Marketing: Chapter Three The Marketing Environment, Ethics, and ...
Marketing: Chapter Three The Marketing Environment, Ethics, and Social Responsibility Environmental Scanning and Environmental Management o Environmental scanning – collecting external marketing environment information to identify and interpret potential trends trying to identify what might affect a company o Goal analyze the information and decide whether these trends represent significant opportunities or pose major threats to company o Vital component of environmental management Trends –opportunities or threats o Environmental management – Attainment of organizational objectives by predicting and influencing the external environments o Strategic Alliances partnerships in which two or more companies combine resources and capital to create competitive advantages in a new market o Especially common in international marketing, share risks and profits o Essential in china Environmental Framework: Elements o Seven elements to the environmental framework 1. The COMPETITIVE Environment (also Porter’s Five Forces, and SWOT) 2. PESTEL Environment Tool; details the 2. Political 3. Economic 4. SocialCultural 5. Technological 6. Environment 7. Legal
1) Competitive Environment 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 o Marketing decisions by individual firms influence o Consumer responses in the marketplace o Marketing strategies of competitors o Monopoly o Market structure in which a single seller dominates trade in a good or service for which buyers can find no close substitutes
o Oligopoly o Few number of sellers in an industry with high startup costs that keep out new competitors
o Perfect competition – a large number buyers and sellers, “pricetakers”
o Types of competition direct Among products in the same category o Indirect Involves products that are easily substituted o Competition for consumer wallets Developing a Competitive Strategy
1) Competitive strategy – Methods through which a firm deals with its competitive environment. Involves answering three questions: i) Should we compete? (Depends on firm resources and objectives) ii) In what markets? (Driven by the need for optimal resource allocation) iii) How should we? (Basis for competition; price, quality, service) o Use the tools: Porter’s Five Forces, SWOT Analysis, and PESTEL Analysis to assess o Make product, distribution, promotion, and pricing decisions that give the firm a competitive advantage in the marketplace o Timebased competition – Strategy of developing and distributing goods more quickly than competitors o i.e. first mover advantage, quick product cycles o In rapid changing markets this is critical
2. Political Environment o Actions, trends, tendencies of the current and projected political environment; tied closely with legal
o Often describes to what degree government intervenes the economy o i.e. trade restrictions, tariffs, political stability o Government regulation – i.e. Competition Act, Consumer Protection Act, CRTC,
o
NEB, and others such as PETA, MADD (Can impact decision making, timelines, investments, etc.) o Competition act most comprehensive legislation in Canada designed to help both consumers and businesses by promoting a healthy competitive environment o Fosters competition, and protects consumers. Categorized in three areas pricing, promotion, or distribution o Pricing: fixing, big rigging, price discrimination, predatory pricing, double ticketing, and resale price maintenance o Promotion: misleading advertisements, referral selling, baitand switch selling o Distribution: refusal to deal, exclusive dealing, pyramid selling Government Regulatory Agencies
3. Economic Environment o Economic environment – factors that influence consumer buying power,
consumer spending and marketing strategies o Gross domestic product (GDP) – Sum of all goods and services produced by a nation in a year o Business cycle – Pattern of stages in the level of economic activity (Prosperity, Recession, Depression, Recovery) o Do you lead, lag, or mimic the economy?
