1. Analyzing the Marketing Environment
Chapter 3
Analyzing the Marketing Environment
Chapter 3 will focus on micro and macro-environmental factors that influence a firms marketing strategy.

2. Chapter 3: Analyzing the Marketing Environment
LEARNING OBJECTIVES
LO1 Outline how the factors in a firm’s microenvironment influence its marketing strategy LO2 Identify the factors in a firm’s macroenvironment and explain how they influence the overall marketing strategy LO3 Identify important social and natural trends that impact marketing decisions
These questions are the learning objectives guiding the chapter and will be explored in more detail in the following slides.

3. Attack or defend! Canadian Tire – an icon & top rated brand
LO1, LO2
Canadian Tire – an icon & top rated brand
Continuously monitor both internal & external environments
Keys to longevity & success: vision, good strategic planning & execution of market strategy
Per chapter introduction: the case study focuses on Canadian Tire – an iconic Canadian brand that has had numerous ups & downs over its almost 100 years in business.
Firms must continuously monitor their internal & external environments to identify new opportunities or threats to their business.
Firms must then develop strategies or action plans to attack the competitors or defend their market position.
Despite its many challenges over the years, Canadian Tire has emerged a success story and can be attributed to many factors including: having a clear vision, good strategic planning, and excellent execution of its marketing strategies.
However, one of the key elements that cannot be understated, is a firms ability to understand and manage its micro and macro enviornment.
Ask students: do you or your parents shop at Canadian Tire? Why do you prefer to shop there vs. Home Depot for example? Do you think that Canadian Tire can maintain its iconic Canadian image and sustain its competitive advantages?

4. A marketing environment analysis framework
LO1, LO2
A marketing environment analysis framework
Marketers who understand & manage the changes in their marketing environments- internal or external – are able to adapt their product or service offerings to meet new challenges & take advantage of opportunities.
Analyzing the marketing environment also helps firms assess their continued strengths & the value of their products & services, and any weaknesses resulting from changes in the marketing environment.
Companies analyze their marketing environment using a framework. In all marketing activities, the consumer is at the centre. Anything that affects consumers affects marketers. Any change in one of these environments likely requires an adjustment to the firm’s marketing mix. By identifying potential environmental trends, firms often can take proactive steps. The next few slides can be used to expand on micro and macroenvironmental factors.
Each of these components will be discussed in detail during this chapter with suggestions on how they interrelate. Exhibit 3.1 as noted in the slide, illustrates these ideas.
Instructors may use this single slide to introduce the subject matter if time is an issue. Otherwise, further details slides follow.

5. Microenvironmental factors
LO1
Microenvironmental factors
This slide illustrates the factors affecting consumers’ microenvironment: the company (i.e. its capabilities), its competition, and its corporate partners.
Instructors can use this single slide if pressed for time or can use additional detailed slides that follow.

6. Company capabilities applied to
LO1
Company capabilities
Core competency = Satisfy customer needs
Knowledge, facilities, patents, technology, people etc.
applied to
In the firm’s microenvironment, the first factor that affects the consumer is the firm itself and the company’s capabilities. Successful marketing firms focus their efforts on satisfying customer needs that match their core competencies.
The primary strength of Apple Inc., for example, originally rested in the design, manufacture, distribution of Macintosh computers. But Apple has successfully leveraged its core competency in the digital audio player arena with its iPod, iPhone and iPad.
Ask students: What do you think Apple Inc.’s core competencies are? How have they successfully used their competencies to create products & services that their consumers value and have come to expect?
Image courtesy of Apple Inc.
Target markets, products etc.

7. competition Identify and analyze direct and indirect competitors
LO1
competition
Identify and analyze direct and indirect competitors
Know strengths & weaknesses
Competitive Intelligence (CI) used to collect and synthesize info
- Competition significantly affects the microenvironment. It is critical that marketers understand their firm’s direct and indirect competitors, including their strengths, weaknesses, and likely reactions to the marketing activities. Information about competitors is available from many sources. (The Market Share Reporter is an annual publication found in most libraries that students may use to analyze companies in a variety of industries.) Companies need to proactively assess their competition to shape their competitive strategy. They should ask:
Should we compete?
If so, in what markets should we compete?
How should we compete?
Group activity: Ask students to brainstorm a list of possible CI sources. Have them discuss what they can learn from each source. Do they know of any illegal sources?
Insider information is a form of CI that often involves a grey area of legality. In some instances the line between sharing information and trading corporate secrets or other proprietary information is grey. Many firms resolve this by having employees sign a non-disclosure statement or confidentiality agreements that detail what information can be disclosed.

