Chapter 3

Chapter 3
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
© zayats-and-zayats
LO 3-1 Summarize why it is important to examine

and respond to the marketing environment
LO 3-2 Explain how competitive factors affect an
organization’s ability to compete
LO 3-3 Articulate how economic factors influence
a customer’s ability and willingness to buy
products
LO 3-4 Identify the types of political forces in the
marketing environment
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website for classroom use.
LO 3-5 Explain how laws, government regulations,

and self-regulatory agencies affect
marketing activities
LO 3-6 Describe how new technology impacts
marketing and society
LO 3-7 Outline the sociocultural issues marketers
must deal with as they make decisions
Competitive
Economic Political
Environmental
Forces
Legal and Technological

Regulatory
Sociocultural
LO 3-1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
O Environmental Scanning
O The process of collecting information about
forces in the marketing environment
O Environmental Analysis
O The process of assessing and interpreting the
information gathered through environmental
scanning
O How you deal with the information collected
during scanning
 After successfully battling with his own
weight, entrepreneur Matt Matros founded
the restaurant Protein Bar to provide
healthy, convenient food options.
 Matt realized his knowledge of healthy food
could be beneficial to others, especially
considering our society’s concerns with
obesity.
 Protein Bar was founded with the mission to
“change the way people eat on the go.”
 How do you think Matt used environmental
scanning and environmental analysis to create
Protein Bar?
 The Protein Bar successfully meets a market
need. Which environmental force is the most
relevant to the business concept of Protein
Bar?
LO 3-1
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
O Marketers take two approaches to

environmental forces:
O Passive – Accepting them as uncontrollable
O Proactive – Attempting to influence and shape
them
O No best way to react
O Depends on the organization,
management, and the situation
O Competition – Other organizations

that market products that are similar
to or can be substituted for a
marketer’s products in the same
geographic area
O Most firms have competition
O When marketing managers define the target
market(s) their firm will serve, they establish a
set of competitors
O Marketing managers must consider the type of
competitive structure in which the firm
LO 3-2 operates
O Brand Competitors – Firms that

market products with similar features
and benefits to the same customers
at similar prices
O Product Competitors – Firms that

compete in the same product class
but market products with different
features, benefits, and prices
O Generic Competitors – Firms that

provide very different products that
solve the same problem or satisfy the
same basic customer need
O Total Budget Competitors – Firms

that compete for the limited financial
resources of the same customers
 Sierra Nevada is the second best selling
craft beer in the United States. It has
many competitors that it must consider.
Some of these competitors are obvious,
but some are less so. Classify each option
below as one of the four types of
competitors:
 Tap water at a restaurant
 New Belgium Brewing beer
 Bottle of Merlot
 Cigarettes
 Milk
 Bud Light
 Chewing gum
 A margarita
LO 3-2
O Monopoly
O A competitive structure in which an
organization offers a product that has no close
substitutes, making that organization the sole
source of supply
O Oligopoly
O A competitive structure in which a few sellers
control the supply of a large proportion of a
product
O Monopolistic Competition
O A competitive structure in which a firm has
many potential competitors and tries to
develop a marketing strategy to differentiate its
product
O Pure Competition
O A market structure characterized by an
extremely large number of sellers, none strong
enough to significantly influence price or supply
O Does not exist in the real world, although some
industries come close
O Helps determine competitor’s

strategies and their effects on firm’s
own strategies
O Guides development of competitive advantage
and adjusting firm’s strategy
O Provides ongoing information about
competitors
O Information about competitors allows
marketing managers to assess the performance
of their own marketing efforts and to recognize
the strengths and weaknesses in their own
marketing strategies
O A pattern of economic fluctuations

that has four stages:
O Prosperity – Low unemployment and relatively
high total income, which together ensure high
buying power (provided the inflation rate stays
low)
O Recession – Unemployment rises and total
buying power declines, stifling both consumer
and business spending
O Depression – Unemployment is extremely high,

