3-1 © 2000 McGraw-Hill Ryerson Limited

C H A P T E R T H R E E

THE CHANGINGMARKETING ENVIRONMENT

3-2 © 2000 McGraw-Hill Ryerson Limited

AFTER READING THIS CHAPTER YOU SHOULDAFTER READING THIS CHAPTER YOU SHOULDBE ABLE TO:BE ABLE TO:

� Understand how environmental scanningprovides information about social,economic, technological, competitive, andregulatory forces.

� Explain how social forces such asdemographics and culture and economicforces such as macroeconomic conditionsand consumer income affect marketing.

3-3 © 2000 McGraw-Hill Ryerson Limited

AFTER READING THIS CHAPTER YOU SHOULDAFTER READING THIS CHAPTER YOU SHOULDBE ABLE TO:BE ABLE TO:

� Describe how technological changes canaffect marketing.

� Understand the forms of competition thatexist in a market, key components ofcompetition, and the impact ofcompetition on corporate structures.

� Explain the major legislation that ensurescompetition and regulates the elements ofthe marketing mix.

3-4 © 2000 McGraw-Hill Ryerson Limited

The Digital RevolutionThe Digital Revolution

The Digital Revolution: one of the biggest changes in

the world of marketing. Changes in technology are

transforming the ways we:

� communicate,

� buy,

� sell,

� learn, and

� work.

3-5 © 2000 McGraw-Hill Ryerson Limited

The Net GenerationThe Net Generation

� Millions of people under the age of 22 who have

grown up with the new technologies, are becoming

authorities in their use.

� As the Internet has become the focus of the digital

age, the Net Generation has become the first group

to use it consistently for:

- entertainment - communication

- education - shopping

3-6 © 2000 McGraw-Hill Ryerson Limited

PP3-1 Environmental forces affecting the organization,PP3-1 Environmental forces affecting the organization, as well as its suppliers and customers as well as its suppliers and customers

SuppliersSuppliers

Organization� Marketing department� Other departments� Employees

CustomersCustomers

� Demographicshifts� Cultural

changes

� Macroeconimicconditions� Consumer

income

� Changingtechnology� Technology�s

impact oncustomervalue

� Alternativeforms ofcompetition� Components

of competition

� Lawsprotectingcompetition andconsumers� Self-regulation� Consumerism

Social Economic Technological Competitive Regulatory

Environmental forces

3-7 © 2000 McGraw-Hill Ryerson Limited

PP3-2a An Environmental Scan of Canada shows the followingPP3-2a An Environmental Scan of Canada shows the followingSocial TrendsSocial Trends

� move toward �natural� and healthfulproducts and lifestyles

� growing number and importance of olderCanadians

� population concentration in censusmetropolitan areas

� greater desire for product simplicity andhonesty in advertising

� greater value placed on education, travel, andleisure

3-8 © 2000 McGraw-Hill Ryerson Limited

� dramatic growth of electronic commerce

� Canadian firms adjust to crises ininternational markets

� public debt levels, high unemployment, anda heavy tax burden persist

PP3-2b An Environmental Scan of the Canadian Economic TrendsPP3-2b An Environmental Scan of the Canadian Economic Trends

3-9 © 2000 McGraw-Hill Ryerson Limited

PP3-2c An Environmental Scan of the Canadian Technological TrendsPP3-2c An Environmental Scan of the Canadian Technological Trends

� increased use of information andcommunication technology

� growing focus on the Internet asconsumers and businesses go online

� expanded computer power and growth of�smart� products

� growing use of electronic money or�e-cash�

3-10 © 2000 McGraw-Hill Ryerson Limited

PP3-2d An Environmental Scan of the Canadian Competitive PP3-2d An Environmental Scan of the Canadian Competitive Trends Trends

� new flexible employment agreements andgrowth of telecommuting

� the emergence of fast, responsive�network corporations�

� mergers reduce costs through economiesof scale

� more international competition fromemerging countries

3-11 © 2000 McGraw-Hill Ryerson Limited

PP3-2e An Environmental Scan of the Canadian Regulatory TrendsPP3-2e An Environmental Scan of the Canadian Regulatory Trends

� increasing emphasis on free trade andderegulation

� greater concern for pollution and globalwarming

� new legislation related to informationcollection and privacy

3-12 © 2000 McGraw-Hill Ryerson Limited

Definition of DemographicsDefinition of Demographics

Demographics is . . . .Demographics is . . . .

describing the population according

to selected characteristics such as

their age, sex, ethnicity, income, and

occupation.

describing the population according

to selected characteristics such as

their age, sex, ethnicity, income, and

occupation.

