The Macro Environment
Political: The outcome of political decisions can often be seen in the economic and
legislative policies of governments. In the UK, major marketing opportunities and threats
in recent years have stemmed from the political policies and legislation of successive
governments irrespective of their political hue.
The fact the Bush administration stopped funding the project hence they were forced into
the private sector.
Public-choice theory (Buchanan and Tullock): government failures leads to private sector
action
Barr(2001): If the government fails the market is more justified to work
Taxation: The more the companies get taxed, the less of the profits will be contributed
towards the Global Fund. Due to RED not being a traditional charity model, taxation will
apply to the businesses selling RED products – refer to after profit tax – Bowles and
Gordon (2000)
In the United States, the top marginal federal corporate rate for income over $18.3
million is 35% (it can be as low as 15% for income under $50,000). Most states also
tax companies,[2] but the state tax is a deductible expense in calculating federal tax,
so the overall tax rate is not simply the sum of the two tax rates.
The UK main rate of Corporation Tax was reduced on 1 April 2008 from 30% to
28%. This applies to companies with a taxable profit greater than £1.5m. Companies
with taxable profits under £300,000 pay tax at the lower rate of 21%, with a sliding
scale rate for profits up to £1.5m. Profits are taxed dependant on which bracket the
company falls into, i.e. a company with profits of £2m would pay tax on all profits at
28%.
Limited Liability Companies and partnerships that carry on no business in the US and derive no
income from any sources within the US do not need to file a US federal tax return. The US can
thus be a conduit for foreign business or foreign investments - the LLC allows the foreign
business or foreign investor to use many of the United States' tax treaties. However, an LLC that
elects to be treated as a corporation does need to file a return.
Economic: Recession and low interest rates: The current economic climate makes it
unfavourable for consumers to spend more money as they have less confidence and lower
disposable incomes to spend on products other than needs. However, as interest rates are
low, this encourages people to spend rather than save as saving would result in lower
interest being accumulated over time in ones savings account.
Exchange rates: Foreign people would favour UK RED products due to the
weakening of the pound in today’s economic market. – Begg (2005)
Index of consumers' attitudes rises in March but remains near historic lows as
unemployment rises – CnnMoney
http://money.cnn.com/2009/03/31/news/economy/consumer_confidence/index.h
tm?postversion=2009033111
The credit crunch did not affect Armani:Amongst all the bad news, stories of
canceled projects in Dubai and lawsuits involving Donald Trump, it is good to be
able to report on one company, at least , that does not seem in any way affected by
the current financial crisis.
Giorgio Armani, in partnership with Dubai-based Emaar Properties, has started
work on the Giorgio Armani Hotel Milano. The project is scheduled for completion in
2010, and is situated above the designer’s megastore in Via Manzoni, in a building
dating back to 1937 and originally designed by Venetian architect Enrico Agostino
Griffini.
Socio-cultural: Core cultural and social values are firmly established within a society
and we are generally difficult to change. If and when they do change, they do so slowly. It
is important to note that although core cultural and social values change relatively slowly,
changes in this area are now taking place increasingly rapidly.
Education: THE TELEGRAPH In total, some 296,000 English school leavers started
degree courses compared to 285,000 a year earlier.
The role of a celebrity in founding Product Red (Bono), this relates to post modern
theory. In addition to this, conscious consumers are increasing in great amounts nowadays
The Youth Market: They have higher discretionary income than others,
Today graying college leaders on the verge of retirement continue to carry the
ideological torch, crusading for various causes in ways that often irritate their
younger Gen X colleagues. Meanwhile, undergraduates are showing yet another
generational personality: The members of this rising Millennial Generation tend to
be upbeat, team-oriented, close to their parents, and confident about their future.
