Why is analyzing the competition important? The degree of competition facing a firm is critical to creating an effective marketing mix. Recall that the varying degrees of competition are perfect competition, monopolistic competition, oligopoly, duopoly, and monopoly. The degree of competition affects a firm’s marketing strategies. A company operating in a monopolistic competitive environment will have a different marketing strategy than one operating in an oligopoly. A successful business must be aware of its competition and try to stay one step ahead of them. Amelia Russo’s shoe store had an edge on the competition because of her unique products. As a result of the dollar’s weakness, however, Amelia may need to rethink her strategy to maintain a competitive advantage.

How does the economic environment affect a marketing strategy? Marketers must keep abreast of changes in the economy. Why? Because the economic environment, including inflation, interest rates, unemployment, economic growth rates, and consumer confidence levels, can affect a firm’s marketing strategy in many ways. A rising inflation rate reduces the purchasing power of money, and sales may fall. A recession will reduce the demand for some products. Even the best-laid marketing plans will fail when customers can no longer afford to buy a company’s product. If interest rates are low, then the cost of borrowing drops, and consumers who buy on credit, especially big-ticket items such as houses and automobiles, may purchase more. Because of globalization, prudent firms follow global economic trends as well. Think back to the different marketing eras discussed previously. Each era resulted from a response to an economic change.

As a final example, suppose the value of the dollar falls (gets weaker) in foreign exchange markets. This will cause imported goods to become more expensive, like Amelia Russo’s French dress shoes. This means Amelia may have to increase the prices she charges for imported goods, potentially reducing their sales. Or, she may need to change her marketing strategy to entice buyers that the imported shoes will reflect a better personal image and are worth the higher cost. Savvy marketers try to keep their fingers on the changing pulse of the economy to forecast looming problems or potential opportunities and then make any necessary adjustments.

How does technology affect marketing? Advances in communication technology have profoundly affected modern marketing. By being able to market and sell products online, many small businesses are able to compete with large corporations around the world. The Internet has also helped companies deliver marketing messages through social media more quickly and to broader audiences. This can give a firm exponential exposure almost instantaneously and has been a key influence in changing the focus of the marketing mix from the product to the consumer.

As a result of technological improvements, manufacturing innovations have enabled firms to more easily customize their products to meet individual needs and to offer them at dramatically reduced prices to satisfy the varying tastes of targeted customers. Technology has enhanced CRM by facilitating the creation and use of computer databases. Successful marketing requires using the latest technologies to reach and satisfy target customers wherever they may be.

How do cultural and social trends affect marketing? In Chapter 4, we examined the critical effect the sociocultural environment has on businesses. Demographic shifts—such as age, gender, ethnicity, and marital status—and changing values can signal opportunities for businesses. For example, we can expect the demand for medical care, pharmaceuticals, and nursing homes to increase as the average age of the population increases. Amelia Russo recognized the demand for high-quality dress shoes from a younger, professional crowd.

How do politics and legislation affect marketing? It has been said that in a democracy, the squeaky wheel gets the grease. Special interest groups try to influence the political process in various ways. Businesses are no exception. They try to influence the laws and regulations affecting them by making contributions to political parties, individual candidates, and political action committees. In addition, a variety of regulatory agencies, such as the Environmental Protection Agency (EPA), the Consumer Product Safety Commission (CPSC), the Food and Drug Administration (FDA), and the Federal Trade Commission (FTC), enforce laws and regulations constraining the marketing efforts firms can engage in. Kellogg’s was forced to stop using the terms “All Natural” and “Nothing Artificial” on certain Kashi and Bear Naked products. The FDA states that few products are “natural” because they have probably been processed at some point and that, because these products had added chemical forms of vitamins, “nothing artificial” was also a misnomer. Businesses are consequently forced to consider the political and legal environment when making marketing decisions, as these factors can play a major role in overall success of a marketing campaign.

How does the global environment affect marketing? Thanks in part to the Internet, world trade has increased significantly. Customers can search globally for attractively priced products, and businesses can search globally for suppliers. To tap new markets, companies have expanded internationally. The marketing efforts that accompany efforts to globalize are not without their difficulties, though. Marketers need to be aware of cultural and social differences before launching their products and their marketing campaigns. Political landscapes with differing policies and regulations can also affect how a company does business in another country. Businesses must also be aware of the complications involved in shipping products to foreign countries.