. 9atural renewal forces are forest, food products from agriculture or sea etc. 9on- renewal
natural resources are finite such as oil, coal, minerals, etc. !oth of these components (uite often change
the level and type of resources available to a marketer for his production.
d) Technological Factors: The technological environment consists of factors related to knowledge
applied, and the materials and machines used in the production of goods and services that have an
impact on the business of an organiation.
e) Political and *egal Forces: "evelopments in political and legal field greatly affect the marketing
decisions. sound marketing decision cannot be taken without taking into account, the government
agencies, political party in power and in opposition their ideologies, pressure groups, and laws of the land.
These variables create tremendous pressures on marketing management. :aws affect production
capacity, capability, product design, pricing and promotion. ;overnment in almost all the country
intervenes in marketing process irrespective of their political ideologies.
f) %ocial and ultural Forces: This concept has crept into marketing literature as an alternative to the
marketing concept. The social forces attempt to make the marketing socially responsible. 't means that
the business firms should take a lead in eliminating socially harmful products and produce only what is
beneficial to the society. These are numbers of pressure groups in the society who impose restrictions on
the marketing process.
Environments Affecting Marketing
+e! Terms: environmental threat, controlla)le and uncontrolla)le environments,
demographics, geodemographics, six ma-or macroenvironmental varia)les, price
discrimination, Ro)inson(Patman Act, hori.ontal price fixing, vertical price fixing,
predator! pricing, Federal Dilution Act, FDA, P%, FT, %herman Antitrust Act,
la!ton Act, counterfeit goods, futuristics, cultural shift, and technological
forecasting$
2ome of the environmental variables affecting a firm are controllable and some are
uncontrollable. The 0),s of marketing, i.e., the marketing mix, are controlled by the
marketing manager. There are variables, however, that are uncontrollable and
managers have to take them as givens. These include the following six ma-or
macroenvironmental varia)les:
.1) demographic -- "emographics are characteristics of the population. "emographics
includes gender, age, income, family sie, occupation, ethnicity, etc. +arketers study
demographic trends. % company, for example, that sells baby food would be very
interested in forecasts of the number of babies that will be born. 4olleges are interested
in the number of teenagers who will be graduating high school. 4heck out the
demographics of the ip code you live in at: http:<<ipskinny.com< % retailer who wants
to open an upscale clothing store for children should study the demographics of the
area where she wants to open her store. =ho lives there> 7ow many children>
+edian income> 7ow many married couples> +arketers are very interested in ip
codes -- this is part of geodemographics .geography ? demographics). +arketers
want to study the profiles of people who live in a certain area in order to sell them
products.
The 4ensus !ureau is the source of much of our demographic information. 't
announced on +ay 2@11 that married couples are no longer a ma$ority. +arried
couples are currently 0AB of all households .down from 5AB in 1C1@). Dnly about 2@B
of households are traditional nuclear families -- married couples with children. 't is
interesting that college-educated women are more likely to be married .and stay
married) than women with only a high school diploma. *ducated women marry later but
are more likely to remain married. Eneducated women with only a high school diploma
tend not to marry the father of their children. They feel that it is too difficult to support a
husband .who tends to be unemployed because of the weak economy and lack of $obs
for the uneducated) and children. 't is clear that rising income ine(uality and
employment instability are having a negative effect on marriage. The biggest change
has been in the huge increase in households headed by women without husbands.
%lso, a large number of households consist of people who are not family.
.2) natural -- see below.
./) cultural .this includes social) -- This will be discussed in detail in a later chapter.
=hat you have to understand about culture is that it is learned and it affects our core
values, attitudes, behaviors, and morals. Dne simple example: There was a time when
women would wear a fur coat8 it was socially acceptable. #ur coats were advertised on
television and sold in many department stores. Today, our culture is opposed to it.
=omen wearing fur coats risk being spat upon or having paint thrown on their coats.
The attitude toward smoking cigarettes and cigars has also changed. ' remember when
you never saw a woman with a tattoo. 'n fact, very few men had tattoos. :isten to
songs of the late 1C1@s and compare to songs of today you will see what is meant by a
cultural shift. !etter yet, look at an old film and compare with a film of today. 'n many
*uropean countries such as #rance, marriage --even between straight couples -- is
disappearing and being replaced by civil unions
.see: http:<<www.nytimes.com<2@1@<12<13<world<europe<13france.html).