Unlike Boomers, they do not want to “teach the world to sing.” Unlike Gen Xers, they
don’t “just do it”—they plan ahead. - by Neil Howe and William Strauss, 2007
Technological: With an increase in communication mediums, social networking is
prominent through the availability of computers and the internet. The vast available
information provided by the internet allows consumers to readily acquire research on
brands and companies. For example Buylesscrap.com is an anti-RED website which
argues that consumerism is not necessary to do good. This adds pressure to RED and their
affiliated brands/companies. The increase in technology will help reduce costs in the
interaction process between RED and partner companies due to the ease of information
exchange leading to the reduction in transaction, production and product costs.
Seboyld et al (2001) – Customers taking over the internet and start interacting and
initiating all over the place, the consumers know what to do with that knowledge
Legal: Contracts: There are contracts that are negotiated between partner companies and
the Global Fund and Product RED. The govertnment is also involved in these contracts.
Due to the fact that this is not a traditional charity model, its a novel business model there
could be legal requirements which the businesses have to oblige to in reference to
transparency in financial aspects.
The Red campaign itself does not advertise, said Susan Smith Ellis, the chief
executive. Instead, companies pay Red a licensing fee to label one or more of their
products “(RED).” Then, they pay a portion of sales from those products to the
Global Fund, a public-private charity set up six years ago to fight AIDS, malaria and
tuberculosis in Africa – New York Times
By using this website, you agree to be bound by the following terms and
conditions governing your use of this website. If you do not agree to these
terms and conditions, please do not use this website. - Joinred.com
("(PRODUCT) RED") is the official (PRODUCT) RED™ website. The names,
trademarks, logos, designs, text and graphics used on this website, the
selection and arrangement thereof, and all other materials used on this
website, are and shall remain owned by The Persuaders, LLC ("us" or
"The Persuaders"). Notwithstanding the foregoing, from time to time, certain
third party trademarks, copyrighted materials and other intellectual property
not owned by The Persuaders may appear on this website. When such
materials appear appropriate credits and notices will be displayed.
Environment: Raw material: Motorola phones are part og an industy with serious
human-rights issues: a key component, the metallic ore coltan, is sometimes sourced from
war-ravaged Congo in Africa (through Motorola claims it sources from legal suppliers).
They use raw materials of African mudcloths to make RED products such as Converse
sneakers
Emissions: are generated from the distribution of RED products.
Dell’s RED printer is environmental friendly: Dell takes great pride in being a
responsible corporate citizen and is dedicated to the development of eco-friendly
products. The V505w is a perfect example of this policy. Learn more at
www.dell.com/earth.
The Micro Environment
Companies were selected by Product Red because they are well known successful brands.
Are they still successful? Is the current economic climate affecting any of the companies?
Market:
New entrants: Blue ocean strategy: If the RED model becomes successful for a certain
period of time then competition can enter and the world can turn red
Other companies may wish to follow suit if it is successful and profitable. Marketing
myopia---> Levitt----> who is your competition. Is there a danger of new entrants?
Replication of the model or even competitors to its current firms such as Gucci for
Armani is a threat
Suppliers: The partners companies’ competition is also going to be RED’s competition
as if consumers go to other brands this will negatively affect RED’s sales revenue. As
RED have partnered with the trendy and fashionable brands such as Armani, Gap, and
Apple, this may be a risky idea as fashion trends are constantly fluctuating and what was
fashionable yesterday may not be fashionable today. Therefore, Product RED will need to
be constantly aware of today’s trends and consumer tastes by partnering with today’s
most fashionable brands and this can be achieved through extensive market and consumer
research.
Complex network of supply lines for each firm for example Armani Cosmetics: The
beauty brand by Armani features cosmetics, skin care, perfumes, and colognes. It is
produced and distributed by the luxury division of L'Oreal, with which Armani has a
long-term partnership agreement. It is available at many department stores
worldwide and has very few boutiques  (Red) Armani Perfume
Buyers: Red's parent companies all have a similar target market of 15-30 year olds
Age
Sex
Apple
Young
adults
particularly
12-25
Users 15 45
Male and
female
Gap
20-35
Converse
15-25
Motorola
Young
generation
Armani
25-35
Amex
Traditionally
over 40
Now 25-35
Male
and
female
Male and
female
male and
female
Male and
female
Male and
female
Income/
£15000occupation £40000
Young
Over
professionals £15000
Substitute: The partner companies’ non-RED products in addition to the other companies
outside products
Examples:
 RED iPods and other coloured iPods/other models are substitutes
 Gap’s other T-shirts or other brands’ T-shirts instead of RED ones
 iPhone can be a potential substitute for the RED iPods as it includes music
storage technology as well as the capability of calling people and all the
other programs it contains
 Other charities aligning themselves with well-known companies.