3-13 © 2000 McGraw-Hill Ryerson Limited

The Population TrendsThe Population Trends

� 1999 Canadian population is 31 million

� expected to be over 35 million by 2011

� number of people ages 20-34 has declined and

the number over 65 has increased

� mature households (age 50+) represent the

fastest growing age segment and control much

of the accumulated wealth in this country

3-14 © 2000 McGraw-Hill Ryerson Limited

PP3-3 The Forecasted Age Distribution of the CanadianPP3-3 The Forecasted Age Distribution of the CanadianPopulation for the year 2011Population for the year 2011

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Major Population SegmentsMajor Population Segments

� Baby Boomers: generation of children born between 1946

and 1964, accounts for the majority of the purchases in

most consumer product and service categories.

� Generation X: 15 % of the Canadian population born

between 1965 and 1976. Consumers who are not prone to

extravagance and likely to prefer lifestyles, products, and

services that are very different from baby boomers.

� Baby Boomlet: Canadians born after 1976; also described

as Generation Y or the Net Generation.

3-16 © 2000 McGraw-Hill Ryerson Limited

Changes in the Canadian FamilyChanges in the Canadian Family� 30 years ago 33% of all households consisted of

married couples with children; this number hasdeclined to 15% .

� 61% of all husband-wife families are dual-incomefamilies

� 50% of all first marriages end in divorce; majority ofthese remarry, creating a blended family

� some do not remarry, and single-parent familiesrepresent close to 15% of all Canadian family units

3-17 © 2000 McGraw-Hill Ryerson Limited

Population Shifts in CanadaPopulation Shifts in Canada

� Since the mid-1970s there has been major shiftfrom from rural to urban areas.

� 80% of Canadians are urban dwellers

� Most Canadians live in census metropolitan areas(CMAs), geographic labour market areas of100,000 persons ore more

� 62% of all Canadians live in two provinces,Ontario and Quebec

3-18 © 2000 McGraw-Hill Ryerson Limited

Racial and Ethnic DiversityRacial and Ethnic Diversity

� French and English Canadians are still the majority(70%); most others are of European descent

� 70% of all immigrants to Canada are classified asvisible minorities

� primarily people from China, Southeast Asia, Africa,and India

� by 2001 visible minorities will represent close to 18%of the Canadian population

3-19 © 2000 McGraw-Hill Ryerson Limited

PP3-4 Income Distribution of Canadian HouseholdsPP3-4 Income Distribution of Canadian Households

3-20 © 2000 McGraw-Hill Ryerson Limited

Definition of Regional MarketingDefinition of Regional Marketing

Regional marketing is . . . .Regional marketing is . . . .

focuses not only on the shifting of consumers

geographically but also on the differences in their

product preferences based on where they live.

Regional marketing involves developing marketing

plans to reflect specific area differences in taste

preferences, perceived needs, or interests.

focuses not only on the shifting of consumers

geographically but also on the differences in their

product preferences based on where they live.

Regional marketing involves developing marketing

plans to reflect specific area differences in taste

preferences, perceived needs, or interests.

3-21 © 2000 McGraw-Hill Ryerson Limited

Definition of CultureDefinition of Culture

Culture is . . . .Culture is . . . .

incorporates the set of values,

ideas, and attitudes of a homogenous

group of people that are transmitted

from one generation to the next.

incorporates the set of values,

ideas, and attitudes of a homogenous

group of people that are transmitted

from one generation to the next.

3-22 © 2000 McGraw-Hill Ryerson Limited

The Changing Role of WomenThe Changing Role of Women

� Nationally more than 65% of women work outsidethe home

� the number of tasks to do is expanding while the timeto do them is shrinking

3-23 © 2000 McGraw-Hill Ryerson Limited

Definition of Value ConsciousnessDefinition of Value Consciousness

Value consciousness is . . . .Value consciousness is . . . .

is the concern for obtaining the best

quality, features and performance of

a product or service for a given price.

is the concern for obtaining the best

quality, features and performance of

a product or service for a given price.

3-24 © 2000 McGraw-Hill Ryerson Limited

Concept CheckConcept Check

1. What is environmental scanning?

2. What is a census metropolitan

area?

3. What are the marketing

implications of blended families?

3-25 © 2000 McGraw-Hill Ryerson Limited

Definition of the EconomyDefinition of the Economy

The economy . . . .The economy . . . .

pertains to the income, expenditures,

and resources that affect the cost of

running a business and household.

pertains to the income, expenditures,

and resources that affect the cost of

running a business and household.

