Discuss Macro Environmental factors in Marketing Environment Dynamics

All the organisations operate in a Macro Environment which has largely uncontrollable factors that pose threats and opportunities to the organisation.
These are –
1. Demographic,
2. Technological,
3. Natural or physical
4. Social and cultural
5. Political, Legal or Government
6. Economic

1. Demographic Environment –

• Age, size, education etc. of population
• Racial or ethnic composition
• Demographic trends that affect market size
• Significant trends offering threats and opportunities

Demographic environment relates to the size, age, density, location, sex, race, occupation, economic condition, urban rural divide, etc. of the human population. These characteristics may or may not relate to the organisations products. Thus a thorough analysis of the demographic factors has to be undertaken by the organisation to forecast the demand. If the young population in the market is bigger than adults, specific strategies will have to be formulated depending on the Demographic mix. If further analysis reveals that the women outnumber men, things become easier for the organisation to understand the market and serve specific needs. If in the urban population, both men and women are working couples, it gives a great opportunity for restaurants, fast food chains, etc. to venture into the market with options of home delivery of products, etc.

Demographic trends constantly change. Many times, there is a change in geographic distribution, and growth, change in income, age, etc. The first step is to analyse these characteristics and sale of products, since both of these are related, andthe next steps in demographic analysis help in forecasting.

These characteristics differ from country to country and even from state to state.
For example, in a developing country like India where the youngsters form the major part of the population, most of the products launched by various firms target the young. In the major cities, the youngsters have high disposable income because of boom in the BPO and IT industry. The organisations in such markets offer attractive EMI options to buy homes, cars, bikes, etc. There are large number of restaurants, fast food chains to serve the needs of the working couples. Global fast food chains like McDonalds, had to change their menu to serve the large vegetarian (most of the Hindus, Sikhs, Jains are vegetarian) population in India.

Demographic characteristics greatly influence the demand and therefor its study and analysis is very critical to Marketing management.

2. Technological Environment –

• Existing technology and its maturity assessment
• Technological developments that will have implications on the organisation or industry.

Technology keeps constantly changing. Technological advancements in the environment has an impact on the marketing strategies. If the organisation does not change its functioning as per the new technological trends, the competitors will definitely have an upper edge in the market. It offers great opportunities for gaining advantage. In the last few decades, technological advancements have changed the way we communicate, travel, etc. There have been extraordinary development in the field of entertainment, medicine, production equipment and machinery. We can see the changes in the products or services in all fields which has benefited the consumers as well as the manufacturers. Telegram, post cards, etc. have become obsolete. Manufacturers have plants producing products at a faster pace and less cost. However, there is cost involved to bring technological changes.

In a generation where both couples are working, the market need is timesaving, easy operating, and less maintenance appliances, etc. like microwave oven, etc.

Technology will remain responsible for making products obsolete. It has shortened the product life cycle and created new sets of needs and wants from consumers. The organisation has to constantly study the technological advancements to ensure it is creating the right kind of products.

Organisations working in the electronic sector face regular challenges due to technological changes. Transistors, Pagers have almost become obsolete by the introduction of mobile phones. Mobile banking and Internet banking has resulted in making life of people easy. People don’t have to visit their home branch too often. Technology impacts –

Processes–New manufacturing processes reduce cost of production, reducing prices and making products more accessible. For example, television sets, laptops, etc. have become cheaper in recent times.
Products – New improved products or new products change the standard and way of life. For example, invention of email, microwave oven, etc.

Promotion and Distribution –New ways of communicating with suppliers, intermediaries and distributors. Promotion activities carried out through new channels like internet, cable television, SAP systems, etc.
Buyers– Easy accessibility of offerings, improved standard of living, ease of operating or using new products, etc. For example, Home shopping, freezers, information and demo available on manufacturers websites, etc.

Technology will keep reinventing itself offering opportunities as well as threats to the marketing activities.

3. Economic –

• Inflation, interest, currency rates
• Economic growth and emerging trends in spending power
• Governments microeconomic policies –wage regulations, encouragement of exports, assistance to various industries, assistance to particular state or region in the country, foreign aid, etc.

The economic factors influence consumers’ purchasing and spending. The economic phases – prosperity, recession and recovery, and
Economic factors – inflation, value of currency, interest rates, shortages, GDP; have direct impact on the income and prices of the market.

The economic growth gives more purchasing power to buyers which offers opportunities for the organisations. However, it differs from region to region. In a city where lot of economic development has occurred, marketers have to further check the saving habits, income, etc. of the target market. The inflation in the economy will result in price rise and higher debts.

The organisations have to constantly keep a track of the economy of the country to understand the spending power, inflation trends, consumption pattern, saving pattern, etc.

After the borders of most of the nations opened for trade, there has been higher spending power with most of the people in developing countries, though the wealth distribution has not been equal. The economic changes in one country also affects the economy of other countries as well. For example, recently (early 2016) the slowdown of economy in a growing economy like china impacted the policies and approaches of industries in Europe and US.