http://en.wikipedia.org/wiki/Marketing_myopia
Value Chain and Direct Product costing
Developed by Porter, value chain analysis is aimed at identifying potential competitive
advantages. Porter suggested that the activities of a company can be broken down into
nine ‘value activities,’ five primary, and four secondary.
Value is added to all of the products which the brands develop through adding Product
Red to their products. The companies can then gain a competitive advantage and edge
over competitors. “Each company that becomes (RED) places their logo in the embrace.
And this embrace is elevated in superscript to the power of RED. Thus the name:
(PRODUCT)RED.” - Smith
Inbound logistics include activities such as materials handling and stock control.
Operations include assembly, packaging and testing. Outbound logistics includes finished
goods warehousing and material handling, and service which is installation and repairs.
All of these operations are carried out independently by each individual partner company.
Marketing and sales are shared between (RED) and the companies. (RED) indirectly
markets the products for the companies through creating brand awareness and
recognition, because of their partnerships with companies such as Myspace, VH1 and
celebrity figures such as Oprah on the Oprah Winfrey show. Individual companies are
able to benefit from these initiatives. After all of these operations, value is added to each
of these products.
Support activities, including procurement, refers to the function of purchasing inputs used
in the organisations value chain and not to the purchased inputs themselves.
Technology development: these are support activities which improve the product and the
service. The obvious areas of support activities here are those which are carried out in the
research and development function. But they also include, for example, technology
support activities for office automation, communication with customers, measuring
quality and so on.
Human resource management: activities here would include recruitment, training and
development
Firm infrastructure: examples of support activities in this category would include systems
of quality control, financial systems and marketing planning
(Lancaster & Massingham, 2001)
The benefits of the value chain: 1) It provides a framework for addressing our earlier problem of
which attributes or activities to assess in our strengths and weaknesses analyses 2) Secondly it uses
value and forces the analysis to see the strength and weaknesses in relation to the customers and the
competition (Johnson and Scholes) observed this as well 3) The concept horizontal linkages reenforces the concept of interrelationships and synergies and balance. 4) Vertical linkages make us
think more broadly about strengths and weaknesses through suppliers and distributors
Ansoff's Product/Market Matrix
Market Penetration
Here we market our existing products to our existing customers. This means
increasing our revenue by, for example, promoting the product, repositioning the
brand, and so on. However, the product is not altered and we do not seek any new
customers.
Market Development
Here we market our existing product range in a new market. This means that the
product remains the same, but it is marketed to a new audience. Exporting the
product, or marketing it in a new region, are examples of market development.
Product Development
This is a new product to be marketed to our existing customers. Here we develop
and innovate new product offerings to replace existing ones. Such products are then
marketed to our existing customers. This often happens with the auto markets
where existing models are updated or replaced and then marketed to existing
customers.
Diversification
This is where we market completely new products to new customers. There are two
types of diversification, namely related and unrelated diversification. Related
diversification means that we remain in a market or industry with which we are
familiar. For example, a soup manufacturer diversifies into cake manufacture (i.e.
the food industry). Unrelated diversification is where we have no previous industry
nor market experience. For example a soup manufacturer invests in the rail
business.