Stages in the Business Cycle o Prosperity – Consumer spending is brisk; growth in services sector o Recession – consumers are a little bit worrying about the future and tend to focus on basic, fundamental products; marketers: more emphasis on value in marketing offering
o Depression – Consumer spending sinks to its lowest level (great
depression 1930s) nothing is important for consumers except price levels
o Recovery – Consumer purchasing power increases, but they have been
Terms to know pg . 82* look over o Inflation increase in prices, often without corresponding increase in wages, resulting decreasing purchasing power o Deflation – decrease in general level of prices in the economy, might result in declining profits, lower ROI, layoffs o Unemployment – proportion of people in the economy who seek, but don’t have job o Discretionary income – money available after buying necessities (food, housing, clothing) o Demarketing – process of decreasing consumer demand the level a firm can supply Global Business Crisis o Business cycles take a severe turn and affect consumers and businesses across the globe o Consumers and businesses become cautious about spending money o Value offering to consumers becomes critically important o Marketers must reevaluate their strategies and concentrate on their most promising products. o Marketers must monitor the economic environment of other nations o Global political changes affect international marketplace 4. SocialCultural Environment o The relationship between the marketer, society, and culture o Marketers must be sensitive to demographic shifts and changing values: o Population age mix (Mexico vs. japan) o Ethnicity considerations (Canada vs. japan) o Cultural diversity (rise of immigration, multiple subcultures) o Views of themselves and organizations (i.e. pleasure seekers vs. self realization; Canadians are less trusting to business than Americans) o Views of society (preservers vs makers vs takers vs changers) o Views of nature and universe, religious beliefs o Consumerism – Social force within the environment that aids and protects the consumer by exerting legal, moral, and economic pressures on business and government Consumer rights • The right to choose freely • The right to be informed • The right to be heard • The right to be safe
5. Technological Environment o Application of knowledge based on discoveries in science, inventions, and innovations to marketing
o Technology leads to 1. New products 2. Improvements in existing products 3. Better customer service 4. Reduced prices 5. Planned obsolescence
o Can quickly make products obsolete o The Social Marketing trend is impacted by the changing technological environment pg. 85
6. Environmental Environment o Recent trend in the last decade: growing concern and awareness of environmental and sustainability issues o Shortage of raw materials o Increased energy costs o Antipolluting pressures o Countryspecific environmental regulations o Impacts o Consumer purchasing (i.e. “Green Products”, but also “green washing”) o Government funding (“green grants,” “carbon offset credits”)
7. Legal Environment o Consists of laws and their interpretations that require firms to operate under competitive conditions and to protect consumer rights
o 1889 First Canadian Competition legislation (one of the first developed countries to introduce competition legislation)
o 1975 – Most recent substantial revision initiated after the Thalidomide disaster in the 1960s)
o Thalidomide a sedative, toxic not tested properly, brough to canada, prescribed Competition Act – Comprehensive legislation administered by Industry Canada and designed to help both consumers and businesses by promoting a healthy competitive environment o Pricing (price fixing, price discrimination, predatory pricing, double ticketing, price maintenance, etc.) o Promotion (misleading advertising, baitandswitch selling, etc.) o Distribution (refusal to deal, exclusive dealing, pyramid selling) Federal and provincial legislation Regulatory forces: CRTC, PETA, MADD, CMA Competition legislation impacts decision making, timelines, investments, etc. Ethical Issues in Marketing 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 o Ensuring ethical practices means promising customers and business partners not to sacrifice quality and fairness for profit
o Standards that are legal are not always ethical Ethics in Product Strategy o Product quality, planned obsolescence, brand similarity, and packaging raise ethical issues o Examples o Larger packages are more noticeable on the shelf o Oddsized packages make price comparison difficult o Bottles with concave bottoms appear to have more liquid in them than they do Ethics in Pricing Strategy o Most regulated aspect of a firm’s marketing activities o Examples o Credit card companies, payday loan companies, and health clubs often walk a fine line between being ethical and unethical Ethics in Promotion Strategy o Truth in advertising is foundation of ethics, Most direct link between a firm and its customers o Marketing to children under scrutiny o Greenwashing– Promotion of products as “green” when they are actually not Ethics in Distribution Strategy o Two ethical issues influence a firm’s decisions: o What is the appropriate degree of control over distribution channel? o Should a company distribute its products in marginally profitable outlets that have no alternative source of supply? o Such as, “hands off” once it goes to the transportation company o Examples? o Sustainable/Unsustainable couriers o Demanding transport contracts o Question? o Should a manufacturer care about how its product reaches stores and consumers? Ethics in Marketing Research o Consumers are concerned about privacy o The profileration of databases o the selling of address lists o Ease with which consumer information can be gathered o Promise of cash or gifts in return for marketing information o Canada has a National DoNotCall List to help prevent unwanted telemarketing o Question: Would you pretend to be someone else to get information about a competitor? o Business and Social Responsibility: competing perspectives (marketing philosophies, policies, procedures, and actions that have the enhancement of society’s welfare as a primary objective) o Accepting an obligation to give equal weight to profits, consumer satisfaction, and social wellbeing in evaluating a firm’s performance o Made of economic, legal, ethical, and philanthropic pg.94**