There has been an increase in riches of the middle class people in a country like India. The marketers in different industries have to fight out to influence people to buy their products. For example, with people having good income, banking sector would create need of buying insurance, credit cards, etc. Similarly auto industry would encourage people to buy cars to make their life easier, etc.
The economic changes in a country make the study for marketers very critical.

4. Social and Cultural Environment–

• Extent of religion, collectivist or individualistic, attitude to authority
• Changes in lifestyles, fashions
• Components of the culture and its impact on the strategies.
• Views about the natural environment, others.
• Healthy, home based or social
• Family centred, work driven (e.g. Japanese), solo or couple

The social and cultural habits influence the buying of products to a great extent. A buyer’s attitude and behaviour is shaped by the family, society and cultural values. As the social and cultural values change from region to region, it’s analysis for marketing strategy becomes vital.
The core cultural values that a person gets from family, schools, and religious institutions like temples, churches, mosques shapes the persons behaviour. The secondary beliefs which are formed overtime are subject to change. The secondary values or beliefs get changed because of the influence of influential personalities like film stars, sports personalities, etc. The youngsters tend to follow their fashion, hair styles, etc.

For example,
• Consumption of alcohol is forbidden in Islamic countries because of religious values. Similarly, as compared to women in Arabic countries, women in European countries drive their own cars and have their own belief system when it comes to fashion, etc.

• After the liberalisation of its economy in 1991, many foreign companies started operating from India. This resulted in employment opportunities, and as a result women who were mostly occupied with household chores, started working in MNC’s etc. to help the male earning members in the family. The society has accepted working women.

• Some societies hold family values important, and the elderly man is the decision maker. In some other culture the individuals are independent to make their own decisions.

• Hollywood movies often get edited when they are released in a country like India, where nudity or intimacy is not openly shown or discussed.

Similarly the advertising and packaging gets affected basis the cultural values. Health conscious society will need a detailed information about a product before purchase. Pricing decisions are made depending on the social aspect as well. For example, an average Indian is price conscious when making a purchase.

Cultural trends offer a variety of threats and opportunities for organisations as the above examples illustrate. Since the society at large goes through changes it offers threats as well as opportunities for the organisations.

5. Political, Legal or Government Environment –

• Government trade and spending policies
• Current Tax and duties and their changes in future that may affect strategies.
• Current regulation and the possible changes.
• Operation of the Organisation in autocratic or democratic government. Structure of government and power (central vs state)
• Attitude of government towards consumer protection, industrial relations, health and safety, and competition.

Marketing management is directly affected by legislative laws, government policies, courts, regulations of the state and the central governments. The democratic government doesn’t has too much control on marketing while an autocratic government, or a dictatorship has control on most of the activities. The addition of some laws pose major threats and opportunities for an organisation. The organisation has to ensure that its marketing strategies are in sync with the policies of the government. A change in the government can bring change in the policies, and hence the marketing system should operate within the policies laid down by the government. The buyer can drag an organisation to court in case the product is not to the standards or as promised.

For example, many medicines have been banned by governments as it poses threats to the patients consuming them. The organisations are forced to stop production, or approach a court to put their case. The auto industry has to follow the norms of emission tests for their vehicles, etc. There are internet websites banned in certain countries because of government intervention. There are constant efforts by the governments to reduce piracy of software, curb the sale of pirated DVD’s, etc. which does impact the sellers who import such items. There are products for which a government reduces tax and has a say on its prices for the welfare or protection of the society. The Indian government had provided LED light bulbs at a lower price to bring down the overall electricity charges. This offers a threat to an organisation which has priced its product at a higher price.

6. Natural or Physical Environment –

• Climate of the region
• Terrain – hilly, plane, desert
• Natural resources availability and implications on strategy if changes occur
• Ecology

The natural environment has long been considered as an uncontrollable factor. Summers increase the sale of products like cold drinks, ice creams, air conditioners, etc., while winters offer opportunities for the manufacturers to sell water heaters, woolen clothes, etc.

Natural resources, physical barrier affect the distribution as well as the entire marketing strategy to a great extent. The organisations have be responsive and ready to deal with the changes in the natural environment to keep their brand image and customer loyalty intact. Firms are also concerned about the ecology as most of them recognise their societal responsibility, as well as because of the society becoming conscious of preserving the natural environment. For unlawful practices, various environmentalists have taken many organisations to court. Marketers in organisations often package the products in biodegradable materials, etc. Because of the industries the earth is actually in danger because of deforestation, extensive use of non-biodegradable product like plastic, etc. Scientists have warned that global warming will result in natural changes. Marketers have to study these when forming various marketing strategies of product development, etc.

For example, due to cold temperatures, automobile industry has to produce vehicles that easily start in freezing cold, etc. The Organisations struggle sometimes to fulfill resource shortage, after sales service for existing and new products. In an industry where water supply is needed constantly, minor changes in the supply or changes in the level of ground water can result in irreparable damage or drastic changes in strategy.