CHAPTER 02

THE
MARKETING
ENVIRONMENT

© 2021 McGraw-Hill Education Limited Prepared by: Maria Vincenten, Red River College

Learning Objectives
1. Explain the importance of an environmental scan and how it
is used to improve marketing programs
2. Describe the elements of an environmental scan and
summarize the trends affecting each area
3. Outline the current demographic and socio-cultural
influences that affect marketing approaches
4. Explain how changes in the economic environment influence
consumer purchase behaviour
5. Discuss the technological developments shaping current
marketing practices
6. Describe the different forms of competition and the
regulatory forces that shape the marketing industry
7. List the steps in an environment scan
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 Canada Post Capitalizes on
E-commerce Trend
• Focus on parcels and direct marketing due to:
– Canadians mailing 2.4B fewer pieces of mail
– Parcel delivery competition
– Volatile spending levels
– Growth of Internet
• Transformation focus:
– Parcel delivery
– Direct marketing

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The Marketing Environment

• Six
Environmental Demogra-
phic
forces
Socio-
Regulatory
cultural

Marketing
Environment

Competitive Economic

Technolo-
gical

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 “Successful marketing programs
must reach out and address
changes and new opportunities
in the marketplace.”

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Situation (SWOT) Analysis

• The essence involves taking stock of organization’s
past performance, where it is now, where it is headed;
analyzing of marketing plans and the external forces
and trends affecting it.
– Strengths
– Weaknesses
– Opportunities
– Threats
• Translate the results from a SWOT into specific
marketing actions → identify critical factor
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 An Environmental Scan

• An environmental scan is the process of continually

acquiring information on events occurring outside an
organization to identify external trends, that are
opportunities or threats to a business.
• Often the first step of developing a more extensive
SWOT

Let’s look at the six environmental forces more closely

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Demographic Forces
• Demographics - The statistical data on a population
according to characteristics such as gender, age,
ethnicity, income, education, and occupation.
• Understanding ensures:
– marketing efforts are well placed, and
– opportunities are not overlooked
• Statistics Canada 2016 Census
– Aging population, diverse generations, settling in large cities,
and ethnically mixed
– Canada’s population growth was the highest of the G7
countries, up more than half a million people to 37.6 million.
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 Demographic Forces
– An Aging Population
Figure 2–1 Population aged 0 to 14 years and 65 years and older, 1998 to 2018
(estimates) and 2019 to 2038 (projections), Canada

• Significant
growth of the
population over
the age of 65

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Demographic Forces
– An Aging Population (continued)

• Government agencies and marketers are taking note

of these demographic changes and determining the
needs of the aging market.
– Health care industry
• Areas of specialization
• Home support services
• Personal care items

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 Demographic Forces
– Diverse Generations

1) Baby boomers, 35%,

born 1946-65
2) Generation X
20%, born 1966-80
3) Generation Y
(Millennials)
27%, born 1981 - 2000
4) Generation Z
18%, born 2001 - later

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Demographic Forces
– Big-City Growth
From 2016 Census data
– Fastest growing G7 country at 1.4%, July 2019
– Each province and territory grew
• Nunavut and Ontario leading the way
• Except Newfoundland and Labrador and NWT
• Two-thirds of the population live close to the Canadian
border
• 35.5 percent of the population live in Toronto, Montreal,
and Vancouver
– Growth is boosted by immigration
– Western Canada grew more rapidly
– Calgary grew by 14.6 percent, Edmonton increased 13.9
percent, and Saskatoon and Regina saw growth rates of
12.5 and 11.8 percent, respectively

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 Demographic Forces
– Ethnic Diversity
• Between 2018 and 2019, 83% of Canada’s growth
was due to the arrival of immigrants and non-
permanent residents
• Multicultural mix creates an interesting array of
opportunities for marketers
– marketing NewsFlash – Chinese Consumers in
Canada

“Canada prides itself on being a

multicultural country.”
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Demographic Forces
– World Markets

Five Largest Countries

• Over 7.7 billion (population in millions,
people as of 2019)
China 1,431.3
– Canada ranks
number 39 India 1,360.1
United States 328.1
• Opportunities for
Indonesia 269.3
expansion to foreign
markets Brazil 214.6
Source: World Population Review, “Country Population
2020” and “Continent Population 2020,” accessed January
2020 at http://worldpopulationreview.com/.

