Chapter 3 Class Notes

Content List For Chapter 3


Marketing does not occur in a vacuum. The marketing environment consists of external forces that directly and/or indirectly impact the organization.

Changes in the environment create opportunities and threats for the organizations.

PRODIGY (On-line service) ran a commercial 24 hours after the LA earth quake to inform customers/potential customers that they could contact friends/family in LA through its service when all the telephone lines were jammed. This illustrates a company (Prodigy), reactively responding to an environmental factor (nature), to further market its services to attract new customers.

To track these external forces a company uses environmental scanning. Continual monitoring of what is going on.

Environmental scanning collects information about external forces. It is conducted through the Marketing Information System (this will be discussed further in chapter 8).

Environmental analysis determines environmental changes and predicts future changes in the environment. The marketing manager should be able to determine possible threats and opportunities from the changing environment. This will help avoid crisis management.

Six Environmental Forces

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Societal Forces

Pressure to create laws
Since marketing activities are a vital part of the total business structure, marketers have a responsibility to help provide what members of society want and to minimize what they don't want.

Important Considerations:

Driving force behind the societal marketing concept. Companies change ways of doing business re: societal concerns. Companies should evolve around societal concerns.

Handout...The Green Movement Sows Demand...

Companies now marketing products that are in response to societal concerns, i.e. recycled furniture is environmentally friendly.

Ralph Nader's Public Citizen group, acts as a watchdog on consumer interests. Lifted consumerism into a major social force. First with his successful attack on the automobile industry, resulted in the passage of the National Traffic and Motor Vehicle and Safety Act of 1962.

Societal forces pressure political forces to create legal forces governed by regulatory forces.
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Regulatory: Political Forces

Currently in power

Reagan era vs Clinton era. Health care reform impacting on small business.
Pressure on the tobacco industry...threatening to regulate cigarettes like other drugs..."underage sales prohibited" will appear on Philip Morris tobacco products. Philip Morris agrees to stop placing billboard ads. in stadiums that can be viewed on TV....24yr TV advertising ban.
Actions may strengthen the market leaders, Philip Morris. Luxury Tax 10% excise tax on boats over $100,000.

Handout...Profits Ahoy!

The luxury tax, that was supposed to aid in the redistribution of wealth, as far as taxing the wealthy to help finance government programs---actually harmed industries that marketed products that were to be taxed...i.e. the boat industry. Tax was created in 1989 and repealed in 1992.

Government purchases about 20% GNP, government is therefore a significant purchaser of many organizations products.

Handout...Wayne firm gets boost...

Companies that have relied on the defence industry have had to adapt their technologies to new markets in order to survive. ECC of Wayne, PA has recently begun producing vending machines for Snapple beverages...they had traditionally relied on winning defence contracts.

Develops new legislation, example gasoline tax, welfare reform, health care reform.

Legal interpretation by the courts. Creation and activities of regulatory agencies.

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Regulatory: Legal Forces

Created by the political force In statute
Three types The following are important acts to be familiar with: Return to Content List

Regulatory Forces

Governing Legal forces
Business can be governed at the following level: Examples of Federal Regulatory agencies: Return to Content List

Economic forces

Business life cycles: Marketers may need to adjust their marketing mix as the economy passes through different stages.
Different between a depression and recession = the number of months certain economic figures decline etc., but different economists use different indicators.
Political force...Government uses fiscal and monetary policy to control the economy.
Fed: Alan Greenspan increased interest rates to try to curb excessive growth that would lead to inflation, has now reduced the rates since the economy has not shown the signs of anticipated inflation.
Interest rates have a big impact on COST OF MONEY...Business investment....consumer spending.
Consumer buying power determined by income (Interest, Rent, wages): Consumer demand and spending patterns are effected by the economy and the perception of the future. Need to determine: Return to Content List

Competitive forces

All firms compete for consumers dollars.

Handout...War on Smoking is Music to...

It is not only important to focus on your direct competitors (gum marketers) but also all marketers that target your customers and therefore compete with you for their income.

Competitive Structures:

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Technological Forces

From research performed by businesses, universities and non-profit organizations.
Consumers technological knowledge influences their desires for goods and services.
Examples of +ve results of changing technology: Examples of -ve consequences of technological change: Patent protection leads to a barrier to entry, monopoly. Without it companies may be unwilling to launch new products that incorporate new technologies for fear of copying, therefore nothing is gained.
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Examples: Return to Content List

Environmental Responses

Two ways to respond to the environment: Return to Content List
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