.0) economic -- The middle class seems to be shrinking in the Enited 2tates. This will
affect the market for many different products including automobiles and housing.
.1) political .legal) -- =e will see how various laws and government agencies affect the
way a marketer conducts business.
.3) technological -- Technology can have a great impact on marketing. 9otice how the
'nternet has had a huge impact on so many industries ranging from banking to retailing.
There was a time when education was almost exclusively in a traditional classroom.
2ome books also add competitive environment .' would have a problem calling that a
macroenvironmental variable), i.e., what the competition is doing. % good marketer
scans these various environments for threats and<or opportunities.
Environmental threatF2ometimes, there is something going on in the environment
that can have an adverse effect on an organiation if no action is taken. 4onsider the
effect of electronic commerce on various businesses, e.g., the music industry and
software retailing. 2imilarly, do you think there is a future for travel agents and video
rental stores> 9ewspapers are now in trouble because on the new media. Goung
people get their news from the 'nternet and are generally not newspaper readers. %lso,
classified advertising has moved from newspapers to the 'nternet.
!ig threat to the music industry: 4onsumers like to purchase individual songs on
websites such as iTunes. =ill this have an effect on sales of albums> =hy buy an
expensive 4" consisting of many songs when all you want is one or two songs> 2ales
of albums have been dropping while sales of individual digital songs have been rising.
'n fact, catalog sales .this is what the music industry calls the sale of old releases)
account for 1@B to 33.35B of the sales of digital singles. 2ome companies are afraid
that online sales of digital singles will hurt profits so they only sell songs in album form
and do not allow downloads of digital singles .see NY Times H=hen all the I;reatest
7itsI are too many to download.H 2<2<2@@3 pp. 1, 3).
/atural Environment(- +ore and more people are concerned with the environment.
;lobal warming is making many of us aware that we are heading for ecological disaster
unless something is done -- and soon. Jared "iamond .9G Times, 1<2<2@@A,D)-*",
%15) is of the opinion that real problem facing humankind is overconsumption.
"eveloped countries .E2, 4anada, =estern *urope, Japan, and %ustralia) with a total
population of about 1 billion consume /2 times more resources such as oil and plastic
than do those in developing countries with a population of 1.1 billion. 'f the entire world
were to consume as much as the developed countries do, this would be the same as if
the world population increased to 52 billion. 9o one believes that the world can support
this many people. The companies that pollute are being forced by new legislation to
invest in pollution-control e(uipment. There are great opportunities for businesses that
produce green products. % large number of people want to buy products that are
friendly to the environment. This is why green business is definitely the way to go for all
firms. 'ssues that companies must address: .1) raw materials such as oil, water,
copper, gold, etc. are becoming scarcer. The price of these raw materials will continue
to rise. =e can no longer assume that there will be an endless supply of oil.
%lternative energy such as wind, geothermal, solar, nuclear, etc. must be considered.
.2) global warming. #irms have to come up with new and better ways to reduce the
amount of carbon dioxide emissions. ./) )rice of energy will continue to rise. )roducts
that use less energy will be in demand. .0) #irms must continue to find new and better
ways to reduce pollution. "umping waste products into rivers is no longer allowed in
much of the world. )ollution has wreaked havoc with most of the ma$or rivers in 4hina.
'n many cities, the air is so polluted that it is difficult to breathe.
*egal0Political 1Regulator!2 Environment of Marketing:
%. )ricing:
Ro)inson(Patman Act .1C/3) K prohibits price discrimination in interstate commerce
unless based on a cost-difference or if the goods are not of Hlike grade and (uality.H This
means that a company cannot charge different retailers .or wholesalers) different prices
without $ustification. Lery large retailers with their great buying power could demand
huge price discounts which small retailers cannot.
3ertical price fixingFwhen a manufacturer controls the price charged by a retailer.
