MKTG 504 - The Environment of MARKETING

1. MKTG 504 - The Environment of MARKETING Marketers react to the environment Dr. Dennis Pitta University of Baltimore

2. The Environments of Marketing • Technological Environment • Economic Environment • Competitive Environment • Sociological Environment • Political-Legal Environment • Global Environment

3. Let’s look at an example….

4. Monroe calculator - Features • weighs 65 lbs • uses 120/220 volt current • mechanical keys enter data • mechanical gears perform calculations • electrical motors move the gears and the display • multiplication = multiple addition • division = something strange

5. Monroe calculator • Advantages • higher accuracy than hand calculation • faster than hand calculation

6. 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!!!) Monroe calculator

7. Display Devices for Calculators • The Number Wheel Behind a Window (e.g. Monroe Calculators) • Multifilament Vacuum Tubes ( e.g. Burroughs)

8. 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

9. 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 Burroughs calculator

10. Display Devices for Calculators • L. E. D.. (Light Emitting Diodes) (e.g. Novus, Bowmar) • L. C. D.. (Liquid Crystal Displays) (e.g. Casio, Panasonic)

11. 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

12. 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. E. D. calculators

13. 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

14. 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 L. C. D. calculators

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

16. _______________________ • _______________________ • _______________________

17. Technological Environment • Technology = Knowledge to do new or old tasks better • Invention = result of technology • Innovation = result of introducing inventions in the marketplace

18. Technology and Marketing • Impact on Competition • Impact on Costs and Productivity • Impact on the Marketing Mix (Product, Price, Promotion, Distribution)

19. Economic Environment • The Business Cycle = cyclical changes in the economy

20. Stages in the Business Cycle • Prosperity • Recession • DEPRESSION • Recovery

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

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

23. THE COMPETITIVE ENVIRONMENT • PERFECT COMPETITION • MONOPOLISTIC COMPETITION • OLIGOPOLY • MONOPOLY

24. 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.

25. Monopoly • ONE SELLER • PRICE: What the market will bear.

26. Oligopoly • Few Sellers • Entry into Industry - Difficult • Action of one firm affect others • Each firm has a large share of the industry’s customers.

27. What is competition like in the deodorant category? • Name three brands ____________ • _____________ _____________ • What are the prices like? • What do the advertisements say?

28. Monopolistic Competition • Each seller’s product DIFFERENTIATED (Somewhat). • The higher the differentiation, the more control the seller has over price. (No close substitutes.)

29. 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.

30. Political-Legal Environment • Government the major element of the Political- Legal environment

31. 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

32. 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”

33. Marketing and the Law • Protecting Consumers Wheeler-Lea Act “Unfair or deceptive acts or practices in commerce”

34. 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

35. 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

36. Why does the FTC target Oligopolies? • All the monopolieshave been identified - or are not significant. • An Oligopoly could be “A MONOPOLY IN OLIGOPOLY CLOTHING!”

37. Government and the Competitive Environment The FTC uses a technique which stresses: STRUCTURE (COMPETITIVE STRUCTURE) CONDUCT (COMPETITIVE TECHNIQUES) and PERFORMANCE (R.O.I.)

38. 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 ____%

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

40. How Do Marketers Compete? • Imitation • Differential Advantage • Price Competition • Non-Price Competition • Enhanced services • Filling a niche • Different distribution

41. Market nicher Market leader Market challenger Market follower 40% 30% 20% 10% Hypothetical Market Structure & Competition Expand Market Attack leader Special- ize Imitate Defend Market Share Status quo Expand Market Share

42. Optimal market share Profitability 0% 25% 50% 75% 100% Market share Optimal Market Share

43. 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.

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

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

46. Upcoming Topics • Segmentation