MKTG 504 - The Environment of MARKETING

Marketers react to the environment

Dr. Dennis PittaUniversity of Baltimore

The Environments of Marketing

Technological EnvironmentEconomic EnvironmentCompetitive EnvironmentSociological EnvironmentPolitical-Legal EnvironmentGlobal Environment

Let’s look at an example….

Monroe calculator - Featuresweighs 65 lbsuses 120/220 volt currentmechanical keys enter datamechanical gears perform calculationselectrical motors move the gears and the

displaymultiplication = multiple additiondivision = something strange

Monroe calculator

Advantages higher accuracy than hand calculation faster than hand calculation

Monroe calculator

BENEFITS It worked… Reduced worker

effort Higher accuracy

NON-BENEFITS Not Portable When you divide by

0 it ______________ Dust is a problem Square root? Too expensive

($1,000!!!)

Display Devices for Calculators

The Number Wheel Behind a Window (e.g. Monroe Calculators)

Multifilament Vacuum Tubes ( e.g. Burroughs)

Burroughs calculator

FEATURES MULTI-FILAMENT VACUUM TUBES weighs 50 lbs uses 120 volt current mechanical keys enter data circuits make calculations and light filaments multiplication, division, square root = real

calculation $750

Burroughs calculator

BENEFITS It worked… Reduced worker effort Higher accuracy No division error

problem Dust not a problem Advanced functions Less expensive Easier to repair

NON-BENEFITS Not Portable

Display Devices for Calculators

L. E. D.. (Light Emitting Diodes) (e.g. Novus, Bowmar)

L. C. D.. (Liquid Crystal Displays) (e.g. Casio, Panasonic)

L. E. D. calculators

FEATURES Run on batteries (but don’t leave them

on..) Integrated circuits allow advanced

calculations Weigh less than a pound Initially cost $US125 for 4 functions plus

square root

L. E. D. calculators

BENEFITS It worked as well as

the others Higher accuracy No division error

problem Dust not a problem Advanced functions Less expensive PORTABLE!

NON-BENEFITS Battery life not

infinite

L. C. D. calculators

FEATURES Run on batteries with very low current

drain Integrated circuits allow advanced

calculations Weigh less than a pound Initially cost $50 for 4 functions plus

square root

L. C. D. calculators

BENEFITS It worked as well as

the others Higher accuracy No division error

problem Dust not a problem Advanced functions Less expensive PORTABLE! Solar!!

NON-BENEFITS Does not work in

the dark

What effect have the changes in display devices had on competition?

_____________________________________________________________________

Technological Environment

Technology = Knowledge to do new or old tasks better

Invention = result of technology

Innovation = result of introducing inventions in the marketplace

Technology and Marketing

Impact on Competition

Impact on Costs and Productivity

Impact on the Marketing Mix (Product, Price, Promotion, Distribution)

Economic Environment

The Business Cycle = cyclical changes in the economy

Stages in the Business Cycle

ProsperityRecessionDEPRESSIONRecovery

Inflation

Decline in buying power due to price levels rising more rapidly than incomes.

Unemployment

Occurs when people want to work and actively look for work, but are unable to find employment.

THE COMPETITIVE ENVIRONMENT

PERFECT COMPETITIONMONOPOLISTIC COMPETITIONOLIGOPOLYMONOPOLY

Perfect Competition

Many Small sellers.Many Small Buyers.Homogeneous Product.No Entry/Exit Barriers.Perfect Information.All buyers buy and all sellers sell under

the same conditions.

Monopoly

ONE SELLER

PRICE: What the market will bear.

Oligopoly

Few SellersEntry into Industry - DifficultAction of one firm affect othersEach firm has a large share of

the industry’s customers.

What is competition like in the deodorant category?

Name three brands _________________________ _____________

What are the prices like?

What do the advertisements say?

Monopolistic Competition

Each seller’s product DIFFERENTIATED (Somewhat).

The higher the differentiation, the more control the seller has over price. (No close substitutes.)

The Post-Industrial Service Economy

Increasing proportion of U.S. Jobs in services.

Service industries provide more high or low paying jobs - less in the middle.

Marketers who target high or low end consumers should do well, those who target the middle may not do well.

Political-Legal Environment

Government the major element of the Political- Legal environment

Actions of Government ..the US example

Regulating and stabilizing the economy.

Facilitating the marketing functions: Transportation - highways Communication - U. S. P. S. Marketing Information - statistical data

Customer

Marketing and the Law

Protecting Competition Sherman Antitrust Act “Every contract, combination, or conspiracy in restraint of trade.” Robinson-Patman Act “Like discounts on like grade and quantity”

Marketing and the Law

Protecting Consumers Wheeler-Lea Act “Unfair or deceptive acts or

practices in commerce”

Government and the competitive Environment

In other words, the FTC and the Competitive Environment

Which one does the FTC target? Monopoly Oligopoly Monopolistic Perfect Competition

Government and the competitive Environment

In other words, the FTC and the Competitive Environment

Which one does the FTC target? Monopoly Oligopoly Monopolistic Perfect Competition

Why does the FTC target Oligopolies?

All the monopolies have been identified - or are not significant.

An Oligopoly could be “A MONOPOLY IN OLIGOPOLY CLOTHING!”

Government and the Competitive Environment

The FTC uses a technique which stresses:

STRUCTURE (COMPETITIVE STRUCTURE) CONDUCT (COMPETITIVE TECHNIQUES) and PERFORMANCE (R.O.I.)

Quantitative measures

OLIGOPOLY? => if the top five firms have more than _____% market share

Conduct?? => what are the techniques used in the industry?

ROI? => if it is greater than ____%

Remedies

The US government can: cross license the brand break up the company (ala Microsoft)

How Do Marketers Compete?

ImitationDifferential AdvantagePrice CompetitionNon-Price Competition

Enhanced services Filling a niche Different distribution

Hypothetical Market Structure & Competition

40%

Marketleader

30%

Marketchallenger

20%

Marketfollower

Expand MarketDefend Market Share

Expand Market Share

Attack leaderStatus quo

Imitate

10%

Marketnicher

Special-ize

Optimal Market SharePro

fita

bili

ty

Market share0% 25% 50% 75% 100%

Optimal market share

Socio-Cultural Environment

The Marketer’s relationship to society.

Important because a marketer’s market exists in the socio-cultural environment.

- Changes in socio-cultural environment important for “needs.”

Social Responsibilities.

Global Environment

Global economics, competition, technology and politics affect even domestic marketers.

Environmental Monitoring

The process by which a marketing organization, identifies, analyzes, and forecasts the impact of relevant environmental forces on it.

Upcoming Topics

Segmentation