8. Gillette vs. schick - Who was first?
LO1
Gillette vs. schick - Who was first?
No one wants to get caught in the war between two giant competing companies. As an example, the two razor giants, Gillette Co. and Energizer USA, which makes Schick razors, as each manufacturer works to add ever more blades to its disposable razor lines.
Gillette accused Schick of engaging in false & misleading advertising when ads claimed that its Hydro razor would hydrate skin. Schick’s parent company countered with the complaint that Gillette’s Fusion ProGlide Razor ads attempt to deceive when they asset that the blades are ‘Gillette’s thinnest blades ever’.
All these efforts represent the companies’ recognition of what their closest competitor is doing, as well as, their attempts to halt tactics they consider damaging.
At the same time, each company will exude their benefits over the competitors, because the ultimate goal is to appeal and win over the customer.
Numerous examples can be cited, including Colgate vs. P&G Crest, Apple Inc. vs. Samsung, Air Canada vs. West Jet.
Ask students: what other big name competitors do they recall as having recently engaged in ‘price wars’?

9. Corporate partners Firms are part of alliances – few work in isolation
LO1
Corporate partners
Firms are part of alliances – few work in isolation
Align with suppliers, corporate partners etc.
In order to be successful, firms cannot operate in isolation.
Firms must work together with many different partners – including suppliers - to create a seamless system that delivers goods and services to customers when and where they want them.
Firms such as auto manufacturers have a lengthy list of partners including: suppliers, other manufacturers, part makers, unions, transport companies, dealerships.
Parties that work with the focal firm are known as corporate partners.
As an example, many attribute a key reason for Walmart’s success is their close relationships with their suppliers.
From manufacture to
Retailer

10. LO1
Test Your Knowledge
Which of the following is NOT considered part of a company’s immediate environment?
A) company’s corporate partners
B) company’s stockholders
C) competitive intelligence
D) company’s capabilities
Answer: B; see page 80

11. Macroenvironmental factors
LO2
Macroenvironmental factors
Marketers must also understand the macroenvironmental factors that operate in the external environment, namely, the culture, demographics, social/natural trends, technological advances, economic situation, and political/legal environment, or CDSTEP as shown in the slide.
This slide can be used to review this topic instead of the following slides, which provide more in-depth discussions on each factor.
Remind students of the acronym CDSTEP to help them remember the macro factors. Each slide that follows introducing a new macro factor shows the first letter of the factor in bold.
Acronym: CDSTEP

12. Culture Culture Country Culture vs. Regional Subcultures LO2
Culture is broadly defined as the shared meanings, beliefs, morals, values, & customs of a group of people.
This is transmitted by words, literature,& institutions, & is passed down from generation to generation & learned over time.
The challenge for marketers is to have products/services identifiable & relevant to a particular group of people.
Two dimensions of culture that must be taken into account as firms develop their marketing strategies are country culture & regional subcultures.
Firms often remove brands from the market because of their poor overall sales, but this strategy can backfire when those brands have strong regional support. Regional differences can make Curry flavoured potato chips a hit in Vancouver but not in Saskatoon.
Regional culture example –The region in which people live in a particular country will affect the way they react to cultural rituals or even how they react to a particular product category. In Quebec, a resident is 25% less likely to buy a hot prepared meal than a resident of Ontario. The difference is attributed to Quebec families desire to cook from scratch & as a way to be more involved with their families. Another example, 37% of Canadians refer to carbonated beverages as soda, while another 40% call it pop and the remainder call it ‘Coke’ or ‘Pepsi’.
Marketers often have difficult in developing materials that transcend regional boundaries.

