Chapter 3: The Marketing Environment, Ethics, and Social Responsibility

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1 Chapter 3: The Marketing Environment, Ethics, and Social Responsibility The Five Components of Marketing Political-Legal Economic Social-Cultural Technological Environmental Environmental Scanning and Environmental Management Environmental Scanning: process of collecting information about the external marketing environment to identify and interpret potential trends o Analyze the trends and decide if they represent significant opportunities or pose major threats Environmental Management: attainment of organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social-cultural environments Strategic Alliances: partnership in which two or more companies combine resources and capital to create competitive advantages in a new market The Competitive Environment Competitive Environment: 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 o As a result, decision makers must constantly monitor competitors activities Monopoly: market structure in which a single seller dominates trade in a good or service for which buyers can find no close substitutes o Corporations prefer to share the market with just a few rivals

2 Oligopoly: market structure in which relatively few sellers compete and where high start-up costs form barriers to keep out new competitors Three types of competition: o Direct Marketers of similar products Gas stations, cell phone providers o Indirect Marketers of products that are easily substituted Fast food, entertainment, tourist industries o Total Competition among all organizations that compete for consumer's purchases Car sale may compete with a vacation Competitive Strategy: methods through which a firm deals with its competitive environment 1. Should we compete? 1. In what market should we compete? 1. How should we compete? Time-Based Competition: strategy of developing and distributing goods and services more quickly than competitors The Political-Legal Environment 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 o Ignorance of this environment could result in fines, negative publicity, and/or expensive civil damage suits The Competition Act: the most comprehensive legislation in Canada, designed to help both consumers and business by promoting a healthy competitive environment o Regulations can be categorized by: Pricing Price fixing Big rigging Price discrimination Predatory pricing Double ticketing Resale price maintenance Promotion Misleading advertising Referral selling Bait-and-switch selling Distribution Refusal to deal Exclusive dealing Pyramid selling The Economic Environment Gross Domestic Product (GDP): sum of all goods and services produced by a nation in a year Economic Environment: factors that influence consumer buying power and marketing strategies, including stage of the business cycle, inflation, unemployment, income, and resource availability

3 o Business Cycle: pattern of stages in the level of economic activity: Prosperity Consumer spending maintains a brisk pace Buyers are willing to spend more for premium versions of wellknown brands Recession Marketers consider lowering prices and increasing promotions that include special offers to stimulate demand Depression Consumer spending sinks to the lowest level Recovery The economy emerges from recession and consumer purchasing power increases While consumers have money, caution restraints their willingness to buy Inflation: rising prices caused by some combination of excess consumer demand and increases in the costs of one or more factors of production --> devaluates money by reducing the products it can by through persistent price increases Unemployment: proportion of people in the economy actively seeking work that do not have jobs --> rises during recession Discretionary Income: money available to spend after buying necessities such as food, clothing, and housing Demarketing: process of reducing consumer demand for a good or service to a level that the firm can supply o Reaction to a shortage The Technological Environment Technological Environment: applications to marketing of knowledge based on discoveries in science, inventions, and innovations o Leads to new goods or services or improvements to current goods and services o Marketers monitor new technology to gain a competitive edge and to enhance customer service Voice over Internet Protocol (VoIP): a phone connection through a personal computer with any type of broadband Internet connection Internet Protocol Multimedia Subsystem (IMS): will offer new opportunities to marketers The Social-Cultural Environment Social-Cultural Environment: component of the marketing environment consisting of the relationship between/among the marketer and society and its culture Consumerism: social force within the environment designed to aid and protect the consumer by exerting legal, moral, and economic pressures on business and government Consumer Rights: in their most basic form, these rights include: 1. The right to choose freely 1. The right to be informed 2. The right to be heard 1. The right to be safe Ethical Issues in Marketing Marketing Ethics: marketer's standards of conduct and moral values o Ethics concern right and wrong

4 o Ethical issues may involve promotion, distribution, price, and product (the marketing mix) o Certain laws can be helpful or hurtful to the consumer

5 Social Responsibility in Marketing Social Responsibility: marketing philosophies, policies, procedures, and actions that have the enhancement of society's welfare as a primary objective o The four dimensions of social responsibility are: i. Economic Be profitable The foundation upon which all others rest i. Legal Obey the law Law is society's codification of right and wrong i. Ethical Be ethical Obligation to do what is right, just, and fair Avoid harm i. Philanthropic Be a good corporate citizen Contribute resources to the community; improve quality of life o Green Marketing: production, promotion, and reclamation of environmentally sensitive products

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