Dn June 2A, 2@@5, the 2upreme 4ourt eliminated a ban on manufacturers and retailers
getting together and establishing minimum prices for products8 agreements on minimum
prices are legal if they do not hurt competition. This means that manufacturers and
retailers are now permitted to set a price floor for products and are not violating federal
antitrust law. =hy would manufacturers want to establish a price floor for a product>
2upposedly, this will make it possible for retailers to offer better service. 'f prices go too
low because of discounters, service may suffer. 's this true> ' have no idea.
4ori.ontal price fixing K competitors at the same level of the channel of distribution
.e.g., manufacturers or retailers) getting together to set prices. This is illegal and a
violation of the 2herman %ntitrust %ct.
Predator! pricing K )ricing below cost in order to drive a competitor out of business.
This is also illegal.
!. )roduct:
Pure Food and Drug Act .1C@3) K prohibits adulteration and misbranding of foods in
interstate commerce. The #"% is responsible for the safety of approximately A@B of the
foods we eat .The %griculture "ept. is responsible for some products, e.g., meat,
poultry, and some eggs). Today the #"% .#ood and "rug %dministration) is concerned
with misleading brand names and deceptive labels on food and drugs .e.g., the word
HfreshH). 4heck out their web site at: http:00555$fda$gov0
*xample: The #"% has been concerned with sunscreens. The #"% issued new rules for
sunscreen products in 2@11. .a) 2unscreens cannot be labeled HsunblocksH since this is
deceptive8 they do not block the sun. .b) 2unscreens must protect skin from both EL!
.causes sunburn) and EL% .causes wrinkling of skin) ultraviolet rays if they wish to
consider themselves Hbroad spectrum.H .c) 2unscreens are not permitted to claim that
they are HwaterproofH8 that is deceptive. =hat the product label should indicate is how
long the sunscreen is water resistant .usually between 0@ and A@ minutes). .d)
2unscreens that make the claim that they reduce risk of skin cancer, must have an 2)#
of at least 11. !y the way, if you use sunscreens, get one that has an 2)# of between
/@ and 1@. M2ource: 9G Times article June 11, 2@11 -- H9ew &ules to 2how the *xtent
of 2unscreen )rotectionHN
The #"% does not allow manufacturers of baby bottles and sippy cups to use plastic
that contains !)% .bisphenol %). !)% is a chemical that mimics estrogen. 'f you see a 5
on the bottom of a plastic bottle, that means it contains !)%.
*ach year, contaminated food will make one out of six %mericans sick: 1/@,@@@ of them
end up in the hospital and /,@@@ die M9GT 2. 2trom O#"% proposes new rules on food
safety,P Jan. 1, 2@1/, %1, %/N. The #"% proposed two new rules in 2@1/ to prevent
contamination of food. Dne big problem has to do with the water used in irrigation. This
water will now have to meet certain standards. #arm workers will need to have access
to portable toilets .rather than urinating in fields of produce) and will have to wash
hands. +anufacturers of processed foods will have to keep records sub$ect to audits
and will have to devise ways to reduce risk of contamination.
onsumer Product %afet! Act .1C52) K 4reated the 4onsumer )roduct 2afety
4ommission .4)24), which establishes safety standards for products. 4heck out their
web site at:http:00555$cpsc$gov0
'f you purchase a bicycle, you might find the following statement on it: HThis bicycle
meets the re(uirements of the 4onsumer )roduct 2afety 4ommission standards.H
Their research .performed by examining emergency room patients) found that two of
the most dangerous products are bicycles and stairs<steps. The 4)24 is also involved
in removing dangerous products from the marketplace. The 4)24 has recalled several
dangerous products that were being sold to consumers. These include: disposable
lighters that leaked and exploded, rayon skirts made abroad that ignited easily, child
swings, foam cushions, etc. +any toys for infants have been found to be (uite
dangerous.
Dn July A, 2@@0 the 4)24 announced the recall of the largest number of products
ever--11@ million pieces of toy $ewelry. The $ewelry is sold in vending machines and
costs 21 to 51 cents. The problem with the toy $ewelry .it is made in 'ndia) is that it has a
very high lead content and children sometimes eat it. Dne boy, who swallowed a toy
pendant purchased for a (uarter, suffered from lead poisoning. 'f you have any toy
metal $ewelry, throw it away.
