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Chapter Three: Analyzing the Marketing Environment Chapter Objectives Identify the factors in a firm’s microenvironment Explain how the factors in a firm’s microenvironment influence its marketing strategy. Identify the factors in a firm’s macroenvironment Explain how the factors in a firm’s macroenvironment influence its marketing strategy. Identify today’s important social trends and describe why they affect marketing decisions Annotated Chapter Outline PowerPoint Slides Instructor’s Notes The chapter objectives and roadmap are intended to help students understand the content to be discussed. The opening vignette shows how Canadian Tire, an icon in Canadian retailing, has managed to not only survive but also to grow and successfully take on global giants from the US such as Home Depot, Lowe’s, Walmart, and others. Canadian Tire’s understanding of its changing external environment and its ability to manage the changes and leverage its internal capabilities are the keys to its success and longevity. Ask students: What factors in the business environment seemed to impact Canadian Tire’s business strategy?? As the opening vignette suggests, all of the external factors, CDSTEP, have impacted its strategy in one way or another. Topic One: A Marketing Environment Analysis Framework The Consumer Rests at the Center of All Marketing Efforts. The firm must consider the entire business from the consumer’s point of view. Firms must monitor the macroenvironment to determine how various factors influence consumers and how firms should respond. In all marketing activities, the consumer is at the centre. Anything that affects consumers affects marketers. Any change in one of these environments likely requires an adjustment to the firm’s marketing mix. By identifying potential environmental trends, firms often can take proactive steps. The next two slides can be used to expand on the role of leveraging company capabilities and how corporate partners affect the analysis. Successfully Leverage Company Capabilities Successful marketing firms focus on satisfying customer needs that match their core competencies. Firms should use information they gain from SWOT analyses to identify attractive opportunities that match existing competencies. Ask students: What are Pepsi’s core competencies? What do they do well? Answer: They know how to bottle beverages, distribute them to stores, and promote their brand. Ask students: How they capitalized on their core competencies in the face of changing market trends? Answer: The trend toward more diet-conscious consumers has led to the development of low-calorie alternatives to sodas. Both Coke and Pepsi understood the market had changed and introduced bottled water products with great success. In 2004, Americans consumed 23 gallons of bottled water per person—ten times as much as in 1980. Consider Competitors and Competitive Intelligence. A firm’s competitors can have significant impacts on the firm’s consumers. By collecting and synthesizing information about its position with respect to rivals, a firm gains competitive intelligence (CI). Using CI enables firms to develop proactive rather than reactive strategies. Firms gather CI through a variety of means but must be careful to avoid methods that are ethically or legally questionable. Information about competitors is available from many sources. The Market Share Reporter is an annual publication found in most libraries that students may use to analyse companies in a variety of industries. Group activity: Ask students to brainstorm a list of possible CI sources. Have them discuss what they can learn from each source. Do they know of any illegal sources? Insider information is a form of CI that often involves a grey area of legality. In some instances the line between sharing information and trading corporate secrets or other proprietary information is grey. Many firms resolve this by having employees sign a non-disclosure statement or confidentiality agreements that detail what information can be disclosed. Work with Corporate Partners Few firms operate in isolation; instead, firms must work together with their partners to create an efficient manufacturing system. Just-in-time (JIT) delivery systems minimize inventory levels. Firms must work together to create a seamless system that delivers goods and services to customers when and where they want them. Many attribute a key reason for Wal-Mart’s success to be because of their close relationships with their suppliers. Answer B Topic Two: Macroenvironmental Factors Macroenvironmental Factors Operate in the External Environment This slide can be used to review this topic instead of the following slides, which provide more in-depth discussions on each factor. Culture and Subcultures refers to the shared meanings, beliefs, morals, values, and customs of a group of people. Country culture involves the visible nuances of a country, such as artifacts, behaviour, dress, symbols, physical settings, ceremonies, languages, tastes, and food preferences, as well as more subtle differences. Regional culture reflects the area in which people