Kotler CHAP04

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Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens 2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458
OBJECTIVES After reading this chapter, you should be able to:
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It is useless to tell a river to stop running The best thing is to learn how to swim in the direction it is flowing.
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OBJECTIVES After reading this chapter, you should be able to: List and discuss the importance of the elements of the companys microenvironment, including the company, suppliers, marketing intermediaries, customers, and public. Describe the macroenvironmental forces that affect the companys ability to serve its customers. Explain how changes in the demographic and economic environments affect marketing, and describe the levels of competition.
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OBJECTIVES After reading this chapter, you should be able to: Identify the major trends in the firms natural and technological environments. Explain the key changes that occur in the political and cultural environments. Discuss how companies can be proactive rather than reactive when responding to environmental trends.
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Marketing for Hospitality and Tourism, Fifth Edition By Philip Kotler, John Bowen and James Makens
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2010 Pearson Higher Education, Inc. Pearson Prentice Hall - Upper Saddle River, NJ 07458
The Marketing Environment McDonalds In 1955, Ray Kroc, a 52-year-old salesman of milkshake-mixing machines, discovered a string of restaurants owned by Richard & Maurice McDonald. Kroc saw fast-food concept as perfect for Americas on-the-go, time-squeezed, family-oriented lifestyles.
he bought the small chain for $2.7 million, & McDonalds grew to become the worlds largest fast-feeder
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More than 31,000 McDonalds restaurants worldwide now serve 52 million customers each day, racking up systemwide sales of almost $60 billion annually.
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The Marketing Environment McDonalds The Golden Arches are one of the worlds most familiar symbols.
other than Santa Claus, no character in the world is more recognizable than Ronald McDonald
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Industry analysts say

the Golden Arches did for greasy spoons what Holiday Inn did for roadside motels in the 1950s and what Sam Walton later did for the discount retail store. McDonalds is much more than an ordinary fast-food chain. It is a cultural mirror [that] reflects the evolution of American eating habits.
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The Marketing Environment McDonalds While a changing marketplace provided opportunities for McDonalds, it also presented challenges. The company has struggled to address shifting consumer lifestyles and its market share fell more than 3% between 1997 and 2003.
in 2002 the company posted its first-ever quarterly loss
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What happened? In this age of obesity lawsuits and $5 lattes, McDonalds seemed a bit out of step with the times.
consumers were looking for fresher, better tasting food and more upscale atmospheres
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The Marketing Environment McDonalds McDonalds was losing share to what the industry calls fast-casual restaurants.
Panera Bread, Baja Fresh & Cosi were offering more imaginative meals in more fashionable surroundings even the local supermarket offered a full selection of prepared, ready-to-serve gourmet meals to go
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Americans were seeking healthier eating options.

