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Chapter 3


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Chapter 3. The Marketing Environment, Ethics, and Social Responsibility. Chapter Objectives. Identify the five components of the marketing environment . Explain the types of competition marketers face and the steps necessary for developing a competitive strategy.

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Chapter 3

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Chapter 3

The Marketing Environment, Ethics, and Social Responsibility


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Chapter Objectives

  • Identify the five components of the marketing environment.

  • Explain the types of competition marketers face and the steps necessary for developing a competitive strategy.

  • Describe how government and other groups regulate marketingactivities and how marketers can influence the political –legal environment.

  • Outline the economic factors that affect marketing decisions and consumer buying power.

  • Discuss the impact of the technological environment on a firm’s marketing activities.

  • Explain how the social-cultural environment influences marketing.

  • Describe the role of marketing in society and identify the two major social issues in marketing.

  • Identify the four levels of the social responsibility pyramid.


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Environmental Scanning and Environmental Management

  • Environmental Scanning is the process of collecting information about the external marketing environment to identify and interpret potential trends

  • Environmental Management involves marketers’ efforts toward achieving organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social-cultural environments.


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  • Elements of the Marketing Mix within an Environmental Framework


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The Competitive Environment

  • Competitive Environment: The interactive process that occurs in the marketplace among marketers of directly competitive products, marketers of products that can be substituted for one another, and marketers competing for the consumer’s purchasing power.


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  • Types of Competition

    • Directly Competitive Products

      • Legoland Competes with Other Theme Parks in California


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  • Types of Competition

    • Indirectly Competitive Products

    • Involves products than can be substituted for one another

    • Mountain Dew competes directly with other soft drinks as well as indirectly with substitutes like bottled or canned iced tea and bottled water


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  • Types of Competition

    • All Consumer Purchases

    • Occurs in the sense that all firms compete for the buyers’ purchases

    • Movies compete against many products, from dining out to buying a new pair of shoes.


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  • Developing a Competitive Strategy

    • Should we compete?

    • If so, in what markets should we compete?

    • How should we compete?


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  • Time-based competition is a strategy of developing and distributing goods and services more quickly than competitors


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The Political-Legal Environment

  • Component of the marketing environment consisting of laws and interpretations of laws that require firms to operate under competitive conditions and to protect consumer rights.


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  • Government Regulation

    • Maintaining a Competitive Environment

      • Began in the late 19th century

      • Aimed at to maintaining a competitive environment by reducing the trend toward monopolies

      • Included:

        • Sherman Antitrust Act

        • Clayton Act

        • Federal Trade Commission


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  • Government Regulation

    • Regulating Competition

      • Began during the depression era of the 1930s

      • Meant to protect independent merchants against competition from larger chain stores

      • Included the Robinson-Patman Act


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  • Government Regulation

    • Protecting Consumers

      • Began mainly in the 1960s

      • Increased focus on consumer protection

      • Newest regulatory frontier is cyberspace

      • Included:

        • FDA

        • Consumer product safety

        • Electronic Signature

        • Aviation security


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  • Government Regulation

    • Deregulating Specific Industries

      • Began in the late 1970s

      • Focused on deregulating specific industries

      • Included:

        • Airline Deregulation Act

        • Motor Carrier Act

        • Telecommunications


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  • Government Regulation

    • Other Federal Regulatory Agencies

      • Federal Trade Commission

      • The FCC (telecommunications, radio, and television)

      • The Food and Drug Administration

      • Consumer Products Safety Commission

      • Federal Power Commission

      • Environmental Protection Agency

      • Securities & Exchange Commission


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  • Other Regulatory Forces

    • Consumer interest groups

      • National Coalition Against Misuse of Pesticides

      • PETA

    • Special-interest groups

      • American Association of Retired People (AARP)

    • Self-regulatory groups

      • Direct Marketing Association

      • Council of Better Business Bureaus


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The Economic Environment

  • Factors that influence consumer buying power and marketing strategies, including stage of the business cycle, inflation, unemployment, resource availability and income

  • Stages in the Business Cycle

    • Cyclical patterns consisting of the stages of prosperity, recession, depression, and recovery.


