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Environment

Chapter 3

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Marketing Environments

The factors and forces outsidemarketings direct control that

affect marketing managements

ability to develop and maintain

successful transactions with its

target customers

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Microenvironment:

The Company Marketing success depends on others:

Other departments in the firm

Suppliers

Marketing intermediaries

Customers

Competitors Relevant publics

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The Companys

Microenvironment

Actors in the Microenvironment

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The Companys

Microenvironment

Top management

Finance

R&D

Purchasing

Operations

Accounting

The Company

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The Companys

Microenvironment

Provide the resources to produce goods and

services Treated as partners to provide customer value

Suppliers

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The Companys

Microenvironment

Help the company to

promote, sell anddistribute its

products to final

buyers

Marketing Intermediaries

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The Companys

Microenvironment

Resellers Physicaldistributionfirms

Marketingservices

agencies

Financialintermediaries

Types of Marketing Intermediaries

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The Companys

Microenvironment

Types of Marketing Intermediaries

The six types of customer markets

Consumer ie residential

Businessie industrial

Reseller

Government International

Institutionalie schools, hospitals, CLSC, etc

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The CompanysMicroenvironment

Firms must gain strategic advantage by

positioning their offerings against

competitors offerings

Competitors

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The Companys

MicroenvironmentPublics

Any group that has an actual or

potential interest in or impact on

an organizations ability to

achieve its objectives

Financial publics

Media publics

Government publics

Citizen-action publics

Local publics

General public

Internal publics

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Microenvironment

The Marketing Environment

Marketing Intermediaries

Customers

The Company

Competitors

Suppliers

Publics

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The Marketing Process

TargetConsumers

Product

Place Price

Promotion

Competitors

MarketingChannels

PublicsSuppliers

Technological-natural

environment

Political-legal

environment

Social-cultural

environment

Demographic-

economic

environment

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3 Cs of Marketing

Consumerism: movement by consumers against business injustice. Movement which attempts to direct marketer away from commercial

gains, towards human welfare. Instead of how much, it deals with how well. Concerned with truth in advertising, safety and quality of ingredients,

full and reliable labelling, etc.

Clean up: Proper disposal and recycling. Ecological concerns; most noticeable in the packaging and promotion

aspects. Example: PCB disposal.

Conservation: Discriminate use of our diminishing resources to ensure rational,

constrained, and justifiable demand. A reaction against the long time abuse/misuse of resources and energy

sources. Observable in product design (auto design).

Describe some of our finite & infinite renewable & non-renewable resources.

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The Companys

Macroenvironment

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Macroenvironment

The Marketing Environment

Political

Demographic

Social/ Cultural

Technological

Environment (Natural)

Economic

P

E

S

T

D

E

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Macroenvironment:

Economics Types of economies

Changes in income

New economyparadoxes

Changing consumerspending patterns

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ErnstEngels Law(1875) German accountant who studied workers and

their families

As family income increases, % amount spent on:

Food - decreases

Housing - stays the same Other items - ex.: leisure, education, medical

increases

Todays rule of thumb for housing is to still spend approximately 25- 31% of gross income.

General levels of expenditures on food indicates affluence of society.

In Canada we spend 17% of GDP on food.

USA = 10%; Britain = 16%; Brazil = 23%; Thailand = 29%.

USA is one of the lowest in the world.

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Measures of Income

GDP (gross domestic product)

PI = gross income or personal income.

DPI = PItaxes (disposable personal income) (take home pay)

DI = PItaxes - essentials (discretionary income).

Essentials = rent, food, transport, etc. Key indicator for market essentials = DPI.Tim Horton coffee

Key indicator for market luxuries = DIieCivet coffee

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Summary of Economic Factors

Real income per capita has not really grown. It hasbeen hurt by: Inflation

Unemployment Increasing tax burden (GST & QST)

The overall picture has caused regional differences in income, and growth levels. This is reflected in Provincial minimum wage laws, strength of unions, and purchase

patterns of the local pop.

Other terms to define/discuss: restructuring & outsourcing.

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Competition(Ch.18)degrees of consumer freedom ie: choices

Competitor myopia:latent competitors may be more dangerous thancurrent ones. Encyclopedia vs. Googleor books vrs ebook Kindle readers

Q: Who is biggest threat to ..ie McDonalds?