fast-food patrons complained about too few healthy menu choices, and many were eating less at fast-food restaurant
As the market leader, McDonalds bore the brunt of much of this criticism.
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The Marketing Environment McDonalds Reacting, in early 2003 McDonalds announced a turnaround planthe Plan to Winto better align the company with the new marketplace realities. McDonalds began refocusing on what made it successful: consistent products and reliable service. To compete with the new fast-casual competitors & expand its customer base, McDonalds experimented with new restaurant concepts such as McCaf coffee shops now open in 34 countries.
kids can still get their Happy Meals, but parents can feast on more sophisticated fare
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The Marketing Environment Introduction McDonalds knows that as a marketing environment changes, the company must change with it.
says McDonalds CEO James Skinner. Were always evolving to meet the changing needs of our customers.
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A companys marketing environment consists of the actors & forces outside marketing that affect ability to build and maintain successful relationships with its target customers.
offering both opportunities and threats
Successful companies know the importance of watching & adapting to a changing environment.
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The Marketing Environment Introduction Managers who practice marketing will be the trend trackers and opportunity seekers.
also spending time in customer & competitor environments
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Good marketers have disciplined methods for collecting marketing environment information.
marketing intelligence & marketing research
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The Marketing Environment Introduction The marketing environment is made up of a microenvironment and a macroenvironment. The microenvironment consists of factors close to the company that affect its ability to serve its customers.
the company itself, marketing channel firms, customer markets & a broad range of publics
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The macroenvironment consists of the larger societal forces that affect the entire microenvironment.
demographic, economic, natural, technological, political, competitor, and cultural forces
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The Marketing Environment The Companys Microenvironment Marketing managements job is to build relationships by creating customer value & satisfaction. The success of marketing plans requires working closely with the companys microenvironment.
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Figure 4-1 Major actors in the companys microenvironment.
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The Companys Microenvironment The Company Marketing managers must work closely with top management and the various company departments. The finance department is concerned with finding & using funds required to carry out the marketing plan. Accounting has to measure revenues & costs to help marketing know how well it is achieving objectives. Housekeeping is responsible for delivering clean rooms sold by the sales department. Top management sets the company mission, broad strategies, objectives, and policies.
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The Companys Microenvironment The Company Marketing decisions must be made within the strategies and plans made by top management. Under the marketing concept, all managers, supervisors, and employees should work in harmony to provide superior customer value and satisfaction.
all departments impact marketing plans & actions
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The Companys Microenvironment Existing Competitors The marketing concept holds a successful company must satisfy the needs and wants of consumers better than its competitors.
every company faces a broad range of existing competitors
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Marketers must adapt to the needs of their target customers, and also to the strategies of other companies serving the same target markets. Companies must gain strategic advantage by strongly positioning their product in the minds of consumers.
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The Companys Microenvironment Existing Competitors No single competitive marketing strategy is best for all companies. Each firm must consider its size & industry position in relation to that of its competitors.
large firms with dominant positions can use strategies smaller firms cannot afford small firms can also choose strategies that give them certain advantages
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Both large and small firms must find marketing strategies that give them specific advantages over competitors operating in their markets.
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The Companys Microenvironment Existing Competitors - Variables A company should monitor three variables when analyzing each of its competitors:
share of market: The competitors share of the target market. share of mind: The percentage of customers who named the competitor in responding to the statement, Name the first company that comes to mind in this industry. share of heart: The percentage of customers who named the competitor in responding to the statement, Name the company from whom you would prefer to buy the product.
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The Companys Microenvironment Existing Competitors - Identifying Managers often fail to identify their competitors correctly. Research has shown only about 40% of customers that rate a hotel or restaurant as being good return.
jumping to 90% when customers give a rating of excellent
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Competitive forces are so strong in our industry that being good is no longer good enough.
we must strive for excellence
It is important for managers to understand how many of their customers might be at risk if a competitor opens in their market area.
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The Companys Microenvironment Existing Competitors - Four Levels Every company faces four levels of competitors. A company can view its competitors as other companies offering similar products & services to the same customers at a similar price.
McDonalds views its competition at this level as Burger King, Wendys & Hardees
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As all companies making the same product or class of products.

McDonalds may competition as all fast-food restaurants
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The Companys Microenvironment Existing Competitors - Four Levels Every company faces four levels of competitors. A company can see its competitors more broadly as all companies supplying the same service.
here McDonalds would see itself competing with all restaurants and other suppliers of prepared food, such as the deli section of a supermarket
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A company can see its competition even more broadly as all companies that compete for the same consumer dollars.
McDonalds would see itself competing with the self-provision of the meal by the consumer
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The Companys Microenvironment Existing Competitors - Four Levels
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Figure 4-2 Levels of competition. Adapted from Analysis for Market Planning, Donald R. Lehmann and Russell S. Winer, p. 22, 1994 by Richard D. Irwin.
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The Companys Microenvironment Suppliers Suppliers are firms & individuals providing resources needed by the company to produce goods & services.
trends & developments affecting suppliers can seriously affect a companys marketing plan requiring tracking changes in supply availability & costs
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Outsourcing food & beverage operations allows the hotel to concentrate on lodging. Some hotels have contracted with restaurant companies to supply their food &beverage services
bringing branded restaurants to their hotels creates value for their guests and exposes restaurant guests to the hotel
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The Companys Microenvironment Suppliers - Outsourcing There are several ways to partner with a celebrity chef or branded restaurant. One is paying a licensing or management fee for a celebrity chef to oversee a and use his/her name on the restaurant.
fees generally run from 4 to 7% of the gross revenue
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A second is a deal where the chef is an equity partner, with a 30 to 50% share of the equity.
this creates more of a commitment on the chefs part, as they now share directly in the profits of the restaurant
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The Companys Microenvironment Suppliers - Outsourcing Problems Some hotels leasing their operations to upscale operators find coffee shop & room service operations, often suffer as a result.
the operators often are not interested in these areas focus groups note that a coffee shop suitable for a business meeting is sometimes a deciding factor in the hotel choice
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The concept works the best when the restaurant brought in for its brand name or brand name of its chef operates just the restaurant on an equity basis.
coffee shop, room service, and banquet operations are best left up to the hotel to run
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The Companys Microenvironment Suppliers - Outsourcing Problems Like any supplier, suppliers of food and beverage for a hotel have to be chosen carefully. When guests complain about poor food service at the front desk, saying the hotel does not operate the restaurants is not an acceptable answer.
service recovery programs need to be worked out between the restaurant and the hotel
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Leasing of food-service operations ties up hotel space through lease agreements.

