Kotler CHAP04

II
4
Marketing for Hospitality and Tourism, Fifth Edition 2010 Pearson Higher Education, Inc.
By Philip Kotler, John Bowen and James Makens Pearson Prentice Hall - Upper Saddle River, NJ 07458
OBJECTIVES
After reading this chapter, you should be able to:
II
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.
ANONYMOUS
4
OBJECTIVES
List and discuss the importance of the elements II
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.
4
OBJECTIVES
Identify the major trends in the firms natural II
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.
4
Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens tab 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 II
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
More than 31,000 McDonalds restaurants worldwide
now serve 52 million customers each day, racking up
systemwide sales of almost $60 billion annually.
4
McDonalds
The Golden Arches are one of the worlds most II
familiar symbols.
other than Santa Claus, no character in the world
is more recognizable than Ronald McDonald
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.
4
McDonalds
While a changing marketplace provided opportunities II
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
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 4
McDonalds
McDonalds was losing share to what the industry II
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
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.
4
McDonalds
Reacting, in early 2003 McDonalds announced a II
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 4
Introduction
McDonalds knows that as a marketing environment II
changes, the company must change with it.
says McDonalds CEO James Skinner. Were always
evolving to meet the changing needs of our customers.
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. 4
Introduction
Managers who practice marketing will be the trend II
trackers and opportunity seekers.
also spending time in customer & competitor environments
Good marketers have disciplined methods for
collecting marketing environment information.
marketing intelligence & marketing research
4
Introduction
The marketing environment is made up of a II
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
The macroenvironment consists of the larger societal
forces that affect the entire microenvironment.
demographic, economic, natural, technological, political,
competitor, and cultural forces
4
The Companys Microenvironment
Marketing managements job is to build relationships II
by creating customer value & satisfaction.
The success of marketing plans requires working
closely with the companys microenvironment.
Figure 4-1
Major actors in
the companys
microenvironment.
4
The Company
Marketing managers must work closely with top II
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.
4
The Company
Marketing decisions must be made within the II
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
4
Existing Competitors
The marketing concept holds a successful company II
must satisfy the needs and wants of consumers better
than its competitors.
every company faces a broad range of existing competitors
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.
4
Existing Competitors
No single competitive marketing strategy is best for II
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
Both large and small firms must find marketing
strategies that give them specific advantages over
competitors operating in their markets. 4
Existing Competitors - Variables
A company should monitor three variables when II
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.
4
Existing Competitors - Identifying
Managers often fail to identify their competitors II
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
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. 4
Existing Competitors - Four Levels
Every company faces four levels of competitors. II
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
As all companies making the same product or
class of products.
McDonalds may competition as all fast-food
restaurants
4
Every company faces four levels of competitors. II
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
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
4
II
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.
4
Suppliers
Suppliers are firms & individuals providing resources II
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
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 4
Suppliers - Outsourcing
There are several ways to partner with a celebrity II
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
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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Suppliers - Outsourcing Problems
Some hotels leasing their operations to upscale II
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
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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Suppliers - Outsourcing Problems
Like any supplier, suppliers of food and beverage II
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
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
4
Marketing Intermediaries
Marketing intermediaries help the company promote, II
sell, and distribute its goods to the final buyers.
Hospitality intermediaries include travel agents, wholesale
tour operators, and hotel representatives
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. 4
Marketing Intermediaries & The Internet
The Internet has created both disintermediation and II
pricing transparency.
disintermediation is the elimination of intermediaries
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
4
Marketing Intermediaries & The Internet
When hotels do sell to intermediaries who use the II
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
The Internet as a booking engine has created many
opportunities, but it has also made interactions with
intermediaries more complex.
4
Marketing Intermediaries
Marketing services agencies are suppliers that help II
formulate & implement marketing strategy & tactics.
these include public relations agencies, advertising
agencies, and direct mail houses
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. 4
Financial Intermediaries
Financial intermediaries are banks, insurance and II
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
The company has to develop strong relationships
with important financial institutions.
Companies must be careful to avoid unmanageable
growth expectations of their financial intermediaries. 4
Intermediaries
Todays marketers recognize the importance of II
working with intermediaries as partners rather than
simply as channels through which they sell products.
4
Customers
The hospitality company needs to study five types of II
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
Each market type has special characteristics. 4
Publics - Seven Types
A public is any group that has an actual or potential II
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. 4
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. 4
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.
A company can prepare marketing plans for these
major publics as well as for its customer markets. 4
The Companys Macroenvironment
Introduction
The company and all of the other actors operate in a II
larger macroenvironment of forces that shape
opportunities and pose threats to the company.
Figure 4-3 Major forces in the companys macroenvironment. 4

