Environmental Analysis Marketing Chapter 2 Environmental Analysis Gilbert A. Churchill, Jr. J. Paul Peter 1 1 1 1

Factors in the Environment Slide 2-1 Factors in the Environment Marketing Mix Ever-Changing Marketplace Social Natural Economic Target Market Competition Product Place Promotion Price Political & Legal Factors Technology Environmental Scanning

Environmental Scanning Slide 2-2 Environmental Scanning Opportunity Threat Personal Computer Industry Technological Advances (Positive Change) Typewriter Industry Home Security Industry Tourism Industry Increase in Crime Rate (Negative Change) The practice of tracking external changes that can affect markets, including demand for goods and services. 2 2 2 2

Economic Environment P P P P Economic Environment Slide 2-3 Economic Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Technological Environment Social Environment Natural Environment The overall economy, including business cycles, consumer income and spending pattern. 3 3 3 3

Basic Pattern of a Business Cycle Slide 2-4 Basic Pattern of a Business Cycle Figure 2.2 Level of Business Activity Prosperity Prosperity Recovery Recession Recession Time The pattern of the level of business activity 4 4 4 4

Consumer Factors Indicators Consumer Income Inflation Gross Income Slide 2-5 Consumer Factors Indicators Consumer Income Inflation A rise in the overall price level. Gross Income The total amount of money earned in one year by an individual or household. Disposable Income The money an individual or household has left after paying taxes. Discretionary Income The money an individual or household has left after paying taxes and living expenses.

Political and Legal Environment Slide 2-6 The Political and Legal Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Technological Environment Social Environment Natural Environment The laws, regulations and political pressures affecting marketers. 5 5 5 5

Political & Legal Factors Slide 2-7 Political & Legal Factors Legislation Impact on Marketing Sherman Act (1890) Prohibits combination, contracts, or conspiracies to trade or monopolization Clayton Act (1914) Prohibits, price discrimination, tying clauses, and exclusive dealer arrangements FTC Act (1914) Created the FTC and gave it investigatory power to deal with antitrust powers Robinson-Patman Act (1936) Prohibits sellers from offering different deals to different customers for like grade & quantity

The Social Environment Slide 2-8 The Social Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Social Environment Technological Environment Natural Environment The people in a society and their values, beliefs and behaviors. 6 6 6 6

Population Changes: 1990-2010 Alaska Percent gain 15.0 to 50.1 Hawaii Slide 2-9 Population Changes: 1990-2010 Figure 2.4 Alaska Percent gain 15.0 to 50.1 5.0 to 14.9 0 to 4.9 Loss Hawaii Source: U.S. Bureau of the Census, Current population Reports, Series P-25. No. 1053, Projections of the population of States by Age, Sex, and race: 10\990 7 7 7 7

Social Responsibility & Ethics Slide 2-10 Social Responsibility & Ethics Issues Definition Social Responsibility Concern for the social consequences of a person’s or institution’s acts as they may affect the interests of others. Ethics The moral principles and values that govern the way an individual or group conducts its activities. Marketing Ethics The principles, values, and standards of conduct considered appropriate for marketers. Morals Vs Laws Morals - rules people develop as a result of cultural values and norms. Laws - values and standards enforced by the courts.

The Natural Environment Slide 2-11 The Natural Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Technological Environment Social Environment Natural Environment The natural resources available to or affected by the organization. 8 8 8 8

Natural Environment Issues Definition Demarketing Green Marketing Slide 2-12 Natural Environment Issues Definition Demarketing A marketing strategy used to decrease the consumption of a product (e.g., electricity). Green Marketing Marketing efforts designed to minimize negative effects on the physical environment or to improve its quality (e.g., Gillette, P & G, Post). Cause-related Marketing Marketing designed to promote a cause or an issue (e.g., Target). Social Marketing Firms attempt to encourage positive behavior (e.g., increase literacy, discourage drunk driving).

Technological Environment Slide 2-13 The Technological Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Technological Environment Social Environment Natural Environment Scientific knowledge, innovations and inventions that result from research. 9 9 9 9

Technology Environment Slide 2-14 Technology Environment Issues Definition Internet An international network of computers that provides people global communication and access to million of information resources. HTML Hyper Text Mark-up Language - the language used to design web pages. World Wide Web A hypertext system that allows users to receive text, graphics, video, and sound by clicking on particular words and images. Browser A software program that runs on a personal computer and provides graphical user interface to the WWW (e.g., Netscape Navigator, Microsoft Internet Explorer).

Where Are WWW Users Located? Slide 2-15 Where Are WWW Users Located? Oceania 4% Other 2% Asia 2% Canada & Mexico 8% Europe 11% United States 73% Source: GVU’s Fifth WWW User Survey, 1996

Internet Security and Privacy Issues Slide 2-16 Internet Security and Privacy Issues Electronic Cash Key Security/Privacy Internet Considerations Cookies Firewalls Spamming

Competitive Environment Slide 2-17 Competitive Environment Economic Environment Political and Legal Environment Competitive Environment P P TM P P Technological Environment Social Environment Natural Environment All the organizations that could potentially create value for the organization’s customers. 10 10 10 10

Competitive Factors Type Description Monopoly Monopolistic Competition Slide 2-18 Competitive Factors Type Description Monopoly One Seller, No Close Substitutes Monopolistic Competition Large Number of Sellers, Products Distinguishable Oligopoly Few Sellers, High Barriers to Entry, Seek Nonprice Advantage Pure Competition Many Sellers, Identical Products, Focus on Lower Product and Distribution Costs

Types of Competitive Forces Slide 2-19 Types of Competitive Forces Figure 2.5 Threat of New Entrants Rivalry among Existing Competitors Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitute Products Source: Adapted with permission from Michael F. Porter, “Industry Structure and Competitive Strategy: Keys to Productivity:, Financial Analysts Journal, July-August 1980. ©1980. The Financial Analysts Federation, Charlottesville, VA. All rights reserved. 5 11 11 11 11