this can be a problem if the hotel decides to renovate and change the design of the public spaces
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The Companys Microenvironment Marketing Intermediaries Marketing intermediaries help the company promote, sell, and distribute its goods to the final buyers.
Hospitality intermediaries include travel agents, wholesale tour operators, and hotel representatives
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A wholesaler creates packages including air fare, ground transportation, and hotel accommodations.
promoted through newspaper advertising & travel agents
Reduced prices through volume purchasing enables the wholesaler to pay the travel agent a commission for selling the product, give the customer a good price, and produce a profit.
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The Companys Microenvironment Marketing Intermediaries & The Internet The Internet has created both disintermediation and pricing transparency.
disintermediation is the elimination of intermediaries
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Hotels have created their own Internet reservations systems, making them less dependent on travel agents and other intermediaries. Perishability of hotel rooms means that most hotels still need help from intermediaries.
including corporate travel departments, meeting planners, incentive houses, and other distribution channels
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The Companys Microenvironment Marketing Intermediaries & The Internet When hotels do sell to intermediaries who use the Internet, they have to consider price transparency.
if a group is given a rate of $229 per night & members can book on the hotel Web site for $209, they may book online
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The Internet as a booking engine has created many opportunities, but it has also made interactions with intermediaries more complex.
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The Companys Microenvironment Marketing Intermediaries Marketing services agencies are suppliers that help formulate & implement marketing strategy & tactics.
these include public relations agencies, advertising agencies, and direct mail houses
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They work directly with the companys marketing program and also include marketing research, media, and marketing consulting firms. These firms can vary in creativity, quality, service & price, and the company should regularly review their performance & replace those no longer performing well.
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The Companys Microenvironment Financial Intermediaries Financial intermediaries are banks, insurance and credit companies, and firms that help hospitality companies finance transactions or insure risks. Rising credit costs, limited credit, or both seriously affect a companys marketing performance
rising insurance costs have forced some hospitality firms out of business
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The company has to develop strong relationships with important financial institutions. Companies must be careful to avoid unmanageable growth expectations of their financial intermediaries.
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The Companys Microenvironment Intermediaries Todays marketers recognize the importance of working with intermediaries as partners rather than simply as channels through which they sell products.
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The Companys Microenvironment Customers The hospitality company needs to study five types of general customer markets closely. Consumer markets are individuals & households that purchase hospitality services for leisure, medical needs & gatherings like reunions and weddings. Business markets buy hospitality services to facilitate their business.
individual rooms for travelers representing the company group meetings the company or organization may conduct or produce
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Each market type has special characteristics.

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The Companys Microenvironment Publics - Seven Types A public is any group that has an actual or potential interest in or impact on an organizations ability to achieve its objectives. We identify seven types:
Financial publics influence the companys ability to obtain funds. Banks, investment houses, and stockholders are the major financial publics. Media publics carry news, features, and editorial opinions. They include newspapers, magazines, and radio & TV. Government publics. Management must take government developments into account. Marketers must often consult the companys lawyers on issues of product safety, truth in advertising, and other matters.
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Citizen-action publics. A companys marketing decisions may be questioned by minority groups, consumer organizations, environmental groups, and others. Its public relations department can help it stay in touch with consumer and citizen groups. Local publics are neighborhood residents & community organizations. Many companies appoint a community relations officer to deal with the community, attend meetings, answer questions & help worthwhile causes.
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General public. A company needs to be concerned about the general publics attitude to its products & activities. The publics image of the company affects its buying. Internal publics include workers, managers, volunteers, and the board of directors. Large companies use newsletters and other means to inform and motivate their internal publics.
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A company can prepare marketing plans for these major publics as well as for its customer markets.
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The Companys Macroenvironment Introduction The company and all of the other actors operate in a larger macroenvironment of forces that shape opportunities and pose threats to the company.
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Figure 4-3 Major forces in the companys macroenvironment.

