Hult | Pride | Ferrell

Marketing
Part 1
Marketing
Foundations 5e
Strategy and
Environment
 1: Strategic Marketing Management
2: Developing and Implementing
Marketing Strategies
3: The Global Marketing Environment

© 2013 South-Western, a part of Cengage Learning 3-2

 Learning Objectives

 Recognize the importance of environmental scanning

and analysis
 Explore the effects of competitive, economic,
political, legal and regulatory, technological, and
sociocultural factors on marketing strategies
 Understand the concept and dimensions of social
responsibility
 Differentiate between ethics and social responsibility

© 2013 South-Western, a part of Cengage Learning 3-3

 The Marketing Environment
Environmental scanning
The process of collecting information about
forces in the marketing environment
Involves observations, secondary data
sources, and marketing research
Environmental analysis
The process of assessing and interpreting the
information gathered by environmental
scanning
Helps identify threats and opportunities
linked to environmental changes
© 2013 South-Western, a part of Cengage Learning 3-4
 Discussion Question

 Which of the following resources would

make a good environmental scanning
tool for a marketer?
 Trade journals
 Government reports
 The Internet
 Friends and family of the marketer
 Other employees within the firm

© 2013 South-Western, a part of Cengage Learning 3-5

 Environmental Forces

Competitive

Economic Political

Environmental
Forces

Legal and
Technological
Regulatory

Sociocultural

© 2013 South-Western, a part of Cengage Learning 3-6

 Responding to the Marketing
Environment
 Marketers take two approaches to
environmental forces
1. Passive/Reactive: Accepting them as
uncontrollable
2. Proactive: Attempting to influence and
shape them
 No best way to react
 Depends on the organization,
management, and the situation
© 2013 South-Western, a part of Cengage Learning 3-7
 Think About It

 Guayaki is a California-based
company selling yerba mate, a
drink popular in South America
 Click here for a slideshow on
Guayaki’s business
 How is Guayaki responding to
changes in the marketing
environment and shifts in
consumer demand?
© 2013 South-Western, a part of Cengage Learning 3-8
 Competitive Forces
 Most firms have competition, other firms
that market similar products
 Brand competitors: Market products with
similar features and benefits to the same
customers at similar prices
 Product competitors: Compete in the same
product class, but market products with
different features, benefits, and prices
 Generic competitors: Provide very different
products that solve the same problem or
satisfy the same basic customer need
 Total budget competitors: Compete
for the limited financial resources of the
same customers
© 2013 South-Western, a part of Cengage Learning 3-9
 Firms You Should Know: Nokia

 Headquartered in Finland
 Largest mobile phone manufacturer
 Sales in 150 countries
 Controls one-third of the global market
share for cellular phones
 Markets lower-end models in the
developing world
 Click here to access the website

© 2013 South-Western, a part of Cengage Learning 3-10

 Competitive Structures
 Monopoly: When an organization offers a
product that has no close substitute, making it
the sole source of supply
 Oligopoly: When a few sellers control the
supply of a large proportion of a product
 Monopolistic competition: When an
organization with many competitors develops
a marketing strategy to differentiate its
product
 Pure competition: Involves a large number
of sellers, none strong enough to
influence significantly price or supply
 Does not exist in the real world
© 2013 South-Western, a part of Cengage Learning 3-11
 Selected Characteristics of
Competitive Structures

© 2013 South-Western, a part of Cengage Learning 3-12

 Discussion Question
 Volvo is a major
Swedish automobile
company
 What competitive
structure exists in
the automobile
industry?
• Monopoly
• Oligopoly
• Monopolistic
competition © Volvo Cars of North America, LLC
• Pure competition

© 2013 South-Western, a part of Cengage Learning 3-13

 Monitoring Competition

 Helps determine competitors’ strategies

and their effects on firm’s own strategies
 Guides development of competitive
advantage and adjusting firm’s strategy
 Provides ongoing information about
competitors
 Assists in maintaining a market
orientation

© 2013 South-Western, a part of Cengage Learning 3-14

 Buying Power
 Buying power: Resources such as money,
goods, and services that can be traded in an
exchange
 Income: The amount of money received
through wages, rents, investments, pensions,
and subsidy payments
 Disposable income: After-tax income
 Discretionary income: Disposable
income available for spending and
saving after an individual has
purchased the basic necessities

© 2013 South-Western, a part of Cengage Learning 3-15

 Willingness to Spend

 Credit: Enables people to spend future

income now or in the near future
 Wealth: The accumulation of past income,
natural resources, and financial resources
 Exists in many forms
 Willingness to spend: An inclination to buy
because of expected satisfaction from a
product, influenced by the ability to
buy and numerous psychological and
social forces
© 2013 South-Western, a part of Cengage Learning 3-16
 Economic Conditions
 The business cycle: A pattern of
economic fluctuations that has four
stages

