Scanning the Marketing Environment 3 3 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

1. Explain how environmental scanning provides information about social, economic, technological, competitive, and regulatory forces. 2. Describe how social forces, such as demographics, and culture and economic forces, such as macroeconomic conditions and consumer income, affect marketing. 3. Describe how technological changes are impacting marketers and customers. 4. Discuss the forms of competition that exist in a market, key components of competition, and the impact of small businesses as competitors. 5. Explain the major legislation that ensures competition and protects consumers in Canada. Learning Objectives After reading this chapter, you should be able to: © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

THE IMPORTANCE OF ENVIRONMENTAL SCANNING ‣ What are the most important changes in the business world? ‣ How do these affect them and us? ‣ What are the implication of these changes? ‣ How do businesses react to them?

ENVIRONMENTAL SCANNING ‣ Environmental Scanning (Tracking Environmental Trends): ‣ Is the process of continually acquiring information on events occurring outside the organization to identify and interpret potential trends. ‣ What does it involve? ‣ Identify the trends  What are the trends?  What types of business are affected by the trend?  What kind of changes are expected or predicted? ‣ Explain the trends  Why does it happen?  What are the causes?  How does it impact?

Environmental scanning ‣ For many years Gerber has manufactured baby food in small, single-serving containers. In conducting an environmental scan, ‣ identify three trends or factors which might significantly affect this company's future business ‣ propose how Gerber might respond to these changes.

Environmental scanning ‣ Car business: ‣ Describe the new features you would add to an automobile designed for an aging baby boomer. ‣ Where would you advertise to appeal to this target market?

THE IMPORTANCE OF ENVIRONMENTAL SCANNING ‣ Tracking Environmental Trends ‣ An Environmental Scan of Canada LO 1 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

Stat Canada -Census 2011 ‣ Census 2011: Families and households: ‣ Census shows new face of the Canadian family Map ‣ Foster children counted in Canadian census for 1st time ‣ Same-sex couples tied the knot in droves ‣ Census finds single dads head rise in lone-parent families ‣ Stepfamilies make up 12.6% of Canadian families

‣ Demographics Demographics ‣ The World Population at a Glance ‣ The Canadian Population ‣ Generational Cohorts ‣ Baby boomers Baby boomers ‣ Generation X Generation X ‣ Generation Y Generation Y SOCIAL FORCES LO 2 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

Generation Cohort: Generations ComparedGenerations Compared ‣ BABY BOOMERS - THE GENERATION OF CHILDREN BORN BETWEEN 1946 AND ARE GROWING UP. MARKETERS HAVE CAPITALIZED ON THIS TREND BY DEVELOPING PRODUCTS AND SERVICES FOR THIS AGE GROUP. ‣ GENERATION X - PERSONS BORN BETWEEN 1965 AND IT IS A GENERATION OF CONSUMERS WHO ARE SELF-RELIANT, ENTREPRENEURIAL, SUPPORTIVE OF DIVERSITY, BETTER EDUCATED, NOT PRONE TO EXTRAVAGANCE AND ARE LIKELY TO PURSUE LIFESTYLES AND PREFER PRODUCTS THAT ARE VERY DIFFERENT FROM BABY BOOMERS. ‣ THE GENERATION Y REFERS TO THE GENERATION BORN BETWEEN 1977 AND 1994 AND HAS BEEN CALLED GENERATION Y OR THE NET GENERATION.

‣ The Canadian Family ‣ Blended family ‣ Population Shifts ‣ Census metropolitan areas (CMA’s) ‣ Ethnic Diversity ‣ Ethnic marketing ‣ Culture ‣ Changing Attitudes and Values ‣ Time poverty ‣ Value consciousness ‣ Eco-consciousness SOCIAL FORCES

Economic Forces ‣ The Economy – Income, expenditure, resources that affect businesses ‣ Macroeconomic Conditions ‣ Inflationary or recessionary? ‣ Consumer Income ‣ Gross Income ‣ Disposable Income – money after paying tax ‣ Discretionary Income – money after paying taxes and necessities

Technological Forces ‣ Technology’s Impact on Customers ‣ Electronic Commerce Electronic Commerce ‣ Twitter ‣ Blogs ‣ Consumer-generated content (CGC) ‣ Consumer-to-consumer (C2C) ‣ Customer-to-business (C2B) LO 3 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

Competitive Forces ‣ Alternate Forms of Competition: ‣ IN PURE COMPETITION, EVERY COMPANY HAS A SIMILAR PRODUCT. ‣ IN MONOPOLISTIC COMPETITION, MANY SELLERS COMPETE WITH THEIR PRODUCTS ON A SUBSTITUTABLE BASIS. ‣ OLIGOPOLY OCCURS WHEN A FEW COMPANIES CONTROL THE MAJORITY OF INDUSTRY SALES. ‣ MONOPOLY OCCURS WHEN ONLY ONE FIRM SELLS THE PRODUCT.

Competitive Forces ‣ Components of Competition: THREE FORCES DRIVE INDUSTRY COMPETITION ‣ 1.ENTRY. ENTRY REFERS TO THE LIKELIHOOD OF NEW COMPETITORS. BARRIERS TO ENTRY ARE BUSINESS PRACTICES OR CONDITIONS THAT MAKE IT DIFFICULT FOR NEW FIRMS TO ENTER THE MARKET. ‣ 2.POWER OF BUYERS AND SUPPLIERS. POWERFUL BUYERS EXIST WHEN THEY ARE FEW IN NUMBER OR THERE ARE LOW SWITCHING COSTS. SUPPLIERS GAIN POWER WHEN THE PRODUCT IS CRITICAL TO THE BUYER OR THERE ARE HIGH SWITCHING COSTS. ‣ 3.EXISTING COMPETITORS AND SUBSTITUTES. INDUSTRY GROWTH AND FIXED COSTS INFLUENCE COMPETITIVE PRESSURES. ‣ Small Business as Competitors ‣ Pure-Play Online Competitors

Regulatory Forces ‣ Protecting Competition and Consumers ‣ The Competition Act: THE MOST IMPORTANT LEGISLATION DESIGNED TO PROTECT COMPETITION AND CONSUMERS IN CANADA. ‣ Self-Regulation: ALTERNATIVE TO LEGISLATION PROTECTING COMPETITION AND CONSUMERS ‣ Consumerism: A MOVEMENT TO INCREASE THE INFLUENCE, POWER, AND RIGHTS OF CONSUMERS IN DEALING WITH INSTITUTIONS.

FIGURE 3-4 Major federal legislation designed to protect competition and consumers LO 5 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.