The 4)24 is looking into the hanging cords and loops that one finds on window blinds.
%pproximately one child a month dies by being strangled on those cords. 't is very easy
to make cordless window blinds but they cost a lot -- possibly twice as much -- more
than blinds with cords. )lease note that there are more than one billion blinds in the
Enited 2tates .9G Times 0<21<2@11, %ndrew +artin, H% "ebate Dver =indow !lindsH).
There are still some dangerous products on store shelves. &ecently .June 2@11),
several people were seriously burned while adding a gel fuel to ceramic fire pots. The
fire pot exploded and they were covered with the gel fuel which burns like napalm.
They did not realie that the fire pot was still burning8 you are not supposed to add fuel
unless the pot is cold. There was a warning on the wrapping but it is removed by the
consumer. The product was sold by !ed, !ath, and !eyond and has been removed
from the store shelves.
:ead poisoning has become a big issue in 4hina. 4hildren and adults living near
factories making batteries and metal smelting companies have extremely high levels of
lead in their blood. This is a problem in several provinces in mainland 4hina. 't led to a
riot at the Qhe$iang 7ai$iu !attery #actory8 2@@ people from the surrounding area
stormed the factory and did a huge amount of damage. 7igh level of lead in childrenIs
blood will have serious effects on their development. *conomic growth is a big issue in
4hina and local officials often ignore safety and environmental issues. 'f you want more
information about this, go to the following website:
http:<<www.nytimes.com<2@11<@3<11<world<asia<11lead.html
Trademarks
This will be covered more thoroughly in a later chapter. Gou should know that a
company can obtain legal protection for its brand name or symbol .e.g., 9ikeIs
swoosh). *ven a color can be part of a trademark. Thus, no company is permitted to
use the name 4okeR or )epsiR . The R means that it is a registered trademark and no
other company may use that name or even a similar name that might cause confusion
e.g., 4ooka 4ola or )epiIs 4ola. 'n fact, if a company tries to introduce a new soft drink
called 4ooka 4ola, ' can almost guarantee them a lawsuit. There is no way that 4oca
4ola will allow a firm to market another brand of soft drink with such a similar name.
'ndeed, the :anham %ct was enacted to prevent this kind of confusion among
competing brands in the same product category.
The Federal Dilution Act goes beyond the :anham %ct, and may allow a firm to
prevent another company, even one in a non-competing business, from using a
registered name. Gou can see why it is called dilution. 2uppose ' want to use the
&olex name which represents (uality on a new brand of toilet paper, &olex toilet paper.
This might dilute the value of the &olex name.
4. )romotion
Federal Trade ommission Act .1C10) K unfair methods of business competition and
deceptive acts and practices, e.g., bait and switch advertising.
The FT is a powerful regulatory agency that can issue fines and cease and desist
orders. Dne of their ma$or functions today is to protect consumers from deceptive
advertising and selling practices. 4heck out their =eb site at: http:00555$ftc$gov0
Dne example of a power of the #T4 is corrective advertising. The #T4 has the power
in certain situations to force a company to run new ads that correct a false impression
made by previous ads. Dne famous example of the use of corrective advertising was
when =arner :ambert was ordered to run ads that stated that :isterine will not prevent
colds or lessen their severity. There were a large number of television commercials that
suggested that :isterine would help prevent colds. 'ncidentally, if you have a cold
and<or sore throat, no mouthwash can help. Gou might as well $ust ;argling with warm
salt water.
!ait-and-switch pricing is illegal and works as follows: % store runs an advertisement for
a product at a very low price .the bait) and once the customers come to the store,
salespeople try to Hswitch them,H i.e., convince the to buy more expensive models or
brands.
+ost of the time, companies do not want to go to court with the #T4 and will agree to
sign a consent order. This means that they waive all rights to seek a review and agree
not to continue the (uestioned practice .e.g., running an ad the #T4 claimed to be
deceptive), but they do not have to admit that they did anything wrong. 'f a firm refuses
to sign a consent decree, the #T4 will issue a cease and desist order which is the first
step in a process that leads to a trial before an administrative law $udge.
