EnvironmentaEnvironmental Scanningl Scanning

What is Environmental What is Environmental Scanning?Scanning?

• The process of continually acquiring The process of continually acquiring information on events occurring information on events occurring outside the organization to identify outside the organization to identify and interpret potential trendsand interpret potential trends

Environmental TrendsEnvironmental Trends

• SocialSocial

• EconomicEconomic

• TechnologicalTechnological

• CompetitiveCompetitive

• Regulatory ForcesRegulatory Forces

Environmental TrendsEnvironmental Trends

Social ForcesSocial Forces

• Demographic characteristics and Demographic characteristics and values of a populationvalues of a population

• DemographicsDemographics– Describing a population according to Describing a population according to

selected characteristics such as age, selected characteristics such as age, gender, ethnicity, income, and gender, ethnicity, income, and populationpopulation

Social Forces – Social Forces – DemographicsDemographics

• World PopulationWorld Population– World population is rapidly growingWorld population is rapidly growing– Increases in population are mainly in Increases in population are mainly in

Africa, Asia, Latin America, India, ChinaAfrica, Asia, Latin America, India, China– North America, Europe, Australia, Japan North America, Europe, Australia, Japan

are not growing as quicklyare not growing as quickly– Number of older people is increasing, Number of older people is increasing,

more than double in the next decademore than double in the next decade

Social Forces – Social Forces – Demographics Demographics

• U.S. PopulationU.S. Population– Getting older, more diverse, and larger Getting older, more diverse, and larger

in numberin number– By 2025, estimated over 350 million By 2025, estimated over 350 million

people in the U.S.people in the U.S.

Social Forces – Social Forces – Demographics Demographics

• Generational CohortsGenerational Cohorts– Baby BoomersBaby Boomers– Generation XGeneration X– Generation YGeneration Y

Social Forces – Social Forces – Demographics Demographics

• Baby BoomersBaby Boomers– Born between 1946 and 1964Born between 1946 and 1964– Important because of numberImportant because of number– Want to feel youngerWant to feel younger– Are interested in their health, children, Are interested in their health, children,

and grandchildrenand grandchildren

Social Forces – Social Forces – Demographics Demographics

• Generation X “Baby Bust”Generation X “Baby Bust”– Born between 1965 and 1976Born between 1965 and 1976– Self-reliant, supportive of racial and Self-reliant, supportive of racial and

ethnic diversity, better educated than ethnic diversity, better educated than previous generationsprevious generations

– The new parent marketThe new parent market

Social Forces – Social Forces – Demographics Demographics • Generation Y “Echo Boom”Generation Y “Echo Boom”

– Born between 1977 and 1994Born between 1977 and 1994– Children of baby boomersChildren of baby boomers– Interested in music, sports, computers, Interested in music, sports, computers,

videogames, cell phonesvideogames, cell phones– Marketing skeptical group because they’ve Marketing skeptical group because they’ve

been exposed to over 23 million ads in their been exposed to over 23 million ads in their lifetimelifetime

– This group just recently started into adulthood This group just recently started into adulthood or will be soonor will be soon

Social Forces – Social Forces – Demographics Demographics

• The American HouseholdThe American Household– 1960 – 75% of households were married, today – 1960 – 75% of households were married, today –

50% of households are married couples50% of households are married couples– Only 25% of married households have kids and Only 25% of married households have kids and

10% have working fathers and stay-at-home moms10% have working fathers and stay-at-home moms– Single parents, unmarried familiesSingle parents, unmarried families– Blended families are formed by merging into a Blended families are formed by merging into a

single household of 2 previously separate unitssingle household of 2 previously separate units•Hallmark CardsHallmark Cards

Social Forces – Social Forces – Demographics Demographics

Social Forces – Social Forces – Demographics Demographics

• Population ShiftsPopulation Shifts– People are moving west and southPeople are moving west and south– Fastest growing states – California, New Fastest growing states – California, New