13. LO2
Demographics
Characteristics of human populations & segments used to identify consumer markets.
Demographics are the characteristics of human populations & segments, especially those used to identify consumer markets.
Ask students: What are some typical demographics? Answer: age, gender, income, education.
Demographic segmentation is probably the most common form of segmentation because the information is so widely available.
Firms use demographics to assess their customers’ needs & position themselves to deliver better value for those customers.
Gender
Ethnicity
Age

14. LO2
Test Your Knowledge
Which of the following are examples of typical demographics?
A) age, gender, race
B) behavior, dress, physical settings
C) temperature, topology, climate
D) conservative, liberal, independent
Answer: A; see page 85

15. Generational cohorts A group of people of the same generation. Tweens
LO2
Generational cohorts
Tweens
Baby Boomers
Generation X
Seniors
Generation Y
A generational cohort is a group of people of the same generation, that have similar purchase behaviours because they have shared experiences & are in the same stage of life.
The five major groups are: tweens, Gen Y/millennials, Gen X, baby boomers & seniors.
Group activity: Have students brainstorm a list of the defining characteristics of their generation. Ask: How does your generation differ from previous generations, such as their parents—the Baby Boomers. What macroenvironmental forces have had the most impact on your generation?
Ask students: What does the phrase “generation gap” mean to you? How do you experience this gap between your generation and that of your parents or grandparents? In what ways do you believe your generation is similar to that of your parents or grandparents?
A group of people of the same generation.

16. Case in point: parker brothers monopoly
LO2
Case in point: parker brothers monopoly
Challenge
Answer
Results
To make a 65 year old board game relevant to today’s market.
Involve consumer in the redesign. Ask consumers what international cities should be included in the new “Here and Now Edition: World Edition.”
Note: this slide has transitions.
Ask Students: How do firms update products to keep them relevant for changing demographics?
The challenge of reinventing a well-known product or brand is significant. A delicate balance exists between the desire to attract a new market but not alienate the current market.
Monopoly: By incorporating current users into its redesign, Hasbro was able to generate excitement about the new version of a beloved game. In September 2008, Hasbro announced “Monopoly Here and Now: The World Edition.”
An online poll in allowed consumers to vote for cities around the world that would win the naming rights to 20 squares. The city with the most votes took the place of Boardwalk as the most coveted bit of real estate on the board. Second place got Park Place. The city of Montreal was a leading contender for votes.
Another example is the use of ‘smart phones’ amongst the baby boomers or older generation that did not grow up with technology & may be intimidated with it. How has Apple made it easy for all their users to feel comfortable with frequent technological advances? One way, is the Genius Bar within Apple retail stores which is a great way to learn about the technology.
See next slide for link to Monopoly site.
New edition available both interactive and traditional board game format with all new properties and new icons.

17. LO2
Click on the ‘Monopoly’ name in the slide and this will take you to the Hasbro site where one can explore this further.
The addresses on the game board reflect different and appealing locations throughout the world.
Monopoly

18. income Purchasing power is tied to income
LO2
income
Purchasing power is tied to income
Statistics Canada tracks income
Many middle class families feel the decline in purchasing power in recent years
Canadians may be classified into distinct groups based upon their income levels.
Individuals are often classed as low-income earners, below the poverty line, high-income earners and middle-income earners.
The “middle-class squeeze” is a very real global phenomenon. Many developing countries face similar income inequities to those found in North America. Pay gaps also cause problems for many new college graduates who find they cannot afford to live on their own and must move back in with their parents: 61% of recent graduates stated that they intend to live with their parents after graduating.
Some marketers choose to target only affluence consumers. While others choose to target middle and low income earners, since this represents a broader base and potentially greater number of customers.
Income demographics also relates to value. Consumers are readily searching for value today than in previous decades. Why is this? Family incomes have stayed slightly ahead of inflation but with other costs such as health care, taxes and tuition bills, rising greater than the rate of inflation, this puts pressure & squeezes income & what can be spent.

19. Education is related to income, which determines spending power
LO2
education =
Education is related to income, which determines spending power
Studies show that higher levels of education lead to better jobs & higher incomes.
Ask students: Do you plan to continue your education after graduation? If so, why and if not, why not?
Many students believe they will never return to school after they finish their Bachelors’ degree, but modern conditions make this choice more and more unlikely. Lifelong learning of new skills and new knowledge has become key to survival in the global economy.
Marketers often combine education levels with other data such as occupation & income to obtain accurate predictions of purchase behaviour.