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Macroenvironment - Future Competitors Barriers to Entry, Exit and Competition The entrance of future competitors is difficult to predict & can have a major effect on a business. Two forces that affect the competition are the ability of companies to enter and exit markets.
entry barriers prevent firms from getting into a business barriers to exit prevent them from leaving
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It takes a relatively small amount of capital to get started in the restaurant business. (a low barrier)
this makes it hard to predict future competition as a large pool of organizations & individuals can open restaurants
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Macroenvironment - Future Competitors Barriers to Entry, Exit and Competition Some restaurant managers open without direct competition & find themselves with four or five competitors in a years time. Restaurant managers should always manage as if there is strong competition even if there is none.
the manager will be prepared when competition arrives
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Macroenvironment - Future Competitors Barriers to Entry, Exit and Competition Hotels have moderately high barriers of entry, due to costs of building a hotel & scarcity of good locations. High barriers to exit from the industry present a different set of competitive problems.
the large capital investment required to build a hotel becomes a sunk cost
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Hotels that cannot meet their debt payments, taxes, and other fixed costs, but can produce enough gross profit to partially offset these fixed costs, may operate at a loss rather than close their doors.
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Macroenvironment - Demographic Environment Introduction Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. The demographic environment is of major interest to marketers because it involves people, and people make up markets Changes in the world demographic environment have major implications for business The most important demographic trend in the United States is the changing age structure of the population.
the US population contains several generational groups
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Macroenvironment - Demographic Environment The Baby Boomers The postWorld War II baby boom produced 78 million baby boomers, born between 1946 and 1964.
a powerful force shaping the marketing environment
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Baby boomers account for nearly 30 percent of the population, spend about $2.3 trillion annually, and hold three quarters of the nations financial assets.
the youngest are in their forties; the oldest in their sixties
The maturing boomers are rethinking the purpose & value of work, responsibilities, and relationships.
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Macroenvironment - Demographic Environment The Baby Boomers As they reach peak earning and spending years, the boomers are a lucrative market for eating out, travel and entertainment, spas & other leisure activities. Many boomers are rediscovering the excitement of life and have the means to play it out.
it would be a mistake to think of them as aging & staid
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According to the Travel Industry Association of America, half of all U.S. adults took adventure vacations within the past five years.
some 56% of these travelers were boomers
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Macroenvironment - Demographic Environment Generation X The baby boom was followed by a birth dearth, creating another generation of 49 million people born between 1965 and 1976. Author Douglas Coupland calls them Generation X because they lie in the shadow of the boomers and lack obvious distinguishing characteristics. Generation Xers are defined as much by their shared experiences as by their age.
having grown up during times of recession and corporate downsizing, they developed a more cautious economic outlook
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Macroenvironment - Demographic Environment Generation X Gen Xers care about the environment and respond favorably to socially responsible companies. While they seek success, they are less materialistic
they prize experience, not acquisition for many of the 30 million Gen X parents, family comes first, career second
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Gen Xers are more skeptical.

says one marketer, Marketing to Gen Xers is difficult, they have a lot of filters in place. another agrees: Sixty-three percent of this group will research products before they consider a purchase.
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Macroenvironment - Demographic Environment Generation X The Gen Xers have brought us the quality movement and enjoy menus combining familiar with unique.
Starbucks, Chipotle & Panera Bread are Gen X favorites
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Gen Xers look for something different in vacations, which means they spend more than boomers.
they have set a higher bar for casual dining, business travel, and midpriced hotels
Gen Xers are now evolving from their grungy twentieth-century adolescence and rapidly becoming the major market segment for business travel.
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Macroenvironment - Demographic Environment Generation X Xers are notoriously uncomfortable with generic global brands and demand alternative brands to those patronized by their parents, the baby boomers.
they prefer to seek out local specialties & experiences
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Whereas their parents might prefer hotels with identical bathrooms from Amsterdam to Zurich, Xers like to celebrate local differences.
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Macroenvironment - Demographic Environment Millennials Both the baby boomers and Gen Xers will one day be passing the reins to the Millennials.
also called Generation Y or the echo boomers
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Born between 1977 and 2000, these children of the baby boomers number 83 million, dwarfing the Xers and larger even than the baby boomer segment. This group includes several age cohorts:
tweens (ages 8 to 12), teens (13 to 18) young adults (the twentysomethings)
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Macroenvironment - Demographic Environment Millennials Younger Millennials are just beginning to wield their buying power, while older ones have graduated from college and moving up in their careers.
significantly expanding both their earning & spending
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Gen Y represents only 9 percent of business travelers now, but this percentage is rising quickly. One thing all of the Millennials have in common is their utter fluency and comfort with computer, digital, and Internet technology. Each Millennial segment constitutes a huge and attractive market. tab
Macroenvironment - Demographic Environment Generational Marketing One way marketers can segment is by forming precise age-specific segments within each group. Defining people by their birth date may be less effective than segmenting them by their lifestyle, life stage, or the common values they seek in the products they buy.
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Macroenvironment - Demographic Environment Increasing Diversity Countries vary in their ethnic and racial makeup.
at one extreme is Japan, where almost everyone is Japanese, at the other, the United States, with people from virtually all nations
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Marketers face increasingly diverse markets as operations become international in scope. Diversity goes beyond ethnic heritage.
there are more than 54 million disabled people in the United Statesa market larger than African Americans or Hispanicsrepresenting almost $1 trillion in annual spending power
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Macroenvironment - Demographic Environment The Changing American Family The traditional household consists of a husband, wife, and children (and sometimes grandparents).
the once American ideal of the two-child, two-car suburban family has lately lost some of its luster
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In the US today, married couples with children make up only 23% of the nations 114 million households.
married couples without children 29% percent single parents comprise another 16%
A full 32% are nonfamily households single livealones or adult live-togethers of one or both sexes.
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Macroenvironment - Demographic Environment The Changing American Family Marketers must increasingly consider the special needs of nontraditional households.
now growing more rapidly than traditional households
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People in their thirties marrying for the first time have gotten used to going out to eat frequently.
when they have children they continue to dine out, taking their children with them
Those in households without children do not have the expense of children.

