Marketing: An Introduction

Second Canadian Edition

Armstrong, Kotler, Cunningham, Mitchell and Buchwitz

Chapter Four
The Marketing Environment

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Looking Ahead
Describe the environmental forces that affect the companys ability to serve its customers. Explain how changes in the demographic and economic environments affect marketing decisions. Identify the major trends in the firms natural and technological environments. Explain the key changes in the political and cultural environments. Discuss how companies can react to the marketing environment.
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Marketing Environment Defined

The factors and forces outside marketings direct control that affect marketing managements ability to develop and maintain successful transactions with target customers.

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Marketing Environment
Microenvironment.
Actors close to the company that affect its ability to serve its customers. Unique to the company.

Macroenvironment.
Larger societal forces that affect the microenvironment. Considered to be beyond the control of the organization.
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The Microenvironment
Factors that are unique to the company and that the company can influence.
Company. Suppliers. Marketing intermediaries. Customers. Competitors. Publics.
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The Company
Companys internal environment.
Areas inside a company. Affects the marketing departments planning strategies. All departments must think consumer and work together to provide superior customer value and satisfaction.

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Suppliers
Provide resources needed to produce goods and services. Important link in the value delivery system. Most marketers treat suppliers like partners.

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Marketing Intermediaries
Help the company to promote, sell and distribute its goods to final buyers.
Resellers. Physical distribution firms. Marketing services agencies. Financial intermediaries.

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Customers
Three types of customers.
Consumers who buy for personal use. Business buyers who buy for the use of the company. Government buyers who buy on behalf of public services.

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Competitors
Those who serve a target market with products and services that are viewed by consumers as being reasonable substitutes. Company must gain strategic advantage against these organizations. Company size and industry position determines best competitive strategy.
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Publics
Group that has an interest in or impact on an organization's ability to achieve its objectives.
Financial publics. Media publics. Government publics. Citizen action publics.

Local publics. General publics. Internal publics.

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The Macroenvironment
Factors that all companies in the industry experience in common and that are difficult to influence.
Demographic environment. Economic environment. Natural forces. Technological force. Political forces. Cultural forces.
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Demographics
The study of human populations in terms of size, density, location, age, gender, race, occupation and other statistics. Marketers track changing age and family structures, geographic population shifts, educational characteristics and population diversity.
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Baby Boomers
9 million born between 1946 and 1964. Account for one-third of population. High amount of disposable income. Now moving into middle-age. Aging of boomers increases Canadas average age. Major influencer of demographic and socioeconomic change. Prime target of consumer product marketers.
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Changing Canadian Household

Common-law and long-parent families now 30% up from 26%. Number of divorced persons 13.5% higher in 2004 than in 2001. As many households of one person as four persons. Growth of same-sex couples 34,000 in 2001 census.
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Population Shifts
Canadas growth rate only 3% from 2001 to 2204. Population of Saskatchewan and Newfoundland declined in last five years. 33% of Canadians live in CMAs of Toronto, Montreal and Vancouver. City to suburb migration continues. Increase in people who telecommute.
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Increasing Diversity
Canada is a salad bowl.
Various groups mixed together, each retaining its ethnic and cultural differences. Diversity and multi-culturalism is valued.

Increased marketing to:

Gay and lesbian consumers. People with disabilities.

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Economic Environment
All those factors that affect consumer buying power and spending patterns.
Income levels and distribution. The necessity of products. Changes in trends and consumer spending patterns. Economies of different nations.

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Economic Changes
Changes in income.
1980s consumption frenzy. 1990s squeezed consumer. 2000s value marketing.

Income distribution

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Upper class major market for luxury goods. Middle class careful but has the good life. Working class sticks to the basics. Underclass counts every penny first.
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Changing Spending Patterns

Food, clothing, housing and fuel spending dropping as a percentage of total spending. Increased spending in:
Personal goods and services. Recreation, entertainment, education and culture.

Engels Law remains true.

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Natural Environment
Involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities.

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Natural Environment Trends

Shortage of raw materials.
Limited quantities of non-renewable resources.

Increased pollution.
Waste disposal, air/water pollutants.

Increased government intervention.

Kyoto and other initiatives.

Environmentally sustainable strategies.

G.R.E.E.N. movement.
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Technological Environment
Most dramatic force now shaping our destiny. Changes rapidly. Creates new markets and opportunities.

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Technological Environment
Challenge is to make practical, affordable products. Safety regulations result in higher research costs and longer time between conceptualization and introduction of product.

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Political Environment
Includes laws, government agencies and pressure groups that influence or limit various organizations and individuals in a given society.
Increasing legislation. Changing government agency enforcement. More emphasis on ethics and socially responsible actions.
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Key Political/Legal Issues

Fair competition. Fair trade practices. Environmental protection. Product safety. Truth in advertising. Packaging and labelling. Pricing.
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Key Canadian Legislation

The Competition Act. National Trade Mark and True Labelling Act. Motor Vehicle Safety Act. Food and Drug Act. Personal Information Protection and Electronic Documents Act.

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Cultural Environment
The institutions and other forces that affect a societys basic values, perceptions, preference and behaviours. Cultural values are highly persistent. Learned from family and community.

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Cultural Environment
Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business and government. Secondary beliefs and values are more open to change.

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Major Consumer Themes

Yankelovich Monitor has identified eight major consumer value themes:
1. 2. 3. 4. 5. 6. 7. 8.
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Paradox. Trust not. Go it alone. Smarts really count. No sacrifices. Stress hard to beat. Reciprocity is the way to go. Me 2.
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Cultural Environment
Culture is expressed through peoples views of:
Themselves. Others. Organizations. Society. Nature. The Universe.

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Global Marketing Environment

Trade restrictions.
Tariffs. Embargos. Quotas. Exchange controls. Non-tariff barriers.

World Trade Organization. Economic communities.

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World Trade Organization

Voluntary trade association established in 1995, 144 members doing 90% of world trade. Objective is to promote international trade by removing barriers through negotiation.

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Economic Communities
Groups of nations working toward common goal. Regional free trade zones. European Economic Community (EEC); adoption of common currency to facilitate trade. North American Free Trade Agreement (NAFTA) among Canada, U.S. Mexico.
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Managing Environments
The passive approach.
Monitor and analyze. Adapt strategies to avoid threats and take advantage of opportunities.

The environmental management perspective.

React aggressively to change forces. Lobbying, advertorials, lawsuits, complaints.
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Looking Back
Describe the environmental forces that affect the companys ability to serve its customers. Explain how changes in the demographic and economic environments affect marketing decisions. Identify the major trends in the natural and technological environments. Explain the key changes in the political and cultural environments. Discuss how companies can react to the marketing environment.
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