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  • The Wealth Effect: Spending for Luxury Products Increases during Recovery and Prosperity Stages


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  • Inflation and Deflation

    • Inflation: The devaluation of money by reducing what it can buy through persistent price increases.

    • Deflation: Falling prices, better?

  • Unemployment

    • The proportion of people in the economy who do not have jobs and are actively looking for work.


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  • Income

    • Discretionary income: the amount of money people have to spend after paying for necessities such as food, clothing, and housing.

  • Resource Availability

    • Demarketing: the process of reducing consumer demand for a good or service to a level that the firm can supply.


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  • The International Economic Environment

    • Marketers must consider the economic environment of other nations

    • Changes in foreign currency rates may affect marketing decisions

    • Recessions in one part of the world may be offset by prosperity in another


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  • Austrian Tourist Office

    • Economic Growth in Other Countries Often Means Increased Potential Growth Due to Foreign Tourists


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The Technological Environment

  • The technological environment represents the application of knowledge in science, inventions, and innovations to marketing.

    • Applying technology helps Fidelity improve customer service


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  • The Toyota Prius: one of the First Hybrid Automobiles Available for U.S. Auto Buyers


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The Social-Cultural Environment

  • The relationship between marketing and society and its culture

    • GardenBurger is a leader in marketing meatless products that satisfy demands of vegetarians and health-conscious consumers


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  • Doritos WOW!

    • Frito-Lay Launches Low-Fat Snacks for Health-Conscious Consumers


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  • Importance in International Marketing Decisions

    • The social-cultural context often exerts a more pronounced influence on marketing decision-making in the international sphere than in the domestic arena


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  • Consumerism

    • A social force within the environment designed to protect the consumer by exerting legal, moral, and economic pressures on business and government.

    • John F. Kennedy’s Statement of Consumer Rights

      • The right to choose freely

      • The right to be informed

      • The right to be heard

      • The right to be safe


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  • Addressing Consumer’s Right to Be Safe


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Ethical Issues in Marketing

  • Marketing ethics: Marketer’s standards of conduct and moral values


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  • Criticisms of the Competitive Marketing System

    • Marketing costs are too high

    • The marketing system is inefficient

    • Marketers and the business system collude and commit price-fixing

    • Firms deliver poor product quality and service

    • Consumers receive incomplete, false, and/or misleading information

    • The marketing system produces health and safety hazards

    • Marketers persuasively promote unwanted and unnecessary products to those who least need them


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  • Figure 3.7, P.99

    • Ten Steps for Corporation to Improve Standards of Business Ethics


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  • Figure 3.8, P.100

    • Test Your Work-place Ethics


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  • Ethical Problems in Marketing Research

    • Alleged invasions of personal privacy

    • Gathering marketing information in exchange for money or free offers

  • Ethical Problems in Product Strategy

    • Product quality

    • Planned obsolescence

    • Brand similarity

    • Packaging


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  • Ethical Problems in Distribution Strategy

    • Determining the appropriate degree of control over a channel

    • Determining whether a company should distribute its products in marginally profitable outlets that have no alternative source of supply

  • Ethical Problems in Pricing

    • Probably the most regulated aspect

    • Most unethical pricing behavior is also illegal


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  • Ethical Problems in Promotional Strategy

    • The source of the majority of ethical questions

    • Ethically questionable personal selling

      • Gifts and bribes

    • Questionable advertising

    • Promotion of questionable features (air bags)

    • Questionable WWW related promotional practices


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Social Responsibility in Marketing

  • Social responsibility

    • Marketing philosophies, policies, procedures, and actions that have the enhancement of society’s welfare as a primary objective


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  • The Four-Step Pyramid of Corporate Social Responsibility


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  • Budweiser Advertising Its Socially Responsible Hispanic Scholarship Fund


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  • Marketing’s Responsibilities

    • Traditionally concerned managers’ relationships with customers, employees, and stockholders

    • Extended to relations with government and the general public

    • Today, corporate responsibility has expanded to cover the entire societal framework in the US and throughout the world


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  • Marketing and Ecology

    • Ecology

    • Planned obsolescence

    • Pollution

    • Recycling

    • Green Marketing


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End of Chapter Three