and more discretionary income for dining and travel
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Macroenvironment - Demographic Environment The Changing American Family The number of working women has increased greatly, growing from under 40% of the US workforce in the late 1950s to 59% today. Both husband & wife work in 57% of marriedcouple families, spawning the need for takeout food.
prepared by someone else, eaten at the home dining table
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Grocery stores, preparing heat-and-serve entrees and side dishes, are now seeking graduates of culinary & hospitality programs as this business grows.
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Macroenvironment - Demographic Environment Geographic Shifts in Population Over the past two decades, the U.S. population has shifted toward the Sunbelt states.
the West and South have grown, where the Midwest and Northeast have lost population
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As companies look for new locations, they need to understand both national and local geographic trends relating to shifting populations.
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Macroenvironment - Demographic Environment Better Educated, More White Collar, More Professional The U.S. population is becoming better educated.
in 2004, 86% of the US population over 25 had completed high school & 28% had completed college compared with 69% and 17% in 1980
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Nearly two thirds of high school graduates now enroll in college within twelve months of graduating. The rising number of educated people will increase the demand for quality products including luxury hotels, travel, wine, and dining at restaurants that have interesting menus.
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Macroenvironment - Economic Environment Introduction The economic environment includes factors affecting consumer purchasing power & spending patterns. Some countries have subsistence economies.
they consume most of their own agricultural & industrial output and offer few market opportunities
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Industrial economies constitute rich markets for many different kinds of goods. Marketers must pay close attention to major trends and consumer spending patterns both across and within their world markets.
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Macroenvironment - Economic Environment Changes in Income In the 90s, Americans fell into a consumption frenzy, fueled by income growth, a stock market boom, rapid increase in housing values & other economic factors.
they bought & bought, seemingly without caution, amassing record levels of debt
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The free spending and high expectations of those days were dashed by the recession of the early 2000s. The 2008 housing market collapse eliminated the opportunity for many to borrow home equity. This was combined with an increase in gasoline prices that created financial pressures for consumers.
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Macroenvironment - Economic Environment The Global Economy Today the travel industry operates in a global environment:
the growth of tourism in Croatia comes at the expense of other destinations when the exchange rate between the Euro and the $US favors the Euro, fewer Americans go to Europe an outcome of currency devaluations in Argentina is a net gain as a convention & meeting destination marketers responsible for destinations must be aware of travel trends & development of new tourist destinations
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Macroenvironment - Natural Environment Introduction The natural environment involves natural resources needed as inputs by marketers or that are affected by marketing activities.
environmental concerns have grown in the past 3 decades
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Marketers should be aware of several trends in the natural environment.

