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CHAPTER

The Marketing Environment, Ethics, and Social Responsibility

Chapter Objectives
1 Identify the five components of the marketing environment. 2 Explain the competition marketers face and the steps necessary for developing a competitive strategy. 3 Describe how marketing activities are regulated and how marketers can

influence the politicallegal environment.

4 Outline the economic factors that affect Describe the ethical marketing decisions and 7 issues in marketing. consumer buying power. Identify the four levels of 5 Discuss the impact of the 8 the social responsibility technological pyramid. environment on a firms marketing activities.

6 Explain how the socialcultural environment influences marketing.

CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility

ENVIRONMENTAL SCANNING AND ENVIRONMENTAL MANAGEMENT

Environmental scanning Process of collecting information about the external marketing environment to identify and interpret potential trends. . Environmental management Attainment of organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social- cultural environments.

Firms often create strategic alliances to combine resources and capital to compete more effectively.

CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility

THE COMPETITIVE ENVIRONMENT

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, and marketers competing for the consumers purchasing power. Companies with a monopoly usually accept regulation in exchange for the exclusive right to serve a market segment. OligarchyLimited number of sellers in an industry with high start-up costs.

TYPES OF COMPETITION
Directamong marketers of similar products.

Indirectinvolves products that are easily substituted for each other.

Competition among all firms that compete for consumers purchases.

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DEVELOPING A COMPETITIVE STRATEGY

Should we compete? Depends on firms resources, objectives, and expected profit potential. If so, in what markets should we compete? Allocate firms limited resources to the areas of greatest opportunity. How should we compete? Includes product, promotion, distribution, and pricing decisions that maximize competitive advantage.

TIME-BASED COMPETITION
Strategy of developing and distributing goods more quickly than competitors.

CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility

THE POLITICAL-LEGAL ENVIRONMENT

Political-legal environment Component of the marketing environment consisting of laws and their interpretations that require firms to operate under competitive conditions and to protect consumer rights.

GOVERNMENT REGULATION
Antimonopoly period of the late 19th and early 20th centuries. Protecting competitors during the Great Depression. Consumer protection in past 40 years. Industry deregulation began in the 1970s and continues today. Newest regulatory frontier is cyberspace.

CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility

GOVERNMENT REGULATORY AGENCIES

Federal Trade Commission has broadest regulatory powers over marketing. Others include Consumer Product Safety Commission, the Federal Power Commission, the EPA, and FDA.

OTHER REGULATORY FORCES

Consumer interest organizations. Self-regulatory groups.

CONTROLLING THE POLITICAL-LEGAL ENVIRONMENT

Complying with laws and regulations serves customers and avoids legal problems.
Influencing the outcome of legislation through lobbying or boycotts.

CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility

THE ECONOMIC ENVIRONMENT

Consumer spending accounts for 70 percent of the gross domestic product. Economic environment Factors that influence consumer buying power and marketing strategies, including stage of the business cycle, inflation and deflation, unemployment, income, and resource availability.

STAGES IN THE BUSINESS CYCLE

Prosperity, recession, depression, and recovery.

INFLATION AND DEFLATION

InflationRising prices caused by some combination of excess demand and increases in the costs of one or more factors of production.

DeflationFalling prices.
Can decrease profits, lower investment returns, and bring widespread job layoffs.

CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility

Unemploymentproportion of people actively seeking work who do not have jobs. Incomemany marketers focus on discretionary income, amount of money people have to spend after buying necessities. Resource availabilityshortages can result from lack of raw materials, component parts, and energy, or labor. Demarketing Process of reducing consumer demand for a good or service to a level that the firm can supply.

THE INTERNATIONAL ECONOMIC ENVIRONMENT

Changes in consumer and business buying habits, in exchange rates, in labor costs, and other factors around the world influence the decisions marketers make.

Global political changes affect international marketplace.

CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility

THE TECHNOLOGICAL ENVIRONMENT

Technological environment Application to marketing of knowledge based on discoveries in science, inventions, and innovations. Government and not-for-profits often contribute to research and development, which can be very costly.

APPLYING TECHNOLOGY
Marketers monitor new technology to gain competitive edge.

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THE SOCIAL-CULTURAL ENVIRONMENT

Social-cultural environment Component of the marketing environment consisting of the relationship between the marketer, society, and culture. Increasing importance of cultural diversity and submarkets with unique values, preferences, and behaviors.

CONSUMERISM
Consumerism Social force within the environment that aids and protects the consumer by exerting legal, moral, and economic pressures on business and government. Basic consumer rights: to choose freely, to be informed, to be heard, and to be safe.

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ETHICAL ISSUES IN MARKETING

Marketing is the interface between the firm and the external world. How marketing deals with external issues has a significant impact on the firms success. Marketing ethics Marketers standards of conduct and moral values. Many companies create ethics programs to train employees to act ethically. Employees personal values sometimes conflict with employers ethical standards.

CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility

ETHICS IN MARKETING RESEARCH

Consumers are concerned about privacy, and Internet has increased privacy concerns. FTC provides consumer information about privacy online.

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

ETHICS IN PRODUCT STRATEGY

Example: Package strategy. Larger packages are more noticeable on the shelf. Oddly sized packages make price comparison difficult.

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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?

ETHICS IN PROMOTION
Truth in advertising is the bedrock of ethics in promotion. Marketing to children has come under increased scrutiny. Marketing beer to college students, including through providing promotional items such as shirts and hats, raises ethical questions.

ETHICS IN PRICING
Most regulated aspect of a firms marketing activities.

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SOCIAL RESPONSIBILITY IN MARKETING

Social responsibility Marketing philosophies, policies, procedures, and actions that have the enhancement of societys welfare as a primary objective.

CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility

MARKETINGS RESPONSIBILITIES
Marketing decisions must involve consideration of general well-being and even potential global effects. Some organization help promote social causes or practice socially responsible investing.

MARKETING AND ECOLOGY

Ecology is the study of the relationship between natural things and their environment. Protection of the environment influences all areas of marketing decision making. Marketing system produces billions of tons of packaging materials annually. Green marketing Production, promotion, and reclamation of environmentally sensitive products.