wages are very low, total disposable income is
at a minimum, and consumers lack confidence
in the economy
O Recovery – The economy moves from
depression or recession to prosperity
O Difficult to ascertain how quickly and to what level
prosperity will return
O Maintain as much flexibility in marketing strategies as
possible to allow for any needed adjustments
O Buying Power – Resources, such as

money, goods, and services, that can
be traded in an exchange
O Income – For an individual, the

amount of money received through
wages, rents, investments, pensions,
and subsidy payments for a given
period
O Disposable Income – After-tax income
O Discretionary Income – Disposable

income available for spending and
saving after an individual has
purchased the basic necessities of
food, clothing, and shelter
O Credit enables people to spend future

income now or in the near future
O Credit increases current buying power
at the expense of future buying
power
O Factors affecting credit use:
O Must be available
O Interest rates
O Credit terms (such as size of down payment and
amount and number of monthly payments)
O The accumulation of past income,

natural resources, and financial
resources
O Global wealth is increasing
O Like income, wealth is unevenly distributed
O As people become wealthier, they

gain buying power:
O To make current purchases
O To generate income
O To acquire large amounts of credit
O An inclination to buy because of

expected satisfaction from a product,
influenced by the ability to buy and
numerous psychological and social
forces
O Factors that affect consumers’ general
willingness to spend:
O Expectations about future employment
O Income levels
O Prices
O Family size
O General economic conditions
O Enactment of legislation
O Legal decisions interpreted by courts
through civil and criminal cases
O Influence of regulatory agencies
O Marketers may:
O View political forces as beyond their control and
simply adjust to conditions that arise
O Influence the process through contributions
and lobbying
Pro-
competitive
Legislation
Self- Consumer
Regulatory Protection
Forces Legislation
Legal and
Regulatory
Forces
Encouraging
Regulatory Compliance
Agencies with Laws and
Regulations
O Procompetitive Legislation
O Preserves competition
O Laws have been created to prevent businesses
from gaining an unfair advantage through
bribery
O Consumer Protection Legislation
O Protects people from harm
O Prohibits hazardous products
O Requires information disclosure
O Aimed at particular marketing activities
O Current trend is away from legally-

based organizational compliance
programs
O Emphasis on providing incentives to create
ethical and responsible corporate cultures
O Regulatory agencies monitor

marketing activities and may enforce
some laws
O An agency that regulates a variety of

business practices and curbs:
O False advertising
O Misleading pricing
O Deceptive packaging and labeling
O Most heavily influences marketing

activities (of all regulatory units)
O Assists businesses in complying with
laws and evaluates new marketing
methods
O Some businesses choose to self-

regulate
O Better Business Bureau (BBB) – A system of
nongovernmental, independent, local
regulatory agencies supported by local
businesses that help settle problems between
customers and specific business firms
O National Advertising Review Board (NARB) – A
self-regulatory unit that considers challenges to
issues raised by the National Advertising
Division (an arm of the Council of Better
Business Bureaus) about an advertisement
O Advantages:
O Establishment and implementation are usually
less expensive
O Guidelines are generally more realistic and
operational
O Effective self-regulatory programs reduce the
need to expand government bureaucracy
O Disadvantages:
O Nonmember firms do not have to abide
O Lack the tools/authority to enforce guidelines
O Often less strict than those established by
LO 3-5
government agencies
Technology
Dynamic Ability to Reach Self-Sustaining

