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Chapter 3
The Marketing
Environment, Ethics,
and Social
Responsibility
CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Chapter Objectives
1. Identify the five components of the marketing environment.
2. Explain the types of 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 political-legal environment.
4. Outline the economic factors that affect marketing decisions
and consumer buying power.
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Chapter Objectives
5.
Discuss the impact of the technological environment on a
firm’s marketing activities.
6.
Explain how the social-cultural environment influences
marketing.
7.
Describe the ethical issues in marketing.
8.
Identify the four levels of the social responsibility pyramid.
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Environmental Scanning
o Collecting external marketing environment
information to identify and interpret potential trends
o Trends may represent significant opportunities or
threats to the company
o Example: CPSC issued a recall of The Princess and the
Frog-themed pendants, citing high levels of cadmium in
the children’s necklaces
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Environmental Management
o Attainment of organizational objectives by predicting
and influencing the competitive, political-legal,
economic, technological, and social- cultural
environments
o Strategic alliance - Partnership in which two or more
companies combine resources and capital to create
competitive advantages in a new market
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
The Competitive Environment
o Interactive process that occurs in the marketplace
among:
o Marketers of directly competitive products
o Marketers of products that can be substituted for one
another
o Marketers competing for the consumer’s purchasing
power
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
The Competitive Environment
o Marketing decisions by individual firms influence:
o Consumer responses in the marketplace
o Marketing strategies of competitors
o Few organizations have monopoly positions
o Monopoly - Market structure in which a single seller
dominates trade in a good or service for which buyers
can find no close substitutes
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
The Competitive Environment
o Some pharmaceutical firms have temporary
monopolies provided by patents on drugs
o Antitrust laws - Designed to prevent restraints on trade
such as business monopolies
o Oligopoly - Few number of sellers in an industry with
high start-up costs which keep out new competitors
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Types of Competition
o Direct
o Among marketers of similar products
o Example: Alternative suppliers in the cell phone market
such as Verizon and AT&T
o Indirect
o Involves products that are easily substituted
o Example: In the fast-food industry, pizza competes with
chicken, hamburgers, and tacos
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Types of Competition
o Competition among all firms that compete for
consumers’ purchases
o All firms compete for a limited number of dollars that
consumers can or will spend
o Example: The purchase of a Honda Accord might
compete with a Norwegian Cruise Line cruise
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Developing a Competitive Strategy
o Competitive strategy - Methods through which a firm
deals with its competitive environment
o Should we compete?
o Depends on firm’s resources, objectives, and expected
profit potential
o In what markets should we compete?
o Allocate firm’s limited resources to the areas of greatest
opportunity
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Developing a Competitive Strategy
o How should we compete?
o Includes product, promotion, distribution, and pricing
decisions that maximize competitive advantage
o Time-based competition - Strategy of developing and
distributing goods more quickly than competitors
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
The Political-Legal Environment
o Consists of laws and their interpretations that require
firms to operate under competitive conditions and to
protect consumer rights
o Ignorance or non-compliance can result in fines,
negative publicity, and civil damage suits
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Government Regulation
o Falls into four historical phases:
o Antimonopoly period of the late 19th and early 20th
centuries
o Protecting competitors during the Great Depression of
the 1930s
o The third phase focused onConsumer protection
o Industry deregulation began in the late 1970s
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Government Regulation
o Newest regulatory frontier is cyberspace
o Federal and state regulators are investigating ways to
police the Internet and online services
o Privacy and child protection issues are difficult
enforcement challenge
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.
CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.
CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Government Regulatory Agencies
o The Federal Trade Commission (FTC) has the
broadest regulatory powers over marketing
o Enforces laws regulating unfair business practices and
stops false and deceptive advertising
o The FTC uses several procedures to enforce laws
o Consent order
o Cease-and-desist orders
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Other Regulatory Forces
o Consumer interest organizations
o Other groups attempt to advance the rights of
minorities, senior citizens, and other causes
o Self-regulatory groups set guidelines for responsible
business conduct
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
The Economic Environment
o Gross domestic product (GDP) - Sum of all goods and
services produced by a nation in a year
o Economic environment - Factors that influence
consumer buying power and marketing strategies
o Business cycle - Pattern of stages in the level of
economic activity
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Stages in the Business cycle
o Prosperity - Consumer spending is brisk; growth in
services sector
o Recession - Consumers focus on basic, fundamental
products
o Depression - Consumer spending sinks to its lowest
level
o Recovery - Consumer purchasing power increases
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
The Global Economic Crisis
o Business cycles take a severe turn and affect
consumers and businesses across the globe
o Marketers must reevaluate their strategies and
concentrate on their most promising products
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Inflation and Deflation
o Inflation devalues money by reducing the products it
can buy through persistent price increases
o Deflation can cause:
o A freefall in business profits
o Lower returns on most investments
o Widespread job layoffs
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Inflation and Deflation
o Unemployment
o Proportion of people in the economy actively seeking
work but do not have jobs
o Rises during recession and declines during recovery and
prosperity
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Inflation and Deflation
o Income
o Influences consumer buying power
o Marketers focus on discretionary income, the amount
of money people have to spend after buying necessities
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Resource Availability
o Shortages can result from lack of raw materials,
component parts, energy, or labor
o Demarketing - Reducing consumer demand for a good
or service to a level that the firm can supply
o Challenges facing marketers:
o Allocating limited supplies
o Deciding whether to spread limited supplies over all
customers or limit purchases by some customers
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
The International Economic Environment
o Marketers must monitor the economic environment of
other nations
o Global political changes affect international
marketplace
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
The Technological Environment
o Application of knowledge based on discoveries in
science, inventions, and innovations to marketing
o Technology leads to:
o New products
o Improvements in existing products
o Better customer service
o Reduced prices
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
The Technological Environment
o Technology addresses social concerns
o Sources of technology :
o Industry
o Educational institutions
o Not-for-profit institutions
o Federal government
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Applying Technology
o Marketers monitor new technology to gain a
competitive edge and to enhance customer service
o Internet Protocol Multimedia Subsystem (IMS) will
offer new opportunities to marketers
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
The Social-Cultural Environment
o The relationship between the marketer, society, and
culture
o Marketers must be sensitive to demographic shifts and
changing values
o Increasing importance of cultural diversity
o Example: Univision and Telemundo face growing
competition in Spanish-language television
programming
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Consumerism
o Social force within the environment that aids and
protects the consumer by exerting legal, moral, and
economic pressures on business and government
o Consumer rights:
o The right to choose freely
o The right to be informed
o The right to be heard
o The right to be safe
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Ethical Issues in Marketing
o Marketing ethics - Marketers’ standards of conduct
and moral values
o Many companies create ethics programs to train
employees to act ethically
o Employees’ personal values sometimes conflict with
employers’ ethical standards
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.
CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Ethics in Marketing Research
o Consumers are concerned about privacy
o Proliferation of databases
o Selling of address lists
o Ease with which consumer information can be gathered
o Several agencies offer assistance to Internet consumers
o The U.S. government maintains a Do Not Call registry
to prevent unwanted telemarketing
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Ethics in Product Strategy
o Product quality, planned obsolescence, brand
similarity, and packaging raise ethical issues
o Example: Packaging strategy
o Larger packages are more noticeable on the shelf
o Oddly sized packages make price comparison difficult
o Bottles with concave bottoms appear to have more
liquid in them than they do
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Ethics in Distribution
o What is the appropriate degree of control over the
distribution channel?
o Should a company distribute its products in marginally
profitable outlets that have no alternative source of
supply?
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Ethics in Promotion
o Truth in advertising is the bedrock of ethics in
promotion
o Marketing to children has come under increased
scrutiny
o Promoting specific products to college students can
raise ethical questions
o Another issue involves firms paying universities for the
use of their logo, team name, or mascot to advertise
products and services to students
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Ethics in Pricing
o Most regulated aspect of a firm’s marketing activities
o Example: Credit-card companies target consumers
with poor credit ratings and offer them what industry
observers call “subprime” or “fee-harvesting” credit
cards
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Source: The Four Step Pyramid of Corporate
Social Responsibility from Business Horizons,
Vol. 34, 1991, page 92, Freeman & Liedtka,
“Corp. Social Responsibility.” Reprinted from
Business Horizons © 1991 with permission
From Elsevier.
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Marketing’s Responsibilities
o Corporate responsibility covers the entire framework
of society
o Marketers must consider:
o The global effects of their decisions
o The long-term effects of their decisions
o The well-being of future generations
o Entire communities can benefit through socially
responsible investing
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Marketing and Ecology
o Ecology - The relationship between organisms and
their natural environments
o Environmental issues influence all areas of marketing
decision making
o Green marketing - Production, promotion, and
reclamation of environmentally sensitive products
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CHAPTER 3 The Marketing Environment, Ethics, and Social Responsibility
Video
Watch The Marketing Environment, Ethics,
and Social Responsibility at Scholfield Honda
o How does Scholfield Honda rate on the social responsibility
pyramid? Do they meet all the criteria for a socially responsible
company?
o What social and cultural changes have affected the way car
manufacturers design and market their products?
o Should governmental regulations be placed on companies’
claims that their products are green? Should official
classifications for environmental friendliness be defined?
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