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 Demographic Forces
– Changing Household Composition
• Dominant household structure is now one-person
household
– Driven by aging population, economic
independence, and increase in separation/divorce
rates
• Increase in:
– Couples without children
– Common-law relationships
– Same-sex couples
– Multi-generational families
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Socio-cultural Forces
• Not easy to identify
• Tend to be gradual and sometimes subtle
• Refer to cultural values, ideas, and attitudes
– society’s morals and beliefs
• Marketers monitor changes to capitalize on new
opportunities
– Canadians are fair and inclusive, and value good
quality of life (education, health care, clean air and
water, work-life balance and availability of social
programs)
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 Socio-Cultural Forces
- Media
• Device connectivity
– Widespread use of Internet on multiple devices - changes
way people communicate, more so digitally than face-to-face
– Showrooming – using mobile devices in-store to check online
competitive product reviews and prices, which results in the
online purchase of a cheaper product
• Social media
– No longer just for friends
• TV and video watching
– Over 27 hours per week
– “binge viewing” - watching complete or partial seasons of
programming over a few days
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Socio-Cultural Forces
- Media (continued)

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 Socio-Cultural Forces
- Food Consumption
• Increasingly concerned about what
they eat
– Rise in chronic diseases
– Clarity of definitions like “low-
fat” and “fat-free”
– Switching from processed
– Focus on freshness
• Buying local
• Ethnic more mainstream
• Ready-to-eat fresh meals (Home
Meal Replacement)
• Grocery & restaurant delivery
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Socio-Cultural Forces
- Attitude and Roles of Men and Women
• One of the most notable has
been in the attitudes and roles
of men and women in the
marketplace
• Some companies are moving
away from traditional gender
norms to avoid gender
stereotypes

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 Socio-Cultural Forces
- Healthy Living
“There is an ever-increasing consumer interest
in maintaining and improving health.”

• One very successful example is

the Fitbit, a wristband activity
tracker that monitors your
movements, sleeping patterns,
and heart rate.
• Extends to technology, food,
pharmaceuticals, fitness,
entertainment, toys, and schools
• Example: Apple offers 43,000
health care apps
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Socio-Cultural Forces
- Ethical Consumption
• Canadians most likely to recycle, buy
used or preowned goods, and use
their own bags when shopping
– Retailers adopted “green” aisles
• Willing to make decisions and
support companies that adopt
responsible and ethical practices
Sixty percent of Canadians consider themselves
“ethical consumers,” while 75 percent say they will
pay more for products that are ethically produced.
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 Economic Forces

• Marketers need to recognize how the economy affects

the purchase behaviour of their target markets
– Upswing increased spending
– Downswing causes delays and cancellations
• Canadians are cautious with their spending, focusing
on paying down debt

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Economic Forces
- Macroeconomic Forces
• State of a country’s economy as a whole
• Key economic indicators:
– Growth rate (GDP) – the total dollar value of all goods and
services produced in a country within a specified time period
– Inflation rate - a period when the cost to produce and buy
products and services gets higher as prices rise.
– Recession - a time of slow economic activity with two
consecutive periods of negative growth.
– Unemployment rate - measures the share of the labour force
that is unemployed
• Marketers may adjust programs to maximize business results

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 Economic Forces
- Microeconomic Forces
• Directly refers to the supply and demand of goods and services
and how this is impacted by individual, household, and
company decisions to purchase
Total amount of money made in one year by a
person, household, or family unit, including taxes.

Balance of income left after paying taxes;

income that is used for spending and savings.

Money that consumers have

left after paying taxes and
buying necessities.

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Technological Forces
• Some dramatic technological changes include:
– Artificial intelligence
– Automation
– Internet of Things (IoT)
– Wearables
• Seamlessly move from one device to another
• Consumers want consistent interactions with brands
• Marketers need to understand online consumer
behaviour

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 Technological Forces (continued)

• Each new wave of technology can replace existing

products, and companies need to be aware of
technological changes to ensure that products do not
become obsolete

“Marketers need to know how consumers are

integrating technology into their lives.”

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Canadians’ Use of Technology

• Internet access - 96% of Canadian households
• E-commerce - expected to grow to $108 billion in 2023
• Privacy - 92% worry about hackers or loss of personal information
• Cloud-based services – such as Google apps, Dropbox, Google
Analytics or Salesforce.com
• Music - Canadians now regularly stream well over a billion songs a
week.
• Online video - More than 25 million people will watch digital video
at least monthly in Canada
• Computers - considered the screen of choice for creating content
and adding data; 87% of Internet traffic
• Smartphones - Ownership 90% and climbing
• Mobile payments - 21.0 percent of the population
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 Competitive Forces
• Marketers must monitor the competitive activity of products
that compete head-to-head with its brands
– Also, the competitive nature of the industry
– Direct competitors: Similar products sold in the same
category.
– Indirect competitors: Products competing for the same
buying dollar in a slightly different, but related category.