20. gender Male/female roles have been shifting
LO2
gender
Marketing has changed to reflect these shifts
Male/female roles have been shifting
Years ago, gender roles appeared clear, but those male/female roles have been blurred.
This shift in attitude & behaviour affects the way many firms design & promote their products & services.
For example, more firms are careful about gender neutrality in positioning their products & services.
Women now head more than 20% of Canadian households and more & more women are in the workforce than ever before.
Ask students: How do you believe this will affect the workplace in the future?
Ask students: Do you believe that there are still significant gender differences? What are they?
Ask students: How do firms address the increasing number of female homeowners? Can you give some examples? In the textbook, page 91, the Rona example is cited.

21. ethnicity Ethnic composition of Canada is changing
LO2
ethnicity
Ethnic composition of Canada is changing
1/5 Canadians not born in Canada
By 2030, population growth will be mainly attributed to immigration
The ethnic composition of Canada will continue to change over the next decades.
The two fastest growing groups are the Chinese (from Hong Kong, mainland China & Taiwan) and South Asians (India, Pakistan, Sri Lanka & Bangladesh).
By 2017, ethnic groups will make up a quarter of Canada’s population.
What does this ethnic shift mean for marketers?
This represents both a challenge & an opportunity. The challenge is for marketers to understand the culture, value & spending patterns of these various groups & determine the best way to communicate with them.
In terms of opportunity, in general, ethnic groups spend more than their Caucasian counterparts & many have an affinity for brand name products.
Many food chains, such as Sobeys/Freshco, specifically targeted to the needs of the ethnic consumer.
Many marketers accommodate the ethnic consumer by adapting signs, flyers, in different languages.

22. Technological advances
Technology has impacted every aspect of marketing:
New products
New forms of communication
New retail channels
Technological changes that have contributed to the improvement of the value of both products & services in the past few decades, and these have impacted every aspect of marketing.
Arguably the single most important change in the way we live is the introduction of new technology.
Technology makes consumers increasingly dependent on the help they can provide, especially in terms of making decisions & communicating with others.
Ask students: Name some new products, new forms of communication, and new retail channels that have been introduced because of technological advances.
Ask students: What new technologies have you seen at retailers?

23. Social & mobile marketing 3.1
LO2
Social & mobile marketing 3.1
Foursquare’s promise & Facebook’s response:
A location based mobile platform
Rewards frequent customers & gives helpful tips
A great way to attract, appeal to & retain loyal customers.
Image courtesy of Foursquare
Foursquare is a location-based mobile platform that rewards frequent customers, helps people find the locations their friends are frequenting & gives them helpful tips about local places such as bars & restaurants.
It is an effective means to attract, appeal to & retain loyal customers.
By gathering information from all its users, consumers & sellers, Foursquare can issue on-target recommendations of other places to go.
Its’ competitor, Facebook, also allows users to check in at locations & has the advantage of a much larger social network with more than 1.3 Billion users (vs. 250k with Foursquare). Facebook can also learn about its users & the places they frequent. Marketers use this information to provide targeted communications.
Ask students: more on ethics will be discussed, however, do students feel that companies such as Foursquare & Facebook are breaking any codes of ethics or privacy concerns? If so, what are they & how can they be addressed?

24. Foreign currency fluctuations
LO2
Economic situation
Foreign currency fluctuations
Combined with inflation and interest rates affect a firm’s ability to market goods and services
Marketers monitor the general economic situation, both domestically and abroad because this affects the way consumers buy and spend money.
Some major factors that influence the state of an economy include the rate of inflation, foreign currency exchange rates, interest rates & recessions.
See text for definitions of these terms.
Depending on the time of year, discuss projections about Christmas shopping, vacation planning, or home buying. Various economic factors affect each of these areas. The Consumer Confidence Index takes into account how consumers feel about how the economy is doing. This economic indicator relates directly to spending.
The web link leads to the Consumer Confidence Index which takes into account how consumers feel about how the economy is doing. This economic indicator relates directly to spending.
Conference Board Website

25. Political/legal environment
LO2
Political/legal environment
Competition Act
Consumer Packaging and Labelling Act
Food and Drugs Act
Access to Information Act
Patent Act
North American Free Trade Agreement (NAFTA)
The political/legal environment comprises political parties, government organizations & legislation & laws that promote or inhibit trade & marketing activities.
This list includes some legislation designed to ensure a competitive marketplace and clearly demonstrates the government’s long history of enacting laws that protect fair trade.
Generally, government regulations may have a negative or positive impact on marketers.
See exhibits 3.4 & 3.5 for lists of the most significant legislation affecting marketing interests.