Prosperity

Recovery

Recession
Depression

© 2013 South-Western, a part of Cengage Learning 3-17

 The Business Cycle

 Prosperity: Unemployment is low and total

income is high
 Recession: Unemployment rises and total
buying power declines
 Depression: Unemployment is very high,
wages are low, total disposable income is at a
minimum, and consumers lack confidence in
the economy
 Recovery: The economy moves from
depression to recession to prosperity
© 2013 South-Western, a part of Cengage Learning 3-18
 Discussion Question

 What kind of income

do consumers
generally use to
purchase a computer,
such as the Dell
model in this
advertisement?

© 2011 Dell Inc. All rights reserved.

© 2013 South-Western, a part of Cengage Learning 3-19

 U.S. Customer Satisfaction Index

© 2013 South-Western, a part of Cengage Learning 3-20

 Political Forces

 Enactment of legislation
 Legal decisions interpreted by courts
through civil and criminal cases
 Influence of regulatory agencies
 Marketers
 Adjust to conditions
 Influence the process through
contributions and lobbying

© 2013 South-Western, a part of Cengage Learning 3-21

 Legal and Regulatory Forces

© 2013 South-Western, a part of Cengage Learning 3-22

 Legislation

 Procompetitive legislation
 Preserves competition
 Consumer protection legislation
 Protects people from harm
 Prohibits hazardous products
 Requires information disclosure
 Aimed at particular marketing
activities

© 2013 South-Western, a part of Cengage Learning 3-23

 Major Federal Laws Affecting
Marketing Decisions

© 2013 South-Western, a part of Cengage Learning 3-24

 Major Federal Laws Affecting
Marketing Decisions (continued)

© 2013 South-Western, a part of Cengage Learning 3-25

 Major Federal Laws Affecting
Marketing Decisions (continued)

© 2013 South-Western, a part of Cengage Learning 3-26

 Regulatory Agencies

 Federal Trade Commission (FTC)

 Food and Drug Administration (FDA)
 Consumer Product Safety Commission
 Federal Communications Commission
(FCC)
 Environmental Protection Agency (EPA)
 Federal Power Commission (FPC)

© 2013 South-Western, a part of Cengage Learning 3-27

 The Federal Trade Commission
(FTC)

 Of all regulatory units, most heavily

influences marketing activities
 Large proportion of its resources spent
on curbing inappropriate behavior
 False advertising
 Misleading pricing
 Deceptive packaging and labeling

© 2013 South-Western, a part of Cengage Learning 3-28

 Self-Regulation
 Some businesses choose to self-regulate
 Often use the help of organizations
 Better Business Bureau
 National Advertising Review Board (NARB)
 Advantages
 Less expensive
 More realistic
 Disadvantages
 Non-member firms not required
to abide
 Lack of enforcement tools
 Often less strict
© 2013 South-Western, a part of Cengage Learning 3-29
 Technological Forces

Technology

Dynamic Ability to Reach Self-Sustaining

Change Customers Technology

© 2013 South-Western, a part of Cengage Learning 3-30

 Technological Forces

 The application of knowledge and tools to

solve problems and perform tasks more
efficiently
 Impacts of technology
 Dynamic change
 Ability to reach customers
 Self-sustaining in nature
 Technology assessment: Trying to
foresee the effects of new products/
processes on a firm’s operations,
other business organizations, and
society
© 2013 South-Western, a part of Cengage Learning 3-31
 Sociocultural Forces

 The influences in a society and its

culture(s) that bring about changes in
people’s attitudes, beliefs, norms,
customs, and lifestyles
 Determine what, where, how, and when
people buy products

© 2013 South-Western, a part of Cengage Learning 3-32

 Demographic and Diversity
Characteristics

 Changes in a population’s demographic

characteristics lead to changes in how people
live and consume products
 Increasing market of retired Baby Boomers
 Generation Y
 Growing Hispanic/Latino market
 A more diverse customer base means
marketing practices must be modified
to meet changing needs

© 2013 South-Western, a part of Cengage Learning 3-33

 Discussion Questions

 What demographic is
this Verizon
advertisement
targeting?
 Why do you think
Verizon chose this
demographic group?