Mexico, Hawaii, Arizona, NevadaMexico, Hawaii, Arizona, Nevada– In early 1900’s, people moved from the In early 1900’s, people moved from the

country to the cities, now more people country to the cities, now more people are trying to get away from the citiesare trying to get away from the cities

Social Forces – Social Forces – Demographics Demographics

• Racial and Ethnic DiversityRacial and Ethnic Diversity– By 2025, there will be ~68 million By 2025, there will be ~68 million

Hispanics in the U.S. (about 20% of the Hispanics in the U.S. (about 20% of the total population)total population)

– By 2025, there will be ~45 million African By 2025, there will be ~45 million African Americans (about 13% of the total Americans (about 13% of the total population)population)

– Multiracials account for 2.4% of the Multiracials account for 2.4% of the populationpopulation

Social Forces – Social Forces – Demographics Demographics

• Racial and Ethnic DiversityRacial and Ethnic Diversity– By 2007:By 2007:

•Hispanics will spend $900 billion/yearHispanics will spend $900 billion/year

•African Americans will spend $850 billion/yearAfrican Americans will spend $850 billion/year

•Asians will spend $455 billion/yearAsians will spend $455 billion/year

– Multicultural MarketingMulticultural Marketing•Combinations of marketing mix that reflect the Combinations of marketing mix that reflect the

unique attitudes, ancestry, communication unique attitudes, ancestry, communication preferences, and lifestyles of different racespreferences, and lifestyles of different races

Social Forces – CultureSocial Forces – Culture

• Culture incorporates the set of values, Culture incorporates the set of values, ideas, and attitudes that are learned ideas, and attitudes that are learned and shared among the members of a and shared among the members of a groupgroup

Social Forces – CultureSocial Forces – Culture

• Major cultural change is women in the Major cultural change is women in the workplaceworkplace

• Less differences in male/female Less differences in male/female buying behaviorsbuying behaviors

• Most younger females had mothers Most younger females had mothers that worked full-time outside the that worked full-time outside the homehome

Social Forces – CultureSocial Forces – Culture

• Women’s sports are breaking down Women’s sports are breaking down walls of inequalitywalls of inequality

• Young women don’t respond well to Young women don’t respond well to “we know you’re busy” ads“we know you’re busy” ads

• More equal responsibilities in the More equal responsibilities in the homehome

Economic ForcesEconomic Forces

• Economy pertains to the income, Economy pertains to the income, expenditures, and resources that expenditures, and resources that affect the cost of running a business affect the cost of running a business and householdand household

Economic ForcesEconomic Forces• The inflationary or recessionary state of the The inflationary or recessionary state of the

economy, actual or perceivedeconomy, actual or perceived– Inflationary economyInflationary economy

•How much it costs to produce and buy products and How much it costs to produce and buy products and services increase as prices increaseservices increase as prices increase

• If price increases more than consumer income, buyer If price increases more than consumer income, buyer power decreasespower decreases

– Recessionary economyRecessionary economy•Slow economic activitySlow economic activity

• Why would macroeconomic conditions be Why would macroeconomic conditions be important in your environmental scan?important in your environmental scan?

Economic Forces – Economic Forces – Consumer IncomeConsumer Income• Gross IncomeGross Income

– Total amount of money made in 1 year by a Total amount of money made in 1 year by a person, household, or family unitperson, household, or family unit

• Disposable IncomeDisposable Income– Money a consumer has left over after paying Money a consumer has left over after paying

taxes to use for necessitiestaxes to use for necessities

• Discretionary IncomeDiscretionary Income– Money remaining after paying for taxes and Money remaining after paying for taxes and

necessitiesnecessities

Technological ForcesTechnological Forces

• Technology refers to inventions from Technology refers to inventions from applied science or engineering applied science or engineering researchresearch

