Chapter 3 The Marketing Environment 3 1 Examining and Responding to the Marketing Environment Environmental factors are always dynamic Firms must try to predict and change with the environment 3 1A Environmental Scanning and Analysis Environmental Scanning the process of collecting information about forces in the marketing environment o Primary observations o Secondary trade general interest publications etc Environmental Analysis the process of assessing and interpreting the information gathered through environmental scanning o Helps identify opportunities and threats in the environment 3 1B Responding to Environmental Forces Two types of responses to outside forces 1 Reactive cautious approach 2 Proactive develop strategies to overcome obstructing environmental forces a Which approach to use depends on firm s philosophy culture objectives 3 2A Types of Competitors Competition other firms that market products that are similar or can be substituted for its own products in the same geographical area There are four types 1 Brand Competitors market products with similar features and benefits ie Diet sodas 2 Product Competitors compete in the same product class but market products with different features benefits and prices ie Ford vs BMW 3 Generic Competitors provide different products that solve the same problem ie Water vs soda 4 Total Budget Competitors compete for the same limited financial resources of the same customers ie Diet coke vs sugar free gum vs bananas 3 2B Types of Competitive Structures Monopoly an organization that offers a product that has no close substitutes making that organization the sole source of supply High barriers to entry for competitors Oligopoly a few sellers control the supply of a large portion of a product Relatively high barriers to entry Monopolistic Competition exists when a firm with many potential competitors attempts to develop a marketing strategy to differentiate its product Pure Competition entails an extremely large number of sellers none of which could significantly alter supply 3 2C Monitoring Competition Price one marketing strategy variable that most competitors monitor Gathering information about competitors is crucial for maintaining a competitive edge 3 3A Economic Conditions Business Cycle fluctuations in the economy that follow a general pattern Consists of four stages 1 Prosperity low unemployment high income high buying power 2 Recession rising unemployment buying power declines 3 Depression a prolonged recession high unemployment low confidence 4 Recovery unemployment declines disposable income increases increased confidence 3 3B Buying Power Buying Power depends on economic conditions and the size of the resources money goods and services that can be traded in an exchange that enable the individual to make purchases Income the amount of money received through wages rents investments pensions and subsidy payments for a given period such as a month or a year Disposable Income money left after payment of taxes used for spending or saving Discretionary Income amount of disposable income left over after an individual has purchased basic necessities like food water clothing and shelter Credit enables people to spend future income now or in the near future at the expense of future buying power Wealth is the accumulation of past income natural resources and financial resources o Cash securities savings accounts jewelry real estate 3 3C Willingness to Spend 3 4 Political Forces Willingness to Spend people s inclination to buy because of expected satisfaction from a product is to some degree related to their ability to buy o Affected by factors such as income levels prices future expectations family size and general economic conditions Marketing organizations strive to maintain good relations with elected political officials o Politicians can play key roles in helping organizations secure foreign markets Organizations can help elect individuals to political offices who regard them positively Procompetitive Laws designed to preserve competition o Prohibit exchange of confidential info via employees copyright infringement price 3 5A Procompetitive Legislation fixing false advertising etc 3 5B Consumer Protection Legislation Two kinds one focuses on how goods are produced the other on how they are labelled 3 5C Encouraging Compliance with Laws and Regulations Organizations encouraging culture that promotes ethical decision making 3 5D Regulatory Agencies Federal Trade Commission most heavily influences marking activities including false advertising misleading prices and deceptive packaging and labelling Local agencies as well regulating gas electricity water etc 3 5E Self Regulatory Forces Better Business Bureau a system of nongovernmental independent local regulatory agencies that are supported by local businesses National Advertising Review Board considers cases in which an advertiser challenges issues raised by the NAD about an advertisement Self regulated forces are cheaper and the guidelines are usually more realistic and operational They also reduce the need of the government 3 6 Technological Forces Technology is the application of knowledge and tools to solve problems and perform tasks more efficiently 3 6A Impact of Technology 3 6B Adoption and Use of Technology E commerce text messaging cell phones smart phones digital software etc all becoming more and more popular Many firms fail to keep up with technology free Wifi 4G etc Technology Assessment attempts to foresee the effects of new products and processes on a firm s operations on other businesses and on society in general 3 7 Sociocultural Forces Sociocultural Forces influences in a society and its culture that bring about changes in people s attitudes beliefs norms customs and lifestyles Three major issues 1 Demographic and Diversity characteristics 2 Cultural values 3 Consumerism 3 7A Demographic and Diversity Characteristics Changes in a population age gender race ethnicity parental status income and education affect consumer behavior 3 7B Cultural Values 3 7 C Consumerism Increased sales of organic foods smokeless cigarettes exercise products etc Greener products safer cars more dependable products etc Consumerism involves organized efforts by individuals groups and organizations to protect consumers rights
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