Marketing's Impact on Other Businesses: Chapter 8

Marketing's Impact on Other Businesses

Critics also charge that companies' marketing practices can harm other companies and reduce competition. Three problems sire involved: acquisition of competitors, marketing practices that create barriers to entry, and unfair competitive marketing practices. Critics claim that firms are harmed and competition reduced when companies expand by acquiring competitors rather than by developing their own new products. In the car industry alone there has been a spate of acquisitions over the past decade: General Motors bought the British sports-ear maker, Lotus; Ford acquired 75 percent of Britain's Aston Martin, which makes hand-built, high-performance cars, and Jaguar; Fiat absorbed Ferrari; BMW has taken over the Rover Group; Volkswagen controls Skoda." These and many large international acquisitions in other industries, such as food, telecommunications, and pharmaceuticals have caused concern that more arid more competitors will be absorbed and that competition will be reduced.

 

The acquisition is a complex subject. Acquisitions can sometimes be good for society. The acquiring company may gain economies of scale that lead to lower costs and lower prices. A well-managed company may take over a poorly-managed company and improve its efficiency. An industry that was not very competitive might become more competitive after the acquisition. But acquisitions can also be harmful and arc therefore closely regulated by the government. Critics have also claimed that marketing practices bar new companies from entering an industry. The use of patents and heavy promotion spending can tie up suppliers or dealers to keep out or drive out competitors. People concerned with anti-trust regulation recognize that some barriers are the natural result of the economic advantages of doing business on a large scale. Other barriers could be challenged by existing and new laws. For example, some critics have proposed a progressive tax on advertising spending to reduce the role of selling costs as a substantial barrier to entry.

The information technology boom: Chapter 5

Finally, some firms have in fact used unfair competitive marketing practices with the intention of hurting or destroying other firms. They may set their prices below costs, threaten to cut off business with suppliers, or discourage the buying of a competitor's products. Various laws work to prevent such predatory competition. It is difficult, however, to prove that the intent or action was really predatory. When Laker Airlines first attacked British Airways' most profitable routes, the latter delayed its counterattack. Laker began to borrow huge sums of money to expand its fleet. It was laden with vast debt and interest obligations on its huge dollar loans when the American dollar appreciated against other currencies. British Airways then aggressively cut prices on Laker's most lucrative routes, restoring these to normal levels only after driving Laker into bankruptcy and out of the competitive arena altogether.'1 The question is whether this was an unfair competition or the healthy competition of a more efficient carrier against the less efficient,

Citizen and Public Actions to Regulate Marketing

Because some people view business as the cause of many economic and social ills, grassroots movements have arisen from time to time to keep businesses in line. The two main movements have been consumerism and environmentalism!!.

Consumerism

Western business firms have been the targets of organized consumer movements on three occasions. Consumerism has its origins in the United States. The first consumer movement took place in the early 190(>s. It was fuelled by rising prices, Upton Sinclair's writings on conditions in the meat industry, and scandals in the drug industry. The second consumer movement, in the mid-1930s, was sparked by an upturn in consumer prices during the Great Depression and another drug scandal. The third movement began in the 1960s, Consumers had become better educated, products had become more complex and hazardous, and people were unhappy with American institutions. Ralph Nader appeared on the scene in the 1960s to force many issues, and other well-known writers accused the big business of wasteful and unethical practices.

 

President John F. Kennedy declared that consumers have the right to safety and to be informed, to choose, and to be heard. American Congress investigated certain industries and proposed consumer protection legislation. Since then, many consumer groups have been organized and several consumer laws have been passed. The consumer movement has spread internationally and has become very strong in Europe.10 But what is the consumer movement? Consumerism is an organized movement of citizens and government agencies to improve the rights and power of buyers in relation to sellers. Traditional sellers' rights include the following:

• The right to introduce any product in any size and style provided it is not hazardous to personal health or safety; or, if it is, to include proper warnings and controls.

• The right to charge any price for the product provided no discrimination exists among similar kinds of buyers.

• The right to spend any amount to promote the product provided it is not defined as unfair competition.

• The right to use any product message provided it is not misleading or dishonest in content or execution.

• The right to use any buying incentive schemes, provided they are not unfair or misleading. Traditional buyers' rights include the following:

• The right not to buy a product that is offered for sale.

• The right to expect the product to be safe.

• The right to expect the product to perform as claimed. Comparing these rights, many believe that the balance of power lies on the sellers' side. True, the buyer can refuse to buy. But critics feel that the buyer has too little information, education, and protection to make wise decisions when facing sophisticated sellers. Consumer advocates call for the following additional consumer rights:

• The right to be well informed about important aspects of the die product.

• The right to be protected against questionable products and marketing practices.

• The right to influence products and marketing practices in ways that will improve the 'quality of life. Each proposed right has led to more specific proposals by consumerists.

