Unit 3: Factors Affecting the Marketing Environment
Learning Objectives:
Upon completion of this unit the learner should be able to:
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Study demographic trends.
Review economic forces
Analyze competitive forces
Study technological implications
Review regulations
Overview of this Unit
This chapter takes an in-depth look at the uncontrollable marketing environment in Canada today.
Anticipating and responding to changes often means the difference between marketing success
and failure.
MRarketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment Video *New* (please view this video)
Unit/Chapter 3 Summary
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment Environment
The Uncontrollable
The Uncontrollable Environment
Organizations cannot effect the marketing environment, instead they are affected by it. Successful
organizations spot trends in the environment and capitalize on these trends.
Changes in the environment are sources of opportunities and threats to an organization that have to
be managed. Environmental Scanning is the process of continually gathering information outside
the company so they can spot trends and threats.
The uncontrollable factors and the areas that can produce trends are:
Social Forces - demographic and cultural shifts
Economic Forces - economic conditions and consumer income
Technological
- changing technology and its impact on consumers
Forces
Competitive Forces - components of competition and alternative forms
Regulatory Forces - laws and self-regulation
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment -
ces - Social Factors
Environmental For
Environmental Forces - Social Factors
Social Factors
Social forces relate to changes and events that are occurring in society. Key indicators of
change are:
Demographic Shifts
Demographics is a study/measure of people's ages, sex, income levels, marital status, gender,
where they live and ethnicity.
Population Size &
Growth
The population in Canada is growing, mainly from immigration.
Age Waves
Mature Households, Baby Boomers, Generation X, Net Generation are all
terms related to different age groups that have and will affect the products
produced and the markets targeted.
Canadian Family
Family dynamics have changed in recent years. Blended families are a trend
as are single-parent families.
Population Shifts
The trend to urban living has increased as rural populations move to cities.
Regional
Marketing
This means developing marketing plans for specific areas or regional tastes
such as Atlantic Canada, Quebec, Ontario, Western Canada & British
Columbia.
Ethnic Diversity
Canada has a diverse ethnic culture with nearly 80 different ethnic groups
represented. Most of this diverse culture is in the main urban centers of
Toronto-Montreal, Vancouver, Calgary and Edmonton.
Cultural Changes
Culture is a reflection of a society's shared values and beliefs. Attitudes are changing and so is the
makeup of our society. People are more conscious of value and the natural environment.
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Attitudes have changed towards work, lifestyles and the consumption of goods and services.
Individuals are more concerned for their health and well-being as is evidenced by the
increase in physical activity and the purchase of vitamins and other products of that nature.
Shoppers are more value-oriented - looking for the best quality, and features for the best
price.
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment Forces - Economic Factors
Environmental
Environmental Forces - Economic Factors
Economic Factors
Economics deals with issues of income and expenditures in our society. Key measures of change in
economic conditions arise from changes in:
Macroeconomic Conditions
This involves the Canadian economy as a whole. It looks at the level of
inflation or recession that is present in the economy and determining
consumers' expectations. What will their spending habits be in an
inflationary period or a recessionary period? Should the organization
produce more or cut back on expenses?
Consumer Income
Just because an organization has a product to sell doesn't mean that the
consumer has the ability to buy the product.
Gross Income
This is the total amount of money a person makes before taxes.
Approximately 1/4 of the population grosses less than $30,000 a year. Yet
another nearly 30% of the population earns more than $75,000 a year.
Disposable Income
This is the amount of income left after paying taxes - Gross Income - Taxes
Discretionary
Income
This is the income left after taxes and necessities are paid - Disposable
Income - Necessities This is the income that is often used for luxury items
but this can differ for different people. One person's luxury could be another
person's necessity.
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment Forces - Technological Factors
Environmental
Environmental Forces - Technological Factors
Technological Forces
Technology is changing faster than ever. Witness how quickly your new computer will become
obsolete. This rapid change poses quite a large challenge for many organizations.
Technology of Tomorrow
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Advances in nanotechnology - really tiny microchips will change the face of computers
Personal computers and telephone technologies are merging ever closer with PDA's and the
Blackberry that are phones and personal organizers.
The use of the Internet has risen dramatically and its use for information is growing
Biotechnology is a growing field
All these advances and much more will change the way people work, play and live.
Impact on Consumers
Changes in technology are having numerous effects on consumers:
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technology prices are falling rapidly thus consumers are looking now at other factors such as
quality, service, etc.
the rapid development of new products gives organizations a chance to offer new and
exciting products.
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technology is reducing production costs thereby lowering the cost to the consumer
E-Business
The Internet has made doing business any where and any time possible.
Electronic Commerce is any activity that uses some form of electronic communication in the
inventory, exchange, advertisement, distribution and payment of goods and services.
Search the Internet
The impact of the Internet on business is growing. Do a quick search of the Internet
to find out the impact of the Internet on business - look for dollar figures, volume or
numbers of people purchasing on the Internet.
Post your response to the Discussion Board. Be sure to include the URL(s) of the
site(s) where you found your information.
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment Forces - Competitive Factors
Environmental
Environmental Forces - Competitive Factors
Competitive Forces
Competition refers to the number of alternatives a consumer has when buying a particular product or
service.
There are varying degrees of competitive environments:
Monopoly
No competition - only one seller - electricity
Oligopoly
Limited competition - two or three sellers - airlines, banking
Monopolistic
Competition
Many sellers offering substitutable products - Coke, Pepsi, Orange
Juice
Pure Competition
Many sellers selling similar or same products - wheat, rice, etc
Components of Competition
Competition may affect a company's ability to enter a market easily. There may be many
Barriers to Entry in place to limit the growth of competition.
