Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility Chapter Objectives 1.Identify the five components of the marketing environment. 2.Explain the types of 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 political-legal environment. 4.Outline the economic factors that affect marketing decisions and consumer buying power. Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility 5.Discuss the impact of the technological environment on a firm’s marketing activities. 6.Explain how the social-cultural environment influences marketing. 7.Describe the ethical issues in marketing. 8.Identify the four levels of the social responsibility pyramid. Chapter Objectives Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Collecting external marketing environment information to identify and interpret potential trends o Trends may represent significant opportunities or threats to the company o Example: CPSC issued a recall of The Princess and the Frog-themed pendants, citing high levels of cadmium in the children’s necklaces Environmental Scanning Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Attainment of organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social- cultural environments o Strategic alliance - Partnership in which two or more companies combine resources and capital to create competitive advantages in a new market Environmental Management Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Interactive process that occurs in the marketplace among: o Marketers of directly competitive products o Marketers of products that can be substituted for one another o Marketers competing for the consumer’s purchasing power The Competitive Environment Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Marketing decisions by individual firms influence: o Consumer responses in the marketplace o Marketing strategies of competitors o Few organizations have monopoly positions o Monopoly - Market structure in which a single seller dominates trade in a good or service for which buyers can find no close substitutes The Competitive Environment Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Some pharmaceutical firms have temporary monopolies provided by patents on drugs o Antitrust laws - Designed to prevent restraints on trade such as business monopolies o Oligopoly - Few number of sellers in an industry with high start-up costs which keep out new competitors The Competitive Environment Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Direct o Among marketers of similar products o Example: Alternative suppliers in the cell phone market such as Verizon and AT&T o Indirect o Involves products that are easily substituted o Example: In the fast-food industry, pizza competes with chicken, hamburgers, and tacos Types of Competition Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Competition among all firms that compete for consumers’ purchases o All firms compete for a limited number of dollars that consumers can or will spend o Example: The purchase of a Honda Accord might compete with a Norwegian Cruise Line cruise Types of Competition Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Competitive strategy - Methods through which a firm deals with its competitive environment o Should we compete? o Depends on firm’s resources, objectives, and expected profit potential o In what markets should we compete? o Allocate firm’s limited resources to the areas of greatest opportunity Developing a Competitive Strategy Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o How should we compete? o Includes product, promotion, distribution, and pricing decisions that maximize competitive advantage o Time-based competition - Strategy of developing and distributing goods more quickly than competitors Developing a Competitive Strategy Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Consists of laws and their interpretations that require firms to operate under competitive conditions and to protect consumer rights o Ignorance or non-compliance can result in fines, negative publicity, and civil damage suits The Political-Legal Environment Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Falls into four historical phases: o Antimonopoly period of the late 19th and early 20th centuries o Protecting competitors during the Great Depression of the 1930s o The third phase focused onConsumer protection o Industry deregulation began in the late 1970s Government Regulation Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Newest regulatory frontier is cyberspace o Federal and state regulators are investigating ways to police the Internet and online services o Privacy and child protection issues are difficult enforcement challenge Government Regulation Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o The Federal Trade Commission (FTC) has the broadest regulatory powers over marketing o Enforces laws regulating unfair business practices and stops false and deceptive advertising o The FTC uses several procedures to enforce laws o Consent order o Cease-and-desist orders Government Regulatory Agencies Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Consumer interest organizations o Other groups attempt to advance the rights of minorities, senior citizens, and other causes o Self-regulatory groupsset guidelines for responsible business conduct Other Regulatory Forces Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Gross domestic product (GDP) - Sum of all goods and services produced by a nation in a year o Economic environment - Factors that influence consumer buying power and marketing strategies o Business cycle - Pattern of stages in the level of economic activity The Economic Environment Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Prosperity - Consumer spending is brisk; growth in services sector o Recession - Consumers focus on basic, fundamental products o Depression - Consumer spending sinks to its lowest level o Recovery - Consumer purchasing power increases Stages in the Business cycle Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Business cycles take a severe turn and affect consumers and businesses across the globe o Marketers must reevaluate their strategies and concentrate on their most promising products The Global Economic Crisis Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Inflation devalues money by reducing the products it can buy through persistent price increases o Deflation can cause: o A freefall in business profits o Lower returns on most investments o