Technological ForcesTechnological Forces

• Hard to predictHard to predict

• The lower cost of technology makes The lower cost of technology makes consumers think about other aspects consumers think about other aspects of the productof the product

• Allows for many new productsAllows for many new products

• Changes the way products are Changes the way products are producedproduced

• InternetInternet

Competitive ForcesCompetitive Forces

• Competition is the alternative firms Competition is the alternative firms that could provide a product to that could provide a product to satisfy a specific market’s needssatisfy a specific market’s needs

Competitive ForcesCompetitive Forces

• Pure CompetitionPure Competition– Every company has a similar productEvery company has a similar product– Commodities (wheat, rice, grain)Commodities (wheat, rice, grain)– Main role of marketing is place Main role of marketing is place

(distribution)(distribution)

Competitive ForcesCompetitive Forces

• Monopolistic CompetitionMonopolistic Competition– Sellers compete with their products on a Sellers compete with their products on a

substitutable basissubstitutable basis– Ex: Coca-Cola is on sale, buy it because Ex: Coca-Cola is on sale, buy it because

Pepsi is not on salePepsi is not on sale– Main role of marketing is promotion Main role of marketing is promotion

(sales, coupons, etc.)(sales, coupons, etc.)

Competitive ForcesCompetitive Forces

• OligopolyOligopoly– Common industry structureCommon industry structure– A few companies control the majority of A few companies control the majority of

industry salesindustry sales– Fewer sellers, price competition reduces Fewer sellers, price competition reduces

profits for allprofits for all

Competitive ForcesCompetitive Forces

• Pure MonopolyPure Monopoly– Only 1 firm sells productOnly 1 firm sells product– Water, electricity, telephone serviceWater, electricity, telephone service– Small marketing role because of Small marketing role because of

government regulationgovernment regulation

Competitive Forces – Competitive Forces – Driving Forces of Driving Forces of CompetitionCompetition• EntryEntry

– Barriers to entry are business practices Barriers to entry are business practices or conditions that make in difficult for or conditions that make in difficult for new firms to enter the marketnew firms to enter the market

Competitive Forces – Competitive Forces – Driving Forces of Driving Forces of CompetitionCompetition• Buyers and Supplier PowerBuyers and Supplier Power

– What makes buyers powerful?What makes buyers powerful?•Few in numberFew in number

•Switching costs are lowSwitching costs are low

•The product represents a big share of a The product represents a big share of a buyer’s total costbuyer’s total cost

– What makes suppliers powerful?What makes suppliers powerful?•Buyer has to have productBuyer has to have product

•Switching costs are highSwitching costs are high

Regulatory ForcesRegulatory Forces

• Regulation consists of restrictions Regulation consists of restrictions state and federal laws place on state and federal laws place on businesses with regard to the businesses with regard to the conduct of its activities, in place to conduct of its activities, in place to protect companies and consumersprotect companies and consumers

Regulatory Forces – Regulatory Forces – Protecting CompetitionProtecting Competition

• Sherman Antitrust Act of 1890Sherman Antitrust Act of 1890– Midwest farms lobbying against fixed Midwest farms lobbying against fixed

railroad shipping prices got this act railroad shipping prices got this act passedpassed

– Forbids contracts, combinations, or Forbids contracts, combinations, or conspiracies in restraint of tradeconspiracies in restraint of trade

– Forbids actual monopolies or attempts Forbids actual monopolies or attempts to monopolize any part of trade or to monopolize any part of trade or commercecommerce

Regulatory Forces – Regulatory Forces – Protecting CompetitionProtecting Competition

• Clayton Act of 1914Clayton Act of 1914– Supplemented the Sherman ActSupplemented the Sherman Act– Forbids certain actions that are likely to Forbids certain actions that are likely to

lessen competition although no actual lessen competition although no actual harm has yet happenedharm has yet happened

Regulatory Forces – Regulatory Forces – Product-Related LegislationProduct-Related Legislation