the first involves growing shortages of raw materials a second environmental trend is increased pollution, as industry almost always damages the natural environment
Hospitality companies must be good corporate citizens and embrace corporate responsibility.
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Macroenvironment - Natural Environment Sustainability The natural environment consists of many amenities that attract tourists, such as forests, clean beaches, pristine streams, wildlife, and clean air. Anyone involved in tourism has an obligation to protect the environment and develop sustainable tourism. The concern for sustainability is increasing and has led to publications such as greenlodgingnews.com
and organizations such as Green Restaurant Association
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Macroenvironment - Natural Environment Government Intervention A third trend is increased government intervention in natural resource management.
governments of different countries vary in their concern and efforts to promote a clean environment
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Many tourist locations are dependent on the natural environment. Some scientists predict some of the Maldive Islands will be under water at the end of the century, a victim of global warming. Courtesy of Fraser Hall/Robert Harding World Imagery.
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Macroenvironment - Technological Environment Description The most dramatic force shaping our destiny is technology
which has given us wireless Internet, the ability to send documents around the globe electronically & inexpensive worldwide transportation it has also released horrors as nuclear missiles and products with mixed blessings, such as TV & the car
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Products taken for granted today were uncommon or simply did not exist thirty years ago.
cell phones, copiers, fast-food chains, personal computers, jet airplanes, all-suite hotels, and DVD players
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Macroenvironment - Technological Environment Technological Effects Technology has affected hospitality in many ways:
computerized video checkout services are common in hotels electronic guest room locking systems tell housekeepers which rooms are occupied the minibar lock tells which guests accessed their minibar, making restocking easier fax machines receive orders at restaurants, and machines cook food automatically
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e-Tickets allow customers to check themselves in at the airport. This saves time for the customer and labor for the airlines. Courtesy of David K. Crow/PhotoEdit.
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Macroenvironment - Technological Environment The Internet Technology has also made communication easier. The Internet needs to be monitored to see what others are saying about your business. Word-of-mouth is no longer restricted to people we know but can be spread to large numbers of people over the Internet.
the web site for this chapter contains a list of several of the sites used by consumers to spread word-of-mouth
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The Internet has had a profound effect on the hospitality and travel industries.
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Macroenvironment - Technological Environment The Internet The Internet has created a new distribution channel for hospitality and travel products. Today, over 60% of all travel bookings & over 40 % of all hotel reservations are generated on the Internet.
expedia.com sells more than 10 million room nights a year
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Smart CVBs provide detailed information on their destination for potential visitors on the Internet. Business-card-size CD-ROMs provide overviews of a destination with links to the CVBs web site.
hotels also use this type of promotion, which is less expensive than producing a color brochure
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Macroenvironment - Technological Environment The Internet Cindy Estis Green of the Green Group notes the control of the media content has shifted from brand marketers to the consumer. Hospitality companies are starting to take advantage of this new medium by putting videos on YouTube.
Marriott International has a site on microblog twitter.com
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Marketers must understand and anticipate changes in the technological environment and use technologies that serve human needs.
they must be sensitive to aspects of any innovation that might harm users and bring about opposition
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Macroenvironment - Political Environment Legislation and Regulation Affecting Business Marketing decisions are strongly affected by developments in the political environment.
laws, government agencies, and pressure groups that influence & limit the activities of various organizations and individuals in society
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Governmental agencies have become involved in the investigation and regulation of everything from fire codes to food-handling practices. Politicians also see travelers as good sources of revenue because nonresidents spend money but cannot vote against them.
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Macroenvironment - Political Environment Legislation and Regulation Affecting Business Hotel taxes and restaurant taxes have become popular sources of revenue for local governments.
in many cases hotel taxes are meant to support tourism
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Hotel managers must make sure that those taxes designated to promote tourism are used effectively.
and work with hotel & restaurant associations to make sure the taxes do not become oppressive
When New York City hiked a hotel tax to over 21.25%, convention business plunged 37% and overall tax revenue declined despite the increase.
the real loser was New York Citys hospitality industry
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Macroenvironment - Political Environment Legislation and Regulation Affecting Business Legislation and regulation affecting business have been enacted for three reasons. First, it protects companies from each other.
while most businesses praise competition, they try to neutralize it when it affects them
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Second, it aims to protect consumers from unfair business practices.

