•

. ENVIRONMENTAL SCANNING IN THE

NEW MILLENNIUM
Environmental scanning is the process of continually acquiring information on
events occurring outside the organization to identify and interpret potential
trends.
A. Tracking Environmental Trends
Environmental trends typically arise from five sources: social, economic,
technological, competitive, and regulatory forces. The declining consumption
of coffee is an example of a trend identified by environmental scanning.
Providing an explanation for the trend and assessing its implications are also
an important part of environmental scanning.
B. An Environmental Scan of the United States
Some emerging trends for each of the five environmental factors are listed
Below
•

II. SOCIAL FORCES

o The social forces of the environment include the demographic
characteristics of the population and its values.
 o Changes in these forces can have a dramatic impact on marketing
strategy.

A. Demographics
Describing the population according to selected characteristics such as age,
gender, ethnicity, income, and occupation is referred to as demographics.
o "The graying of America. - The U.S. population
shows a continued increase in the number of
people over age 65
o Greater marketing attention has been focused
Population Trend on the mature household, headed by people over
50 years old.
o These households control 75 percent of the net
worth of U.S. households
 2. The Baby Boom
Generations o Born between 1946 and 1964.
o Account for 56-58% of the purchases in most consumer
product and service categories.
o Individualism is very important
o Personalized economy product for boomers
 custom-designed for small target markets
 Immediacy of delivery
 value.
o This group focuses on
 family
 health
 convenience
 finances
 reading materials.
Generation X
o 15 % of the U.S. These consumers are
population o self-reliant,
o Born between 1965 o entrepreneurial,
and 1976 (the baby bust) o supportive of racial and
(declining birth rate). sexual diversity,
o 48 million consumers o better educated,
o Critical and suspicious
o Marketers are now
o not prone to
tracking this generation to
extravagance,
identify the dominant
 o and likely to pursue
lifestyles, products, and
consumption values of the services that are very
21st century. different from baby boomers
Generation Y: Born to Shop
o Born after 1976, (baby boomers began having children.
o Also described as the echo-boom and the baby boomlet
o Generation Y:
11 About 58 million Americans under age 16
11 Great impact on companies selling products from
toys to Club Med family vacations.
11 Environmental changes affecting Generation Y
include:
 60% of children aged < 6 have working mothers.
 61% of children aged 3 - 5 attend preschool.
 60% of households with children aged <=7 have
computers.
 More than one-third of elementary school
students nationwide are Black or Hispanic.
 About 15% of recent U.S. births were to foreign-
 born mothers.
 Nearly one in three births in the early 1990's was
to an unmarried woman.
 One-quarter of children under age 6 are living in
poverty.

o More households with single parents and unrelated

persons
3. The o The majority of divorced people remarry,
American
 giving rise to the blended family,
Family
 one formed by the merging into a single
household of two previously separated units.
 o Continued major shift to western and sunbelt states in
the 1990s.
 California, Texas, and Florida accounted for 33
percent of the net population change,
 These states gained more than 3 million persons
each.
o Populations are also shifting within states.
 During the 1990s, the population shifted
 from suburbs to more remote suburbs called
4. Population exurbs
Shifts  to smaller towns called penturbia.
o The Census Bureau collects data using a three-level
classification system. From the largest to the smallest,
these three areas are
 the consolidated metropolitan statistical area
(CMSA)
 the primary metropolitan statistical area (PMSA)
 the metropolitan statistical area (MSA).
o The average U.S. citizen moves every six years.

