Part One
Strategic Marketing
and Its
Environment
Chapter 03
The Marketing
Environment,
Social Responsibility,
and Ethics
Chapter Learning Objectives
1. To recognize the importance of environmental
scanning and analysis
2. To explore the effects of competitive, economic,
political, legal and regulatory, technological, and
sociocultural factors on marketing strategies
3. To understand the concept and dimensions of
social responsibility
4. To differentiate between ethics and social
responsibility
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Chapter Outline
• The Marketing Environment
–
–
–
–
–
–
–
Responding to the Marketing Environment
Competitive forces
Economic forces
Political forces
Legal and Regulatory forces
Technological forces
Sociocultural forces
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Chapter Outline (cont’d)
• Social Responsibility and Ethics in Marketing
–
–
–
–
–
Economic Dimension
Legal Dimension
Ethical Dimension
Philanthropic Dimension
Incorporating Social Responsibility and Ethics into
Strategic Planning
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The Marketing Environment
• Environmental Scanning
– The process of collecting information about
forces in the marketing environment
• Observation
• Secondary sources
• Market research
• Environmental Analysis
– The process of assessing and interpreting the
information gathered through environmental
scanning
• Accuracy
• Consistency
• Significance
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The Marketing Environment (cont’d)
• Responding to Environmental Forces
– Reactive approach
• Passive view of environment as uncontrollable
• Current strategy is cautiously adjusted to accommodate
environmental changes
– Proactive approach
• Actively attempts to shape and influence environment
• Strategies are constructed to overcome market
challenges and take advantage of opportunities
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Types of Competitors
• Competition
– other firms that market products similar to or that can be
substituted for its products in the same geographic area
– Brand competitors—market products with similar features and
benefits to the same customers at similar prices
– Product competitors—compete in the same product class, but
their products have different features, benefits, and prices
– Generic competitors—provide very different products that solve
the same problem or satisfy the same basic customer need
– Total budget competitors—compete for the limited financial
resources of the same customers
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Competitive Environment
• Monopoly
– A competitive structure in which an organization offers a
product that has no close substitute, making it the sole source
of supply
• Oligopoly
– A competitive structure in which a few sellers control the supply
of a large proportion of a product
• Monopolistic competition
– A competitive structure in which a firm with many potential
competitors attempts to develop a marketing strategy to
differentiate its product
• Pure competition
– A competitive structure involving a large number of sellers, no
one of which could significantly influence price or supply
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Competitive Forces
• 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
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Economic Forces
• Buying Power
– Resources, such as money, goods, and services,
that can be traded in an exchange
– Income
• Disposable income—after tax income
• Discretionary income—disposable income
available for spending and saving beyond
the basic necessities of life
– Credit
– Wealth
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Economic Forces (cont’d)
• Willingness to Spend
– An inclination to buy because of expected
satisfaction from a product, influenced by the ability
to buy and numerous psychological and social
forces
– Expectations influencing the willingness to spend:
•
•
•
•
•
Future employment
Income levels
Prices
Family size
General economic conditions (e.g., rising prices)
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Figure 3.1: American Customer
Satisfaction Index
Source: American Customer Satisfaction Index, University of Michigan Business School, May 16, 2006,
www.theacsi.org/press_releases/0506q1htm.
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Business Cycle
Positive Economic Indicators
• A pattern of economic fluctuations that has four
stages:
Prosperity
Recovery
Recession
Depression
Time
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Stages in the Business Cycle
Stages in the Business Cycle
Prosperity
Low unemployment and high total income
create high buying power
Recession
Rising unemployment reduces total buying
power; consumer and business spending
decline
Depression
Unemployment extremely high, wages and
total disposable income are very low, and
there is a lack of consumer confidence
Recovery
Economy is moving out of recession or
depression towards prosperity
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Political Forces
• Some organizations respond to political forces
reactively.
