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ESSENTIALS OF

MARKETING MANAGEMENT
William M. Pride and O.C. Ferell
CHAPTER 1:
THE MARKETING ENVIRONMENT, SOCIAL
RESPONSIBILITY AND ETHICS
• The marketing environment consists of external forces that directly or
indirectly influence an organization’s acquisition of inputs (human,
financial, natural resources and raw materials, information) and creation
of outputs (goods, services and ideas)
• Includes six forces namely:
1.Competitive forces
2.Economic forces
3.Political forces
4.Legal and Regulatory forces
5.Technological forces
6.Sociocultural forces
ENVIRONMENTAL SCANNING
• The process of collecting information about forces in the marketing
environment
• Scanning involves observation; secondary sources such as business,
trade, government, internet and market research

• Internet - a popular scanning tool because it makes data accessible and


allows companies to gather needed information quickly
Example:
Information can be obtained to determine proposed legislation or consumer
protection regulations that could affect a firm’s operations
ENVIRONMENTAL ANALYSIS
• Process of accessing and interpreting the information gathered through
environmental scanning
• Typically, a manager evaluates the information for accuracy; tries to resolve
inconsistencies in the data; and if warranted, assigns significance to the findings
• By evaluating the information, the manager should be able to identify potential
threats and opportunities linked to environmental changes
THREAT - could be rising interest rates or commodity prices
OPPORTUNITY – could be increases in consumer income, decreases in the
unemployment rate or a sudden drop in commodity prices
*Understanding the current state in marketing environment and recognizing
threats and opportunities arising from changes within it, helps the companies
with strategic planning. In particular they help marketing manager assess the
performance of current marketing efforts and develop future marketing
strategies
SIX FORCES OF MARKETING
ENVIRONMENT
1. COMPETITIVE FORCES
 Competition – other firms that market products that are similar to or can be
substituted for its products in the same geographic area

Competitors can be classified into four types:


A. Brand Competitors – market product with similar features and benefits to the
same customer at similar prices
(Example: Diet Coke or Diet Pepsi)
B. Product Competition – compete in the same product class but the market
products with different features, benefits and prices
(Example: thirsty dieter might purchase iced tea, juice, sports beverage, or
bottled water instead of soda
COMPETITIVE FORCES
C. Total Budget Competitors – firms that compete for the limited resources
of the same customer
(Example: instead of Diet coke, he or she will buy bottled water

D. Monopoly – exist when an organization offers a product that has no close


substitutes, making that organization the sole source of supply
(Example: utilities, Google – a digital monopoly)
2. ECONOMIC FORCES
• Influence marketers and customers’ decisions and activities alike and the
effects of buying power and willingness to spend as well as general
economic decisions

Buying Power – depends on economic conditions and the amount of


resources – money, goods and services that can be traded in an exchange
that enable the individual to make purchases

Income – amount of money received through wages, rents, investments,


pensions, subsidy payments for a given period. Normally, this money is
allocated among taxes, spending for goods and services and savings
2. ECONOMIC FORCES
Disposable income
• is used for spending or saving
• a ready source of buying power, the total amount available in nation is
important to marketers
•Includes total amount of income – which is affected by wage levels, the
rate of unemployment, interest rates, and dividend rates – and the kinds
and amount of taxes

Discretionary income - available for spending and saving after an individual


has purchased the basic necessities of food, clothing and shelter
3. POLITICAL FORCES
• Political, legal and regulatory forces of the marketing environment are
closely interrelated
• Legislation is enacted; legal decisions are interpreted by courts and
regulatory agencies are created and operated, for the most part, by
elected or appointed officials

• Example:
After the financial crisis caused by worldwide recession, the US government
passed established a new Consumer Financial Protection Bureau to
protect consumers from deceptive financial practices
4. LEGAL AND REGULATORY FORCES
• Federal, state, and local bodies can set rules or restrictions on the
conduct of businesses. The purpose of regulation is to protect both
consumers and businesses. Businesses favor some regulations (such as
patent laws) while chafing under others (such as restrictions on
advertising)

Example:
the tobacco industry has had to learn to live with a federal ban on TV and
radio advertising
5. TECHNOLOGICAL FORCES
• The word technology brings to mind scientific advances such as electric vehicles,
smartphones, virtual office communication, life style, radio frequency identification tags,
and more. Such development make it possible for marketers to operate more efficiently
and provide an exciting array of products for consumers. However, even though these
innovations are outgrowths of technology, none of them is technology

Technology – the application of knowledge and tools to solve problems and perform tasks
more efficiently
• Also determines how we, as a member of society, satisfy our psychologic needs
Example:
When’s the last time you rented a VHS tape of a new movie? If you had trouble finding it,
that’s because DVDs are in and videotapes are out. Videotape makers who were monitoring
technological trends in the industry would probably have taken steps to keep up (go into
DVDs) or otherwise protect themselves from losses (maybe even getting out of the market).
In addition to making old products obsolete, technological advances create new products. 
6. SOCIOCULTURAL FORCES
• Influences the society and its culture that brings out changes in attitudes,
beliefs, norms, customs and lifestyles
• Profoundly affecting how people live, these forces help to determine what,
where, how, when people buy products

• Changes in population’s demographic characteristics – the age, gender,


race, ethnicity, marital and parental status, income and education -- have
a significant bearing on relationships and individual behavior
• This shifts lead to changes in how people live and ultimately in their
consumption of products such as food, clothing, housing, transportation,
communication, recreation, education and health services
SOCIAL RESPONSIBILITY AND ETHICS
Social responsibility
• refers to an organizations obligation to maximize its positive impact and
minimize its negative impact on society
•Deals with the total effect on society of all marketing decisions
•In marketing, it includes the managerial processes needed to monitor,
satisfy, and even exceed stakeholders expectation and needs

Marketing Citizenship – the adoption of a strategic focus or fulfilling the


economic, legal, ethical and philanthropic social responsibilities expected by
stakeholders
SOCIAL RESPONSIBILITY AND ETHICS