5. Racial and Ethnic o Approximately one in four U.S. residents is

 African-American, American Indian, Asian, Pacific
Islander, or a representative of another racial or
ethnic group.
o Hispanics, who may be from any race,
currently make up 12% of the U.S. population.
Diversity o Racial and ethnic groups tend to be
concentrated in geographic regions.
o 38% of children in the U.S., will be African-
American, Hispanic, or Asian in 2010
o The long-term consequences of their buying
patterns must be understood.
o Developing marketing plans to reflect specific
area differences
6. Regional Marketing  taste preferences,
 perceived needs,
 interests.
B. Culture
o Culture is the set of
 values,
  ideas,
 attitudes
o of a homogeneous group of people
o that is transmitted from one generation to the next.
o Marketers monitor cultural trends to spot new opportunities.
1. The Changing o In the 1990s marketing to women focused on
Attitudes and Roles of their challenges of balancing family and career.
Women o Many Generation Y women have
 had career mothers,
 participated in organized sports, and
 benefited from the Internet’s providing a
marketspace that makes gender, race, and
ethnicity invisible.
o Now most manufacturers offer equal quality
products designed specifically for each sex.
o The financial services, insurance, and health-
care industries are also developing programs for
women’s individual interests and needs as
consumers.
o Two-career families
 a1 Greater household incomes
b1 Less available time for family activities.
c1 Purchase roles are changing
d1 Purchase patterns are changing
o Values vary with age but tend to be similar for
men and women.
o All age groups rank "protecting the family" and
"honesty" as the most important values.
o Ranked as the "third" most important value
 "friendship" for consumers under 20
 "self-esteem" for consumers aged 20–29
2. Changing Values  "health and fitness" for Consumers aged
30–39 .
o "Value consciousness"
 the concern for obtaining the best quality,
features, and performance of a product or
service for a given price
 will drive consumption behavior for the
foreseeable future
 o Cultural Creative (24%)
 Interested in new products
 Scan information sources
 Grab topics of interest
 Explores the topic in depth.
Marketing-oriented o Heartlanders(29%) - Traditional Beliefs
values of the late 1990s o Modernists(47%) - Place high value on
11 Personal Success
11 Consumerism
11 Materialism

III. ECONOMIC FORCES

The economy pertains to the income, expenditures, and resources that
affect the cost of running a business and household.
 A. Macroeconomic Conditions
o Companies monitor inflationary or recessionary states of the economy,
whether actual or perceived by consumers or businesses.
o Consumer expectations are an important element of environmental
scanning.
o Consumer spending, which accounts for two-thirds of U.S. economic
activity, is affected by expectations.
o The higher the Consumer Sentiment Index, the more favorable are
consumer expectations–valuable knowledge for marketing planners of a
company like Chrysler.
o
 B. Consumer Income
A consumer’s ability to buy is related to income.
 o is the total amount of money made in one year by
Gross income
a person, household, or family unit.
Disposable income o is the money a consumer has left after paying
 taxes to use for food, shelter, and clothing.
o As the marketplace has become more efficient,
producing products that are more durable and use
less energy, consumers have increased their
disposable income.
o For example, car maintenance costs have
declined 28 percent since 1985 because automobile
quality has improved.
o is the money that remains after paying for taxes
and necessities.
Discretionary income o Discretionary income is used for luxuries.
o Studies suggest that two-thirds of all American
households have some discretionary income.

IV. TECHNOLOGICAL FORCES .

Technology refers to inventions or innovations from applied science or
engineering research. Technological innovation can replace existing
 products and companies