Change Customers Technology
O Technology
O The application of knowledge and tools to solve
problems and perform tasks more efficiently
O Impacts of technology:
O Dynamic change
O Ability to reach customers
O Self-sustaining in nature; spurs more development
O Rapid technological growth and change are
expected to accelerate
O Mobile devices and consumers’

increasing use of the Internet have
changed:
O How people communicate
O How marketers reach consumers
O Can improve productivity and

opportunities for e-commerce
O Negative impacts include:
O Concerns over privacy
O Intellectual property protection issues
O Firms must keep up with technology

to maintain their status as market
leaders
O Must ensure that their technology is not easily
copied
O Use a technological assessment to
learn about and attempt to foresee
the effects of new products and
processes
O Estimate whether benefits of adopting a
specific technology outweigh costs
Demographic
and Diversity
Characteristics
Sociocultural
Forces
Cultural
Consumerism
Values
O The influences in a society and its

culture(s) that change people’s:
O Attitudes
O Beliefs
O Norms
O Customs
O Lifestyles
O Determine what, where, how, and

when people buy products
 Walmart has announced the
development of its Sustainability Index, a
measurement system that is used to
track the environmental impact of
products.
 The index has been applied to 300
product categories and 5,000 suppliers.
 By using the index, Walmart is able to
increase the sustainability of its product
offerings.
 Describe the importance of the index
from a sociocultural perspective.
 How might this index give Walmart a
competitive advantage over other rival
companies?
LO 3-7
O Changes in a population’s
demographic characteristics lead to
changes in how people live and
consume products
O Increasing market of retired Baby Boomers
O Generation Y
O Growing Hispanic/Latino market in the U.S.
O A more diverse customer base means

marketing practices must be modified
and diversified to meet changing
LO 3-7 needs
O Changes in cultural values alter

people’s needs/desires for products
O Health, nutrition, and exercise growing in
importance (sales of organic foods, herbal
remedies, and vitamins have escalated)
O Definition of family is changing
O Children continue to be very important
O Trend towards eat-out and take-out meals
O Green marketing helps establish long-term
consumer relationships by maintaining,
supporting, and enhancing the natural
environment
O The organized efforts of individuals,

groups, and organizations to protect
consumers’ rights
O Lobbying government officials and agencies
O Letter-writing/e-mail sending campaigns
O The movement’s major forces are:

O Individual consumer advocates
O Consumer organizations and other interest
groups
O Consumer education
O Consumer law
 Facebook is facing backlash for a
psychological study it performed without
user consent. Facebook manipulated the
message steams of nearly 700,000 users in
2012 to analyze their subsequent responses.
 Describe the marketing The idea was to see whether these
alterations would be enough to get
environmental forces
Facebook users to post something similar in
that apply to this
tone.
situation.
 Anger in the United States by consumers who
feel their privacy has been violated. Although
not likely illegal according to U.S. law, the
study violated social conventions
 The possibility that it could be legally liable in
the United Kingdom, which does have more
stringent privacy laws
 The use of big data and analytics to analyze
behavior implications not easily noticeable
otherwise
LO 3-7

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Chapter 3

LO 3-1 Summarize why it is important to examine

LO 3-5 Explain how laws, government regulations,

Legal and Technological

O Marketers take two approaches to

O Competition – Other organizations

O Brand Competitors – Firms that

O Product Competitors – Firms that

O Generic Competitors – Firms that

O Total Budget Competitors – Firms

O Helps determine competitor’s

O A pattern of economic fluctuations

O Depression – Unemployment is extremely high,

O Buying Power – Resources, such as

O Income – For an individual, the

O Disposable Income – After-tax income

O Discretionary Income – Disposable

O Credit enables people to spend future

O The accumulation of past income,

O As people become wealthier, they

O An inclination to buy because of

O Influence of regulatory agencies

O Current trend is away from legally-

O Regulatory agencies monitor

O An agency that regulates a variety of

O Most heavily influences marketing

O Some businesses choose to self-

Dynamic Ability to Reach Self-Sustaining

O Mobile devices and consumers’

O Can improve productivity and

O Firms must keep up with technology

O The influences in a society and its

O Determine what, where, how, and

O A more diverse customer base means

O Changes in cultural values alter

O The organized efforts of individuals,

O The movement’s major forces are:

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