5.6: Summary

In this chapter, the importance of understanding environmental forces was discussed. Marketing decisions are affected by external agencies, competitors, regulators, the economy, technology, and the social factors. Each of these elements of the marketing environment must be monitored continuously for changes that are taking place. Changes affect the way marketers go about providing want-and need-satisfying products.

Information about external forces must be gathered for each stage of the strategic marketing planning process. The purpose of collecting and analyzing this information is to reduce the uncertainty associated with marketing decision making. While experience is an important resource, new problems or old problems that need new solutions require marketers to stay abreast of marketplace developments so that they can continue to offer successful products and service to the marketplace.

Key terms

External environment Forces external to the organization that affect organization and marketing decision making.

External analysis The identification of trends, opportunities, and threats that will influence marketing strategy and tactics.

Marketing research supplier An external agency that specializes in the conduct of marketing research demography-the study of important population statistics such as age, income, sex, and location of people.

Business cycle The pattern that is generally followed by a fluctuating economy.

Prosperity A. period of time during which the economy is growing.

Recession A period of time that is characterized by a decrease in the rate of growth of the economy.

Depression A long-lasting recession during which unemployment is very high, buying power is very low, and consumers are unwilling to spend.

Recovery A period of time in which unemployment begins to decline, buying power increases, and consumers become more willing to purchase products.

Technology The knowledge of how to accomplish tasks and goals.

Buying power The ability of a consumer to make purchases.

Regulators The set of laws, agencies, and policies established to ensure that marketers compete legally in their efforts to provide want-and need-satisfying products and services.

Questions

➢ Describe the role of external analysis in the strategic marketing planning process.

➢ Of what importance is environmental scanning to marketing decision makers?

➢ Several external forces were presented in this chapter. Describe each and provide a brief statement as to the importance of each of these to the marketing planner.

➢ External agencies can provide valuable marketing services to marketing organizations. Under what circumstances do you think that a marketing organization might seek the services of an external agency like a distributor? A marketing research supplier? An advertising agency? A materials supplier?

➢ Comment on the impact that the decline of mass marketing might have on marketing strategists for companies that have typically mass marketed products.

➢ How should a marketing organization define its competition?

➢ What role do price competition and discount promotions play in the marketing of products? Do you think that the use of these strategies has been effective from the standpoint of organizations? Customers?

➢ Briefly describe the impact that each of the following has on marketing activity: regulators, the economy, and technology.

➢ To what extent can marketers foresee opportunities and threats posed by the external environment? What factors can alter forecasts?

➢ What steps can organizations take to ensure external elements are factored into the strategic planning process?

➢ How can the information found in the Interactive Journal be utilized to help organizations take advantage of market opportunities? Divert threats?

➢ Describe the external factors that have an impact on the soft drink industry.

➢ How would you assess the competitive situation in the soft drink industry?

➢ What marketing strategies might be appropriate for soft drink marketers in order to improve sales of New Age beverages?

Project

Since Pathfinder touched down on Mars, much has been learned about the Red Planet. Did you know that sales of Mattel's Hot Wheels Mars Rover Action Pack skyrocketed and that sales of Mars bars increased dramatically?

The activities of the National Aeronautics and Space Administration (NASA) from Alan Shepard's first space flight to today's Pathfinder have spawned many new products and spurred the sales of many products. Track key NASA events, like landing on the moon, and see which products' sales were boosted by some of these events. Also, discover what new products entered into the marketplace as a result of developments in space technology.

Case application

Snapple is in a financial funk. Clearly Canadian is in a sales free-fall. Results are mixed for Pepsi's juice line. Coca-Cola's Fruitopia is off to a slow start.

These could have been headlines for these New Age beverages. They do accurately describe their performance. At the same time, "plain old" carbonated beverages were making a comeback after years of flat sales.

One reason cited for these results is the fading intensity of America's health kick. Consumers seem to have grown weary of sipping "all-natural" teas and juices. Many have returned to chugging sweet, fizzy colas. A second reason, according to taste researchers, is that people quickly get tired of the taste of distinctive juices and unusual teas. According to one industry expert, a third reason is that many consumers got caught up in the mystical, good-for-you, Generation X phenomenon. The phenomenon was cute and interesting for a while, but it had no staying power.

A fourth reason cited for waning consumer interests is in consumer perceptions. Originally, many consumers believe that all-natural sodas, teas, and juices were healthier than brown cola, However, it has been discovered that many of these alternative beverages contain more sugar than traditional colas.

Finally, the new generation of soft drinks has not pleased bottlers. Many bottlers spend millions of dollars to overhaul their product lines or change their distribution systems to accommodate the new soft drinks. Despite the many new products, New Age beverages have resulted in only small sales increases.

Sales of these alternative beverages are still growing, reaching a level of USD 5.36 billion in 1999. In that same year, the soft drink industry had total sales of about USD 51 billion.

Some industry experts are predicting an industry shakeout. Their reasoning is that New Age beverage sales are driven by trendy young consumers who are constantly seeking the latest drink. Tapping into this young generation, over 100 companies introduced a New Age beverage into the marketplace.

References

¹Subhash C. Jain, Marketing Planning and Strategy, South-Western Publishing Co., Cincinnati, OH, 1981, p. 67.

²Robert H. Malott, 1981 , "An Overdose of Lawsuits," excerpts from a speech in Friendly Exchange, August, 27-28.

³Witcher, S. Karene, "A Driving Tip From Down Under: Keep Those Roos Off the Bullbar," The Wall Street Journal, (July 14, 1994), BI.

⁴Robert 1. Samuelson, "The Joy of Deregulation," Newsweek, (February 3, 1997), p. 39.

⁵Alan R. Andreasen "Social Marketing: It's Definition and Domain," Journal of Public Policy & Marketing, Vol. 13(1), Spring 1994, 108-114.

⁶Oscar Suris, "Electric Cars Also Pollute Air, EPA Study Says," The Wall Street Journal, (April 5, 1994), BI , B8.

⁷Peter Francese, "America At Mid-Decade," American Demographics, Feb, 1995, pp. 12-31.

⁸Laurie Freeman, "No Tricking the Media-Savvy," Advertising Age, Feb 6, 1995, p. 30.

⁹"The Power to Create Competitive Advantage," Roper Starch World-wide, 2000.