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