Macroenvironment - Future Competitors
Barriers to Entry, Exit and Competition
The entrance of future competitors is difficult to II
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
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
4
Some restaurant managers open without direct II
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
4
Hotels have moderately high barriers of entry, due to II
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
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.
4
Macroenvironment - Demographic Environment
Introduction
Demography is the study of human populations in II
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 4
The Baby Boomers
The postWorld War II baby boom produced 78 II
million baby boomers, born between 1946 and 1964.
a powerful force shaping the marketing environment
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.
4
The Baby Boomers
As they reach peak earning and spending years, the II
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
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
4
Generation X
The baby boom was followed by a birth dearth, II
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
4
Generation X
Gen Xers care about the environment and respond II
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
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.
4
Generation X
The Gen Xers have brought us the quality movement II
and enjoy menus combining familiar with unique.
Starbucks, Chipotle & Panera Bread are Gen X favorites
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.
4
Generation X
Xers are notoriously uncomfortable with generic II
global brands and demand alternative brands to
those patronized by their parents, the baby boomers.
they prefer to seek out local specialties & experiences
Whereas their parents might prefer hotels with
identical bathrooms from Amsterdam to Zurich,
Xers like to celebrate local differences.
4
Millennials
Both the baby boomers and Gen Xers will one day II
be passing the reins to the Millennials.
also called Generation Y or the echo boomers
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)
4
Millennials
Younger Millennials are just beginning to wield their II
buying power, while older ones have graduated from
college and moving up in their careers.
significantly expanding both their earning & spending
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. 4
tab
By Philip Kotler, John Bowen and James Makens
2010 Pearson Higher Education, Inc.
Generational Marketing
One way marketers can segment is by forming II
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.
4
Increasing Diversity
Countries vary in their ethnic and racial makeup. II
at one extreme is Japan, where almost everyone is
Japanese, at the other, the United States, with people
from virtually all nations
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
4
The Changing American Family
The traditional household consists of a husband, II
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
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 live-
alones or adult live-togethers of one or both sexes.
4
Marketers must increasingly consider the special II
needs of nontraditional households.
now growing more rapidly than traditional households
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
4
The number of working women has increased II
greatly, growing from under 40% of the US
workforce in the late 1950s to 59% today.
Both husband & wife work in 57% of married-
couple families, spawning the need for takeout food.
prepared by someone else, eaten at the home dining table
Grocery stores, preparing heat-and-serve entrees and
side dishes, are now seeking graduates of culinary &
hospitality programs as this business grows.
4
Geographic Shifts in Population
Over the past two decades, the U.S. population has II
shifted toward the Sunbelt states.
the West and South have grown, where the Midwest
and Northeast have lost population
As companies look for new locations, they need to
understand both national and local geographic trends
relating to shifting populations.
4
Better Educated, More White Collar, More Professional
The U.S. population is becoming better educated. II
in 2004, 86% of the US population over 25 had
completed high school & 28% had completed college
compared with 69% and 17% in 1980
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.
4
Macroenvironment - Economic Environment
Introduction
The economic environment includes factors affecting II
consumer purchasing power & spending patterns.
Some countries have subsistence economies.
they consume most of their own agricultural & industrial
output and offer few market opportunities
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.
4
Changes in Income
In the 90s, Americans fell into a consumption frenzy, II
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
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. 4
The Global Economy
Today the travel industry operates in a global II
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
4
Macroenvironment - Natural Environment
Introduction
The natural environment involves natural resources II
needed as inputs by marketers or that are affected by
marketing activities.
environmental concerns have grown in the past 3 decades
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. 4
Sustainability
The natural environment consists of many amenities II
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
4
Government Intervention
A third trend is increased government intervention in II
natural resource management.
governments of different countries vary in their concern
and efforts to promote a clean environment
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.
4
Macroenvironment - Technological Environment
Description
The most dramatic force shaping our destiny is II
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
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
4
Technological Effects
Technology has affected hospitality in many ways: II
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
e-Tickets allow customers to check
fax machines receive orders themselves in at the airport. This
saves time for the customer and
at restaurants, and machines labor for the airlines. Courtesy of
cook food automatically David K. Crow/PhotoEdit.
4
The Internet
Technology has also made communication easier. II
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
The Internet has had a profound effect on the
hospitality and travel industries.
4
The Internet
The Internet has created a new distribution channel II
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
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 4
The Internet
Cindy Estis Green of the Green Group notes the II
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
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 4
Macroenvironment - Political Environment
Legislation and Regulation Affecting Business
Marketing decisions are strongly affected by II
developments in the political environment.
laws, government agencies, and pressure groups that
influence & limit the activities of various organizations
and individuals in society
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.
4
Hotel taxes and restaurant taxes have become popular II
sources of revenue for local governments.
in many cases hotel taxes are meant to support tourism
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 4
Legislation and regulation affecting business have II
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
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
4
Third, regulation also aims to protect societys II
interests against unrestrained business behavior.
regulation aims to make firms responsible for
social as well as private costs of their activities
Business executives must know the major laws
protecting competition, consumers, and society
when planning their products and marketing
programs.
4
Changing Government Agency Enforcement
To enforce laws, Congress has established several II
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
In recent years, the Federal Trade Commission has
added marketing experts to its staff to gain a better
understanding of these complex issues.
4
Emphasis on Socially Responsible Actions & Ethics
The number of public-interest groups has increased II
during the past two decades, as has their clout in the
political arena.
these groups take on issues of social responsibility
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
4
One expert who follows People for the Ethical II
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. 4
II
See this feature on page 102 of your textbook. 4