Social Criticisms of Marketing: Deceptive Practices: Chapter 6

The right to be informed includes the right to know the true interest on a loan (truth in lending), the true cost per unit of a brand (unit pricing), the ingredients in a product (ingredient labeling), the nutrition in foods (nutritional labeling), product freshness (open dating), and the true benefits of a product (Truth in advertising). Proposals related to consumer protection include strengthening consumer rights in cases of business fraud, requiring greater product safety, and giving more power to government agencies. Proposals relating to the quality of life include controlling the ingredients that go into certain products (detergents) and packaging (soft-drink containers), reducing the level of advertising 'noise', and putting consumer representatives on company boards to protect consumer interests. Consumers have not only the right but also the responsibility to protect themselves instead of leaving this function to someone else. Consumers who believe chat they got a bad deal have several remedies available, including writing to the company heads or to the media; contacting government or private consumer-interest/protection initiatives or agencies, and going to small-claims courts.

Environmentalism

Whereas txmsumeriscs consider whether the marketing system is efficiently serving the consumer wants, environmentalists, are concerned with marketing's effects on the environment and the costs of serving consumer needs and wants. They are concerned with damage to the ecosystem caused by strip mining, forest depletion, acid rain, loss of the atmosphere's ozone layer, toxic wastes, and litter. They are also concerned with the loss of recreational areas and with the increase in health problems caused by bad air, polluted water, and chemically treated food. These concerns are the basis for environmentalism - an organized movement of concerned citizens and government agencies to protect and improve people's living environment. Environmentalists are not against marketing and consumption; they simply want people and organizations to operate with more care for the environment, not to maximize consumption, consumer choice, or consumer satisfaction, but rather to maximize life quality.

 

'Life quality' means not only the quantity and quality of consumer goods and services but also the quality of the environment. Environmentalists want environmental costs to be included in both producer and consumer decision-making. Environmentalism has hit some industries hard. Heavy industry, public utilities, and chemical and steel companies have to spend heavily on clean-up technology, waste management, and other pollution-control equipment. The car industry has had to introduce expensive emission controls in cars. In some countries, governments have introduced tough regulations on car makers to deal with environmental problems, as in the case of Germany, where the Environment Ministry has threatened the car industry that it would force through laws to create a car recycling system."The packaging industry has had to find ways to reduce waste and energy consumption (see Marketing Highlight 2.3). The petroleum industry has had to create new low-lead and unleaded patrols.

These industries often resent environmental regulations, especially when they are imposed too rapidly to allow companies to make proper adjustments. These companies have absorbed large costs that they pass on to buyers. In the twenty-first century, environmentalism will create special challenges for global markets. As international trade barriers come down and global markets expand, environmental issues will continue to have an ever greater impact on international trade. Countries in North America, Western Europe, and other developed regions are developing stringent environmental standards. In the United States, for example, more regulation is on the way. A side accord to the North American Free Trade Agreement (NAFTA) sets up a commission for resolving environmental matters. A raft of directives on environmental issues is continuing to make its way through the European Commission, with the European Union's Eco-Management and Audit Regulation providing guidelines for environmental self-regulation.

Marketers' lives will become more complicated. They must raise prices to cover environmental costs, knowing that the product will be harder to sell. Yet environmental issues have become so important in our society that there is no turning back to the time when few managers worried about the effects of product and marketing decisions on environmental quality.12 However, environmental policies still vary widely from country to country, and uniform worldwide standards are not expected for another 15 years or more.13 Although countries such as Denmark, Germany, Japan, and the United States have fully developed environmental policies and high public expectations, major countries such as China. India, Brazil, and Russia are in only the early stages of developing supply policies. Moreover, environmental factors that motivate consumers in one country may have no impact on consumers in another. For example, PVC soft-drink bottles cannot be used in Switzerland or Germany.

 

 However, they are preferred in France, which has an extensive recycling process for them. Thus, international companies are finding it difficult to develop standard environmental practices that work around the world. Instead, they are creating general policies and then translating these policies into tailored programs that meet local regulations and expectations. The 1990s have often been viewed as the earth's Decade', in win eh protection of the natural environment has been the most important issue facing people around the world. Companies have responded with 'green marketing' - developing ecologically safer products, recyclable and biodegradable packaging, better pollution controls, and more energy-efficient operations. It is essential to recognize that environmental marketing is part of overall environmental management and should not be treated in isolation. Sound practice in 'green marketing' calls for the following:

Social Criticisms of Marketing: High-Pressure Selling: Chapter 7

 

• A comprehensive assessment of the company's current environmental performance.

• A genuine commitment to monitoring, auditing, reporting, and measuring improvements in performance.

• Development of an achievable environment policy with clear goals and an action program.

• Monitoring the evolution of the green agenda (don't become out of date as the laws are constantly changing).

• Investment in staff training and education, environmental science, and technology.

• Consumer assistance and education programs to increase consumers' environmental responsibility through information provision, product takeback services, and helplines.

• Supplier education programs,

• Building coalitions or bridges between the various interests.

• Contribution to environmental programs.

• Greater adherence to marketing values: selling benefits, not products, and preservation of corporate, not just product, values

 

Public Actions to Regulate Marketing

Citizen concerns about marketing practices will usually lead to public attention and legislative proposals. New bills will be debated - many will be defeated, others will be modified and a few will become workable laws. Figure 2.1 illustrates the principal legal issues facing marketing management. Individual country laws exist which affect marketing. The task is to translate these. 

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