26. LO2
Test Your Knowledge
Since the turn of the century, the government has enacted laws
that promote both fair trade and competition by prohibiting __________
that would damage a competitive marketplace.
A) the formation of foreign corporations
B) excessive foreign imports
C) price gouging
D) the formation of monopolies or alliances
Answer: D; see page 96

27. Social & natural trends
LO3
Social & natural trends
GREENER
CONSUMERS
PRIVACY
CONCERNS
This graphic introduces some social trends as noted in the slide. All can be addressed using this slide or can be expanded upon using the slides that follow.
You can also mention other social trends not covered in the textbook such as price sensitivity (frugal customers, economic impact of recessions has led many people to save more, spend less) are also important to be aware of and can affect marketing activities.
TIME-POOR
SOCIETY

28. Greener consumers Customers who appreciate the efforts of companies
LO3
Greener consumers
Customers who appreciate
the efforts of companies
to supply them with
environmentally
friendly merchandise.
Green consumers purchase products based on issues beyond the tangible product.
These issues can include a variety of social causes such as environmental awareness, protection of animals, HIV/AIDS awareness and prevention, etc. Consumers who purchase these products do so to support these causes.
Green marketing involves a strategic effort by firms to supply customers with environmentally friendly merchandise. This trend is likely to continue since we as a society still have a long way to go.
See next slide for an example.

29. Entrepreneurial marketing 3.1 – turning trash into cash
LO3
Entrepreneurial marketing 3.1 – turning trash into cash
A compost crusader
Growing City: a service to pick up food scraps from offices in Vancouver area
67% of waste comes from offices & industry
In 2015, organic materials will be banned from landfills
Much organic material ends up in the garbage. This was the insight & impetus for Growing City to launch a service that picks up food scraps from offices in the Vancouver area.
Growing City places stainless steel bins in offices, employees deposit their organic waste in the bin and Growing City picks up the matter & then take it to an industrial composting facility.
It was founded in late 2010 by Lisa von Sturmer and has since then diverted 130 tonnes of waste away from landfills. Plus the company has made money doing it! Since then, its owner has won numerous awards.
The owner also pitched the idea to CBC’s Dragons’ Den seeking investment of $100k for a 25% share of the company. Her offer compelled three Dragon’s to express interest & in the end she went with Jim Treliving who could provide both a cash infusion & help with franchising.

30. Privacy concerns Loss of privacy Identity theft Do not call
Do not
More & more consumers worldwide sense a loss of privacy. At the same time, the Internet has created an eruption of accessibility to consumer information, improvements in computer storage facilities & the manipulation of information have led to more & better credit-check services.
In recent years, firms have had to inform consumers of the steps they take to protect their privacy. The government also has instituted new rules for privacy protection.
Ask students: Have you ever had a privacy problem with a credit card or when using the Internet?

31. Time-poor society In the majority of families, most parents work
LO3
Time-poor society
In the majority of families, most parents work
Consumers have many more choices regarding leisure time
Many consumers multitask
With more time spent at work, the amount of time available for home or leisure activities has shrunk. In turn, services that complete the tasks that people no longer have the time to do, such as housecleaning, errands, and cooking, have grown.
As such, marketers are faced with the challenge of finding creative ways to get their messages out to the consumer.
To find & develop methods to make life easier for many diverse consumers in a time-poor society, marketers often rely on technology, another macroenvironmental factor discussed in this section.
Ask students: what other entrepreneurial marketing opportunities have a time-poor society provided? They will mention many food products, Blackberry’s, TiVo.

32. LO3
Test Your Knowledge
Minorities now represent ________ of the population.
A) one-quarter
B) one-third
C) one-half
D) two-thirds
Answer: A; see page 91