Harvard Business Review. W. Chan Kim and Renee Mauborgne
Unfortunately, most companies seem becalmed in their red oceans. In a study of business
launches in 108 companies, we found that 86% of those new ventures were line
extensions—incremental improvements to existing industry offerings. This is evident in
Apples case where they introduced the iPod Nano and shuffle in a red colour in response
to Product Red. A mere 14% were aimed at creating new markets or industries. While
line extensions did account for 62% of the total revenues, they delivered only 39% of the
total profits. By contrast, the 14% invested in creating new markets and industries
delivered 38% of total revenues and a startling 61% of total profits.
Evaluation
Marketing myopia is a term used in marketing as well as the title of an important
marketing paper written by Theodore Levitt.[1][2] This paper was first published in 1960 in
the Harvard Business Review; a journal of which he was an editor.
Some commentators have suggested that its publication marked the beginning of the
modern marketing movement. Its theme is that the vision of most organizations is too
constricted by a narrow understanding of what business they are in. It exhorted CEOs to
re-examine their corporate vision; and redefine their markets in terms of wider
perspectives. It was successful in its impact because it was, as with all of Levitt's work,
essentially practical and pragmatic. Organizations found that they had been missing
opportunities which were plain to see once they adopted the wider view. The paper was
influential. The oil companies (which represented one of his main examples in the paper)
redefined their business as energy rather than just petroleum; although Royal Dutch Shell,
which embarked upon an investment program in nuclear power, subsequently regretted
this course of action.
One reason that short sightedness is so common is that people feel that they cannot
accurately predict the future. While this is a legitimate concern, it is also possible to use a
whole range of business prediction techniques currently available to estimate future
circumstances as best as possible.
There is a greater scope of opportunities as the industry changes. It trains managers to
look beyond their current business activities and think "outside the box". George Steiner
(1979) claims that if a buggy whip manufacturer in 1910 defined its business as the
"transportation starter business", they might have been able to make the creative leap
necessary to move into the automobile business when technological change demanded
it.[3]
People who focus on marketing strategy, various predictive techniques, and the
customer's lifetime value can rise above myopia to a certain extent. This can entail the use
of long-term profit objectives (sometimes at the risk of sacrificing short term objectives).
Harvard Business Review
http://www.dallascap.com/pdfs/MarketingMyopia.pdf
"We Know Who You Are and We Know Where You Live": The Instrumental
Rationality of Geo-demographic Systems by Jon Goss (1995)
Abstract
 Electronic data bases on consumer characteristics and behaviour, segmentation
schemes, and Geographic Information Systems (GIS)
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Examines strategic implications of each component of geo-demographics,
including electronic surveillance and the erosion of privacy
Spatial inference and the representation of social space and segmentation and
construction of consumer identity
Role of consumer in geo-demographics and potential for tactical resistances to its
strategy
Geo-demographics works by collecting spatially referenced data on consumers,
constructing statistical models of identity, and mapping distributions of consumer
characteristics or types
Geo-demographic system combines three essential components:
o Massive electronic data bases composed of public and private, individual
and aggregate records on consumer identity and behaviour
o Geographic Information Systems (GIS) that provide the tools to analyze,
locate, and graphically represent the spatial distribution of consumer
characteristics
o Segmentation schemes that identify consumer types through factor and
cluster analysis of spatially referenced demographic and psychographic
data
Capacity of geo-demographics to sell intimate knowledge on consumers has led to
expressions of concern in the media (see, e.g., Schwartz 1991; Miller 1991; "No
Hiding Place" 1993; WGBH Boston 1992; M.J. Smith 1993; R.E. Smith 1992;
Flowers 1993)
Legal actions and informational campaigns by organizations such as the American
Civil Liberties Union and Computer Professionals for Social Responsibility (these
organizations were instrumental in halting the development of the product Lotus
Marketplace, which would have provided, at a modest price, credit and other
intimate forms of data on 120 million households (see Gandy 1993, 93)); and to
the development of specific advocacy groups such as Privacy Rights
Clearinghouse, the Stop Junk Mail Association, and Privacy International (see
Lyon 1994, 177)
Evidence of an increasing level of awareness among the general public of the
threat to personal privacy that target marketing may constitute.