unregulated firms might make unsafe or low-quality products, be untruthful in advertising, or deceive via packaging & price
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Macroenvironment - Political Environment Legislation and Regulation Affecting Business Third, regulation also aims to protect societys interests against unrestrained business behavior.
regulation aims to make firms responsible for social as well as private costs of their activities
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Business executives must know the major laws protecting competition, consumers, and society when planning their products and marketing programs.
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Macroenvironment - Political Environment Changing Government Agency Enforcement To enforce laws, Congress has established several federal regulatory agencies, which can have a major impact on a companys marketing performance. These agencies have some discretion in enforcing the laws, and at times, appear overly eager.
lawyers & economists, who often lack a practical sense of marketing & other business principles, frequently dominate the agencies
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In recent years, the Federal Trade Commission has added marketing experts to its staff to gain a better understanding of these complex issues.
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Macroenvironment - Political Environment Emphasis on Socially Responsible Actions & Ethics The number of public-interest groups has increased during the past two decades, as has their clout in the political arena.
these groups take on issues of social responsibility
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Cindi Lamb formed what is now known as MADD (Mothers Against Drunk Driving).
MADD has had a major impact on the hospitality industry by demanding restaurants be more responsible in serving of alcohol
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Macroenvironment - Political Environment Emphasis on Socially Responsible Actions & Ethics One expert who follows People for the Ethical Treatment of Animals (PETA) states they would like to see all fast-food outlets that serve meat closed.
better treatment of animals would be good, but complete elimination of animals from human diets is something that the majority of people would not embrace
One of PETAs tactics is to picket restaurants and let people know what the animals go through to become food. They would like to see everyone become vegetarians and all restaurants serve only vegetarian meals. Courtesy of PETA.
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See this feature on page 102 of your textbook.

