MKTG 1120 CH2

The Marketing Environment: Comprehensive Study Notes

Marketers constantly monitor the marketing environment to identify changes and new opportunities in the marketplace.
Key external forces: Social, Economic, Technological, Competitive, and Regulatory. These forces shape marketing strategies and decisions.
An environmental scan is a formal process used to collect and interpret information about external events and trends that could affect a business (opportunities or threats).
SWOT analysis is used to summarize internal strengths and weaknesses and external opportunities and threats; the ultimate goal is to identify crucial strategy-related factors and leverage strengths, correct weaknesses, exploit opportunities, and avoid threats.
The environment is shaped by social/demographic trends, economic conditions, technological advances, competitive dynamics, and regulatory rules.
Real-world example: Cirque du Soleil illustrates how changing external forces can redefine an industry (Blue Ocean Strategy).

SWOT and Environmental Scan: Key Concepts

Situation Analysis: Taking stock of a firm’s or product’s past performance, its current position, and its future direction.
SWOT Analysis: Assessing how well an organization or brand services its businesses and target markets.
- Processes include: identifying changes and trends in the industry, analyzing current and potential competitors, assessing the organization’s resources, and researching present and prospective customers.
Ultimate goal of SWOT: identify crucial strategy-related factors that impact the firm and build on strengths, correct weaknesses, exploit opportunities, and avoid disaster-laden threats.
An Environmental Scan definition: the ongoing collection of information about events outside an organization to identify external trends that are opportunities or threats; often the first step in developing a broader SWOT.
External environment interaction: The environment interacts with the organization, customers, and suppliers (as depicted in typical interaction figures).

External Forces: Social Forces

Social Forces include demographic characteristics and culture.
Demographics: statistical data on a population by gender, age, ethnicity, income, education, occupation, etc. Changes here can dramatically impact marketing strategy.

Demographic Forces

Statistics Canada 2021 Census highlights:
- Aging population: significant growth among those >65; analysis informs areas like health care, home support services, personal care items.
- Diverse generations: Baby Boomers, Generation X, Generation Y ( Millennials ), Generation Z.
- Big-city growth: urbanization trends continue with immigration driving city growth.
- Ethnic diversity: multicultural population with many languages; 450 mother-tongue languages reported.
- World markets: global market opportunities beyond Canada; Canada ranks 39th in world population.
- Changing household composition: rise of one-person households, couples without children, common-law relationships, same-sex couples, and multigenerational families.
An Aging Population (examples and implications):
- Growth in population >65: ext{share} = 0.19 ext{ (19 ext%)} (up from $0.169$ in 2016).
- Implications for health care, home support services, and personal care items.
Big-City Growth:
- Since the pandemic, population growth has rebounded; growth driven mainly by immigration.
- Urban centres house $ext{0.737} ext{ of Canadians}$ , with urban spread increasing during the pandemic.
Ethnic Diversity:
- Between 2016 and 2021, $71.1 ext{ ext{-}}\%$ of Canada’s growth came from immigrants and non-permanent residents, with about 62 ext{ ext%} from Asia and the Middle East.
- Canada’s multicultural identity presents diverse opportunities for marketers.
- The country reports around $450$ mother-tongue languages.
World Markets:
- Global population exceeds $7.9 imes 10^9$ people.
- Canada’s international market opportunities: rank 39 by population size.
- Five largest economies by population (as of 2022):
- China: $1425.9$ million
- India: $1417.2$ million
- United States: $338.3$ million
- Indonesia: $275.5$ million
- Brazil: $235.8$ million
World Markets (summary): these large-population countries create opportunities for export, investment, and cross-border marketing initiatives.
Changing Household Composition:
- Dominant structure is the one-person household.
- Drivers: aging population, economic independence, higher separation/divorce rates.
- Increases in: couples without children, common-law relationships, same-sex couples, multigenerational families.
Culture within social forces (broad cultural indicators that affect marketing):
- Media usage, food consumption patterns, gender roles, health consciousness, and ethical consumption.

Culture and Media

Media and connectivity:
- Widespread internet access and device connectivity change how marketers relate to consumers; less reliance on face-to-face interactions.
- Showrooming and social media engagement are significant features of modern consumer behavior.
- In Canada, about $31.8 ext{ million}$ people use social platforms; roughly $6 ext{ platforms}$ accessed; average TV/video viewing is $21.8 ext{ hours/week}$ .
Food consumption trends:
- Increased health awareness and chronic disease concerns drive demand for transparent labeling, fresh/diet-conscious options, local sourcing, ethnic foods, and ready-to-eat fresh meals.
Gender attitudes and roles:
- Shifting away from traditional gender norms; some brands embrace gender-neutral positioning to avoid stereotypes.
Healthy Living for an Aging Population:
- Growing consumer focus on health maintenance and improvement.
Ethical Consumption:
- High interest in sustainable and ethical business practices; $0.71$ (71%) of Canadians identify as sustainable consumers.
- Consumer labeling claims can be confusing or raise skepticism.

Economic Forces

Definition: The economy comprises the collective income, expenditures, and resources affecting business or household costs.
Marketing relevance: Economic conditions influence purchase behavior (confidence, spending power, and timing of purchases).
Downturn effects: reduced consumer confidence, delays in purchases, and cancellations of non-essential or high-priced items.
Upturn effects: increased confidence and higher spending power.
Macroeconomic vs. microeconomic forces: macro refers to national economic indicators; micro refers to supply/demand dynamics at the market level.