Suppliers of raw material may help limit competition in an industry by refusing to sell to a new
entrant.
Buyers of products may aid in limited competition by being reluctant to buy from a new
entrant into the market.
Competitors may try to limit competition by forcing new entrants out of the market.
Global competition has helped to increase the overall level of competition. Many companies
are forming world-wide partnerships called Strategic Alliances.
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment Forces - Regulatory Factors
Environmental
Environmental Forces - Regulatory Factors
Regulatory Forces
Regulation is a basic set of rules/laws set down by either the industry in question
(self-regulation) or by government that effects how that business operates.
Most regulation is designed to:
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Protect consumers
Protect competition
To stem off government-imposed regulation, many industries have decided to self-regulate.
Consumerism is a movement among consumers to fight for better protection from bad or corrupt
business practices and bad products.
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment by Environmental Scan
Trends Identified
Trends Identified by Environmental Scan
Social
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Movement toward "natural" and healthy products and lifestyles
Growing number and importance of older Canadians
Population concentration in urban areas
Greater desire for product simplicity and honesty in advertising
Greater value placed on education, travel and leisure
Decrease in the interest for conspicuous consumption
Economic
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Dramatic growth of electronic commerce
Canadian firms adjust to crises in international markets
Public debt levels, high unemployment, and a heavy tax burden persist
Technological
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Increased use of information and communication technology
Increased use of wireless technology
Expanded computers power and growth of "smart" products
Growing use of electronic money or "e-cash"
Competitive
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The emergence of fast, responsive "network corporations"
Mergers reduce costs through economies of scale
More international competition from emerging countries
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Regulatory
Increasing emphasis on free trade and deregulation
Greater concern for pollution and global warming
New legislation related to information collection and privacy
Greater concern for security issues
Source: McGraw-Hill Ryerson
Latest Trends
Do a quick search for the latest trends in technology, food or fashion. Post one
item to the Discussion Board you think will be a hot ticket item in the next 5 years
stating why you think that way.
Check out the Trend Database on this site:
http://www.trendwatching.com/
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment -
Discussion 1
Baby Boomers
Anyone born between 1946 and 1964 have become known as the Baby Boom Generation. This
generation of nearly 77 million Americans and over 6 million Canadians have changed the world as
they developed from infants to teens to twenty-somethings and in the next few years many will turn
60 years old.
This demographic group been many marketer's nightmare and joy. They've changed the face of
marketing over the years - hula hoops, frisbees, crowded colleges and soaring housing prices. Over
1/3 of adults will be 50 or older by 2010. This will provide organizations with many opportunities in
many different sectors. Many of these aging baby boomers will have money to spend.
These adults will have diverse habits - some will have young grandchildren, some will be dating for
the first time in years. Many of these baby boomers are in good health, while others have let their
health deteriorate. This is the generation of aerobic exercise and "natural" foods. They may not sink
into old age gracefully.
Discussion Posting
Based on the information above and any other research, post 3 products or product
categories that you think will appeal to this generation in the next five years.
Comment on at least 2 other postings.
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment Questions
Unit 3 Study Questions
Unit 3 Study
MARKETING CONCEPTS AND PERSPECTIVES
1. For many years Gerber's has manufactured baby food in small, single-sized containers. In
conducting an environmental scan for the 1990's, identify three trends or factors which might
significantly affect this company's future business. Propose how Gerber's might respond to
these changes.
Answer
2. Describe the new features you would add to an automobile designed for the mature
household. In what magazines would you advertise to appeal to this target market?
Answer
3. New technologies are continuously improving and replacing existing products. Although
technological change is often difficult to predict, suggest how the following companies and
products might be affected by the Internet and new digital technologies: (a) Kodak cameras
and film, (b) Canadian Airlines, and (c) a Museum of Art.
Answer
4. In recent years in the Canadian brewing industry, a couple of large firms that have
historically had most of the beer sales (Labatt’s and Molson’s) have faced competition from
many small regional brands. In terms of the continuum of competition, how would you
explain this change?
Answer
5. With the deregulation of the Canadian long-distance telephone industry, how do you think
the role of marketing in the industry will change? What elements of the marketing mix are
more or less important since deregulation?
Answer
6. The Johnson Company manufactures buttons and pins with slogans and designs. These
pins are inexpensive to produce and are sold in retail outlets such as discount stores, hobby
shops, and bookstores. Little equipment is needed for a new competitor to enter the
market. What strategies should it consider to create effective barriers to entry?
Answer
7. Today’s consumer is more value conscious. How could a retail home improvement centre
sell the exact same products but still offer the consumer greater perceived value? What
specific things could the retailer do?
Answer
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment Quiz
Unit 3 Text book
Unit 3 Text Book Quizzes
Try these Quizzes to test your knowledge of Unit 3 - Chapter 3 of the Book
McGraw-Hill Site
Unit 3 Quiz 1 Link
Unit 3 Quiz 2 Link
Unit 3 Quiz 3 Link
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment Check and Internet Exercises
Unit 3 Concept
Unit 3 Concept Check and Internet Exercises
Unit 3 - Chapter 3 of the Book - Concept Check and Internet Exercises
McGraw-Hill Site
Concept Checks
Internet Exercises
MR1100 Marketing I - PT (CL) - Unit 3. Factors Affecting the Marketing Environment -
Unit 3 Video Case
Unit 3 Video Case
Unit 3 - Chapter 3 of the Book - Video Case
McGraw-Hill Site
Video Case 03 - Becoming and Environmental Scanner
MR1100 Marketing I - PT (CL) - Unit 4. Ehtics and Social Responsibility -
Learning Objectives