A. Technology of Tomorrow
o Technological change is the result of research
o It is difficult to predict.
o Some changes occurring now include advances in
 Nanotechnology (the science of unimaginably small electronics),
 The convergence of personal computer and telephone
technologies,
 The Internet’s becoming the backbone of information-intensive
industries,
 The emergence of biotechnology as a key component of the
economy.
B. Technology's Impact on Customer Value
o The cost of technology is plummeting
o Causing customer value assessment of technology-based products to
focus on other dimensions such as
 quality,
 service
 relationships.
o Technology also provides value through the development of new
products and the way existing products are produced.
o Many companies are using technological developments to allow
recycling products through the manufacturing cycle several times.
o Another approach is precycling–efforts by manufacturers to reduce
waste by decreasing the amount of packaging they use.
C. Electronic Business Technologies
o communication-based electronic exchange
environment mostly occupied by
 sophisticated computer technologies
marketspace  telecommunication technologies and
 digitized offerings.
o Growth illustrates the transformative power
of technology
electronic commerce
o Any activity that uses some form of electronic communication in the
 inventory
 exchange
 advertisement
 distribution
 payment
o The most widely visible application is business-to-consumer
interactive marketing, involving the
 Internet,
 the World Web
 commercial online services.
o An integrated global network of computers
The Internet o gives users access to information and
documents.
o Part of the Internet
o that supports a retrieval system
The World Wide Web
o that formats information and documents into
Web pages.
Commercial online o Such as America Online
 o Offer electronic information and marketing
services services to subscribers who are charged a
monthly fee.
o Many companies have adapted Internet-based technology internally to
support their electronic business strategies.
o An Internet/Web-based network used within
the boundaries of an organization.
Intranet o A private Internet
o May or may not be connected to the public
Internet.
o Uses Internet-based technologies
o Permit communication between a company
and its
Extranets  supplier,
 distributors, and
 other partners (such as advertising
agencies).
US is not creating new o U.S. companies seem to have trouble
technology as fast as in changing results of pure research into goods
 and services.
o U.S. share of new patents, research and
development funding, and the focus of R&D
expenditures have fallen behind .
o The federal government spends about $75
billion a year on R&D
o Private industry spends $120 billion on R&D
o U.S. companies are
 seeking short-term profits
the past.  Taking minimal risk.
 This leads to line extensions rather than
real innovations.
o Some political and cultural changes could
encourage innovation
11 Tax incentives
11 Changes in organizational structure
11 Company encouragement of risk taking.

•
 V. COMPETITIVE FORCES
o Competition refers to the alternative firms that could provide a product
to satisfy a specific market's needs. Specifically
 Number of competitors a firm must face
 Relative size of competitors
 Degree of interdependence within the industry.
o Competition is beyond the control of management
o The marketing mix, particularly pricing, depends on the type and
amount of competition facing the firm.

A. Alternative Forms of Competition

There are four basic forms of competition, forming a continuum from pure
competition to monopoly.
pure competitionevery company has a similar product.
 many sellers compete with their products on a
monopolistic competition
substitutable basis.
occurs when a few companies control the majority of
Oligopoly
industry sales.
Monopoly occurs when only one firm sells the product.
B. Components of Competition
The factors that drive competition:
o Assess the likelihood of new entrants.

1. Entry o Barriers to entry are business practices or

conditions that make it difficult for new firms to
enter the market.
o Powerful buyers exist when
 Few buyers
 Low switching costs,
2. Power of Buyers and  Buyer can exert significant pressure for
Suppliers price competition.
o Suppliers gain power
 Product is critical to the buyer
 High switching costs.
3. Existing Competitors o Industry growth and fixed costs affect
and Substitutes competitive pressures.
o Employment peaked in large corporations in
the early 1980s.
o About the same time, small firms generated
66 percent of all new jobs created in the U.S.
4. Start-Ups, o The recession of 2001
Entrepreneurs, and  Contributed to the downsizing of giant
Small Business corporations
 Failure of hundreds of start-ups
 Led to the formation of hundreds of new
start-ups.
C. The New Look in American Corporations
o Past successful practices Today’s organization requires
won’t work any more. 11 constant change rather than
o The need to expand beyond stability
domestic markets 11 networks rather than hierarchies
o Increase in the importance 11 partnerships and alliances
of intellectual capital rather than self-sufficiency.
o Use of Internet technologies
 o The Web gives everyone in the organization
the ability to access and process information at
any time and from any location.
"network o The Web allows employees to manage
organization" formal and informal networks of
AKA  contractors,
"e-corporation"  designers,
 manufacturers,
 distributors.
Global competition
o Growing facet of U.S. business.
o U.S. firms consider going international as a growth strategy
o Foreign firms are entering the United States to do business.
o Global competition will be covered in more detail in the chapter on
global marketing
o In the past, foreign firms entered U.S. markets by emphasizing price,
but today the accent is on quality.
o U.S. companies often battle one another in global markets just as
intensively as they battle in the domestic market.
o Increased competition for market share
 o More companies offering more products aimed at the same customers
o Increased market share often results in economies of scale and
domination of supply chains

VI. REGULATORY FORCES

Regulation consists of restrictions state and federal laws place on
business with regard to the conduct of its activities.

