Chapter 3:
The Marketing
Environment, Social
Responsibility, and
Ethics
Pride/Ferrell
Foundations of Marketing
Fourth Edition
Prepared by Milton Pressley
University of New Orleans
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Objectives
1. Recognize the importance of environmental
scanning and analysis.
2. Explore the effects of competitive, economic,
political, legal and regulatory, technological,
and sociocultural factors on marketing
strategies.
3. Understand the concept and dimensions of
social responsibility.
4. Differentiate between ethics and social
responsibility.
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The Marketing Environment
• Environmental Scanning
– The process of collecting information
about forces in the marketing
environment.
• Environmental Analysis
– The process of assessing and interpreting
the information gathered through
environmental scanning.
– ‘How you deal with the information
collected.’
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Responding to Environmental Forces
Environmental
Forces
Uncontrollable
Passive
Reactive
Controllable
Active
Reactive
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Environmental Forces
Competitive
Political
Economic
Environmental
Forces
Legal and
Regulatory
Technological
Sociocultural
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The Marketing Environment
• Bosch is responding to the marketing
environment by showing a concern
for the environment in this
commercial.
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Types of Competitors
• Brand competitors
– Firms that market products with similar features
and benefits to the same customers at similar
prices
• Product competitors
– Firms that compete in the same product class but
market products with different features, benefits,
and prices
• Generic competitors
– Firms that provide very different products that
solve the same problem or satisfy the same basic
customer need
• Total budget competitors
– Firms that compete for the limited financial
resources of the same customers
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How Competitive Forces Align
Types of
Competitors
Brand
Competitors
Generic
Competitors
Product
Competitors
Total Budget
Competitors
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Competitive Forces
Brand and Product Competition – Other firms that market products
that are similar to or can be substituted for a firm’s products in the
same georgraphic area
IKEA and Lowe’s compete in the kitchen remodeling market.
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Selected Characteristics of Competitive
Structures
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Monitoring Competition
• Helps determine competitors’ strategies and
their effects on firm’s own strategies
• Guides development of competitive
advantage and adjusting firm’s strategy
• Provides ongoing information about
competitors
• Assists in maintaining a marketing
orientation
• What are the ethical issues that emerge in
managing competitive intelligence?
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Buying Power and
Willingness to Spend
• Buying Power
– Resources such as money, goods, and services,
that can be traded in an exchange
• Disposable Income
– After-tax income
• Discretionary Income
– Disposable income available for spending and
saving after an individual has purchased the basic
necessities
• Willingness to spend
– An inclination to buy because of expected
satisfaction from a product, influenced by the
ability to buy and the numerous psychological
and social forces
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Economic Forces
• The Business Cycle – a pattern of economic
fluctuations that has four stages:
Prosperity
Recovery
Recession
Depression
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The Business Cycle
• Prosperity
– Unemployment is low and total income is
relatively high
• Recession
– Unemployment rises and total buying power
declines
• Depression
– Unemployment is extremely high, wages are very
low, total disposable income is at a minimum, and
consumers lack confidence in the economy
• Recovery
– The economy moves from depression or
recession to prosperity
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Figure 3.1 American Customer
Satisfaction Index
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The Marketing Environment
Economic Forces
Tag Heuer and Omega rely on consumers with significant
discretionary income to purchase their watches.
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Political Forces
• Enactment of legislation
• Legal decisions interpreted by courts
through civil and criminal cases
• Influence of regulatory agencies
• Marketers
– Adjust to conditions
– Influence the process through
contributions and lobbying
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The Federal Trade Commission (FTC)
• Most heavily influences marketing activities
(of all regulatory units)
• Large portion of its resources spent on
curbing inappropriate behavior:
– false advertising
– misleading pricing
– deceptive packaging and labeling
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Legal and Regulatory Influence
• Procompetitive legislation- preserves
competition
• Consumer protection legislation
– Protect people from harm
– Prohibit hazardous products
– Information disclosure
– Particular marketing activities
• Encourages compliance
• Regulatory agencies
• Self-regulatory forces
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Table 3.2-Major Federal Laws That Affect
Marketing Decisions-Procompetitive
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Table 3.2-Major Federal Laws That Affect
Marketing Decisions-Consumer Protection
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Table 3.2-Major Federal Laws That
Affect Marketing Decisions-Copyright
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Regulatory Forces
• Regulatory Agencies
– Federal Trade Commission (FTC)
– Food and Drug Administration (FDA)
– Consumer Product Safety Commission
– Federal Communications Commission
(FCC)
– Environmental Protection Agency (EPA)
– Federal Power Commission (FPC)
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Self-Regulatory Forces
• Better Business Bureau
• National Advertising
Review Board (NARB)
Advantages
- Less expensive
- More realistic and operational
Limitations
- Nonmember firms do not
have to abide
- Lack of enforcement tools
- Often less strict
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Technological Forces
• Technology
– The application of knowledge
and tools to solve problems and
perform tasks more efficiently.