Q: Who is the biggest threat to Publix & Loblaws?(**)

Components of competition

1. Barriers to entry: via $, promotion expenditure, product identification, distributionaccess, and switching costs.

2. Bargaining power of suppliers & buyers (ie Apple vrs Wal-Mart)

(**) see Super Walmart article

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Competition

Levels of competition1. Pure: many buyers & sellers with easy market entry. Products are similar

and homogeneous in consumers eyes. (local restaurants).

2. Oligopoly: relatively few sellers, selling basically homogeneousproduct. Fairly inelastic demand with occasional price wars. (gas stations)

3. Monopolistic: derived by trying to create a differentiated orheterogeneous product in the eyes of the consumer. Price is important, butthere may be many sellers. (airlines, newspapers)

4. Monopoly: extreme case of monopolistic competition. Typicallyunder government scrutiny. (Videotron)

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Competition(p.610-617 ch. 18) (see Table 18.1 p.610)

Leader strategy- expand total mrkt = expand mrkt share & protect turf Coke, McDonalds, Wal-Mart, Google, Nike

Challenger strategyfrontal & indirect attack via 2ndmover advantage

Pepsi, Colgate, Avis, HP, Internet Explorer vrs Netscape Follower strategy- follow

Zeller, The Baie;

Nichersstrategy

very focused (Chez Coras, DicAnns Burger)

Q: What effect do category killers like Starbucks & Walmart have on the little competitor?

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Macroenvironment:

Political Consists of laws, government agencies,

and lobby groups

Public policy Increasing legislation:

Protect companies from each other

Protect consumers from unfair businesses Protect the interests of society

NAFTA and The Competition Act

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Macroenvironment:

Political

Ethics and social responsibility

Corporate codes and rules of ethics Stress long run interests of consumers and

the environment

Whats right as well as whats legal? Difficulty of determining the right thing

Cyberspace

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Consumerism

Lack of information: too many items, too little service, toolittle control

Inadequate performance: questionable quality versesexpectations causing consumer let down

Antagonism towards advertising: creating falsewants (sexist ads, etc.)

Depersonalized market institutions: self serviceoutlets

Changing values: caused by a better educated, wealthierpopulation, disillusioned by materialism

Disillusionment with the system: political votes cannow be levered, thereby venting our rage (proposition 13 in California,GST protest, NDP doing well in Quebec ref Federal elections)

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Legal Environment p.91

Abuses of the system: unduly lessen competition Trusts & Cartels: bid rigging, price fixing(see article), tying

agreements (Microsoft, Montreal construction firms (Charbonneau commission), Domfoam caseseearticle)

Price discrimination: functional discounts, predatorypricing, (Honda attacking G.M. Amazon Kindle book pricing; - see articles);refusal to deal

RPM: resale price maintenance (vertical price fixing ie Adidas ex.)

Bait & Switch

Reciprocity ie Honda using Dell computers for their reps.

Pyramid sales ie xxx Telecom firm

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Macroenvironment:

Cultural p.95

Persistence of cultural values Core vs. Secondary

Core are Highly persistent

Secondary more open to change Views of themselves

Views of others

Views of organizations

Views of society

Views of nature

Views of the universe

Regional Differences

Cultural legacies may explain Korean jet crashes of the1980-1990s, as well as farmer vrs rancher mentalities.See Malcolm Gladwell- Outliers.

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Cultural & Social Concerns

Culture: heritage of tangible and intangible aspects of life handed downfrom generation to generation. It may be strongly influenced and shaped byour environment.

Social concerns: the way people live as they do. USA is referred to asa Melting Pot. Canada is referred to as a Mosaic or Salad Bowl.

4 characteristics of Canada: 1. Mosaic diversity 2. Bi- cultural(not bi-lingual); 3. Negative nationalism 4. Conservatism (low risk takers & entrepreneurial spirit).

Cultural values are expressed in how they viewthemselves, others, organizations, nature, society, andthe universe.

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Ecology

Concerns pertaining to:

finite non-renewable resources (oil, coal)

as well as our supposedlyinfinite resources; (waterand air)

finite renewable resources(forests and food)

This will have ramifications on our cost of

energy, raw materials, and pollution levels. (Codfishing industry).

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Technology

Accelerating pace of change (new computers every day).Real live viruses to help chip speed.

Unlimited innovational opportunities.

A key factor with the above is the volume of new patents launched byindustry. This may be affected by the level of Government patentprotection offered. (pharmaceutical firms).

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Resources & Objectives of Firm

Financial strength

Raw material reserves

Physical plant

Patents

Public acceptance

Skill of personnel

Management attributes