Widespread job layoffs Inflation and Deflation Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Unemployment o Proportion of people in the economy actively seeking work but do not have jobs o Rises during recession and declines during recovery and prosperity Inflation and Deflation Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Income o Influences consumer buying power o Marketers focus on discretionary income, the amount of money people have to spend after buying necessities Inflation and Deflation Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Shortages can result from lack of raw materials, component parts, energy, or labor o Demarketing - Reducing consumer demand for a good or service to a level that the firm can supply o Challenges facing marketers: o Allocating limited supplies o Deciding whether to spread limited supplies over all customers or limit purchases by some customers Resource Availability Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Marketers must monitor the economic environment of other nations o Global political changes affect international marketplace The International Economic Environment Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Application of knowledge based on discoveries in science, inventions, and innovations to marketing o Technology leads to: o New products o Improvements in existing products o Better customer service o Reduced prices The Technological Environment Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Technology addresses social concerns o Sources of technology : o Industry o Educational institutions o Not-for-profit institutions o Federal government The Technological Environment Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Marketers monitor new technology to gain a competitive edge and to enhance customer service o Internet Protocol Multimedia Subsystem (IMS) will offer new opportunities to marketers Applying Technology Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o The relationship between the marketer, society, and culture o Marketers must be sensitive to demographic shifts and changing values o Increasing importance of cultural diversity o Example: Univision and Telemundo face growing competition in Spanish-language television programmingUnivisionTelemundo The Social-Cultural Environment Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Social force within the environment that aids and protects the consumer by exerting legal, moral, and economic pressures on business and government o Consumer rights: o The right to choose freely o The right to be informed o The right to be heard o The right to be safe Consumerism Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Marketing ethics - Marketers’ standards of conduct and moral values o Many companies create ethics programs to train employees to act ethically o Employees’ personal values sometimes conflict with employers’ ethical standards Ethical Issues in Marketing Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Consumers are concerned about privacy o Proliferation of databases o Selling of address lists o Ease with which consumer information can be gathered o Several agencies offer assistance to Internet consumers o The U.S. government maintains a Do Not Call registry to prevent unwanted telemarketingDo Not Call registry Ethics in Marketing Research Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved. o Consumers are concerned about privacy o Proliferation of databases o Selling of address lists o Ease with which consumer information can be gathered

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Product quality, planned obsolescence, brand similarity, and packaging raise ethical issues o Example: Packaging strategy o Larger packages are more noticeable on the shelf o Oddly sized packages make price comparison difficult o Bottles with concave bottoms appear to have more liquid in them than they do Ethics in Product Strategy Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o What is the appropriate degree of control over the distribution channel? o Should a company distribute its products in marginally profitable outlets that have no alternative source of supply? Ethics in Distribution Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Truth in advertising is the bedrock of ethics in promotion o Marketing to children has come under increased scrutiny o Promoting specific products to college students can raise ethical questions o Another issue involves firms paying universities for the use of their logo, team name, or mascot to advertise products and services to students Ethics in Promotion Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Most regulated aspect of a firm’s marketing activities o Example: Credit-card companies target consumers with poor credit ratings and offer them what industry observers call “subprime” or “fee-harvesting” credit cards Ethics in Pricing Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved. Source: The Four Step Pyramid of Corporate Social Responsibility from Business Horizons, Vol. 34, 1991, page 92, Freeman & Liedtka, “Corp. Social Responsibility.” Reprinted from Business Horizons © 1991 with permission From Elsevier.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Corporate responsibility covers the entire framework of society o Marketers must consider: o The global effects of their decisions o The long-term effects of their decisions o The well-being of future generations o Entire communities can benefit through socially responsible investing Marketing’s Responsibilities Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility o Ecology - The relationship between organisms and their natural environments o Environmental issues influence all areas of marketing decision making o Green marketing - Production, promotion, and reclamation of environmentally sensitive products Marketing and Ecology Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility Watch The Marketing Environment, Ethics, and Social Responsibility at Scholfield Honda o How does Scholfield Honda rate on the social responsibility pyramid? Do they meet all the criteria for a socially responsible company? o What social and cultural changes have affected the way car manufacturers design and market their products? o Should governmental regulations be placed on companies’ claims that their products are green? Should official classifications for environmental friendliness be defined? Video Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.