© Verizon Wireless

© 2013 South-Western, a part of Cengage Learning 3-34

 U.S. Population Projections by Race

© 2013 South-Western, a part of Cengage Learning 3-35

 Cultural Values

 Changes in cultural values alter people’s

needs and desires for products
 Health, nutrition, and exercise are growing
in importance
 Definitions of family are changing

© 2013 South-Western, a part of Cengage Learning 3-36

 Social Responsibility

 An organization’s obligation to maximize

its positive impact and minimize its
negative impact on society
 Being a good corporate citizen can result in
greater consumer trust and loyalty
 Positive publicity
 Indirect long-term benefits

© 2013 South-Western, a part of Cengage Learning 3-37

 Marketing Citizenship

 The adoption of a strategic focus for

fulfilling the economic, legal, ethical,
and philanthropic social responsibilities
expected by stakeholders

© 2013 South-Western, a part of Cengage Learning 3-38

 Marketing Citizenship Affects
Stakeholder Groups
Stakeholder Groups Possible Affects
Customers • Positive product evaluation
• Customer loyalty
• Positive word-of-mouth
• Long-term relationships
• Enhanced corporate reputation

Marketing Channel Members • Long-term partnerships

• Trusting relationships
• Enhanced efficiency in
communications

Employees • Improved self-concept

• Increased commitment and
motivation
• Reduced absenteeism and turnover
• Trust in co-worker relationships
• Enhanced efficiency in
communication

© 2013 South-Western, a part of Cengage Learning 3-39

 The Pyramid of Corporate Social
Responsibility

© 2013 South-Western, a part of Cengage Learning 3-40

 The Dimensions of Social
Responsibility
 Marketing Ethics
 Principles and standards that define
acceptable conduct in marketing as
determined by various stakeholders
• The most basic of these standards are codified
into laws
 Ethical Issue: An identifiable problem,
situation, or opportunity requiring
a choice among several actions
that must be evaluated as right
or wrong
© 2013 South-Western, a part of Cengage Learning 3-41
 Trust in Business for Top 10 GDP
Countries

© 2013 South-Western, a part of Cengage Learning 3-42

 Ethical Issues in Marketing

© 2013 South-Western, a part of Cengage Learning 3-43

 Corporate Philanthropy

 Cause-related marketing: The practice of

linking products to a particular social cause
on an ongoing or short-term basis
 Strategic philanthropy: The synergistic use
of organizational core competencies and
resources to address key stakeholders’
interests and achieve both organizational
and social benefits

© 2013 South-Western, a part of Cengage Learning 3-44

 Sustainability
 The potential for the long-term well-being of
the natural environment, including all
biological entities, as well as the interaction
among nature and individuals, organizations,
and business strategies
 Green marketing: A strategic process involving

stakeholder assessment to create meaningful

long- term relationships with customers

while maintaining, supporting, and
enhancing the natural environment
© 2013 South-Western, a part of Cengage Learning 3-45
 Think About It

 While we may think of green marketing

as a new concept, it is more than 50
years old
 Click on the hyperlink for a slideshow of
the history of green marketing

© 2013 South-Western, a part of Cengage Learning 3-46

 Consumerism

 The organized efforts of individuals,

groups, and organizations to protect the
rights of consumers
 Lobbying government officials and agencies
 Letter-writing and email-writing campaigns
and boycotts
 Kennedy’s Consumer Bill of Rights
 Right to safety
 Right to be informed
 Right to choose
 Right to be heard
© 2013 South-Western, a part of Cengage Learning 3-47
 Social Responsibility and Ethics
Improve Marketing Performance
Social
Social
Ethics
Ethics Responsibility
Responsibility
Individual
Individualand
and The
Thetotal
totaleffect
effectof
of
group
groupdecisions
decisions marketing
marketingdecisions
decisionsonon
society
society

Overall
OverallStrategic
StrategicMarketing
MarketingPlanning
Planning

Evidence shows there are long-term financial benefits

to being ethical and socially responsible

© 2013 South-Western, a part of Cengage Learning 3-48

 Codes of Conduct

 Formalized rules and standards that

describe what the company expects of
its employees
 Also called codes of ethics

© 2013 South-Western, a part of Cengage Learning 3-49

 Percentage of U.S. Workers
Observing Misconduct

© 2013 South-Western, a part of Cengage Learning 3-50

 Important Terms
Environmental scanning Business cycle
Environmental analysis Federal Trade Commission (FTC)
Competition Better Business Bureau
Brand competitors National Advertising Review Board
(NARB)
Product competitors Technology
Generic competitors Sociocultural forces
Total budget competitors Social responsibility
Monopoly Marketing citizenship
Oligopoly Marketing ethics
Monopolistic competition Ethical issue
Pure competition Cause-related marketing
Buying power Strategic philanthropy
Disposable income Green marketing
Discretionary income Consumerism
Willingness to spend Codes of conduct
© 2013 South-Western, a part of Cengage Learning 3-51