Regulations cannot cover all potential marketing II
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
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 4
Macroenvironment - Cultural Environment
Persistence of Cultural Values
The cultural environment includes institutions and II
other forces that affect societys basic values,
perceptions, preferences, and behaviors.
people in any society hold persisting core beliefs & values
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 4
Persistence of Cultural Values
Marketers have some chance of changing secondary II
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
4
Subcultures
Each society contains subcultures, groups of people II
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
To the extent that subcultural groups have specific
wants and buying behavior, marketers can choose
subcultures as their target markets.
4
Linked Environmental Factors
Description
When the first Millennials became teenagers, total II
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
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. 4
Linked Environmental Factors
Patterns
Culturally, thirty to forty years ago women were II
expected to stay home and cook.
no longer the case
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.
4
Responding to the Marketing Environment
Introduction
Many companies view the marketing environment as II
an uncontrollable element to which they must
adapt.
they passively accept the marketing environment and
do not try to change it
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 4
Description
Trade associations also hire lobbyists and form II
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
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. 4
Environmental Scanning
Use of an environmental scanning plan has proven II
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
Part of the analysis is weighing importance of trends
to keep them in proper perspective.
4
Environmental Scanning
One of the most important tasks, especially in a small II
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
For an example of environmental scanning,

refer to Table 4-1 on page 106 of your textbook.
4
Using the Information
It is never sufficient simply to collect data about the II
environment.
information must be reliable, timely & used in
decision making
Researchers must put less emphasis on data & more
on the interpretation of those data.
4
KEY TERMS
Baby boomers. The 78 million people born between II

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. 4
KEY TERMS
Economic environment. Factors that affect II

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. 4
KEY TERMS
Generation X. A generation of 45 million people II

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.
4
KEY TERMS
Marketing environment. The actors and forces II

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.
4
KEY TERMS
Microenvironment. The forces close to a company II

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). 4
KEY TERMS
Political environment. Laws, government agencies, II

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
achieve its objectives.
Suppliers. Firms and individuals that provide the
resources needed by a company and its competitors
to produce goods and services.
4
EXPERIENTIAL EXERCISES
Try One !
View the annual reports of several hospitality II
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.
4
EXPERIENTIAL EXERCISES
Try One !
Choose and visit a restaurant, club, or hotel you feel II
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.
4
INTERNET EXERCISES
Try This !
Support for this exercise can be found on the Web II
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?
4
INTERNET EXERCISES
Try This !
Support for this exercise can be found on the Web II
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
4
END
II
CHAPTER END 4

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II

It is useless to tell a river to

The best thing is to learn how

Figure 4-2 Levels of competition.

Figure 4-3 Major forces in the companys macroenvironment. 4

Many tourist locations are dependent on

One of PETAs tactics is to picket restaurants and let people

See this feature on page 102 of your textbook. 4

For an example of environmental scanning,

Baby boomers. The 78 million people born between II

Economic environment. Factors that affect II

Generation X. A generation of 45 million people II

Marketing environment. The actors and forces II

Microenvironment. The forces close to a company II

Political environment. Laws, government agencies, II

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