CHAPTER SCANNING THE MARKETING ENVIRONMENT Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-1 AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 1. Explain how environmental scanning provides information about social, economic, technological, competitive, and regulatory forces. 2. Describe how social forces such as demographics and culture and economic forces such as macroeconomic conditions and consumer income affect marketing. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-2 AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 3. Describe how technological changes can affect marketing. 4. Discuss the forms of competition that exist in a market, key components of competition, and the impact of competition on corporate structures. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-3 AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 5. Explain the major legislation that ensures competition and regulates the elements of the marketing mix. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-4 IT’S SHOW TIME! Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-5 Apple iPod Video How has the entertainment world changed? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-6 ENVIRONMENTAL SCANNING IN THE NEW MILLENNIUM • Environmental Scanning • An Environmental Scan of Today’s Marketplace Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-7 FIGURE 3-1 Environmental forces affecting the organization, as well as its suppliers and customers Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-8 FIGURE 3-2 An environmental scan of today’s marketplace Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-9 SOCIAL FORCES • Social Forces • Demographics The World Population at a Glance The U.S. Population Generational Cohorts • Baby Boomers • Millennials • Generation X • Generational Marketing • Generation Y Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-10 Olay Total Effects Which generational cohort is being reached? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-11 American Express Which generational cohort is being reached? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-12 DKNY Kids Which generational cohort is being reached? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-13 Motorola Which generational cohort is being reached? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-14 SOCIAL FORCES • Demographics Population Shifts • Statistical Areas • Metropolitan Statistical Area • Micropolitan Statistical Area • Metropolitan Divisions • Combined Statistical Areas Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-15 SOCIAL FORCES • Demographics Racial and Ethnic Diversity • Multicultural Marketing • Culture Changing Values Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-16 FIGURE 3-3 Racial and ethnic concentrations in the United States (excluding whites) Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-17 Concept Check 1. Describe three generational cohorts. A: (1) Baby boomers is the generation born between 1946 and 1964. (2) Generation X is the 15 percent of the U.S. population born between 1965 and 1976. (3) Generation Y is the 72 million Americans born between 1977 and 1994. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-18 Concept Check 2. Why are many companies developing multicultural marketing programs? A: (1) The racial and ethic diversity of the U.S. is changing rapidly due to the increases in the African American, Asian, and Hispanic populations, which increases their economic impact. (2) An accurate understanding of the culture of each group is essential if marketing efforts are to be successful. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-19 Concept Check 3. How are important values such as “health and fitness” reflected in the marketplace today. A: Millions of Americans are trying to live a healthier lifestyle. In response, companies have developed vitamins, exercise equipment, fitness drinks, magazines, and other products to target these consumers. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-20 ECONOMIC FORCES • Economy • Macroeconomic Conditions • Consumer Income Gross Income Disposable Income Discretionary Income Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-21 FIGURE 3-4 Income distribution of U. S. households Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-22 Cunard Queen Mary What happens when discretionary income rises? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-23 TECHNOLOGICAL FORCES • Technology • Technology of Tomorrow • Technology’s Impact on Customer Value Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-24 Memorex Thumb Drive What products might be replaced with this? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-25 Napster What products might be replaced with this? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-26 LG Plasma Screen TV What products might be replaced with this? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-27 Bayer How does technology change the marketplace? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-28 TECHNOLOGICAL FORCES • Electronic Business Technologies Marketspace Electronic Commerce Intranet Extranets Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-29 COMPETITIVE FORCES • Competition • Alternative Forms of Competition Pure Competition Monopolistic Competition Oligopoly Pure Monopoly • Small Businesses as Competitors Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-30 FIGURE 3-A Continuum of competition Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-31 Concept Check 1. What is the difference between a consumer’s disposable and discretionary income? A: Disposable income is the money a consumer has left after paying taxes to use for food, clothing, and shelter. Discretionary income is the money that remains after paying taxes for necessities. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-32 Concept Check 2. How does technology impact customer value? A: (1) Consumers assess value on the basis of other dimensions, such as quality, service, and relationships, due to the decline in the cost of technology. (2) Technology provides value through the development of new products. (3) Technology has changed the way existing products are produced through recycling and precycling. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-33 Concept Check large 3. In pure competition there are a ____ number of sellers. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-34 REGULATORY FORCES • Regulation • Protecting Competition Sherman Antitrust Act (1890) Clayton Act (1914) Robinson-Patman Act (1936) Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-35 REGULATORY FORCES • Product-Related Regulation Company Protection • Patent Law • Copyright Law • Digital Millennium Copyright Act (1998) Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-36 REGULATORY FORCES • Product-Related Regulation Consumer Protection • Nutritional Labeling • Consumer Product Safety Act (1972) Consumer Product Safety Commission • Consumerism Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-37 REGULATORY FORCES • Product-Related Regulation Both Company and Consumer Protection • Landham Act (1946) • Trademark Law Revision Act (1988) • Madrid Protocol (2003) • Federal Dilution Act (1995) Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-38 Kleenex, Band-Aid, and Q-Tips Becoming generic trademarks? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-39 REGULATORY FORCES • Pricing-Related Legislation • Distribution-Related Legislation Exclusive Dealing Requirement Contracts Exclusive Territorial Distributorships Tying Arrangement Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-40 REGULATORY FORCES • Advertising- and Promotion-Related Legislation FTC Act of 1914 • Cease and Desist Order • Corrective Advertising Do Not Call Registry CAN-SPAM Act (2004) • Control through Self-Regulation Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-41 BBBOnline Does self-regulation work? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-42 Concept Check Sherman Antitrust Act was 1. The _______________ punitive toward monopolies, whereas the _______ Clayton Act was preventative. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-43 Concept Check 2. Describe some of the recent changes in trademark law. A: The Trademark Law Revision Act (1988) allows companies to secure rights to a name before its actual use by declaring an intent to use the name. Also, the U.S. Supreme Court recently ruled that a company now may obtain trademarks for colors associated with their products. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-44 Concept Check 3. How does the Better Business Bureau encourage companies to follow its standards for commerce? A: Companies must agree to follow BBB standards before they are allowed to display the BBB logo. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-45 GOING ONLINE USING THE WEB TO SCAN THE ENVIRONMENT Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-46 Going Online 1. What is the current (to the minute) population of the United States? What is the projected population of the United States in 2050? Current 2050 Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-47 Going Online 2. What population or social trends can be identified with UN information? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-48 VIDEO CASE 3 FLYTE TYME PRODUCTIONS, INC.: THE BEST IDEA WINS Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-49 VIDEO CASE 3 Flyte Tyme Productions Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-50 VIDEO CASE 3 Flyte Tyme Productions 1. Based on the case information and what you know about today’s music industry, conduct an environmental scan for Flyte Tyme to identify key trends. For each of the five environmental forces (social, economic, technological, competitive, and regulatory), identify trends that are likely to influence it in the near future. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-51 VIDEO CASE 3 Flyte Tyme Productions 2. About 80 percent of start-up businesses fail within five years. What reasons explain Flyte Tyme’s continuing success? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-52 VIDEO CASE 3 Flyte Tyme Productions 3. What marketing factors and actions must Jimmy Jam and Terry Lewis consider in developing music for (a) a new, unknown artist and (b) an established artist like Janet Jackson? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-53 VIDEO CASE 3 Flyte Tyme Productions 4. What promotional and distribution strategies should Flyte Tyme use to get its music in front of prospective buyers? Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-54 SUPPLEMENTAL LECTURE NOTE 3-1 TRENDS THAT MAY CHANGE MARKETING IN THE FUTURE Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-55 IN-CLASS ACTIVITY 3-1 CONDUCTING AN ENVIRONMENTAL SCAN FOR A PANASONIC DVR Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-56 Panasonic Digital Video Recorder TV Ad Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-57 Panasonic DVR Print Ads (Brochure) Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-58 Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-59 IN-CLASS ACTIVITY 3-2 COMPETITIVE INTELLIGENCE: FULD & COMPANY Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-60 FIGURE 3-B Porter’s five competitive forces Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-61 Fuld & Company Brochure Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-62 Environmental Scanning Environmental scanning is the process of continually acquiring information on events occurring outside the organization to identify and interpret potential trends. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-63 Social Forces The social forces of the environment include the demographic characteristics of the population and its values. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-64 Demographics Demographics describes a population according to selected characteristics such as age, gender, ethnicity, income, and occupation. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-65 Baby Boomers Baby boomers is the generation of children born between 1946 and 1964. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-66 Generation X Generation X includes the 15% of the U.S. population born between 1965 and 1976. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-67 Generation Y Generation Y includes the 72 million Americans born between 1977 and 1994. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-68 Multicultural Marketing Multicultural marketing consists of combinations of the marketing mix that reflect the unique attitudes, ancestry, communication preferences, and lifestyles of different races. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-69 Culture Culture incorporates the set of values, ideas, and attitudes that are learned and shared among the members of a group. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-70 Economy The economy pertains to the income, expenditures, and resources that affect the cost of running a business and household. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-71 Technology Technology refers to inventions or innovations from applied science or engineering research. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-72 Marketspace Marketspace is an information- and communication-based electronic exchange environment mostly occupied by sophisticated computer and telecommunication technologies and digitized offerings. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-73 Competition Competition refers to the alternative firms that could provide a product to satisfy a specific market’s need. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-74 Regulation Regulation consists of restrictions state and federal laws place on business with regard to the conduct of its activities. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-75 Consumerism Consumerism is a grassroots movement started in the 1960s to increase the influence, power, and rights of consumers in dealing with institutions. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-76 Self-Regulation Self-regulation is an alternative to government control where where an industry attempts to police itself. Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Slide 3-77