MKTG 504 - The Environment of MARKETING
Marketers react to the environment
Dr. Dennis Pitta
University of Baltimore

The Environments of
Marketing
 Technological Environment
 Economic Environment
 Competitive Environment
 Sociological Environment
 Political-Legal Environment
 Global Environment

Let’s look at an example….

Monroe calculator -
Features
 weighs 65 lbs
 uses 120/220 volt current
 mechanical keys enter data
 mechanical gears perform calculations
 electrical motors move the gears and the display
 multiplication = multiple addition
 division = something strange

Monroe calculator
 Advantages
 higher accuracy than hand calculation
 faster than hand calculation

Monroe calculator
 BENEFITS
 It worked…
 Reduced worker effort
 Higher accuracy
 NON-BENEFITS
 Not Portable
 When you divide by
0 it ______________
 Dust is a problem
 Square root?
 Too expensive
($1,000!!!)

Display Devices for Calculators
 The Number Wheel Behind a
Window (e.g. Monroe Calculators)
 Multifilament Vacuum Tubes ( e.g.
Burroughs)

Burroughs calculator
 FEATURES
 MULTI-FILAMENT VACUUM TUBES
 weighs 50 lbs
 uses 120 volt current
 mechanical keys enter data
 circuits make calculations and light filaments
 multiplication, division, square root = real calculation
 $750

Burroughs calculator
 BENEFITS
 It worked…
 Reduced worker effort
 Higher accuracy
 No division error problem
 Dust not a problem
 Advanced functions
 Less expensive
 Easier to repair
 NON-BENEFITS
 Not Portable

Display Devices for Calculators
 L. E. D.. (Light Emitting Diodes) (e.g.
Novus, Bowmar)
 L. C. D.. (Liquid Crystal Displays) (e.g.
Casio, Panasonic)

L. E. D. calculators
 FEATURES
 Run on batteries (but don’t leave them on..)
 Integrated circuits allow advanced calculations
 Weigh less than a pound
 Initially cost $US125 for 4 functions plus square root

L. E. D. calculators
 BENEFITS
 It worked as well as the others
 Higher accuracy
 No division error problem
 Dust not a problem
 Advanced functions
 Less expensive
 PORTABLE!
 NON-BENEFITS
 Battery life not infinite

L. C. D. calculators
 FEATURES
 Run on batteries with very low current drain
 Integrated circuits allow advanced calculations
 Weigh less than a pound
 Initially cost $50 for 4 functions plus square root

L. C. D. calculators
 BENEFITS
 It worked as well as the others
 Higher accuracy
 No division error problem
 Dust not a problem
 Advanced functions
 Less expensive
 PORTABLE!
 Solar!!
 NON-BENEFITS
 Does not work in the dark

What effect have the changes in display devices had on competition?

 _______________________
 _______________________
 _______________________

Technological Environment
 Technology = Knowledge to do new or old tasks better
 Invention = result of technology
 Innovation = result of introducing inventions in the marketplace

Technology and Marketing
 Impact on Competition
 Impact on Costs and Productivity
 Impact on the Marketing Mix (Product,
Price, Promotion, Distribution)

Economic Environment
 The Business Cycle = cyclical changes in the economy

Stages in the Business Cycle
 Prosperity
 Recession
 DEPRESSION
 Recovery

Inflation
Decline in buying power due to price levels rising more rapidly than incomes.

Unemployment
Occurs when people want to work and actively look for work, but are unable to find employment.

THE COMPETITIVE ENVIRONMENT
 PERFECT COMPETITION
 MONOPOLISTIC COMPETITION
 OLIGOPOLY
 MONOPOLY

Perfect Competition
 Many Small sellers.
 Many Small Buyers.
 Homogeneous Product.
 No Entry/Exit Barriers.
 Perfect Information .
 All buyers buy and all sellers sell under the same conditions .

Monopoly
 ONE SELLER
 PRICE: What the market will bear.

Oligopoly
 Few Sellers
 Entry into Industry - Difficult
 Action of one firm affect others
 Each firm has a large share of the industry’s customers.

What is competition like in the deodorant category?
 Name three brands ____________
 _____________ _____________
 What are the prices like?
 What do the advertisements say?

Monopolistic Competition
 Each seller’s product
DIFFERENTIATED (Somewhat).
 The higher the differentiation, the more control the seller has over price.
(No close substitutes.)

The Post-Industrial Service
Economy
 Increasing proportion of U.S. Jobs in services.
 Service industries provide more high or low paying jobs - less in the middle.
 Marketers who target high or low end consumers should do well, those who target the middle may not do well.

Political-Legal Environment
 Government the major element of the
Political- Legal environment

Actions of Government
..the US example
 Regulating and stabilizing the economy.
 Facilitating the marketing functions:
 Transportation - highways
 Communication - U. S. P. S.
 Marketing Information - statistical data
 Customer

Marketing and the Law
 Protecting Competition
Sherman Antitrust Act
“Every contract, combination, or conspiracy in restraint of trade.”
Robinson-Patman Act
“Like discounts on like grade and quantity”

Marketing and the Law
 Protecting Consumers
Wheeler-Lea Act
“Unfair or deceptive acts or practices in commerce”

Government and the competitive Environment
 In other words, the FTC and the
Competitive Environment
 Which one does the FTC target?
Monopoly
Oligopoly
Monopolistic
Perfect Competition

Government and the competitive Environment
 In other words, the FTC and the
Competitive Environment
 Which one does the FTC target?
Monopoly
Oligopoly 
Monopolistic
Perfect Competition

Why does the FTC target
Oligopolies?
 All the monopolies have been identified - or are not significant.
 An Oligopoly could be “A MONOPOLY
IN OLIGOPOLY CLOTHING!”

Government and the
Competitive Environment
The FTC uses a technique which stresses:
STRUCTURE (COMPETITIVE
STRUCTURE)
CONDUCT (COMPETITIVE
TECHNIQUES) and PERFORMANCE (R.O.I.)

Quantitative measures
 OLIGOPOLY? => if the top five firms have more than _____% market share
 Conduct?? => what are the techniques used in the industry?
 ROI? => if it is greater than ____%

Remedies
 The US government can:
 cross license the brand
 break up the company (ala Microsoft)

How Do Marketers Compete?
 Imitation
 Differential Advantage
 Price Competition
 Non-Price Competition
 Enhanced services
 Filling a niche
 Different distribution

Hypothetical Market
Structure & Competition
Market leader
40%
Market challenger
30%
Expand Market
Defend Market Share
Expand Market Share
Attack leader
Status quo
Imitate
Market nicher
Market follower
20% 10%
Specialize

Optimal Market Share
Optimal market share
0% 25% 50% 75% 100%
Market share

Socio-Cultural
Environment
 The Marketer’s relationship to society.
 Important because a marketer’s market exists in the socio-cultural environment.
- Changes in socio-cultural environment important for “needs.”
 Social Responsibilities.

Global Environment
Global economics, competition, technology and politics affect even domestic marketers.

Environmental Monitoring
The process by which a marketing organization, identifies, analyzes, and forecasts the impact of relevant environmental forces on it.

Upcoming Topics
 Segmentation