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Chapter 2

MGMA01H3 Chapter Notes - Chapter 2: Business Cycle

5 pages66 viewsWinter 2011

Management (MGM)
Course Code
Ingrid L.Stefanovic

of 5
Wednesday, September-16-09 Principles of Marketing Chapter 2
Organizations operate in an environment that is constantly shifting and changing
Environmental Scanning is the process by which the marketing manager gathers and
sorts information about the marketing environment
Information can be gathered periodically or continuously and they usually come from
informal or formal sources
Information must be analyzed and acted upon
If issues rise that affects an industry as a whole, all the industry players will act in
cohesion to correct the problem.
oExample: All car manufacturers adopting the policy to have air bags
Competitive Environment is the interactive process that occurs in the marketplace in
which different organizations seek to satisfy similar markets
Marketing decisions by an individual firm affect consumers and competitors
Supermarkets are very sensitive to fluctuations in sales caused by the actions of
competitors as the competition is fierce in that market
oIf one competitor advertises a sale in price, the other competitors are inclined to
advertise the same price
Types of Competition
Three types of competition
Most direct form is inter-product or direct competition
oMarketers that have similar products
Second type is product-substitute or indirect competition
oAmong products that can be substituted for one another
Final type is alternative-gratification
oInvolves all organizations that compete for consumer’s purchases
Changes in competitive environment can wipe out a product or entire business
oTherefore, marketers must assess the marketing strategies of competitors
New product offerings with technological advances, price reductions must be monitored
in order to adjust the firms marketing program in light of changes
Technological Environment consists of the applications of knowledge based on
scientific discoveries, inventions and innovations
oTechnology is reshaping the face of marketing
Service design is changing due to technology also
oExample: Ebay, Amazon
Technology also helps firms keep detailed records and to access records in useful way
Also it has helped inventory management by reducing the level of inventory necessary
Wednesday, September-16-09 Principles of Marketing Chapter 2
There is an importance of understanding and assessing the relevant social and cultural
components when making marketing decisions
Sociocultural Environment is the mosaic of societal and cultural components that are
relevant to the organizations business decisions
oOne important category is the general readiness of society to accept a marketing
oAnother important category involves the trust and confidence of the public in
business as a whole
All institutions have lost public confidence to some degree; even government and labour
No marketer can initiate a strategy without taking the social context into account
Manager of Public Policy Research is someone who studies the changing social
environments future impact on the company
Firms must develop new ways of revaluating its performance if it attuned to its societal
Marketers must recognize societal difference among countries, and assume that a
homogenous social environment exists at home.
oHowever, Canada is a mixed society composed of varied submarkets
Gender is another increasingly important social factor
Since variables change constantly, marketers must continually evaluate this dynamic
One of the most serious – and avoidable – of all marketing mistakes is failing to
appreciate social difference within our own domestic market
Rise of consumerism can be traced to the growing public concern with making business
more responsible
Economic Environment is the factors in a region or country that affect the production,
distribution, and consumption of its wealth. Key elements are monetary resources,
inflation, employment, and productive capacity
Stages of the Business Cycle
Four Stages
Marketers must be aware of the economys relative position in the business cycle and how
it will affect the position of the particular firm
During prosperous times, consumers willing to buy more
During recession, personal savings climbed to very high levels, and cut back expenditures
More aggressive marketing may be called for periods of lessened buying interest
Wednesday, September-16-09 Principles of Marketing Chapter 2
Successful firms have a rising sales trend line
oAchieved by foreseeing, correctly defining and reaching new market opportunities
Inflation is a rising price level that results in reduced purchasing power for the consumer
ocan occur at any stage of the business cycle
Stagflation is when there is high unemployment and a rising price level at the same time
oFormulating effective strategies under these circumstances is quite difficult
Unemployment is defined as people actively looking for work who do not have jobs
Government tools for combating inflation and unemployment
Two basic approaches
oFiscal Policy concerns the receipts and expenditures of government
Economy can reduce government expenditures to raise revenue
Wage and price controls
oMonetary Policy refers to the manipulation of the money supply and market rates
of interest
Government can decrease the money supply and raise interest rates in
periods of rising prices to restrain purchasing power
Both policies have been used to battle inflation and unemployment
Unemployment and inflation affect marketing by modifying the consumer behaviour
As consumers become more conscious of inflation, they are likely to become more price-
conscious in general
Consumers can (1) elect to buy now in the belief that prices will be higher later on or (2)
decide to alter their purchasing patterns, or (3) postpone certain purchases
Demarketing – Dealing with Shortages
Shortages may be caused by a lack of raw materials, component parts, energy, or labour
oRequires marketers to reorient their thinking
Demarketing refers to the process of cutting consumer demand for a product, because the
demand exceeds the level that can reasonably be supplied by the firm or because doing so
will create a more favourable corporate image
oExample: Oil companies giving tips to how to cut gas consumption
Shortages may force marketers to be allocators of limited supplies
Shortages require marketers to decide whether to spread a limited supply over all
customers so that none are satisfied or to back-order some customers so that others may
be completely supplied
Political-Legal Environment is the laws and interpretation of laws that require firms to
operate under competitive conditions and to protect consumer rights
Pricing and promotion have received the most legislative attention
Society’s Expectations Create the Framework

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