3
CHAPTER
The Marketing Environment, Ethics,
and Social Responsibility
Chapter Objectives
1 Identify the five
components of the
marketing environment.
2 Explain the competition
marketers face and the
steps necessary for
developing a competitive
strategy.
3 Describe how marketing
activities are regulated
and how marketers can
influence the politicallegal environment.
6 Explain how the socialcultural environment
influences marketing.
4 Outline the economic
factors that affect
Describe the ethical
marketing decisions and 7 issues in marketing.
consumer buying power.
Identify the four levels of
5 Discuss the impact of the 8 the social responsibility
technological
pyramid.
environment on a firm’s
marketing activities.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
ENVIRONMENTAL SCANNING AND
ENVIRONMENTAL MANAGEMENT
• Environmental scanning Process of collecting information about the
external marketing environment to identify and interpret potential trends. .
• Environmental management Attainment of organizational objectives
by predicting and influencing the competitive, political-legal, economic,
technological, and social- cultural environments.
• Firms often create strategic alliances to combine resources and
capital to compete more effectively.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
THE COMPETITIVE ENVIRONMENT
• Competitive environment 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.
• Companies with a monopoly usually accept regulation in exchange for the
exclusive right to serve a market segment.
• Oligarchy—Limited number of sellers in an industry with high start-up
costs.
TYPES OF COMPETITION
• Direct—among marketers of similar products.
• Indirect—involves products that are easily substituted for each other.
• Competition among all firms that compete for consumers’ purchases.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
DEVELOPING A COMPETITIVE STRATEGY
• Should we compete?
• Depends on firm’s resources, objectives, and expected profit potential.
• If so, in what markets should we compete?
• Allocate firm’s limited resources to the areas of greatest opportunity.
• How should we compete?
• Includes product, promotion, distribution, and pricing decisions that
maximize competitive advantage.
TIME-BASED COMPETITION
• Strategy of developing and distributing goods more quickly than
competitors.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
THE POLITICAL-LEGAL ENVIRONMENT
• Political-legal environment Component of the marketing environment
consisting of laws and their interpretations that require firms to operate
under competitive conditions and to protect consumer rights.
GOVERNMENT REGULATION
• Antimonopoly period of the late 19th and early 20th centuries.
• Protecting competitors during the Great Depression.
• Consumer protection in past 40 years.
• Industry deregulation began in the 1970s and continues today.
• Newest regulatory frontier is cyberspace.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
GOVERNMENT REGULATORY AGENCIES
• Federal Trade Commission has broadest regulatory powers over marketing.
• Others include Consumer Product Safety Commission, the Federal Power
Commission, the EPA, and FDA.
OTHER REGULATORY FORCES
• Consumer interest organizations.
• Self-regulatory groups.
CONTROLLING THE POLITICAL-LEGAL ENVIRONMENT
• Complying with laws and regulations serves customers and avoids legal
problems.
• Influencing the outcome of legislation through lobbying or boycotts.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
THE ECONOMIC ENVIRONMENT
• Consumer spending accounts for 70 percent of the gross domestic product.
• Economic environment Factors that influence consumer buying power and
marketing strategies, including stage of the business cycle, inflation and
deflation, unemployment, income, and resource availability.
STAGES IN THE BUSINESS CYCLE
• Prosperity, recession, depression, and recovery.
INFLATION AND DEFLATION
• Inflation—Rising prices caused by some combination of excess demand
and increases in the costs of one or more factors of production.
• Deflation—Falling prices.
• Can decrease profits, lower investment returns, and bring
widespread job layoffs.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
• Unemployment—proportion of people actively seeking work who do not
have jobs.
• Income—many marketers focus on discretionary income, amount of money
people have to spend after buying necessities.
• Resource availability—shortages can result from lack of raw materials,
component parts, and energy, or labor.
• Demarketing Process of reducing consumer demand for a good or service
to a level that the firm can supply.
THE INTERNATIONAL ECONOMIC ENVIRONMENT
• Changes in consumer and business buying habits, in exchange rates, in
labor costs, and other factors around the world influence the decisions
marketers make.
• Global political changes affect international marketplace.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
THE TECHNOLOGICAL ENVIRONMENT
• Technological environment Application to marketing of knowledge
based on discoveries in science, inventions, and innovations.
• Government and not-for-profits often contribute to research and
development, which can be very costly.
APPLYING TECHNOLOGY
• Marketers monitor new technology to gain competitive edge.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
THE SOCIAL-CULTURAL ENVIRONMENT
• Social-cultural environment Component of the marketing environment
consisting of the relationship between the marketer, society, and culture.
• Increasing importance of cultural diversity and submarkets with unique
values, preferences, and behaviors.
CONSUMERISM
• Consumerism Social force within the environment that aids and protects
the consumer by exerting legal, moral, and economic pressures on business
and government.
• Basic consumer rights: to choose freely, to be informed, to be heard, and
to be safe.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
ETHICAL ISSUES IN MARKETING
• Marketing is the interface between the firm and the external world.
• How marketing deals with external issues has a significant impact on the
firm’s success.
• Marketing ethics Marketers’ standards of conduct and moral values.
• Many companies create ethics programs to train employees to act
ethically.
• Employees’ personal values sometimes conflict with employers’ ethical
standards.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
ETHICS IN MARKETING RESEARCH
• Consumers are concerned about privacy, and Internet has increased privacy
concerns.
• FTC provides consumer information about privacy online.
• The U.S. government also maintains a Do Not Call registry to prevent
unwanted telemarketing.
ETHICS IN PRODUCT STRATEGY
• Example: Package strategy.
• Larger packages are more noticeable on the shelf.
• Oddly sized packages make price comparison difficult.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
ETHICS IN DISTRIBUTION
• What is the appropriate degree of control over the
distribution channel?
• Should a company distribute its products in marginally
profitable outlets that have no alternative source of supply?
ETHICS IN PROMOTION
• Truth in advertising is the bedrock of ethics in promotion.
• Marketing to children has come under increased scrutiny.
• Marketing beer to college students, including through
providing promotional items such as shirts and hats, raises ethical questions.
ETHICS IN PRICING
• Most regulated aspect of a firm’s marketing activities.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
SOCIAL RESPONSIBILITY IN MARKETING
• Social responsibility Marketing philosophies, policies, procedures, and
actions that have the enhancement of society’s welfare as a primary
objective.
CHAPTER 3 The Marketing Environment, Ethics, & Social Responsibility
MARKETING’S RESPONSIBILITIES
• Marketing decisions must involve consideration of
general well-being and even potential global effects.
• Some organization help promote social causes or
practice socially responsible investing.
MARKETING AND ECOLOGY
• Ecology is the study of the relationship between natural
things and their environment.
• Protection of the environment influences all areas of
marketing decision making.
• Marketing system produces billions of tons of packaging materials annually.
• Green marketing Production, promotion, and reclamation of
environmentally sensitive products.