Macroenvironment - Political Environment Emphasis on Socially Responsible Actions & Ethics Regulations cannot cover all potential marketing abuse, and existing laws are often difficult to enforce.
beyond written laws and regulations, business is also governed by social codes & rules of professional ethics
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Enlightened companies encourage their managers to look beyond what the regulatory system allows and simply do the right thing. Recent business scandals & increased concerns about the environment has created fresh interest in the issues of ethics and social responsibility.
almost every aspect of marketing involves such issues
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Macroenvironment - Cultural Environment Persistence of Cultural Values The cultural environment includes institutions and other forces that affect societys basic values, perceptions, preferences, and behaviors.
people in any society hold persisting core beliefs & values
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Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government. Secondary beliefs and values, however, are more open to change.
believing in marriage is a core belief; believing people should get married early is a secondary belief
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Macroenvironment - Cultural Environment Persistence of Cultural Values Marketers have some chance of changing secondary values but little chance of changing core values. The hospitality industry is worldwide and cultural norms & prohibitions may affect managerial roles in ways quite different from in the US and Canada.
hoteliers in Israel are expected to understand & observe the rules of kashruth, or keeping kosher
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Macroenvironment - Cultural Environment Subcultures Each society contains subcultures, groups of people with shared value systems based on common life experiences or situations.
Episcopalians, teenagers, and working women are all separate subcultures who share common beliefs, preferences & behaviors
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To the extent that subcultural groups have specific wants and buying behavior, marketers can choose subcultures as their target markets.
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Linked Environmental Factors Description When the first Millennials became teenagers, total expenditures on food in restaurants & food-service exceeded grocery expenditures for the first time.
in 1996 people in the United States purchased more meals outside the home than they ate home-prepared
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Families are purchasing meals at restaurants or taking prepared food home, as many people still prefer to eat at home, but do not have time to cook The number-one trend in the food service industry today is the growth of food service in supermarkets and convenience stores.
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Linked Environmental Factors Patterns Culturally, thirty to forty years ago women were expected to stay home and cook.
no longer the case
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Thus we have seen a cultural change where men now participate in home duties and no one member of the household is expected to prepare all meals. The change in food consumption patterns relates to economic, demographic, technological, cultural, and competitive trends.
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Responding to the Marketing Environment Introduction Many companies view the marketing environment as an uncontrollable element to which they must adapt.
they passively accept the marketing environment and do not try to change it
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Other companies take an environmental management perspective, with aggressive action to affect the publics and forces in their marketing environment. An element of the macroenvironment that can be influenced is the political environment.
large companies hire lobbyists to present their interests
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Responding to the Marketing Environment Description Trade associations also hire lobbyists and form political action committees (PACs) to represent & communicate their concerns to government.
by communicating the possible effects on industry and the community, PACs can sometimes influence legislation
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Marketing management cannot always affect environmental forces; in many cases, it must settle for simply watching and reacting to the environment. Whenever possible, smart marketing managers take a proactive approach to the publics and forces in their marketing environment.
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Responding to the Marketing Environment Environmental Scanning Use of an environmental scanning plan has proven beneficial to many hospitality companies.
determine the environmental areas to be monitored determine how the information will be collected, including information sources, frequency & who will be responsible implement the data collection plan analyze the data & use them in the market planning process
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Part of the analysis is weighing importance of trends to keep them in proper perspective.
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Responding to the Marketing Environment Environmental Scanning One of the most important tasks, especially in a small business such as a restaurant, is to assign responsibilities for the collection of data.
bar managers can look for lounge promotions dining room managers can study serving and promotional ideas the staff then feeds ideas to the manager
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For an example of environmental scanning, refer to Table 4-1 on page 106 of your textbook.
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Responding to the Marketing Environment Using the Information It is never sufficient simply to collect data about the environment.
information must be reliable, timely & used in decision making
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Researchers must put less emphasis on data & more on the interpretation of those data.
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KEY TERMS Baby boomers. The 78 million people born between 1946 -1964. Demography. Study of human populations in terms of size, density, location, age, sex, race & other data. Disintermediation. The elimination of intermediaries. Echo boomers. See Millenials. Born between 1977 and1994, these children of the baby boomers now number 72 million, dwarfing the Gen Xers and almost equal in sizeto the baby boomer segment. Also known as Generation Y.
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KEY TERMS Economic environment. Factors that affect consumer purchasing power and spending patterns. Environmental management perspective. A management perspective in which a firm takes aggressive actions to affect the publics and forces in its marketing environment rather than simply watching and reacting to it. Financial intermediaries. Banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.
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KEY TERMS Generation X. A generation of 45 million people born between1965 and 1976; so named because they lie in the shadow of the boomers and lack obvious distinguishing characteristics. Generation Y. See Millennials. Macroenvironment. The larger societal forces that affect the whole microenvironment: competitive, demographic,economic, natural, technological, political, and cultural forces.
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KEY TERMS Marketing environment. The actors and forces outside marketing that affect marketing managements ability to develop and maintain successful transactions with its target customers. Marketing intermediaries. Firms that help the company to promote, sell, and distribute its goods to final buyers. Marketing services agencies. Marketing research firms, advertising agencies, media firms, marketing consulting firms, and other service providers.
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KEY TERMS Microenvironment. The forces close to a company that affect its ability to serve its customers: the company, market channel firms, customer markets, competitors, and the public. Millennials (also called Generation Y or the echo boomers). Born between 1977 and 2000, these children of the babyboomers number 83 million, dwarfing the Gen Xers and larger even than the baby boomer segment. This group includes several age cohorts: tweens (ages 8 to 12), teens(13 to 18), and young adults (the twentysomethings).
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KEY TERMS Political environment. Laws, government agencies, and pressure groups that influence and limit the activities of various organizations and individuals in society. Public. Any group that has an actual or potential interest in or impact on an organizations ability to achieve its objectives. Suppliers. Firms and individuals that provide the resources needed by a company and its competitors to produce goods and services.
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EXPERIENTIAL EXERCISES Try One ! View the annual reports of several hospitality companies. How did you find out about how they might be changing their business to fit the environment from their annual report? If you do not have access to an annual report, visit the books Web site for electronic access to annual reports.
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EXPERIENTIAL EXERCISES Try One ! Choose and visit a restaurant, club, or hotel you feel is designed for one of the generations discussed in the book (e.g., baby boomers, Generation X, echo boomers). After doing some research on the generation, state what the business you chose has done to cater to its target generation.
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INTERNET EXERCISES Try This ! Support for this exercise can be found on the Web site for Marketing for Hospitality and Tourism, www.prenhall.com/kotler A. On the Internet, find how ecotourism is being used to attract tourists by different organizations. B. From information you can find on the Internet, when do you think space tourism will be a viable form of tourism?
what organizations are working to develop space tourism?
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INTERNET EXERCISES Try This ! Support for this exercise can be found on the Web site for Marketing for Hospitality and Tourism, www.prenhall.com/kotler C. Go to travel or hospitality Web sites and find examples of how they are taking measures to sustain and improve the natural environment.
explain which companies that you examined you think have the best programs
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END
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CHAPTER END

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OBJECTIVES After reading this chapter, you should be able to:

Industry analysts say

Americans were seeking healthier eating options.

Figure 4-1 Major actors in the companys microenvironment.

As all companies making the same product or class of products.

The Companys Microenvironment Existing Competitors - Four Levels

Leasing of food-service operations ties up hotel space through lease agreements.

Each market type has special characteristics.

Figure 4-3 Major forces in the companys macroenvironment.

Gen Xers are more skeptical.

Those in households without children do not have the expense of children.

Marketers should be aware of several trends in the natural environment.

Second, it aims to protect consumers from unfair business practices.

See this feature on page 102 of your textbook.

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