The biggest settlement in #T4 history is with 4ountrywide 7ome :oans. +ore than
01@,@@@ consumers who dealt with 4ountrywide were charged excessive fees. This
took place between 1<1<2@@1 and 5<1<2@@A. Jon :iebowit, chairman of the #T4 said
regarding 4ountrywideIs business model: HM'tN was a business model based on deceit
and and corruption, and the harm they caused to %merican consumers is absolutely
massive and extraordinary.H %nyone who went into default on their mortgage paid
excessive and<or improper fees to 4ountrywide for default-related services.
4ountrywide was the largest mortgage lender and loan servicer in the E2.
4ountrywide nearly went bankrupt because of the number of subprime mortgages they
made. !ank of %merica took over the company in 2@@A. M2ource: ;retchen
+orgenson, 9ew Gork Times July 21, 2@11, pp. !1, !3N
The #T4 =eb site that exposes popular 'nternet scams and informs consumers on how
to avoid them is at: http:<<www.ftc.gov<dotcons 4heck out the Top Ten "ot 4ons.
". )lace and 4ompetition
%herman Antitrust Act .1AC@) K deals with activities that are in restraint of trade or
tend to create a monopoly .e.g., price fixing, predatory pricing, bid rigging,
market<territory allocation). The 2herman %ntitrust %ct was the first federal law that was
passed-- note the year of 1AC@-- to encourage competition.
la!ton Act .1C10) K 2upplemented the 2herman %ntitrust %ct and also deals with
exclusive dealing arrangements .which limit the sources of supplies available to
consumers) and tying arrangements .the forced purchase by dealers of some products
with others).
'f a manufacturer insists that wholesalers and other intermediaries only carry their
brands and not the brands of competing companies, this would be an example
of exclusive dealing. 't might be illegal under the 4layton %ct if it can be shown that
competition is being hurt by this practice.
2uppose a company that manufactures printers forces intermediaries .wholesalers
and<or retailers) that want its printers to also purchase fax machines, this is a t!ing
arrangement. 't could be illegal under the 4layton %ct if it can be shown that it hurts
competition. 4ar manufacturers sometimes try to do this. % dealer wants small cars
and is told that he also has to purchase some 2ELs to get the small .and very popular)
cars.
#ind online legal help and get free access to a vast collection of understandable legal
information at: http:<<www.mycounsel.com<
%s far as self-regulation for businesses, i.e., businesses regulating themselves, the self-
regulatory organiation that is the best known is, of course, the !etter !usiness !ureau
.!!!). They have a website at http:<<welcome.bbb.org< Gou can use the !!! website
to check out a charity or company and see whether a retailer has a satisfactory record.
' checked out a store in my neighborhood and this is what ' found:
6"ased on """ files, this )usiness has a satisfactor! record 5ith the "ureau$ A
7satisfactor! record8 means that a compan! has )een in )usiness for at least 9:
months, and has properl! addressed complaints referred to it )! the "ureau$ The
)usiness cannot have an unusual volume or pattern of complaints, or an!