live and often affects how they refer to and their preferences for products and services. Regional culture - It's dinnertime, and two families, one in Quebec, the other in Ontario, are sitting down to eat. A hot meal is on the menu for both families but in Ontario, the meal is likely to be ready-to-eat purchased at the grocery store. In Quebec, the dinner is probably made from scratch at home. A Leger Marketing study found that Ontarians buy a hot prepared meal or meal they reheat at home two times per month on average, compared to 1.6 times for Quebecers. Quebecers, especially Quebec women, value themselves a lot through cooking and being directly involved in the feeding of their family. The survey also suggested Quebecers enjoy food more: 57% agreed that eating is one of the great joys of life, compared to 47% of Ontarians and 40% elsewhere in Canada. Quebecers prefer smaller (40,000- to 50,000- square- foot) grocery stores near their homes, (that’s why the supercentre store format hasn't taken off in the province.) Quebecers also tend not to choose stores on price as much as Ontarians. IGA and Metro, proximity-based retailers, are two of the top three favourite grocery store banners in Quebec. In Ontario, two of the top three are No Frills and Food Basics, which are price-based banners. (http://www.marketingmag.ca/magazine/current/quebec_rpt/article.jsp?content=20070625_69884_69884) Demographics are the characteristics of human populations and segments. These characteristics are particularly valuable for identifying consumer markets. Age, gender, and income demographics are readily available from a wide range of sources. Ask students: What are some typical demographics? Answer: age, gender, income, education. Demographic segmentation is probably the most common form of segmentation because the information is so widely available. Answer A A. Generational cohorts refer to groups of people of the same generation who have similar purchase behaviours because they have shared experiences and are in the same stage of life. Group activity: Have students brainstorm a list of the defining characteristics of their generation. Ask: How does your generation differ from previous generations, such as their parents—the Baby Boomers. What macroenvironmental forces have had the most impact on your generation? Tweens Do everything at lightening fast speeds. Generation Y (also known as Millennials or Echo Boomers) Skeptical Web-savvy Generation X Considerable spending power. Astute. Cynical about advertising. Significant knowledge about products and services Baby Boomers Prioritize individualism and leisure time. Believe they will always be able to care for themselves. Youth obsessed. Love rock ’n roll. Seniors make up America’s fastest growing group. Loyal shoppers. Demand high quality. Prefer natural fibers, recognizable brand names, and classic styles. Purchase at about the same rates as other segments. Ask students: What does the phrase “generation gap” mean to you? How do you experience this gap between your generation and that of your parents or grandparents? In what ways do you believe your generation is similar to that of your parents or grandparents? Case-in-Point Series Products must be updated to attract a new market. But how can a firm update an established product for a new market? The challenge of reinventing a well-known product or brand is significant. A delicate balance exists between the desire to attract a new market but not alienate the current market. By incorporating current users into its redesign, Hasbro was able to generate excitement about the new version of a beloved game. In September 2008, Hasbro followed this edition with “Monopoly Here and Now: The World Edition.” On online poll in February allowed consumers to vote for cities around the world that would win the naming rights to 20 squares. The city with the most votes took the place of Boardwalk as the most coveted bit of real estate on the board. Second place got Park Place. The city of Montreal was a leading contender for votes. The addresses on the game board reflect different and appealing locations throughout the United States. Income has become increasingly polarized in the Canada. The wealthiest families are getting wealthier, while middle- and lower-income families are losing ground. Consumers therefore increasingly search for value. The “middle-class squeeze” is a very real global phenomenon. Many developing countries face similar income inequities to those found in North America. Pay gaps also cause problems for many new college graduates who find they cannot afford to live on their own and must move back in with their parents: 61% of recent graduates stated that they intend to live with their parents after graduating. Education matters, because higher levels of education lead to better jobs and higher incomes, especially among college graduates. In addition, a strong link connects income, occupation, and education. Ask students: Do you plan to continue your education after graduation? Many students believe they will never return to school after they finish their Bachelors’ degree, but modern conditions make this