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The marketing environment

Marketing environment - The range of forces, outside the direct control of a business, which affect buyer behaviour and competition within markets. These include: Economic, Technological, Legal and Regulatory, and Social and Ethical forces.

Economic forces - The changes in economic variables, such as taxation, which alter consumers' spending and/or alter the prices set by businesses for their products. For example: an increase in value added tex (VAT) would increase the price of, and reduce the demand for, some products.

Technological forces - The developments in technology that alter the ways in which businesses produce and/or sell products. For example: internet technology has made it easier for businesses to sell products directly to consumers.

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The marketing environment continued

Legal and regulatory forces - The laws of government regulations that constrain business practices. For example: consumer protection legislation restricts the way any business can promote and advertise its products.

Social and ethical forces - They arise from the attitudes generally held by society, or sections of society. For example: changing public attitudes to the environment are forcing businesses to demonstrate greater environmental responsibility. Changing attitudes towards financial debt is having an impact on credit sales.

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Markets - Where (and when) buyers and sellers come together to decide on price and quantity bought and sold. They are not necessarily physical locations.

Monopoly - A market with one seller. However, a business with a market share in excess of 25% is often referred to as having "monopoly power".

Oligopoly - A market which is dominated by a few businesses.

Perfect competition - This occurs in a market in which there are many businesses relative to the size of the market. All businesses sell similar products, with little product differentiation evident.

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Competition continued

Monopolistic competition - This occurs in a market in which there are many businesses relative to the size of the market but in which products are differentiated. Many corner shops sell similar products but they are differentiated by their locations.

Customer loyalty - The tendency for customers to make repeat purchases of products that they are familiar with and trust.

Barriers to entry - Factors that make it difficult for new business to enter a market. For example: the huge initial investment cost of building and equipping a factory is a barrier to entry to car manufacturing.

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Economic and technological forces

National income - A measure of the value of goods and services produced by a nation over a period of time.

Economic growth - A measure of the increase in a nation's national income. For example: the UK national income grew by 5.4% in 2004.

Unemployment level - A measure of the number of people who are out of work and are actively seeking employment. In the UK, unemployment fell from a peak of 3 million in 1993 (about 11% of the working population) to 1.5 million (about 5%) in 2001.

Interest rate - The return a financial institution (or an individual) recieves for lending money to a borrower. The interest rate can be used to calculate the cost of the loan to the borrower.

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Economic and technological forces continued

Fiscal policy - A statement of how a government intends to finance its spending through taxation. This is done through a mix of direct taxes (such as income tax) or indirect taxes (such as VAT and duty on fuel, alcohol and cigarettes).

Exchange rates - Specifies the value of one nation's currency in terms of another nation's currency also referred to as foreign exchange rates. If the exchange rate between the UK and the USA is £1 : $1.60, then you can get $1.60 for every £1.

Barriers to trade - Any monetary or non-monetary action which makes trade between nations more difficult. For example: a government might place a limit on the number of motor vehicles that can be imported from other nations.

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Legal, regulatory, social and ethical forces

Office of fair trading - A UK government body that seeks to protect the consumer from anti-competitive practices. It can impose significant fines on businesses that are found to be harming consumer interests through anti-competitive practices such as restricting supply or fixing prices at an artificially high level.

Competition commission - An independent body responsible for investigating mergers, market shares and conditions, and the regulation of businesses in the UK.

Advertising standards authority - An independent body responsible for regulating broadcast and non-broadcast advertising in the UK.

Ethical values - Sets of beliefs that define what society, or a group within that society, considers as acceptable behaviour.

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Scanning the market environment

Market research - The systematic collection and analysis of data to enable a business to make better marketing decisions.

Pimary research - Involves gathering information directly from customers within the target market.

Secondary research - Involves gathering information directly from already published data such as government statistics.

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Analysing marketing environment data

Rate of change - A measure of how rapidly a variable is changing, usually calculated as a percentage. For example: if a population of a town was 50,000 in 2004 and 55,000 in 2005, then the annual rate of change in the town's population between 2004 and 2005 would have been 10% [(55,000 - 50,000) / 50,000 x 100].

Index numbers - Indicates change in a time series of data. The current value of a variable (such as prices) is compared with its value at some specified time in the past.

Line of best fit - The line tat best represents the apparent relationship between two variables when values for both are plotted as a scatter graph

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Analysing marketing environment data continued

Mean - The arithmetic average of a set of values calculated by dividing the sum of the values by the number of the values. To calculate the mean of this data set {3; 6; 10; 12; 18}, sum the values (the answer in 49) and divided by 5 (the number of values): the mean is 9.8 (49 / 5).

Median - The middle value within an ordered data set. The median of {3; 6; 10; 12; 18} is 10. Note that the median does not have to equal the mean.

Mode - The most frequently occurring value within a data set.

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An introduction to marketing strategies

Segmentation strategies - Dividing markets into seperate groups of customers.

Competitive position strategies - Approaches taken by businesses operating within competitve markets. In competitve markets, for example: market followers yield to the dominance of the market leader.

Integrated growth strategies - Ways in which a business expands in operations through acquiring other businesses.

Ansoff's competitive strategies - How a business can increase sales through developing its products and/or its markets.

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