Chapter 3 Class Notes
Marketing does not occur in a vacuum. The marketing environment
consists of external forces that directly and/or indirectly impact
the organization.
Changes in the environment create opportunities and threats for the
organizations.
Example:
PRODIGY (On-line service) ran a commercial 24 hours after the LA earth
quake to inform customers/potential customers that they could contact
friends/family in LA through its service when all the telephone lines
were jammed. This illustrates a company (Prodigy), reactively
responding to an environmental factor (nature), to
further market its services to attract new customers.
To track these external forces a company uses environmental
scanning. Continual monitoring of what is going on.
Environmental scanning collects information about external forces.
It is conducted through the Marketing Information System (this will be
discussed further in chapter 8).
Environmental analysis determines environmental changes and
predicts future changes in the environment. The marketing manager
should be able to determine possible threats and opportunities from
the changing environment. This will help avoid crisis management.
Six Environmental Forces
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Pressure to create laws
Since marketing activities are a vital part of the total business
structure, marketers have a responsibility to help provide what
members of society want and to minimize what they don't want.
Important Considerations:
- Marketers need to understand Cultural diversity--By the year
2000 15% of the entering work-force will be white male.
- Great Melting Pot vs. Great Salad Bowl...different cultures
maintain own cultural identity.
- Aging population
Handout...Catering to middle aged BBs....
Change products due to changing needs of society, i.e. Baby Boomers are
aging, they demand different attributes/benefits from their products (cars),
i.e. performance and safety, marketers need to respond, as the car
marketers have, to satisfy these changing needs.
- Society becomes concerned about marketers actions when those
actions are questionable.
Calvin Klein's latest advertising campaign, American Family Association
sent letters to 50 retailers suggesting store boycotts if there was no
action taken....FBI investigating child porn allegations.
Driving force behind the societal marketing
concept. Companies change ways of
doing business re: societal concerns. Companies should evolve around societal
concerns.
Handout...The Green Movement Sows Demand...
Companies now marketing products that are in response to societal
concerns, i.e. recycled furniture is environmentally friendly.
Ralph Nader's Public Citizen group, acts as a watchdog on consumer
interests. Lifted consumerism into a major social force. First
with his successful attack on the automobile industry, resulted in
the passage of the National Traffic and Motor Vehicle and Safety
Act of 1962.
Societal forces pressure political forces to create legal forces
governed by regulatory forces.
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Currently in power
Reagan era vs Clinton era. Health care reform impacting on small business.
Pressure on the tobacco industry...threatening to regulate cigarettes like
other drugs..."underage sales prohibited" will appear on Philip Morris
tobacco products. Philip Morris agrees to stop placing billboard ads. in
stadiums that can be viewed on TV....24yr TV advertising ban.
Actions may strengthen the market leaders, Philip Morris.
Luxury Tax
10% excise tax on boats over $100,000.
Handout...Profits Ahoy!
The luxury tax, that was supposed to aid in the redistribution of wealth,
as far as taxing the wealthy to help finance government
programs---actually harmed industries that marketed products that were to
be taxed...i.e. the boat industry. Tax was created in 1989 and repealed
in 1992.
Government purchases about 20% GNP, government is therefore a
significant purchaser of many organizations products.
Handout...Wayne firm gets boost...
Companies that have relied on the defence industry have had to adapt their
technologies to new markets in order to survive. ECC of Wayne, PA has
recently begun producing vending machines for Snapple beverages...they
had traditionally relied on winning defence contracts.
Develops new legislation, example gasoline tax, welfare reform,
health care reform.
Legal interpretation by the courts. Creation and activities of
regulatory agencies.
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Created by the political force In statute
Three types
- Anti Trust
- Consumer Protection
- Deregulation
The following are important acts to be familiar with:
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Governing Legal forces
Business can be governed at the following level:
- Federal Level
- State Level
- Local Level
- Self-regulation
Examples of Federal Regulatory agencies:
- Federal Trade Commission FTC...Governs commerce
- Federal Communications Commission FCC Governs the airwaves...Howard Stern
etc.
- Food & Drug Administration FDA...Governs new labeling law etc.
- Bureau of Alcohol and Tobacco ATF...Recent conflict with the marketers of ice beer
focusing on alcohol content.
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Business life cycles:
- Prosperity
- Recession
- Depression
- Recovery
Marketers may need to adjust their marketing mix as the economy passes
through different stages.
Different between a depression and recession = the number of months
certain economic figures decline etc., but different economists use
different indicators.
Political force...Government uses fiscal and monetary policy to
control the economy.
Fed: Alan Greenspan increased interest rates to try to curb
excessive growth that would lead to inflation, has now reduced the rates
since the economy has not shown the signs of anticipated inflation.
Interest rates have a big impact on COST OF MONEY...Business
investment....consumer spending.
Consumer buying power determined by income (Interest, Rent, wages):
- Pre-tax Income--Gross Income
- After Tax income--Disposable income
- After purchasing necessities--Discretionary income
Consumer demand and spending patterns are effected by the economy
and the perception of the future.
Need to determine:
- Consumer buying power
- willingness to purchase, a function of employment security etc. Credit,
increases current buying power over future buying power.
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All firms compete for consumers dollars.
Handout...War on Smoking is Music to...
It is not only important to focus on your direct competitors (gum
marketers) but also all marketers that target your customers and
therefore compete with you for their income.
Competitive Structures:
- Monopoly: One marketer in the marketplace. Governed by
Sherman Anti Trust Act.
Sometimes it is to the consumers benefit to have a monopoly; when
competition would raise the price to the consumer (high barriers of entry
to the marketplace being passed along etc.), i.e. Utilities...DP&L.
DP&L must get permission from the Public Services Commission (regulatory
agency) before it can raise prices etc.
- Oligopoly: A few marketers (perhaps 3 or 4) dominate the
market place.
Examples: Cigarettes...Marlboro example, in 1 day, reduced the price by 20%,
all competitors immediately followed.
Airline Industry...$50 cap on commissions led by Delta, within one
week all major airlines followed.
Handout...Microsoft's Rivals Urge It to Seperate...
Looks at the commercial on-line service industry and the threat of
Microsoft to the balance of the industry.
- Monopolistic Competition: many marketers competing in the
market place.
Most common market structure. Need to establish a differential advantage, i.e., trade mark,
brand name, some reason for consumers to purchase your product as opposed
to your competition's product.
- Perfect Competition: all competitors are equal and have equal
access to
the market place. Very rare!! Commodities, unregulated agriculture market.
Distribution is key.
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From research performed by businesses, universities and non-profit
organizations.
Consumers technological knowledge influences their desires for
goods and services.
Examples of +ve results of changing technology:
- Change in transportation methods have enabled the development of
out of town shopping centers.
- Inventory control systems make companies more efficient, this cost
efficiency can be passed onto the consumer. It has helped develop
relationships with suppliers and their supplied.
- Improved standard of living achieved by increased leisure time :)
- Fax machines
- Medicine
- Being able to read this :)
Examples of -ve consequences of technological change:
- Environmentally unclean pollution
- Unemployment (employment shifts leading to temporary unemployment.)
- Misuse of information
Patent protection leads to a barrier to entry, monopoly. Without
it companies may be unwilling to launch new products that
incorporate new technologies for fear of copying, therefore nothing
is gained.
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Examples:
- Hurricane ANDREW
- Floods
- Severe winter
- Humid Summer...Drought
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