Study by Louis Harris and Associates as early as 1984 found that the majority of
the general public believes that computer data bases are a threat to privacy
(Mendes 1988, 193); by 1991, almost half of those surveyed were "very
concerned" and almost one-third claimed to have foregone services in order to
protect their privacy (Larson 1992, 209)
Privacy is a difficult concept, culturally specific and politically contested; it can
be conceived as an extrinsic value that provides the conditions for the enjoyment
of other rights (Muthuchidambaram 1988, 194), particularly for the exercise of the
freedom of action and association critical to self-actualization, or the realization of
individual identity. Information technologies threaten privacy when the release of
records about an individual's behaviour or beliefs "unnecessarily" or "unjustly"
com-promises that individual's identity
Terrain of social life systematically territorialized by capital and state for the
purpose of efficient profit and administration, and marketing sciences are able to
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occupy a position from which to exercise surveillance and control over the field of
consumption
Geo-demographics, for example, is only possible because of the administrative
geographies of the U.S. Bureau of the Census, the U.S. Postal Service, and various
media monopolies and increasing complementarity in function between public and
private bureaucracies as the state ventures into the business of government and as
commerce seeks to administer the lives of consumer-citizens
Geo-demographics in its marketing and electoral applications is only the most
recent of information technologies to extend the capacity for strategic control of
everyday life
The Value of Marketing Expertise by Mehmet Paşa and Steven M. Shugan (1996)
Abstract
 Three objectives:
1. Construct a theoretical model that aids in evaluating marketing expertise
2. Use that theoretical model to identify factors influencing the value of
marketing expertise
3. Empirically test the model by observing how different market conditions
influence whether companies emphasize marketing expertise. We
accomplish these objectives as follows.
 Decision theory to find an expression for the expected value of marketing
expertise; do not use decision-analysis in the normative tradition, or assume that
firms actually use formal decision-analysis
 Assume that firms are rational and that decision theory describes their actions
o Given above assumption, predict how firms should evaluate marketing;
marketing expertise helps a firm make better marketing decisions (at least
on average); hence, value of marketing expertise increases as marketing
decisions become more important
 Consistent with decision theory, predict that marketing decisions become more
important with increases in the instability of the marketing environment (i.e.,
predictability), the profit impact of marketing decisions (i.e., opportunity profit),
and the loss from marketing mistakes (i.e., potential loss).
 Construct empirical measures of theoretical constructs with data from 592 firms
 Empirical results are consistent with predictions and reveal factors influencing
marketing expertise value
o E.g. greater market instability and market presence increase the value of
marketing expertise, while larger organization size, organization
instability, and competition decrease its value
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Value of marketing expertise depends on three factors: (1) the probability of a
mistake; (2) the profit impact from alternate strategies, i.e., strategies not taken
without marketing expertise; and (3) the potential loss from a mistake. Moreover,
the value of non-marketing expertise would be influenced by similar factors
Findings are limited by the extent of measures and database
o For example, relied heavily on the market research spending and CEO
background as our measures of the value of marketing expertise
Arguable that marketing expertise encompasses many other activities; second
measure, professional background of CEO, may be somewhat controversial. It
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would be valuable to do future work looking into different measures of these
constructs
Future research should analyze different cross sections of the data, such as firm
type (e.g., industrial versus consumer)
Any significant differences across groups can be studied; goal was to identify firm
and market factors that have an impact on the value of marketing expertise, not to
identify industries per se
However, extending analyses to identify industries or industry groups can be
valuable; analyses based on U.S. industries. However, European and Asian
industries may provide richer examples with clearer distinctions between different
areas of expertise
Three factors influencing the expected value of marketing expertise:
1. The instability of the marketing environment
2. The profit impact of marketing decisions, and
3. The potential loss from marketing mistakes