• Some firms respond proactively:
– Campaign contributions, often as “soft money”
– Political action committees (PACs)
– Lobbying elected officials
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Regulation
• Regulatory Agencies
– Federal Trade Commission (FTC) influences
marketing activities most; can seek civil penalties
and require corrective advertising
• Self-Regulatory Forces
– Better Business Bureau
– National Advertising Review
Board (NARB)
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Major Regulatory Agencies
Major Federal Regulatory Agencies
AGENCY
MAJOR AREAS OF RESPONSIBILITY
Federal Trade
Commission
(FTC)
Enforces laws and guidelines regarding business
practices; takes action to stop false and deceptive
advertising, pricing, packaging, and labeling
Food and Drug
Administration
(FDA)
Enforces laws and regulations to prevent
distribution of adulterated or misbranded foods,
drugs, medical devices, cosmetics, veterinary
products, and potentially hazardous consumer
products
Consumer
Product Safety
Commission
(FCC)
Ensures compliance with the Consumer Product
Safety Act; protects the public from unreasonable
risk of injury from any consumer product not
covered by other regulatory agencies
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Major Regulatory Agencies (cont’d)
Major Federal Regulatory Agencies (cont’d)
AGENCY
MAJOR AREAS OF RESPONSIBILITY
Federal
Regulates communication by wire, radio, and
Communications television in interstate and foreign commerce
Commission
(FCC)
Environmental
Protection
Agency (EPA)
Develops and enforces environmental protection
standards and conducts research into the adverse
effects of pollution
Federal Power
Commission
(FPC)
Regulates rates and sales of natural gas
producers, thereby affecting the supply and price
of gas available to consumers; also regulates
wholesale rates for electricity and gas, pipeline
construction, and U.S. imports and exports of
natural gas and electricity
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Technological Forces
• Technology
– The application of knowledge and tools to solve
problems and perform tasks more efficiently
• Impact of Technology
– Dynamic means constant change
– Reach refers to how technology
quickly moves through society.
– The self-sustaining nature of
technology as the catalyst
for even faster development
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Sociocultural Forces
• Sociocultural Forces
– The influences in a society and its culture(s) that
change people’s attitudes, beliefs, norms, customs,
and lifestyles
• Demographic Diversity and Characteristics
–
–
–
–
Increasing proportion of older consumers
Increasing number of people living alone
Entering another baby boom
Increasingly multicultural U.S. society
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Sociocultural Forces
• Cultural Values
– Primary source of values is the family
– Values influence:
• Eating habits (healthier foods) Alternative health and
medical treatment choices
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Figure 3.2: U.S. Population
Projections by Race
Source: U.S. Census Bureau, “U.S. Interim Projections by Age, Sex, Race, and Hispanic Origin,” March 18, 2004,
www.census.gov/ipc/www/usinterimproj/natprojtab01a.pdf.
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Social Responsibility and Ethics in
Marketing
• Social Responsibility
– An organization’s obligation to maximize its positive
impact and minimize its negative impact on society
• Stakeholders
Constituents who have a “stake” or claim in some aspect of the
company’s products, operations, markets, industry, and
outcomes
• 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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Figure 3.3: The Pyramid of Corporate
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/Aug. 1991. Copyright © 1991 by the Trustees at Indiana University, Kelley School of Business. Used with permission.
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Ethical Dimension
• Marketing Ethics
– Principles and standards that define acceptable
marketing conduct as determined by various
stakeholders
• Ethical Issue
– An identifiable problem,
situation, or opportunity
requiring a choice among
several actions that must be
evaluated as right or wrong,
ethical or unethical
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Influence Factors of Ethical Standards
Company
Industry
Government
Customers
Interest Groups
Society
Influence
Factors
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Ethical
Standards
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Philanthropic Dimension
• Cause-Related Marketing
– The practice of linking products to a particular 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
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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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Incorporating Social Responsibility and
Ethics into Strategic Planning
Ethics
Individual and
group decisions
Social
Responsibility
The total effect of
marketing decisions
on society
Overall Strategic Marketing Planning
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Benefits of Codes of Conduct and
Social Responsibility
• Codes of Conduct (Ethics)
– Formalized rules and standards that describe what
the company expects of its employees
• Social responsibility and ethics improve
marketing performance.
– Socially responsible companies (and their
employees) can better respond to stakeholder
demands.
– A company’s reputation for social responsibility is
important to consumers’ buying decisions.
– Social responsibility and ethical behavior reduce the
costs of legal violations, civil litigation, and damaging
publicity.
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Source: “Survey Documents State of Ethics in the Workplace,” Ethics Resource Center, press release, Oct. 12, 2005,
www.ethics.org/nbes/nbes2005/release.html..
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After reviewing this chapter you should:
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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3 | 38