Chapter 3: The Marketing Environment, Ethics, and Social Responsibility
Chapter Objective 1: Identify the five components of the marketing environment.
Environmental Scanning – Collecting external marketing environment information
to identify and interpret potential trends
- Trends may represent significant opportunities or threats to the company
Environmental Management – Attainment of organizational objectives by predicting
and influencing the competitive, political-legal, economic, technological, and social-
Strategic Alliance – Partnership in which two or more companies combine resources
and capital to create competitive advantages in a new market
Chapter Objective 2: Explain the types of competition marketers face and the steps
necessary for developing a competitive strategy.
Process that occurs in marketplace among:
o Marketers of directly competitive products (Direct – similar products)
E.g. Bell vs Rogers vs Telus for cell phone services o Marketers of products that can be substituted for one another
(Indirect – Easily substituted)
E.g. Fast food industry: pizza competes with chicken and tacos
o Markets competing for the consumer’s purchasing power
All firms compete with one another for this
E.g. Honda competes with a vacation to Europe
Marketing decisions by individual firms influence:
o Consumer responses in the marketplace
o Marketing strategies of competitors
Monopoly – Single seller dominates in a good or service; buyers can find no close
o Few organizations have this position
o E.g. Some pharmaceutical firms have temporary monopolies provided
by patents on drugs
Oligopoly – Few number of sellers in an industry with high start-up costs that keep
out new competitors
Competitive Strategy – Methods a firm deals with its competitive environment
o Answers the three questions:
1. Should we compete?
a. Depends on resources, objectives and expected profit potential
2. In what markets should we compete?
a. Allocate limited resources to the areas of greatest opportunity
3. How should we compete?
a. Includes product, promotion, distribution, and pricing decisions that
maximize competitive advantage
Time-based competition – Strategy of developing and distributing goods more
quickly than competitors
Chapter Objective 3: Describe how marketing activities are regulated and how
marketers can influence the political-legal environment.
Consists of laws and their interpretations that require firms to operate under
competitive conditions and to protect consumer rights.
- Ignorance or non-compliance can result in fines, negative publicity and civil
Competition Act – Comprehensive legislation administered designed to help both
consumers and businesses by promoting a healthy competitive environment
- Laws roughly categorized in three marketing areas: o Pricing
- Generally focused on protection of buyers and sellers with respect to direct
- Consumer Protection Act or Direct Seller’s Act
Government regulatory agencies:
- CRTC: regulates and supervises all aspects of the Canadian broadcasting
- National Energy Board – regulates construction and operation of
interprovincial and international pipelines and power lines
Other Regulatory Forces:
- Consumer interest organization – e.g. PETA
- Other groups attempt to advance rights of minorities, other causes – e.g.
- Self regulatory groups set guidelines for responsible business conduct – e.g.
Advertising Standards Canada
Chapter Objective 4: Outline the economic factors that affect marketing decisions
and consumer buying power.
GDP – Sum of all goods and services produced by a nation in a year
Economic environment – Factors that influence consumer buying power and
Business Cycle – Pattern of stages in the level of economic activity
- Prosperity: consumer spending is brisk; growth in services sector
- Recession: consumers focus on basic, fundamental products