Chapter 4: The Marketing Environment
Chapter 4: The Marketing Environment MKTG 3650
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Date Created: 02/21/16
MKTG 3650 Foundations of Marketing Practice Chapter 4: The Marketing Environment Four takeaways o The relationship between a glacier and its environment is highly comparable to the relationship that exists between any marketing Firm and its environment. o Marketers and Firms are impacted by their environments o Their environments are affected by the decisions that marketers make and the behaviors that those decisions inspire o Because decisions always generate behaviors which produce consequences, choose wisely The Past is Never Past Understanding the past is valuable because the resulting insights point out places, we call them opportunities, where you or your Firm should go. An understanding of the past points out places that you or your Firm should seek to avoid, we call these threats. A Good Choice; One Good Decision Firms can achieve desirable futures if they properly assess, analyze, aggregate, and act upon info they purposely gather about their Firm’s past and present circumstances. A successful marketing life is a “being” (managing the present) and a becoming” (managing toward the future) Managing the Horizon Marketers should live their professional lives on the horizon. Horizons provide vantage points from which people can look back (or around) to see what has happened and what worked well or failed miserably. o From the vantage point, people can also look forward to determine what their Firm has the capacity to make happen next o This is called environmental scanning. What about American Men…fashion? Men care less about their clothes and generally wear their clothes longer than women. Therefore, marketers market more towards women in the apparel industry. These facts, environmental differences represent both opportunity and threat to apparel marketers. More Environmental Differences—and Their Consequences An American male is not as likely to go to college but are more likely to go to prison, compared to females. Each still emerging trend or environmental change difference exercises a tremendous impact on the: o Growth and productivity of the entire US economy o Norms, beliefs, and behaviors that prevail through US society and culture o Current welfare and future prospects of US children, just for starters, because we could have gone on Fortunes Rise, Fortunes Fall Branding thoughts Sustainable branding power can emerge when the right marketing medium delivers the right message at the right time to the right audience Managing Environmental Opportunities and Threats Marketing efforts to identify environmental opportunities should begin with a strategic examination of what might be trending in various relevant dimensions of the Firm’s environment. o This “looking around process” is called environmental scanning. Key Marketing Success Factors Faster firms are much more likely to destroy or devour slower competitors in today’s world. Information that is acquired through environmental scanning should be fed directly into the Firm’s marketing information system (MkIS) for use in its ongoing strategic planning process. o The resulting operational and actionable knowledge should allow those Firms to get lower, move faster, gain leverage, and win their marketing competitions. The ultimate secret formula for achieving marketing success is much more the same as a threepart “secret formula” for achieving sustainable life success: o First, you and your Firm should accept change as a permanent condition, meaning that change is a constant, like death and taxes. o Second, accept that you or your Firm should willingly adapt constantly in response to ever changing environmental circumstances. o Three, understand the degree to which dynamically disruptive environmental conditions facilitate continuously arising opportunities, threats, and problems for you or your Firm to exploit, avoid, or solve. Environmental Opportunities and Threats, Defined An environmental opportunity entails any environmental trend that is moving in ways that support the best interests of a Firm and its current strategy and mission. An environmental threat entails any environmental trend that is moving against the best interests of the Firm and its current strategy and mission. Firms should operate on the cuttingedge in terms of their awareness and understanding of the likely consequences through environmental scanning efforts. The disagreement here arises because Firms who are equivalent to each other in everything else can sill create sustainable competitive advantages for themselves by managing the environmental scanning process and operating the bleeding, rather than cutting edge of environmental changes. o Bleedingedge environmental trends are so fresh and new that any “cuts” they elicit are still hemorrhaging Firms that are firsttomarket with anything—an idea, insight, or product—that offers or promises new useful value have genuine advantages Is It Opportunity or Threat? Firms should ask five questions during the environmental scanning process: o First, is this environmental trend an opportunity or threat? o Second, why is this trend an opportunity or threat? o Third, for whom (which business unit) inside our Firm is this trend an opportunity or threat? o Fourth, should our Firm respond strategically to this opportunity or threat? o Finally, how should our firm respond, if the preceding answer was yes? Micro- and Macro- Environments Every Firm faces a series of microenvironments, which include: o An internal environment consisting of all entities (departments and functions) within the Firm o Customers and prospective customer relationships o Relationships with suppliers, other supply chain intermediaries or resellers, which could include retailers. o Relationships with various publics, which could include investors (shareholders) or public interest groups, such as the media or regulatory agencies, who may or may not support the general mission and goals of the Firm o The Firm’s competitors Every Firm simultaneously operates in macroenvironment, consisting strictly of environments external to the Firm. The Firm’s macroenvironment consists of: o Cultural trends o Demographic trends o Technological trends o Governmental/regulatory trends Key Macro-Environments and Trends Cultural and Environmental Trends While there may be products that everyone would love to own, consume, or experience, not everyone can afford them. So the fact that each human being is in some ways like every other person on earth is of little interest to marketers as they engage in segmentation, targeting, and positioning efforts. A culture emerges whenever a group of people who share one, two, or possibly, three or more characteristics in common establish a pattern of interaction with each other. These people collectively determine those norms, beliefs, or behaviors that are deemed right or wrong, appropriate or inappropriate, within their group or culture. Culture influences how individuals behave and that’s what important to marketers Culture is a social force that influences consumers’ behaviors and marketers’ key success factors in more ways than can be easily imagined. Culture and its Effects on Marketing Practice Subcultures frequently exist in readymade market segments. Once discrete subcultures are identified, Firms might decide to determine a unique and uniquely desirable marketing mix and then target its unique value to the respective subcultures. Three important Cultural Trends Attitudes about the role of men and women in the workplace are actually converging. Attitudes toward gay and lesbian marriage have changed US consumers have become increasingly valueconscious