government actions against it involving its marketplace conduct$ The "ureau
must understand and have no concerns a)out the )usiness;s products, services
and t!pe of )usiness$6
ounterfeit 'oods
The unauthoried copy of a product is known as a counterfeit good. 't is against the
law8 the #ederal %nti-4ounterfeiting :aw was passed in 1CA0. Gou can go to $ail and
pay a stiff fine for manufacturing counterfeit goods. 't is a huge problem and has caused
plane crashes .key engine components were found to be counterfeit) and faulty medical
e(uipment .counterfeit batteries in pace-makers). %t least 11B of the worldIs branded
clothing .t-shirts, $eans, etc.) is fake. +any people think that buying a counterfeit
handbag or t-shirt is a victimless crime. 'n fact, it is easy to pick up counterfeit goods on
4anal 2treet in 9G4 and many flea markets. 't is not a victimless crime. %ccording to
+agnus &anstorp, an expert on terrorism, H)rofits from counterfeiting are one of the
three main sources of income supporting international terrorism.H .(uoted in 9G Times,
HTerrorIs )urse 2tringsH by "ana Thomas -- p. %2/, A</@<2@@5). +any counterfeit goods
are manufactured in factories in 4hina using child labor. %ccording to "ana Thomas,
The average %merican woman buys more than four handbags a year8 the average
brand name bag costs 1@ to 12 times what it costs to manufacture it. +any women
.even $udges) will shop for counterfeit handbags with a designer label .e.g., ;ucci bag)
to save money. )eople are proud to tell others how much they saved by buying the
fake bags. The phonies look exactly like the real thing. Suality is not that important
since many women will buy a new hand bag every year as the fashion changes, even if
the HoldH hand bag is still in excellent shape. The next time you are thinking of buying a
counterfeit good, remember that you might be supporting international terrorism, child
labor, and<or organied crime. =hat do you think> 's it ethical to knowingly buy
counterfeit goods>
Future Environment0Technological Environment
Futuristics is the study of the future. % good marketer should have a future orientation
and try to determine what lies ahead as far as technological, social, and cultural
changes.Technological forecasting refers to the prediction of future technology and
inventions and is part of futuristics. Technology is not the only factor with which
marketers have to be concerned. +arketers also have to be concerned
with social0cultural shifts. % shift away from materialism and ostentatiousness towards
simplicity, for example, could have a huge impact on the demand for super luxury
products such as T1@,@@@ watches, T2,@@@ pens, and T1@@,@@@ cars. The current
financial meltdown has caused many %mericans to become frugal and learning to
tighten their belts. 2howing off wealth is not cool, especially when millions of people are
out of work. 2everal articles have been written about religion and spirituality in the
workplace. %pparently, religion and spirituality are becoming more important to
%mericans. %mericans are also concerned about the environment and green marketing
is in.
+any shopping malls were built assuming that women stay home and take care of the
children. The percentage of women in the labor force with small children keeps growing.
Today, working women do not go to malls on weekdays, they have to be at work. They
prefer shopping from catalogs. 'n fact, there are several successful catalogs that
specialie in clothing for working women. *lectronic commerce will have a huge impact
on catalogs and, in the future, it seems (uite likely that people will prefer electronic
catalogs .using the =eb) to paper catalogs.
't is only a matter of time before technology makes video rental stores obsolete.
4onsumers will be able to easily download .from a =eb site) movies they wish to see
.Hvideo on demandH). The future of the music industry is also moving to the =eb.
4onsumers are downloading the music they want and pay per individual song. The
same is true of books. ' believe that it is (uite likely that in the future most books will be
downloaded8 you will print books on your own printer, rather than buying books at
bookstores.
)age 1: 'ntroduction
!usinesses have a number of ob$ectives. Typical examples include:
winning the biggest share of the total market
increasing sales
satisfying customers
making profit for shareholders.
% businessI ability to meet these ob$ectives depends on two main groups of factors:
1. the internal strengths of the organisation for example being able to make the right
products in an efficient way
2. being able to identify external influences in the business environment and on its
consumers and adapt accordingly.
The external environment today is changing fast. The external environment consists of
everything outside the business. This case study shows how +c4ain needs to identify
changes in the external environment. 't must then rise to the challenges posed by
change.
+c4ain #oods
The +c4ain product most people recognise is Dven 4hips. +c4ain is the worldIs
largest producer of chips. +c4ain buys 12B of the !ritish potato crop. +c4ain is also
one of the worldIs largest froen foods companies.
+c4ain is a privately owned company with a strong market focus. This means that it
carries out research to find out what consumers want. 't then uses this market
information to create products that consumers want to buy.
+c4ain is the worldIs largest producer of chips. +c4ain buys 12B of the !ritish potato
crop. +c4ainIs business is broader than $ust chips, with a range as wide as froen
potato specialities and froen light meals. 't provides consumers with a wide variety of
cut and seasoned potato products through EU retailers, like supermarkets and
restaurants. These include roast potatoes, potato wedges, hash browns, waffles and
potato cro(uettes.
+c4ain produces more specific potato shapes like )otato 2miles, 4rispy !ites and
2umthings .shaped as numbers) which appeal to younger consumers. +c4ain also
makes pias.
4hips have come a long way
since the potato was first brought to this country by =alter &aleigh in the 15th century.