• Effects of technology
» Dynamic change
» Ability to reach customers
» Self-sustaining technology
Insert illustration from p. 61
Impact of Technology
The use of corn ethanol is
having an impact on many
industries and companies
such as BASF
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Sociocultural Forces
The influences in a society
and its culture(s) that
change people’s
attitudes, beliefs, norms,
customs, and lifestyles
In our culture, there are
changing values
regarding the provision
of health care.
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Figure 3.2 U.S. Population Projections
by Race
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Social Responsibility
• An organization’s
obligation to maximize its
positive impact and
minimize its negative
impact on society.
– Marketing citizenship
– Stakeholder responsiveness
The Nature of Social Responsibility
The Home Depot recognizes its social
responsibility in hiring over 50,000
members of the military community
over the past several years.
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Discussion Question
• List four things or values that you think
Walgreens should consider important to its
social responsibility. After the discussion,
click on the @ symbol below to see
Walgreen's’ Social Responsibility
statement.
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Marketing Citizenship
The adoption of a strategic focus
for fulfilling the economic, legal,
ethical, and philanthropic social
responsibilities expected by
stakeholders
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Pyramid of Social Responsibility
Source: Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of
Organizational Stakeholders,” adaptation of Figure 3, p. 42. Reprinted from Business Horizons, July/August 1991.
Copyright 1991 by the Foundation for the School of Business at Indiana University. Reprinted with permission.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Marketing Citizenship Affects
Stakeholder Groups
Stakeholder Groups:
Customers
Possible Effects:
Positive product evaluation
Customer loyalty
Positive word-of-mouth
Long-term relationships
Enhanced corporate reputation
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Marketing channel members
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Long-term partnerships
Trusting relationships
Enhanced efficiency in communications
Employees
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Improved self-concept
Increased commitment and motivation
Reduced absenteeism and turnover
Trust in co-worker relationships
Enhanced efficiency in communication
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Ethical Dimension
Marketing Ethics – Principles and standards that
define acceptable marketing conduct as
determined by various stakeholder
Ethical issue – An identifiable problem, situation, or
opportunity requiring a choice among several
actions that must be evaluated as right or wrong
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Table 3.3 Ethical Issues in Marketing
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Philanthropic Dimension
• Cause-related marketing
– the practice of linking products to a
particular social cause on an ongoing or
short-term basis
• Strategic philanthropy
– the synergistic use of organizational core
competencies and resources to address
key stakeholders’ interests and achieve
both organizational and social benefits
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Green Marketing
• The specific development,
pricing, promotion, and
distribution of products
that do not harm the
natural environment.
Demonstrating Social Responsibility
Shell recognizes its environmental
responsibilities through recycling
programs and efforts to reduce
greenhouse gases.
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Foundations of Consumerism
• Consumerism
– The organized efforts of individuals, groups,
and organizations to protect the rights of
consumers
• Lobbying government officials and agencies
• Letter-writing campaigns and boycotts
– Kennedy’s Consumer “Bill of Rights”
• Right to safety
• Right to be informed
• Right to choose
• Right to be heard
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Discussion Question
• Click on the @ symbol below to see
Walgreens’ “Four-Way Test.” Based on
ethical business principles, these four
questions are the foundation of the
“Walgreen Way.”
• Can you think of something
to add to this “Four-Way
Test” to improve Walgreen’s
ethics?
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Social Responsibility and Ethics
in Marketing
• Incorporating Social Responsibility and
Ethics Into Strategic Planning
- Ethics – individual and group decisions or
judgments about right and wrong
- Social Responsibility- total effect of
marketing decisions on society
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Social Responsibility and Ethics
in Marketing
Incorporating Social Responsibility
The EPA recognizes companies as “Climate Leaders” who reduce
their carbon footprint and control greenhouse gas emissions
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
After Reviewing This Chapter
You Should:
1. Be able to recognize the importance of
environmental scanning and analysis.
2. Be able to explore the effects of competitive,
economic, political, legal and regulatory,
technological, and sociocultural factors on
marketing strategies.
3. Understand the concept and dimensions of
social responsibility.
4. Be able to differentiate between ethics and
social responsibility.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Key Concepts
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Environmental scanning
Environmental analysis
Competition
Brand competitors
Product competitors
Generic competitors
Total budget competitors
Monopoly
Oligopoly
Monopolistic competition
Pure competition
Buying power
Disposable income
Discretionary income
Willingness to spend
• Federal Trade Commission
(FTC)
• Better Business Bureau (BBB)
• National Advertising Review
Board (NARB)
• Technology
• Sociocultural forces
• Social responsibility
• Marketing citizenship
• Marketing ethics
• Ethical issue
• Cause-related marketing
• Strategic philanthropy
• Green marketing
• Consumerism
• Codes of conduct
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.