Perspective 1: o Free market will provide an optimal solution for society. The only responsibility of business is to make profits for their shareholders and let them decide how to utilize money for benefits of society (Milton Friedman, worldwideknown economist) Perspective 2: o Through concerted efforts, corporations can do more for wellbeing of society and have a greater positive impact than individual shareholders Marketing Responsibilities o Concerns managers’ relationships with customers (quality products, reasonable prices), employees (adequate wages, decent working environment), and shareholders (acceptable profits) o Marketers must consider o The global effects of their decisions (child labour, threatened due to attempt to unionize) o The longterm effects of their decisions o The wellbeing of future generations o Entire communities can benefit through socially responsible investing Marketing & Ecology o Ecology (relationship between organisms and their natural environments) has become a driving force in influencing the ways in which businesses operate o Many rank the protection of the environment as the biggest challenge facing today’s corporations Green marketing production, promotion, and reclamation of environmentally sensitive products
1) Competitive Environment 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 o Marketing decisions by individual firms influence o Consumer responses in the marketplace o Marketing strategies of competitors o Monopoly o Market structure in which a single seller dominates trade in a good or service for which buyers can find no close substitutes
o Oligopoly o Few number of sellers in an industry with high startup costs that keep out new competitors
o Perfect competition – a large number buyers and sellers, “pricetakers”
o Types of competition direct Among products in the same category o Indirect Involves products that are easily substituted o Competition for consumer wallets Developing a Competitive Strategy
1) Competitive strategy – Methods through which a firm deals with its competitive environment. Involves answering three questions: i) Should we compete? (Depends on firm resources and objectives) ii) In what markets? (Driven by the need for optimal resource allocation) iii) How should we? (Basis for competition; price, quality, service) o Use the tools: Porter’s Five Forces, SWOT Analysis, and PESTEL Analysis to assess o Make product, distribution, promotion, and pricing decisions that give the firm a competitive advantage in the marketplace o Timebased competition – Strategy of developing and distributing goods more quickly than competitors o i.e. first mover advantage, quick product cycles o In rapid changing markets this is critical
2. Political Environment o Actions, trends, tendencies of the current and projected political environment; tied closely with legal
o Often describes to what degree government intervenes the economy o i.e. trade restrictions, tariffs, political stability o Government regulation – i.e. Competition Act, Consumer Protection Act, CRTC,
o
NEB, and others such as PETA, MADD (Can impact decision making, timelines, investments, etc.) o Competition act most comprehensive legislation in Canada designed to help both consumers and businesses by promoting a healthy competitive environment o Fosters competition, and protects consumers. Categorized in three areas pricing, promotion, or distribution o Pricing: fixing, big rigging, price discrimination, predatory pricing, double ticketing, and resale price maintenance o Promotion: misleading advertisements, referral selling, baitand switch selling o Distribution: refusal to deal, exclusive dealing, pyramid selling Government Regulatory Agencies
3. Economic Environment o Economic environment – factors that influence consumer buying power,
consumer spending and marketing strategies o Gross domestic product (GDP) – Sum of all goods and services produced by a nation in a year o Business cycle – Pattern of stages in the level of economic activity (Prosperity, Recession, Depression, Recovery) o Do you lead, lag, or mimic the economy?
Stages in the Business Cycle o Prosperity – Consumer spending is brisk; growth in services sector o Recession – consumers are a little bit worrying about the future and tend to focus on basic, fundamental products; marketers: more emphasis on value in marketing offering
o Depression – Consumer spending sinks to its lowest level (great
depression 1930s) nothing is important for consumers except price levels
o Recovery – Consumer purchasing power increases, but they have been
Terms to know pg . 82* look over o Inflation increase in prices, often without corresponding increase in wages, resulting decreasing purchasing power o Deflation – decrease in general level of prices in the economy, might result in declining profits, lower ROI, layoffs o Unemployment – proportion of people in the economy who seek, but don’t have job o Discretionary income – money available after buying necessities (food, housing, clothing) o Demarketing – process of decreasing consumer demand the level a firm can supply Global Business Crisis o Business cycles take a severe turn and affect consumers and businesses across the globe o Consumers and businesses become cautious about spending money o Value offering to consumers becomes critically important o Marketers must reevaluate their strategies and concentrate on their most promising products. o Marketers must monitor the economic environment of other nations o Global political changes affect international marketplace 4. SocialCultural Environment o The relationship between the marketer, society, and culture o Marketers must be sensitive to demographic shifts and changing values: o Population age mix (Mexico vs. japan) o Ethnicity considerations (Canada vs. japan) o Cultural diversity (rise of immigration, multiple subcultures) o Views of themselves and organizations (i.e. pleasure seekers vs. self realization; Canadians are less trusting to business than Americans) o Views of society (preservers vs makers vs takers vs changers) o Views of nature and universe, religious beliefs o Consumerism – Social force within the environment that aids and protects the consumer by exerting legal, moral, and economic pressures on business and government Consumer rights • The right to choose freely • The right to be informed • The right to be heard • The right to be safe