3-26 © 2000 McGraw-Hill Ryerson Limited

Consumer ExpectationsConsumer Expectations

Consumer expectations of an inflationary

or recessionary Canadian economy is an

important element of environmental

scanning. Consumer spending, which

accounts for two-thirds of Canadian

economic activity, is affected by

expectations of the future.

3-27 © 2000 McGraw-Hill Ryerson Limited

Consumer IncomeConsumer Income

A consumer�s ability to buy is related to income,which consists of:

� gross income: the total amount of money made in

one year by a person, household, or family unit;

� disposable income: the money a consumer has left

after paying taxes, to use for food, shelter and

clothing;

� discretionary income: the money that remains

after paying for taxes and necessities.

3-28 © 2000 McGraw-Hill Ryerson Limited

Technological ForcesTechnological Forces� Technology is a major environmental force and refers to

inventions or innovations from applied science or engineeringresearch.

� Some of the most dramatic technological changes occurringnow are:

� the declining cost and size, and increasing power, ofmicroprocessors;

� the convergence of television, personal computer, andtelephone technologies;

� the pervasive trend toward �connectedness� through theWorld Wide Web;

� the emergence of biotechnology.

3-29 © 2000 McGraw-Hill Ryerson Limited

Information TechnologyInformation Technology

One of the most important developments

for marketers may be related to

information technology via improved

methods of collecting, storing, analyzing,

and distributing information, with the

ultimate goal of better understanding

and serving customers.

3-30 © 2000 McGraw-Hill Ryerson Limited

Continuum of CompetitionContinuum of Competition

� Number ofsellers

� Productdifferences

� Importance ofmarket mix

� Large numberof sellers

� Similar products

� Distribution isimportant

� Large numberof sellers

� Unique butsubstitutable

� Pricing isimportant

� A few largecompetitors

� Similarproducts

� Promotion iskey to achieveperceivedproductdifferences

� Singleproducer

� Unique andunsubstitutable

� Unimportant

BASIS OFCOMPARISON

PURECOMPETITION

MONOPOLISTICCOMPETITION OLIGOPOLY MONOPOLY

Number of sellersMany One

3-31 © 2000 McGraw-Hill Ryerson Limited

Components of CompetitionComponents of Competition

Entry (barriers)

Power of Buyers and Suppliers

Existing Competitors and Substitutes

3-32 © 2000 McGraw-Hill Ryerson Limited

Competing on the InternetCompeting on the Internet

� The Internet is changing customers� expectations

about convenience, price, quality, and service.

� As a result a new model--the �network organization�

or �e-corporation�--is evolving as a new form of

competition.

� These firms combine computer, the Web, and

software to change everything about they way they

operate.

3-33 © 2000 McGraw-Hill Ryerson Limited

Concept CheckConcept Check

1. What is the difference between a

consumer�s disposable and

discretionary income?

2. In pure competition there are _______

number of sellers.

3. What is a network organization?

3-34 © 2000 McGraw-Hill Ryerson Limited

Legislation Protecting CompetitionLegislation Protecting Competition

Major legislation has been passed toencourage competition, which is deemeddesirable because it permits theconsumer to determine whichcompetitors will succeed or fail. The keylegislation designed to protectcompetition and consumers in Canada isthe Competition Act.

3-35 © 2000 McGraw-Hill Ryerson Limited

PP3-5 Major federal legislation designed to protectcompetition and consumers

Bank Cost Borrowing Act Fish Inspection Act

Bankruptcy Act Food and Drug Acts

Bills of Exchange Act Hazardous Products Act

Board of Trade Act Income Tax Act

Broadcasting Act Industrial Design Act

Canada Agricultural Products Maple Products Industry Act

Standards Act Motor Vehicle Safety Act

Canada Cooperative Association Act Official Languages Act

Canada Corporations Act Patent Act

Canada Dairy Products Act Precious Metals Marketing Act

Canadian Human Rights Act Small Loans Act

Competition Act Standards Council of Canada Act

Consumer Packaging and Labelling Act Textile Labelling Act

Copyright Act The Interest Act

Criminal Code Timber Marketing Act

Department of Consumer and Trade Marks Act

Corporate Affairs Act True Labelling Act

Electricity Inspection Act and Gas Weighs and Measures Act

Inspection Act Winding-up Act

3-36 © 2000 McGraw-Hill Ryerson Limited

Concept CheckConcept Check

1. The __________ Act is the most important legislation designed to protect competition and consumers in Canada.

2. An alternative to legislation protectingcompetition and consumers is self-__________________.

3. What is consumerism?