Demographic Environment and Trends Demographics is destiny, particularly for the category of marketers called politicians and their handlers, brand managers, communication directors, and spokespeople. “Demographic” should be viewed as a description and a measurement of some key aspect of a particular population at a given point in time. These demographic forces should influence the Firm’s strategies and certainly will influence the fortunes of entire industries. Gen X demonstrate middle ground with respect to their views on political and social issues. Major US firms frequently develop unique customized marketing mixes that are specifically targeted at various foreign markets. Economic Environment and Trends The economic conditions that prevail within a given market, in both present and predicted future forms, should instruct and inform most important marketing decisions Firms make. Emergent market systems are simultaneously bottomup and topdown and should be studied differently, as autonomous, distinct wholes and as nested networks of relationships. Continue to invest in Promotion and NPD Firms that maintain or even increase their marketing expenditures despite the presence or threat of economic distress have gained significant market share vs. competitors who cut their promotional and/or new product developments. Innovative Promotions Hyundai was first to market with clever innovative promotions such as “if you buy a car and then lose your job, we will take it back” Scan the Environment Identify the economic trend as a friend or foe. Get ahead of it and stay ahead. Technological Environment and Trends Technology encompasses all the inventions and innovations that emerge form various sources and enter cultures, economies, and markets. o Inventions can be defined as something that is new. o Innovations can be defined as something that is new and useful—useful particularly in terms of their ability to solve existing or new problems. One thing to understand about thus still emergent technological systems is that they have made the world of information far more dominant than it once was. Every successive wave of new technologies threatens and actually often destroys existing products, business models, Firms and at times entire Industries. Creative destruction unfolds naturally as existing problems, services, ideas, or processes are replaced or quickly become outmoded as new, superior technologies are introduced. New technological environmental trends are often creates myriad opportunities for newtotheworld Firms to thrive. Governmental and Regulatory Environments and Trends One thing to understand from the start about the environmental role played by the Federal government is that it does not produce anything. o The government only takes, aggregates, and redistributes value that it receives, in the form of taxes, from the productivity of businesses and citizens. The “it depends” portion of this proposition depends on who the Firm is and in what industry of business or educational or organizational sphere a Firm operates. The government also exists to protect the free and fair interests of various Firms and individuals whose interests genuinely need to be protected. o The government eliminates or regulates monopolies o Price discrimination and collusion are both illegal. o Government supports consumerism Exists to elevate the influence rights and power of consumers in relation to the influence, right and power of the marketers o Government elevates the welfare of, and provides a safety net for, consumers needing such values at particular points in time in their lives. o Allows consumers, who otherwise would lack the resources to continue, to purchase necessary goods and services Competitive Environment Forms of Competition Monopoly: exists when a single competitor virtually owns the entire market Oligopolies: occur in industries where there exist a handful of large competitors, each with substantial market share Monopolistic competition: exists in industries characterized by a large number of competitors all vying with each other for market share Perfect competition: exists in industries characterized by many small companies each producing and selling essentially the same product or service. The Nature and Intensity of Competitive Interaction Marketers often and inappropriately believe that the only important source of competition is from other Firm’s that produce the same kinds of products i.e., rivalry between alternative brands within the same product category. Threat of a New Entry The likelihood that new competitors will enter a given industry is a function of the industry’s relative appeal in terms of such things as growth potential, profitability, ability to acquire market share; the likelihood of retaliation by existing competitors; and any barriers to entry in place in that industry. Threat from Substitute Products A substitute product performs the same or a similar function as an industry’s product by a different means. Substitutes are alternative products or services that essentially satisfy the same customer needs or provide the same solutions. Changes in product performance, quality and/or changes in the marketing programs are essential. Bargaining Power of Suppliers Some factors that provide suppliers with power include: o Buyers face very high switching costs should they attempt to change suppliers o There are no viable substitute products to which buyers can switch o The supplier’s products are highly differentiated from other sources in terms of quality and/or function Bargaining Power of Buyers Some factors that provide buyers with power include: o Buyer purchases in large quantities from the supplier, accounting for a significant proportion of that seller’s revenue o Other sources of supply exist to which buyers can readily switch o Buyer poses a credible threat of backward integration i.e. can easily become its own supplier o Few switching costs for changing suppliers exist Rivalry among Existing Competitors Intense competitive rivalry generally translates into lower prices and higher costs The intensity of competitive interactions is a function of: o Stage of the product life cycle. Competitive rivalry increases as products move through the growth stage into maturity and the number of competitors increases. There are strong incentives to “steal” business from one another, meaning that further growth for a single Firm is at the expense of its competitors. o Firms face high exit barriers, meaning that it is difficult to leave the industry. This situation arises when firms haves significant funds tied up in assets that cannot be easily liquidated. The Natural Environment Marketers have to recognize their social responsibility to help conserve precious resources. Concern about the environment has spurred the current “green” (aka environmental sustainability) movement and its concomitant marketing opportunities. Accepting and Exploiting Environmental Change While change does not always represent progress, change is always necessary for progress to occur. While engaging in environmental scanning, managers should step outside their Firms and ask: o What customer wants, needs, and/or problems do we satisfy now? o What customer wants, needs, and/or problems could satisfy now or in the future? o Given our changing environment, what is the gap between those needs we could satisfy in the future and what we do now, and how we bridge the gap? o What sustainable competitive advantages do we currently possess? o Given our changing environment, what sustainable advantages do we need to create? o Given our changing environment, what old competencies do we need to deemphasize and what new competencies do we need to create?
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