5. Technological Environment o Application of knowledge based on discoveries in science, inventions, and innovations to marketing
o Technology leads to 1. New products 2. Improvements in existing products 3. Better customer service 4. Reduced prices 5. Planned obsolescence
o Can quickly make products obsolete o The Social Marketing trend is impacted by the changing technological environment pg. 85
6. Environmental Environment o Recent trend in the last decade: growing concern and awareness of environmental and sustainability issues o Shortage of raw materials o Increased energy costs o Antipolluting pressures o Countryspecific environmental regulations o Impacts o Consumer purchasing (i.e. “Green Products”, but also “green washing”) o Government funding (“green grants,” “carbon offset credits”)
7. Legal Environment o Consists of laws and their interpretations that require firms to operate under competitive conditions and to protect consumer rights
o 1889 First Canadian Competition legislation (one of the first developed countries to introduce competition legislation)
o 1975 – Most recent substantial revision initiated after the Thalidomide disaster in the 1960s)
o Thalidomide a sedative, toxic not tested properly, brough to canada, prescribed Competition Act – Comprehensive legislation administered by Industry Canada and designed to help both consumers and businesses by promoting a healthy competitive environment o Pricing (price fixing, price discrimination, predatory pricing, double ticketing, price maintenance, etc.) o Promotion (misleading advertising, baitandswitch selling, etc.) o Distribution (refusal to deal, exclusive dealing, pyramid selling) Federal and provincial legislation Regulatory forces: CRTC, PETA, MADD, CMA Competition legislation impacts decision making, timelines, investments, etc. Ethical Issues in Marketing 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 o Ensuring ethical practices means promising customers and business partners not to sacrifice quality and fairness for profit
o Standards that are legal are not always ethical Ethics in Product Strategy o Product quality, planned obsolescence, brand similarity, and packaging raise ethical issues o Examples o Larger packages are more noticeable on the shelf o Oddsized packages make price comparison difficult o Bottles with concave bottoms appear to have more liquid in them than they do Ethics in Pricing Strategy o Most regulated aspect of a firm’s marketing activities o Examples o Credit card companies, payday loan companies, and health clubs often walk a fine line between being ethical and unethical Ethics in Promotion Strategy o Truth in advertising is foundation of ethics, Most direct link between a firm and its customers o Marketing to children under scrutiny o Greenwashing– Promotion of products as “green” when they are actually not Ethics in Distribution Strategy o Two ethical issues influence a firm’s decisions: o What is the appropriate degree of control over distribution channel? o Should a company distribute its products in marginally profitable outlets that have no alternative source of supply? o Such as, “hands off” once it goes to the transportation company o Examples? o Sustainable/Unsustainable couriers o Demanding transport contracts o Question? o Should a manufacturer care about how its product reaches stores and consumers? Ethics in Marketing Research o Consumers are concerned about privacy o The profileration of databases o the selling of address lists o Ease with which consumer information can be gathered o Promise of cash or gifts in return for marketing information o Canada has a National DoNotCall List to help prevent unwanted telemarketing o Question: Would you pretend to be someone else to get information about a competitor? o Business and Social Responsibility: competing perspectives (marketing philosophies, policies, procedures, and actions that have the enhancement of society’s welfare as a primary objective) o Accepting an obligation to give equal weight to profits, consumer satisfaction, and social wellbeing in evaluating a firm’s performance o Made of economic, legal, ethical, and philanthropic pg.94**
Perspective 1: o Free market will provide an optimal solution for society. The only responsibility of business is to make profits for their shareholders and let them decide how to utilize money for benefits of society (Milton Friedman, worldwideknown economist) Perspective 2: o Through concerted efforts, corporations can do more for wellbeing of society and have a greater positive impact than individual shareholders Marketing Responsibilities o Concerns managers’ relationships with customers (quality products, reasonable prices), employees (adequate wages, decent working environment), and shareholders (acceptable profits) o Marketers must consider o The global effects of their decisions (child labour, threatened due to attempt to unionize) o The longterm effects of their decisions o The wellbeing of future generations o Entire communities can benefit through socially responsible investing Marketing & Ecology o Ecology (relationship between organisms and their natural environments) has become a driving force in influencing the ways in which businesses operate o Many rank the protection of the environment as the biggest challenge facing today’s corporations Green marketing production, promotion, and reclamation of environmentally sensitive products
