Chapter 4
The Markeng Environment
This chapter begins with the learning outcome summaries followed by a set of lesson plans for
instructors to use to deliver the content.
Lecture (for large sections) on page 4
Company Clips (video) on page 5
Review and Assignments begin on page 7
Review questions
Application questions
Application exercise
Ethics exercise
Video Assignment
Case assignment
Great Ideas for Teaching Marketing from faculty around the country begin on page 22
Learning Outcomes
4-1 Discuss the external environment of marketing and explain how it affects a firm
A target market is a group of people or organizations for which an organization designs,
implements, and maintains a marketing mix intended to meet the needs of that group, resulting in
mutually satisfying exchanges. Instead, managers react to changes in the external environment
and attempt to create a more effective marketing mix. Then marketing managers can create a
marketing mix to effectively meet the needs of target customers.
4-2 Describe the social factors that affect marketing
Social change is perhaps the most difficult external variable for marketing managers to forecast,
influence, or integrate into marketing plans. Social factors include our attitudes, values, and
lifestyles. Component lifestyles increase the complexity of consumers’ buying habits. Social
media are making profound changes in the way people obtain and consume information—
consumers are interacting; sharing beliefs, values, ideas, and interests; and, of course, making
purchases at a dizzying rate. Marketers have learned that social media are not like network
television, where a message is pushed out to a mass audience. Instead, social media enable firms
to create conversations with customers and establish meaningful connections. In other words,
social media marketing can humanize brands.
4-3 Explain the importance to marketing managers of current demographic trends
Another uncontrollable variable in the external environment—also extremely important to
marketing managers—is demography, the study of people’s vital statistics, such as age, race and
ethnicity, and location. Demographics are significant because the basis for any market is people.
4-4 Explain the importance to marketing managers of growing ethnic markets
The American demographic profile is rapidly changing as racial and ethnic groups continue to
grow. The minority population today is about 118 million. By 2050, around one in three U.S.
residents will be Hispanic. The United States will flip completely to a majority-minority makeup
in 2035, meaning that whites of European ancestry will make up less than 50 percent of the
population.
4-5 Identify consumer and marketer reactions to the state of the economy
In addition to social and demographic factors, marketing managers must understand and react to
the economic environment. The three economic areas of greatest concern to most marketers are
consumers’ incomes, inflation, and recession. In recent years, U.S. incomes have risen at a slow
pace. When income is high relative to the cost of living, people have more discretionary income.
That means they have more money to spend on nonessential items (in other words, on wants
rather than needs). During a time of inflation, businesses seeking to increase their profit margins
can do so only by increasing their efficiency. During times of recession, the gross domestic
product falls for two consecutive quarters. By 2008, the recession had spread around the globe.
4-6 Identify the impact of technology on a firm
Technological success is based upon innovation, and innovation requires imagination and risk
taking. Bringing new technology to the marketplace requires a corporate structure and
management actions that will lead to success. The United States excels in basic research and, in
recent years, has dramatically improved its track record in applied research. Innovation is
increasingly becoming a global process. Without innovation, U.S. companies can’t compete in
global markets.
4-7 Discuss the political and legal environment of marketing
Business needs government regulation to protect innovators of new technology, the interests of
society in general, one business from another, and consumers. Some key federal laws that affect
marketing are the Sherman Act, Clayton Act, Federal Trade Commission Act, Robinson–Patman
Act, Wheeler–Lea Amendments to the FTC Act, Lanham Act, Celler–Kefauver Antimerger Act,
Foreign Corrupt Practices Act, Federal Food and Drug Act, Federal Hazardous Substances Act,
Kefauver-Harris Drug Amendment, Consumer Credit Protection Act, Child Protection and Toy
Safety Act, Public Health Smoking Act, Poison Prevention Labeling Act, National
Environmental Policy Act, Public Health Cigarette Smoking Act, Consumer Product Safety Act,
Child Protection Act, Children’s Online Privacy Protection Act, Aviation Security Act, Homeland
Security Act, Do Not Call Law, CAN-SPAM Act, Credit Card Act, Restoring American Financial
Stability Act, Patient Protection and Affordable Care Act, and Hart–Scott–Rodino Act. Many
laws, including privacy laws, have been passed to protect the consumer as well. The Consumer
Product Safety Commission, the Consumer Financial Protection Bureau (discussed in Section
4-7a), the Federal Trade Commission, and the Food and Drug Administration are the four federal
agencies most directly and actively involved in regulating marketing activities.