Macroeconomic Forces

Key indicators include:
- Growth rate (GDP) $ext{GDP growth rate}$
- Inflation rate $ext{Inflation}$
- Unemployment rate $ext{Unemployment}$
- Consumer confidence $ext{Consumer confidence index}$
marketers adjust programs to maximize results across different cycles.
Example data (Canada GDP in USD):
- 2021: $1990.73$
- 2020: $1645.42$
- 2019: $1745.02$
- 2018: $1725.33$
Economic context helps forecast short- and long-term marketing strategy and budget planning.

Microeconomic Forces

Focus on supply and demand for goods and services and how individual/household/company decisions affect purchasing.
Visual concept often used: levels of customer income (e.g., low, middle, high) influencing buying power and behavior.

Technological Forces

Technological forces refer to inventions or innovations from scientific/engineering research.
Technology can replace existing products and create new markets and value propositions.

Competitive Forces

Each company must consider present and potential competitors when designing its marketing strategy.
Marketers monitor competitive activity for head-to-head and indirect competition.
Types of competition typically discussed:
- Monopoly
- Oligopoly
- Monopolistic competition
- Pure (perfect) competition
Canada Post case example (environmental forces): a media/video example illustrating organizational response to external pressures and evolving communication needs.

Regulatory Forces

Regulations protect consumers from unscrupulous practices, set standards, and encourage fair competition.
Ethical business practices are essential to avoid backlash and negative publicity.
Regulatory bodies and associations relevant to a given industry/jurisdiction should be reviewed and monitored.

Steps in an Environmental Scan

The process includes brainstorming, evaluating, and implementing ideas to meet business objectives:
- Brainstorm: generate ideas and alternatives.
- Evaluate and implement: select viable options and put them into action.
- Determine the impact of each fact/trend on the business; set objectives accordingly.
- Collect facts and identify trends: gather data, conduct competitive reviews, and cluster information into facts and trends.
Use the gathered external trends to inform strategic decisions and alignment with organizational goals.

Case Examples and Illustrations

Cirque du Soleil: Example of Blue Ocean Strategy illustrating how a business can redefine an industry by identifying uncontested market spaces and reshaping consumer value.
- Discussion prompts include: What environmental forces shaped Cirque du Soleil’s revolution of the circus? How did these forces create a new market space?
Canada Post: Example discussing how environmental forces should shape communications and logistics strategies; what challenges might arise when creating marketing or outreach materials?

Quick Reference: Key Numerical Highlights

Aging population: 19 ext{ ext%} vs. 16.9 ext{ ext%} (2016)
Big-city share of population: $0.737$ (73.7%)
Canadian urban population and mobility: $ext{high urban concentration; pandemic-era changes continue}</li><li>Global population:$ 7.9 imes 10^9 $</li><li>Top-five countries by population (millions):<ul><li>China:$ 1425.9 $</li><li>India:$ 1417.2 $</li><li>United States:$ 338.3 $</li><li>Indonesia:$ 275.5 $</li><li>Brazil:$ 235.8 $</li></ul></li><li>Sustainable consumers:$ 0.71 $(71%)</li><li>Social media usage (Canada):$ 31.8 ext{ million} $on$ 6 ext{ platforms} $; TV/video:$ 21.8 ext{ hours/week} $</li><li>GDP (Canada, USD):$ 2018: 1725.33, 2019: 1745.02, 2020: 1645.42, 2021: 1990.73 $</li></ul><h3 collapsed="false" seolevelmigrated="true">Connections to Foundational Principles and Real-World Relevance</h3><ul><li>Environmental scanning aligns with strategic planning, market research, and risk management by formalizing how external changes affect internal capabilities and opportunities.</li><li>Understanding demographic shifts and cultural trends supports segmentation, targeting, and positioning in diverse markets.</li><li>Recognizing the influence of macro and microeconomic forces helps marketers forecast demand, pricing strategies, and budget allocation.</li><li>Ethical and regulatory considerations are essential to maintain trust and avoid backlash, especially in a globally connected market.</li><li>The Cirque du Soleil example demonstrates how reframing value propositions and creating uncontested market space can outperform traditional competition.</li></ul><h3 collapsed="false" seolevelmigrated="true">Key Formulas and Notation (LaTeX)</h3><ul><li>Population shares and percentages (demographics):$ ext{Share}_{>65} = 0.19 ext{ (19 ext{ }%)} $</li><li>Big-city population share:$ ext{UrbanShare} = 0.737 ext{ (73.7 ext{ }%)} $</li><li>World population:$ P_{ ext{world}} = 7.9 imes 10^9 $</li><li>GDP figures (USD):<ul><li>$ GDP_{2021} = 1990.73 $</li><li>$ GDP_{2020} = 1645.42 $</li><li>$ GDP_{2019} = 1745.02 $</li><li>$ GDP_{2018} = 1725.33 $</li></ul></li><li>Largest country populations (millions):<ul><li>$ ext{China} = 1425.9 $</li><li>$ ext{India} = 1417.2 $</li><li>$ ext{United States} = 338.3 $</li><li>$ ext{Indonesia} = 275.5 $</li><li>$ ext{Brazil} = 235.8 $</li></ul></li><li>Sustainable consumers:$ 0.71 $</li><li>Social platform usage:$ N{ ext{platforms}} = 6, ext{ with } N{ ext{users}} = 31.8 ext{ million}$$

Title

-Comprehensive study notes: The Marketing Environment (Chapter 2)