1. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 3 The Marketing Environment, Ethics, and Social Responsibility

2. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Objectives 1.Identify the five components of the marketing environment. 2.Identify the environmental factors that affect marketing decisions and consumer buying power. 3. Identify the four levels of the social responsibility pyramid.

3. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Environmental Scanning Process of collecting information about the external marketing environment in order to identify and interpret potential trends. Upscale chocolate retail outlet sales grew 20% from 2005-2007 –So Mars launched Ethel’s Chocolate Lounges named for the founding matriarch of the company

4. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Environmental Management Attainment of organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social-cultural environments.

5. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Elements of the Marketing Mix Within an Environmental Framework THE COUNCIL OF BETTER BUSINESS BUREAUS (CBBB) “OUR MISSION is to promote and foster the highest ethical relationship between businesses and the public through voluntary self- regulation, consumer and business education, and service excellence.” The CBBB helps in keeping the Competitive Environment playing field level.

6. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Dolls to Ethnic Targets 2007 Nickelodeon’s bilingual character Kmart 2007 - 1 st mass retailer with dolls in all stores –Terry Lee dolls –Baby Abuelita singing dolls special songs preserving Hispanic heritage: El patio de mi casa, Tengo una muñeca, A la rueda, Amambrocha 2050 – minorities 50% of U.S. residents –30% in 2007 Hispanic buying power - $1.2T in 2011 People want a doll & a story reflecting who they are –Mattel’s American Girl with Native American, Hispanic, black historical dolls

7. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Major Federal Law Affecting Marketing

8. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Burger King ’07 Agrees to Limits on Kid- Aimed Ads Join Better Business Bureau's Children's Food and Beverage Advertising Initiative New product: raw apples cut to look like french fries and served in a box called the Frypod. –Fits in car’s cupholder –Naming influence from IPod May ’07 - when Jobs became the largest shareholder of Disney –Disney ended $1 billion deal with McDonald’s to receive cash for use of its movie &cartoon characters in Happy Meal tie-ins.

9. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Major Federal Law Affecting Marketing

10. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Major Federal Law Affecting Marketing

11. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Four Stages in the Business Cycle 1.Prosperity - Consumer spending maintains a brisk pace and buyers are willing to spend more. 2.Recessionary Periods - Sales of lower-priced brands of grocery and household-goods products and private-label goods rise. 3.Depression - Consumer spending sinks to its lowest level. 4.Recovery Stage - The economy emerges from recession and consumer purchasing power increases. –Caution often restrains their willingness to buy. –As a recovery strengths, consumers become more indulgent.

12. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Social-Cultural Environment The relationship between marketing and society and its culture. The U.S. is becoming –older, –more affluent and –more cultural diverse Consider the Nickelodeon web site. What are they doing to promote cultural diversity? Is their approach socially responsible?

13. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Social-Cultural Jockey 1976

14. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

15. Ethical Questions in Marketing Product Planned obsolescence Product quality and safety Product warranties Fair packaging and labeling Pollution Distribution Exclusive territories Dumping Dealer rights Predatory competition Promotion Bait-and-switch advertising Promotional allowances Bribery Price Price fixing Price discrimination Price increases Deceptive pricing Ethical Issues

16. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Competitive Advantage Montreal’s Cirque du Soleil 32 talent scouts maintain dbase of 20,000 potential additions to cast Each show as life of 10-12 yrs. Runs 5 world tours & 5 permanent shows, each with a $500M return 300 seamstresses, engineers, makeup artist create custom show materials Award-winning series on Bravo NikeID.com customizes: –Lining, mesh, laces, style, shox

17. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Three Questions of Determining a Competitive Strategy 1.Should we compete? 2.If so, in what markets? 3.How should we compete?

18. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1 st Competitive Strategy Question Should we Compete? Depends on –Firm’s resources. –Objectives. –Expected profit potential.

19. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 2 nd Competitive Strategy Question What Markets Should we Compete In? Must acknowledge: –Firms limited resources. –Accept responsibility for allocating these resources to the areas of greatest opportunity.

20. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Ten Steps for Corporation to Improve Standards of Business Ethics 1.Appoint a senior-level ethics compliance officer. 2.Set up an ethics code capable of detecting and preventing misconduct. 3.Distribute a written code of ethics to employees, subsidiaries, and associated companies and require all business partners to abide by it. 4.Conduct regular ethics training programs to communicate standards and procedures. 5.Establish systems to monitor misconduct and report grievances. 6.Establish consistent punishment guidelines to enforce standards and codes. 7.Encourage an open-door policy, allowing employees to report cases on misconduct without fear of retaliation. 8.Prohibit employees with a track record of misconduct from holding positions with substantial discretionary authority. 9.Promote ethically aware and responsible managers. 10.Continually monitor effectiveness of all ethics- related programs.

21. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Legoland competes with other theme parks in California.

22. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 3 rd Competitive Strategy Question How Should we Compete? Make product decisions about: –Pricing, –Distribution, –Promotional, –Product quality, and –Customer service.

23. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. When Sales Fail Britannica $650M revenue in 1989 from 4- volume encyclopedia sets –Sales force of 7,500 –Fell to force of 300 in 2005 Slow to react to changing technologies Myopic in defining business as publishing books vs. providing information

24. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Time-Based Competition Strategy Developing and distributing goods and services more quickly than competitors. Provides for Flexibility and responsiveness. Improve product quality. Reduce costs. Expand product offerings. Enhance customer satisfaction.

25. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. New Regulatory Frontier Cyberspace: –How do you “police?” –Privacy and child protection issues. –How do you protect the consumer?

26. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Economic Environment Forces that Influence Consumer Buying Power and Marketing Strategies 1.Business cycle 2.Inflation 3.Unemployment 4.Income 5.Resource availability

27. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Inflation Rising prices caused by some combination of excess demand and increases in the costs devalues money. Three possible outcomes: 1.consumers elect to buy now, in the belief that prices will be high later; 2.they decide to alter their purchasing patterns; or 3.They postpone certain purchases.

28. Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. The Four-Step Pyramid of Corporate Social Responsibility