• Company ProtectionCompany Protection– Patent lawsPatent laws– Copyright lawsCopyright laws

• Consumer ProtectionConsumer Protection– Consumerism is a grassroots movement started in Consumerism is a grassroots movement started in

the 1960’s to increase the influence, power, and the 1960’s to increase the influence, power, and rights of consumers in dealing with institutionsrights of consumers in dealing with institutions

– Want safe products and ethically socially Want safe products and ethically socially responsible business practicesresponsible business practices

Regulatory Forces – Regulatory Forces – Product-Related LegislationProduct-Related Legislation

• Company and Consumer ProtectionCompany and Consumer Protection– TrademarksTrademarks

•Protects company because their investments Protects company because their investments are protected against theftare protected against theft

•Protects consumers because they know Protects consumers because they know when they buy a product under a certain when they buy a product under a certain target market they get what they think target market they get what they think they’re gettingthey’re getting

Regulatory Forces – Regulatory Forces – Product-Related LegislationProduct-Related Legislation

• Company and Consumer ProtectionCompany and Consumer Protection– TrademarksTrademarks

•Lanham Act of 1946 allows for registration of trademarksLanham Act of 1946 allows for registration of trademarks

•Generic trademarkGeneric trademark– Is your trademark a common description of a product?Is your trademark a common description of a product?– Aspirin, escalatorAspirin, escalator– Coca-Cola?, Band-Aid?Coca-Cola?, Band-Aid?

•Recent changesRecent changes– Can obtain trademarks for colorsCan obtain trademarks for colors– Not allowing a non-competing product to use your trademark Not allowing a non-competing product to use your trademark

(Cadillac brushes)(Cadillac brushes)

Regulatory Forces – Regulatory Forces – Pricing-Related LegislationPricing-Related Legislation

• Price fixing is illegalPrice fixing is illegal

• Price discounting is allowedPrice discounting is allowed

Regulatory Forces – Regulatory Forces – Distribution-Related Distribution-Related LegislationLegislation• Exclusive DealingExclusive Dealing

– A manufacturer makes a deal with a A manufacturer makes a deal with a reseller to handle only its products and reseller to handle only its products and not competing productsnot competing products

– Legal unless it lessens competitionLegal unless it lessens competition

Regulatory Forces – Regulatory Forces – Distribution-Related Distribution-Related LegislationLegislation• Requirement ContractsRequirement Contracts

– Requires a buyer to purchase all or part of its Requires a buyer to purchase all or part of its needs for a product from one seller for a needs for a product from one seller for a period of timeperiod of time

– Can be interpreted as illegalCan be interpreted as illegal

• Exclusive Territorial DistributorshipsExclusive Territorial Distributorships– Grants a distributor the sole rights to sell a Grants a distributor the sole rights to sell a

product in a specific geographic areaproduct in a specific geographic area– Usually legalUsually legal

Regulatory Forces – Regulatory Forces – Distribution-Related Distribution-Related LegislationLegislation• Tying ArrangementTying Arrangement

– Seller requires the purchaser of one Seller requires the purchaser of one product to also buy another item in the product to also buy another item in the lineline

– Can be illegalCan be illegal

Regulatory Forces – Regulatory Forces – Advertising & Promotion-Related Advertising & Promotion-Related LegislationLegislation• Federal Trade Commission watches Federal Trade Commission watches

for deceptive and misleading for deceptive and misleading advertising and unfair business advertising and unfair business practicespractices

• Can issue cease and desist ordersCan issue cease and desist orders

• Can order corrective advertisingCan order corrective advertising

Regulatory Forces – Regulatory Forces – Self-RegulationSelf-Regulation

• An industry attempts to police itselfAn industry attempts to police itself

• Ex: TV networks not allowing certain Ex: TV networks not allowing certain commercialscommercials

• Ex: Reader’s Digest does not allow Ex: Reader’s Digest does not allow advertising for liquor productsadvertising for liquor products