!y the 1A1@s fish and chips were sold in the streets and alleys of :ondon and in some
of !ritainIs industrial towns. 'f asked to name a typically *nglish dish, most people will
say Ifish and chipsI. 4hips are produced in lots of different shapes and sies, ranging
from those deep-fried in fish and chip shops to +c4ainIs 1B fat Dven 4hips.
*xternal challenges
Dne of the biggest environmental factors affecting +c4ain in 2@@1<3 was the growing
concern about obesity, particularly in children. This case study shows how +c4ain has
risen to the challenges of this debate and other external challenges.
+c4ainIs view is that its chips can and do play a role in a healthy balanced diet and it is
continually finding ways to ensure +c4ain products are as healthy as possible.
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)age 2: 2:*)T analysis and social factors
'n order to be
able to understand its customersI re(uirements and respond to other changes, it is
important for a company to analyse its environment. % 2:*)T analysisis a tool that
helps to analyse the environment.
To create a 2:*)T analysis
the company needs to examine the key environmental factors that affect its business.
7aving carried out the analysis it must then take action to respond to the important
changes that have been identified. Df course, some of the factors in the 2:*)T analysis
can be placed under more than one of these headings.
The following analysis outlines 2:*)T factors and indicates some of the changes that
+c4ain has made and is making.
2ocial factors
2ocial trends are one of the key factors affecting a business.
4onsumer buying patterns are determined by trends. Just as the demand for some
popular clothes are determined by fashion, demand for food products is determined by
eating patterns. *ating habits are always changing. 4urrently one in four of all !ritish
potatoes consumed are eaten as chips.
&ecently +c4ain and other food producers have seen a slow down in salesas a result
of campaigns to encourage healthier eating such as that spearheaded by Jamie Dliver.
+c4ain has responded to this challenge in two main ways:
1. by reducing (uantities of salt and oil throughout its potato products range. +c4ain
argues that these figures are very low already. #or example, +c4ainIs Dven 4hips
contain only 1B fat, @.AB saturated fat and 32mg of sodium in every 1@@g portion. They
are made with only natural ingredients - specially selected potatoes and sunflower oil.
2. by seeking to get the message over that its chips are not unhealthy. The message that it
communicates through public relations campaigns and advertising is that all +c4ain
potato products are made from simple ingredients such as whole potatoes and sunflower
oil.
% key way in which +c4ain has responded to changing customer tastes has been to
improve the nutritional make-up of its products. %ll of +c4ainIs potato products are now
pre-cooked in sunflower oil instead of regular vegetable oil to reduce saturated fats.
There is no added salt in oven chips and added salt has been reduced by up to 1@B in
other potato products.
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Page B: *egal factors
&esponsible businesses not only abide by the law, they
seek to create standards above minimum re(uirements.
#ood labelling
+c4ain has to be aware of a
number of legal factors. The governmentIs #ood 2tandards %gency has recommended
that firms put Itraffic lightI labels on food to help people understand what they are buying
and to help them make the right choices:
&ed represents high levels of ingredients such as fats and salts.
;reen represents low levels.
+c4ain has put Itraffic lightI labels on its !ritish products as a response to consumer
concerns about healthy eating. %ll of +c4ainIs potato products are able to display the
green label for saturated fat and none of its products show a red label.
%lso featured on the labels are ;uideline "aily %mounts .;"%s) which show how much
fat, saturated fat, sugar and salt each product contains. This helps the consumer to
achieve a consistently balanced diet.
%dvertising
'n the EU, advertising of products is supervised by a voluntary body within the
advertising industry. 't is called the %dvertising 2tandards %uthority .%2%).
+c4ain makes sure that all its advertising sticks rigidly within the re(uirements of the
%2%. The %2% sets out that all adverts must be:
legal
decent
honest and
truthful.
:egislation
+c4ain takes these responsibilities very seriously. 't is important to build a reputation
for honesty and fair play.
'n addition +c4ainIs products comply with a range of laws, including:
The #ood 2afety %ct, covering the way in which food is prepared and served.
The Trades "escriptions %ct, which states that goods and services must be
exactly as described.
