The External Environment
Jeremy Kees, Ph.D.
Basic Concepts
• Environmental Scanning is the process of
collecting information about the external
marketing environment to identify and
interpret potential trends
• Environmental Management involves
marketers’ efforts toward achieving
organizational objectives by predicting and
influencing the competitive, political-legal,
economic, technological, and social-cultural
environments.
Elements of the Marketing Mix within an
Environmental Framework
The Competitive Environment
• Competitive Environment: The
interactive process that occurs in the
marketplace among marketers of
directly competitive products, marketers
of products that can be substituted for
one another, and marketers competing
for the consumer’s purchasing power.
– As a result of the deregulation movement
there has been a shift from Monopolies to
Oligopolies
– Do true monopolies still exist today?
Pharma Companies have
Temporary Monopolies
Types of Competition
• Direct Competition
– Competitors with similar products
– Who are the major pick-up truck players?
How about this company?
• Indirect Competition
– Products that are easily substituted
– Who does Mountain Dew compete with?
• Can competition be defined even more
broadly??
Marketing Strategy
• In developing a competitive
strategy, we must ask ourselves….
– Should we compete?
– If so, in what markets should we
compete?
– How should we compete?
Political-Legal Environment
• Component of the marketing
environment consisting of laws and
interpretations of laws that require
firms to protect:
– Competition and
– Consumer Rights
Laws Affecting Marketing
Laws Affecting Marketing
Protecting Competition
• Maintaining a Competitive
Environment
– Aimed at to maintaining a
competitive environment by reducing
the trend toward monopolies
– Key Laws:
• Sherman Antitrust Act
• Clayton Act
Regulating Competition
• Regulating Competition
– Meant to protect independent
merchants against competition from
larger chain stores
– Key Laws (to protect Competitors)
• Robinson-Patman Act
Deregulation
• Deregulation
– Focused on deregulating specific
industries
– Key Laws (to further encourage
competition)
• Airline Deregulation Act
• Telecommunications Act
Protecting Consumers
• Protecting Consumers
– Increased focus on consumer
protection
– Key Laws (to protect Consumers)
• Federal Food & Drug Act
• Proposed legislation to require
nutrition information….
Class Activity
Think about the following food
items and estimate:
1. Number of Calories
2. Number of Total Fat Grams
Note: FDA recommends a diet consisting of
2,000 calories and 65 fat grams per day
“Breakfast”
“Lunch”
“Late-Night Snack”
“Dinner”
Federal Regulatory Agencies
• Federal Trade Commission
• The FCC (telecommunications, radio,
and television)
• The Food and Drug Administration
• Consumer Products Safety Commission
• Federal Power Commission
• Environmental Protection Agency
• Securities & Exchange Commission
Other Regulatory Forces
– Consumer interest groups
• National Coalition Against Misuse of Pesticides
• PETA
• One Million Moms
– Carl’s Jr. Example
– Special-interest groups
• American Association of Retired People
(AARP)
– Self-regulatory groups
• Direct Marketing Association
• Better Business Bureau
Controlling the Political-Legal
Environment
– Do the right thing!!
– Public Relations Departments
– Companies fight unjust regulations
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Garnering Consumer Support
Campaign Funding
Political lobbying
Political action committees
Economic Environment
• Factors that influence consumer
buying power and marketing
strategies
• Stages in the business cycle
– Implications for marketers??
Economic Environment
• Key economic factors to consider
and monitor:
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Inflation
Deflation
Unemployment
Income
• More importantly, discretionary income
– Resource Availability
Technological Environment
• The application of knowledge in
science, inventions, and
innovations to marketing.
• What’s the latest technology that
has revolutionized the way we do
business??
Technological Environment
The Toyota Prius: one of the First Hybrid Automobiles
Available for U.S. Auto Buyers
Technological Environment
• Tech developments can give us a
distinct competitive advantage or
can put us out of business…
Social-Cultural Environment
• The relationship between
marketing and society and its
culture
• What is the big trend in the US in
regard to eating habits?
Social-Cultural Environment
Social-Cultural Environment
• Important cultural issues can help
marketers get consumers
attention…
– Terrorism as a platform to fight drug
use
– Canadian pride as a platform to sell
beer
• Hockey (pre-lockout)
• Hockey (post-lockout)
Ethical Issues in Marketing
• Marketer’s standards of conduct
and moral values
Ethical Issues in Marketing
• Promotional Strategy
– Source of the majority of ethical issues
– Questionable advertising
• Distribution Strategy
– Make product available to all income groups?
• Pricing Strategy
– Most regulated
– Price fixing…
• Product Strategy
– Product quality
– Product safety
Social Responsibility
• Marketing philosophies, policies, procedures,
and actions that have the enhancement of
society’s welfare as a primary objective
• Marketing’s Responsibilities
– Traditionally concerned managers’ relationships
with customers, employees, and stockholders
– Extended to relations with government and the
general public
– Today, corporate responsibility has expanded to
cover the entire societal framework in the US and
throughout the world
Social Responsibility