A. Protecting Competition
Major federal legislation passed to o the Sherman Antitrust Act
encourage fair competition: (1890)
o the Clayton Act (1914)
o the Robinson-Patman Act
 (1936).
o Federal Trade
Commission Act
o Celler-Kefauver
Antimatter Act
o Hart-Scott-Rodino Act
B. Product-Related Legislation
o Companies are afforded basic protection for their
products under the patent law.
o The copyright law gives the author of a literary,
1. Company dramatic, musical, or artistic work the exclusive right to
Protection print, perform, or copy the work.
o Digital technology has necessitated new copyright
legislation to improve protection of copyrighted digital
products against piracy.
2. Consumer o There are many consumer-oriented federal laws
Protection regarding products.
 Meat Inspection Act (1906).
 Food, Drug, and Cosmetics Act (1938).
o Laws with a broader scope,
  Fair Packaging and Labeling Act (1966)
 Consumer Product Safety Act (1972).
o Consumerism
 A grassroots movement started in the 1960s to
increase the influence, power, and rights of
consumers in dealing with institutions.
 Responses to consumer interests
 Clean Air Act (1990,
 Telephone Consumer Protection Act (1991),
 Children’s Online Privacy Protection Act
(1998).
3. Both o The Lanham Act (1946) provides for registration of a
Company and company’s trademarks for exclusive use unless it
Consumer becomes generic.
Protection o The Trademark Law Revision Act (1988) changed the
Lanham Act to allow a company to secure rights to a
name before actual use by declaring an intent to use the
name.
o Trademarks also protect consumers by assuring
them that they get the product they want.
 o The U.S. Supreme Court has ruled that companies
may obtain trademarks for colors associated with their
products.
C. Pricing-Related legislation
o The Robinson-Patman Act - regulate pricing practices.
o The courts view price fixing itself as illegal.
o Certain forms of price discounting are allowed.
 Quantity discounts are acceptable
 Buyers can be charged different prices for a product provided
there are differences in manufacturing or delivery costs.
D. Distribution-Related legislation
The government has four concerns with regard to distribution and the
maintenance of competition:
o Buyer to handle only the products of one
manufacturer and not those of competitors.
(1) Exclusive dealing
o This is illegal when it substantially lessens
competition.
(2) Requirement o Require a buyer to purchase all or part of its
 needs for a product from one seller for a period of
time.
contracts
o Not always illegal, depending on a court’s
interpretation of their impact on distribution.
o Manufacturer grants a distributor the sole
(3) Exclusive rights to sell a product in a specific geographic
territorial area.
distributorships
o Often receive regulatory scrutiny.
o Seller requires the purchaser of one product
also to buy another item in the line.
(4) Tying
arrangements o These contracts may be illegal when the seller
has such economic power in the tying product that
the seller can restrain trade in the tied product.
E. Advertising- and Promotion-Related Legislation
o The Federal Trade Commission (FTC)
 monitors deceptive or misleading advertising and unfair business
practices.
 It has the power to issue cease and desist orders and to order
corrective advertising.
o Other laws designed to regulate advertising
 The Wheeler-Lea Act - controls false advertising.
 Federal Cigarette Labeling and Advertising Act (1967)
 The Children’s Television Act (1990).
Control through Self-Regulation
o An alternative to government
control
o An industry attempts to police
itself.
o The best known self-regulatory
group is the Better Business Bureau
o Two problems:
(BBB),
 noncompliance by
 Recently developed a reliability
members
assurance program, BBB Online, to
provide objective consumer  enforcement.
protection for Internet shoppers.
 Participating companies must
follow the BBB’s standards before
they display the BBB logo on their
website.