The =eights and +easures %ct governing such aspects as giving the right
weight on packs. #or example, +c4ainIs oven chips come in packs of 010g, C@5g,
1kg, 1.1kg, and 1.Akg.
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)age 0: *conomic and political factors
*conomic factors
*conomic factors include changes in buying patterns as peopleIs incomes rise. #or
example, as incomes go up people prefer to buy what they see as superior varieties of a
product type. =e see this with the development of ready prepared foods.
%s people become cash-rich and time-poor they prefer to switch to ready meals and
simple to prepare foodstuffs that they can (uickly heat in an oven or microwave. &ather
than buying potatoes and making chips at home or taking the time to go to a fish and
chip shop, it may be seen as more desirable to buy oven chips. Df course, it may be
cheaper to make your own chips by peeling and cutting up potatoes. 7owever, with
growing affluence people prefer ready prepared oven chips.
&esponsible eating and healthy exercise encourages everyoneIs health and well-being.
+c4ain has risen to this challenge by creating a range of varieties e.g. +c4ainIs
2traight 4ut Dven 4hips, 7ome #ries, roast potatoes and wedges, to appeal to a variety
of customers.
)olitical factors
Dn political factors, the EU government has increased the pressure on food suppliers to
come up with healthier foods. The government publicises and supports healthy eating
by creating initiatives such as I7ealthy 2choolsI. This encourages pupils to think about
the choices they make when choosing what to eat.
+c4ain supports the governmentIs initiative. 't believes that the foods that it provides,
including potato based products, are nutritious provided that they are prepared in a
healthy and simple way.
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)age 1: Technological changes
4hallenges of food technology
#ood technology is one of the most dynamic technologies in the modern economy.
#ood technology involves researching and developing new techni(ues for making
products as diverse as ice cream, probiotic yoghurt, froen oven chips and muesli bars.
*ach of these products involves finding technical solutions to problems such as how to:
freee while retaining flavour
maximise natural nutritional characteristics
turn a froen product into an oven heated product.
+c4ain is continually being faced by new challenges from technological factors. 't
should be no surprise therefore that +c4ainIs food technologists were only too happy to
rise to the challenge of making its potato products even healthier. +c4ain needed a
solution that not only reduced fat and salt, but also kept the sort of flavour that would
delight customers.
2olutions
The solution was to use sunflower oil which reduced saturated fats by 5@B across the
whole potato product range. #ood technologists know that by working with real potatoes
they are dealing with a product with a very strong nutritional pedigree.
#or example, it is a little known fact that potatoes are a ma$or source of vitamin 4 for the
EU diet. %s a product, potatoes are the second most important staple food in the world
today .rice is the first), providing essential carbohydrates that help us to generate
energy.
)otatoes also have tremendous future potential. 'n 1CC1 the potato became the first
vegetable to be grown in space. 9%2% worked with top scientists to develop super-
nutritious and versatile potatoes. These can be used to feed astronauts on long space
voyages and 9%2% hopes one day that these will feed space colonies.
Mcain Foods V 7ow +c4ain responds to changes in the external environment
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)age 3: 4onclusion
4hange comes from a number of sources 2ocial, :egal,
*conomic, )olitical and Technological. 4hange is the one constant in the business
environment.
This case study has illustrated how these changes have affected +c4ain, particularly in
relation to its core products.
!ecause +c4ain is a market-focussed company, it recognises that it has to respond to
what its consumers want. There are clear indicators that todayIs consumers want to live
a healthier lifestyle.
4onsumers are increasingly aware of food content and food issues. +ore and more
people look at food labelling and read information in the press about what is good for
them. They listen to people like Jamie Dliver and government spokespeople. They listen
to advice from teachers and nutritionalists.
The challenge has been, and continues to be, to prepare chips and potato products in
the healthiest way possible. #ortunately for +c4ain, it has market researchers and food
technologists who enable the company to keep in tune with the changing environment.
+c4ainIs advertising supports the companyIs message that chips are nutritionally
acceptable provided they are made in the right way. The challenge now is to keep
listening to consumers and to the external environment in order to continue to give
those consumers the best value healthy chips and other food products.
Df course the choice rests with the consumer. =hat do you think> 's +c4ain doing the
right thing>
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