Direct
Competition
Indirect
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Types of Competition
• Marketers need to have a clear understanding of the
competitive nature of the industry in which they function

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 Regulatory Forces
• Regulations are put in place to:
– Protect consumers from unscrupulous business
practices,
– Set acceptable standards of practice, and
– Encourage fair competition
• Ethical business practices should be followed to avoid
consumer backlash and negative publicity
• Review regulatory bodies and associations specific to
their industry and jurisdiction

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Regulatory Forces
- Competition

• The Competition Bureau -

independent law-
enforcement agency tasked
to ensure that the market in
Canada is competitive and
innovative
• Canadian Anti-Fraud Centre
(CAFC) – reduce marketing
fraud

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 Regulatory Forces
- Advertising

• Advertising Standards Canada (ASC) - self-regulatory

non-government association run by advertising,
media, and marketing professionals with the purpose
of setting and regulating standards of professional
practice in the advertising industry.

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Regulatory Forces
- Do Not Call List
• Canadian Radio-television and Telecommunications
Commission (CRTC)
– Do Not Call List (DNCL)
– Gives consumers the ability to elect to not receive
telemarketing calls by registering their phone
numbers.
• keeps these numbers in the DNCL for five years, after
which consumers must re-register.
• Telemarketers are required by law to subscribe to the
DNCL and to not call the numbers in its database.

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 Regulatory Forces
- Marketing & Mobile

• Canadian Marketing Association (CMA)

– Code of Ethics and Standards of Practice
• Canadian Wireless Telecommunications Association
(CWTA)
– Provides resources on communication devices
• Mobile Marketing Association (MMA)
– Global standards and guidelines

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Regulatory Forces
- Privacy

• Personal Information Protection and Electronic

Documents Act (PIPEDA) refers to the private-sector
collection of personal data.
• Privacy Act - government agencies limits federal
government departments and agencies from
collecting personal information unless it relates
directly to the task at hand and discloses the purpose
of this collection
– exemptions exist for legal and police

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 Regulatory Forces
- SPAM
• Canada’s anti-spam legislation (CASL) - protect
consumers and businesses from unwanted
commercial electronic messages (CEMs)

– including messages to e-mail

addresses, social networking
accounts, and text messages sent to
a cellphone.
– Spam refers to the dissemination of
unsolicited electronic messages to
recipients

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Regulatory Forces
- Online behavioural advertising
• Online behavioural advertising (OBA) -
use of web-based programs that track
consumers’ online browsing activities in
order to serve online ads that
correspond to their browsing interests
• The Digital Advertising Alliance of
Canada (DAAC) was formed to ensure
that consumers were aware of OBA and
could opt out of the collection and use
of OBA data on their devices

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 Steps in an
Environmental Scan
Brainstorm,
Determine the
evaluate, and
Collect the impact that this
implement
facts and fact/trend will
ideas to meet
identify trends have on the
business
business
objectives

• Gather data and • Set business • Brainstorm

information objectives • Evaluate and
• Conduct • Analyze the implement
competitive external trends to alternatives
reviews determine their
• Cluster impact
information into
facts and trends
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Summary…just the facts (part 1)

1. An environmental scan is the process of continually

acquiring information on events occurring outside
an organization to identify external trends that are
opportunities or threats to a business.
2. Elements in an environmental scan include
demographic factors, socio-cultural factors,
economic factors, technological factors, competitive
factors, and regulatory factors.

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 Summary…just the facts (part 2)
3. Demographics is the statistical data about a population
according to characteristics such as gender, age,
ethnicity, income, education, and occupation. Socio-
cultural forces look at cultural values, ideas, and
attitudes, as well as society’s morals and beliefs.
4. Economic forces consider macro and micro
environmental factors. These forces reflect the state of
the overall economy as well as the ability of consumers
to spend.
5. Technological forces relate to scientific inventions and
innovations that may impact the running of a business
and influence consumer behaviour and interactions.
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Summary…just the facts (part 3)

6. Competitive forces refer to direct and indirect
competitors as well as the competitive nature of the
market in which they function. Regulatory forces are
the restrictions placed on businesses, products, or
services by the government or industry associations.
7. Steps in a marketing environment scan involve (1)
collecting the facts and identifying trends, (2)
determining the impact that these facts/trends will
have on the business, and (3) brainstorming,
evaluating, and implementing ideas.

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