4-8 Explain the basics of foreign and domestic competition
The competitive environment encompasses the number of competitors a firm must face, the
relative size of the competitors, and the degree of interdependence within the industry.
Management has little control over the competitive environment confronting a firm. Many
foreign competitors also consider the United States to be a ripe target market. In the past, foreign
firms penetrated U.S. markets by concentrating on price, but the emphasis has switched to
product quality.
Key Terms
Applied research Demography Millennials
Baby boomers Inflation
Basic research Federal Trade Commission (FTC) Purchasing power
Component lifestyles Food and Drug Administration
(FDA)
Recession
Consumer Product Safety
Commission (CPSC)
Generation X Target market
Suggested Homework
The end of this chapter contains assignments on the GaGa’s Inc. video and the One Direction
case.
This chapter’s online study tools include flashcards, visual summaries, practice quizzes, and
other resources that can be assigned or used as a basis for longer investigations into
marketing.
Lesson Plans for Video
Company Clips
Segment Summary: GaGa’s Inc.
GaGa’s Inc. produces a frozen dessert called Sherbetter in a variety of flavors. GaGa’s is a very
small product line. Jim King, the founder and CEO, discusses the challenges his company faces
in their product category. He also reveals other environmental challenges to his product.
These teaching notes combine activities that you can assign students to prepare before class, that
you can do in class before or while watching the video, and that you can assign students to
complete on their own after watching the video.
During the viewing portion of the teaching notes, stop the video periodically when appropriate to
ask students the questions listed on the grid or perform the activities listed on the grid. You may
even want to give the students the questions before starting the video and have them think about
the answer while viewing the segment. That way, students will be engaged in active rather than
passive viewing.
Pre-class Prep for You Pre-class Prep for Your Students
Review the Company Clips video
segment from Chapters 2 and 3. This
exercise reviews concepts for LO1,
LO2, and LO3
Review your lesson plan.
Have students familiarize themselves
with the following terms and concepts:
competition, demography, and target
market.
Video Review Exercise
Activity Teaching Method
Warm-up Begin by asking students, “How do businesses go about
researching and determining a target market?”
In-class Preview
Segue into a discussion of the external marketing environment
and social factors as variables that marketing managers must
integrate into their marketing plans.
Review how elements in the external environment create
opportunities as well as threats to a firm’s marketing mix.
Ask students to volunteer the seven classifications, or factors,
that marketing managers may attempt to manage or shape
within the external environment.
Review the cohorts in the present-day demography. Ask
students the importance of understanding demographic
characteristics.
Review the Company Clips questions with students. They
should be prepared to answer them after viewing the video.
Viewing
(solutions below)
1. Explain how GaGa’s Inc. has used environmental management
to help shape the external environment in which they sell
Sherbetter.
2. Values influence buying habits; in what way(s) does GaGa’s
recognize its customers’ values?
Follow-up
Have students use the Internet or the Yellow Pages to identify
companies that pitch “sustainability” or other green marketing
practices. Students should then e-mail or call one of the
companies and ask the manager or sales personnel to describe
their clientele and the types of products they sell to them. Ask
students to be prepared to share their research at the next class
meeting.
Solutions for Viewing Activities
1. Explain how GaGa’s Inc. has used environmental management to help shape the
external environment in which they sell Sherbetter.
Students’ answers will vary. Some students may say that GaGa’s manages its environment
by targeting stores that have a lower slotting fee and have shoppers that fit the GaGa’s
demographic. In addition, GaGa’s no longer sells Sherbetter through distributors that
require the Sherbetter to be shipped, making it too expensive for consumers. Basically,
students should highlight the ways that GaGa’s evaluates weaknesses and leverages its
strengths to make up for the numerous challenges the frozen dessert faces.
2. Values influence buying habits. In what way(s) does GaGa’s recognize its customers’
values?
Students’ answers will vary, but it is important for them to understand that GaGa’s knows
its customers value premium ingredients and (based on where they shop) value local
products.