Recall that we are interested in an organization's internal resources, the marketing mix, and the external environment.  The marketing mix, or 4Ps, are typically all under the control of the marketer, and so are considered to be internal controllable factors.  The external environment is dynamic - constantly changing - and elements in the external environment are typically not under the direct control of the marketer,  The marketer could, for example, lobby the local town council to change zoning laws to permit a new kind of business, but this is still an external factor that is not under the direct control of the marketer.

MARKETING ENVIRONMENT
dynamic, uncontrollable factors outside of an organization that affect a marketer's ability to develop and maintain its marketing strategies

These factors include:

• competitive
• economic
• political
• legal and regulatory
• technological
• natural
• sociocultural
• demographic
• - etc.

Environmental forces are dynamic, creating uncertainty, threats, and opportunities for marketers.

COMPETITION
can be

• direct competition
  • firms that market products that are similar or are substitutes
  • e.g., if you own a pizza shop, then other pizza shops in the area are competitors as are, perhaps, shops which sell sub sandwiches
    • competition is defined by defining your core business as making pizza or as making fast food

• indirect competition
  • anything that competes for consumer dollars
  • e.g., if you own a pizza shop, prospective customers might prefer to spend their money to see a movie or to play a round of miniature golf
    • competition is defined in this case by defining your core business as entertainment
  • e.g., if you own a pizza shop in certain neighborhoods, you might also notice that your business drops off when customers are more concerned about making the rent payment while waiting for the next pay check - competition can include anything that competes for customers.

Note that competition provides for opportunities as well as threats. For example, another pizza shop, a sub shop, a movie theater, and a miniature golf course on the same block might attract potential customers away from your business, but they might collectively function to attract potential customers into the area.

COMPETITIVE STRUCTURES

• monopoly
  only one player in an industry
• oligopoly
  few competitors in an industry
• monopolistic competition
  many competitors in an industry
• pure competition
  a very large number of players in an industry

ECONOMY
The state of the economy affects people's ability and willingness to spend. Some general related factors include:

• income
  the amount of money received through wages, investments, pensions, etc.

• disposable income
  income left after paying taxes
  • different cities states in the US leave residents with more or less disposable income

• discretionary income
  income left after paying for basic necessities (food, clothing, and shelter)
  • different locations can leave residents with more of less disposable income

• consumer confidence
  consumer perceptions of the state of the economy which affect their willingness to spend money

POLITICAL, LEGAL, AND REGULATORY FACTORS

• Regulation occurs at federal, state, and local levels.
• Industry self-regulation can also occur within non-governmental agencies
  • - e.g., Better Business Bureau, National Advertising Review Board

• Deregulation is just as influential!
• Political forces can be influential in absence of regulation.

SOME REGULATORY AGENCIES IN THE US

• Federal Trade Commission (FTC)
  administers regulation associated with a variety of business practices that protect consumer rights, including false advertising, deception, and unfair pricing
• Food and Drug Administration (FDA)
  administers regulation associated with the production, labeling, and distribution of food
• Consumer Product Safety Commission (CPSC)
  administers regulation associated with product safety

DEMOGRAPHICS
have to do with such population factors as size, density, location, age, gender, race, occupation, and other statistics.

examples of demographic environmental factors of interest to marketers include:

• geographic population shifts
• changing education levels
• changing ethnic diversity
• changing family structures
• bulges in age distributions (e.g., "baby boomers")

MONITORING THE MARKETING ENVIRONMENT

Environmental Scanning
the process of collecting information about factors in the marketing environment

Environmental Analysis
the process of assessing and interpreting the information gathered through environmental scanning

Environmental scanning should be a constant process. An environmental analysis should be conducted periodically, typically once per year, with an assessment of external threats and opportunities, for inclusion in an annual marketing plan.

edited 5 JUN 05