choice more and more unlikely. Lifelong learning of new skills and new knowledge has become key to survival in the global economy. Gender traditionally has had a significant impact, but the blurring of gender roles has led many firms to search for gender-neutral positioning strategies. Women now make up more than 60% of the college population. Ask students? How do you believe this will affect the workplace in the future? Ask students? Do you believe that there are still significant gender differences? What are they? Social and Cultural Trends have dramatic Marketing Impacts. This graphic introduces three significant social trends (green consumers, time-poor society, and privacy concerns) and cultural issues such as culture, subcultures and ethnicity. All can be addressed using this slide or can be expanded on using the slides that follow. Greener consumers appreciate green marketing, the strategic effort by firms to supply customers with environmentally friendly merchandise. Green consumers purchase products based on issues beyond the tangible product. These issues can include a variety of social causes such as environmental awareness, protection of animals, HIV/AIDS awareness and prevention, etc. Consumers who purchase these products do so to support these causes. Entrepreneurial Marketing 3.1 Bullfrog Power is cashing-in on the growing social trend among consumers to reduce their carbon footprint by offering an alternative, greener energy option. The company’s energy costs more and its targeted to a higher income, higher education demographic Ask Students: Do you think the higher prices for this alternative energy will affect consumers’ decision to switch? Possible answer: Students’ opinions will be divided with some saying yes while others saying no. You could probe into the reasons why some consumers may not pay higher prices – you may uncover other factors that they think influence adoption decisions. Privacy concerns plague many consumers. In recent years, firms have had to inform consumers of the steps they take to protect their privacy. The government also has instituted new rules for privacy protection. Ask students: Have you ever had a privacy problem with a credit card or when using the Internet? A time-poor society means that the median number of hours worked outside the home has increased, while leisure hours have decreased. With more time spent at work, the amount of time available for home or leisure activities has shrunk. In turn, services that complete the tasks that people no longer have the time to do, such as housecleaning, errands, and cooking, have grown. Ask students: what other entrepreneurial marketing opportunities have a time-poor society provided? Answer: A A. Ethnicity represents a socio-cultural characteristic likely to change most in the next few years. Various ethnic markets now offer lucrative segments, and marketers are responding with products and services to meet the specific needs/wants of those segments. Ask students: What steps can and should marketers take to respond to the changing ethnic mix in Canada? Many marketers already have adjusted their marketing mix to meet the needs of ethnically diverse segments better. Technological advances have accelerated greatly in the past few decades, affecting every aspect of markets. Arguably the single most important change in the way we live is the introduction of new technology. Ask students: Name some new products, new forms of communication, and new retail channels that have been introduced because of technological advances. Internet Marketing 3.1: Brands, Calling at your Service, Sir! This example illustrates how companies (big brands) are combining the Internet and communication technologies to offer great service to their customers – convenience, flexibility, timely information – all hassle-free. The economic situation comprises several elements. Inflation is the persistent increase in the prices of goods and services. Foreign currency fluctuations highlight the discrepancy in value between the currencies used by different countries. Interest rates represent the cost of borrowing money. Shifts in any of these elements make marketing either easier or harder for a firm. Recession a period of economic downturn when the economic growth of the country is negative for at least a couple of quarters Depending on the time of year, discuss projections about Christmas shopping, vacation planning, or home buying. Various economic factors affect each of these areas. The Consumer Confidence Index takes into account how consumers feel about how the economy is doing. This economic indicator relates directly to spending. Political/regulatory environments comprise political parties, governmental organizations, and legislation and laws. Various laws ensure fair trade and competition by prohibiting activities that would damage a competitive marketplace. This list includes some legislation designed to ensure a competitive marketplace and clearly demonstrates the government’s long history of enacting laws that protect fair trade. Answer: D Instructor Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9780071320382, 9780070984929