Greater market instability and market presence (for marketing research spending)
increase value of marketing expertise, while higher organization instability, larger
organization size (for CEO background), and competition decrease the value of
marketing expertise
In sum, this research reinforces the emerging view that the firm and market factors
have an influence on the value of marketing expertise
Even though the various teams of each firm were expert in marketing, we can question
their expertise over the particular section since a) product red was a new product at the
beginning of its life cycle b) the business model was new on its on
Electronic Monitoring and Privacy Issues in Business-Marketing: The Ethics of the
DoubleClick Experience by Darren Charters (2002)
Abstract
 Examines the ethics of electronic monitoring for dvertising purposes and the
implications for Internet user privacy using as a backdrop DoubleClick Inc
 Paper will discuss electronic monitoring from an ethical perspective
 Explores various ethical theories that are applicable to understand privacy issues
in electronic monitoring
 Argued that, despite the fact that electronic monitoring always constitutes an
invasion of privacy, can still be ethically justified on both Utilitarian and Kantian
grounds
o From a Utilitarian perspective the emphasis must be on minimizing
potential harms
o From a Kantian perspective the emphasis must be on giving users
complete information so that they can make informed decisions as to
whether they are willing to be monitored
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o Product red got accused because Apple stopped being transparent about its
contribution
o
If DoubleClick was guilty of anything, it was just of being too far ahead in
anticipating customer tolerance for such activity
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Reflecting on the aborted initiative, Mr. O'Connor indicated that DoubleClick
would not combine personally identifiable information with anonymous user
activity profiles until such time as industry-wide privacy standards exist
Argued that electronic monitoring is almost always an invasion of the right to
privacy regardless of how the right to privacy is conceived
However, it can still be ethically justified on a Utilitarian basis provided its
benefits exceed realizable harm. In fact, electronic monitoring was ethically
justified on a utilitarian basis in Doubleclick's initial situation because of how it
was conceived and implemented. There was increased convenience and measures
were taken to minimize potential harm. However, privacy advocates should have
been aware from the outset that companies would have difficulty resisting the
opportunity to exploit potential gains made possible by attaching generic user
profiles to identifiable individuals
Also argued that there is another ethical justification for electronic monitoring
and, considering Doubleclick's recent conduct, it may be the most appropriate
foundation upon which to build future electronic monitoring activities
If Internet advertisers gave users the option of permitting or rejecting electronic
monitoring they could ethically justify the invasion of privacy on a Kantian basis.
No intention of discontinuing an activity that provides its competitive advantage,
but should not want to jeopardize itself by apparently engaging in conduct that
amounts to an unethical invasion of privacy
DoubleClick allayed initial concerns by ensuring that all profiles maintained
individual anonymity; DoubleClick could claim that its electronic marketing was
in fact an ethical invasion of privacy
Every reason to believe, both practically and ethically, that government regulators
should place control of electronic monitoring directly and completely by computer
users - The Electronic Communications Privacy Act of 1986 (ECPA Pub. L. 99508, Oct. 21, 1986, 100 Stat. 1848, 18 U.S.C. § 2510[2]) was enacted by the
United States Congress to extend government restrictions on wire taps from
telephone calls to include transmissions of electronic data by computer.
Specifically, ECPA was an amendment to Title III of the Omnibus Crime
Control and Safe Streets Act of 1968 (the Wiretap Statute), which was
primarily designed to prevent unauthorized government access to private
electronic communications. The ECPA also added new provisions prohibiting
access to stored electronic communications, i.e., the Stored Communications
Act,18 U.S.C. §§ 2701-2712. The ECPA also included so-called pen/trap
provisions that permit the tracing of telephone communications. §§ 31213127. Later, the ECPA was amended, and weakened to some extent, by some
provisions of the USA PATRIOT Act. In addition, Section 2709 of the Act,
which allowed the FBI to issue National Security Letters (NSLs) to Internet
service providers (ISPs) ordering them to disclose records about their
customers, was ruled unconstitutional under the First (and possibly Fourth)
Amendments in ACLU v. Ashcroft (2004). It is thought that this could be
applied to other uses of National Security Letters.