Types of Marketing Environment: Macro Environment

08/07/2020 0 By indiafreenotes

There are number of factors which influences the marketing decisions.

Hence it is very important to understand each parameter. Macro environment generic in nature, impacts the whole business environment, while micro environment specific to the industry affects industrial decisions on personal level.

The macro environment includes all the factors which are external to the firm and which cannot be controlled by the organization. Macro environment influence is not specific to any particular industry but influence all the firms on a different level. Marketing management must have knowledge of different factors which influences the marketing decision of a firm. Since they are not controllable, one must adjust the decisions as per the changes in the environment.

“The macro environment consists broader forces that affects the actors in the micro environment.”

The conditions that exist in the economy as a whole, rather than in a particular part of a region affects organization very much rather than micro economic forces. Macro Environment generally includes trends in gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro environment is closely linked to the normal business cycle, as opposed to the performance of an individual business sector.

The macro environment affects micro environment and therefore business.

The macro environment in which an organization is operating will be influenced by its forces and in return is affected by organization’s performance as well.

This macro environment forces are so influential that can result in a major changes in organization’s outlook to a large extent. Service sector have contributed largely towards economic growth of a country, this macro environment change affects every organization in respect of providing services and fulfillment of consumer needs.

All the departments and people in the organization work under the bigger impactful macro environment.

Following are the elements of macro environment:

  • Demographic Environment
  • Economic Environment
  • Natural Environment
  • Technological Environment
  • Political and Social Environment
  • Cultural Environment
  1. Demographic Environment

Changes in demography’s in the nature of human population means ultimate changes in markets. Demographic environment is study of human population in terms of size, density, location, age, gender, race, occupation and other statistics. It is the study of people who are nothing but market. People are responsible for demand for a product and some other people contribute towards the supply of the product. So people and people mix are the most important factor of macro environment.

Thus as a marketer, one must understand the demographics of the nation and the also due to globalization, global population also influences the marketing decisions.

(i) Population Mix

Population study is very important because it is very dynamic and rapidly changing. Not only growth of population should be considered but also composition of population is equally important. In India where youth is the largest denominator, promotion must be made accordingly.

(ii) Population Growth

India is the second largest populated country after china. According to 2011 census report Indian population reached 1.21 billion constituting 17.5 % of the world population. India is projected to be the World’s most populous country by 2025, surpassing china. This provides an exceptional opportunity for business. Many foreign companies got attracted with this market because of its dynamism and power to increase sale with very high percentage.

(iii) Geographical Shift

Very diversified culture is present on Indian soil with changes spotted every 100 kilometers including change languages and traditions. Marketer must have this knowledge of different culture where he wants to sale his product.

(iv) Changing Family System

India had a tradition of joint family system in which all the parents, grandparents and sometimes great grandparents would live together under one shelter. The eldest man being the Head or Chief of the family and the able bodied men would work for daily bread and butter and women were responsible for kitchen and other household responsibilities.

(v) Changing Role of Women in India

Women in India were basically engaged in household activities and took responsibility of kitchen and other work including maintenance, cleaning of house, raising kids etc. Today more and more women, even from rural area, are completing graduation and even post-graduation. Women are working shoulder to shoulder with men in every sphere of activity, be it in education, organization, hospital, or a science research Institute.

(vi) Rural Population

The MGI India consumer Demand Model forecasted that the population in rural India will be 900 million by 2015. Which will result in rising demand at a compounding rate. Such demographic factors affects marketing decisions.

(vii) Middle Class Factor

India is showing tremendous growth in middle class with their own set of nature, features, likes, dislikes and demands. It is a study subject for marketing managers because it changes product requirements, demands for services etc. It is predicted that middle class will dominate the urban consumption in near future.

  1. Economic Environment

The economic environment can offer both opportunities and threats. It refers to the factors that affects consumer buying power and spending patterns.

To attract the India’s growing middle class, Tata motors introduced the small, affordable Tata Nano car designed to be the Indian model T- the car that puts the developing nation on wheel.

Economic considerations includes, inflation, GDP, bank policies, market trends, union budget. Fiscal policies, credit issues, financial crisis or progress, and global economic situation.

All these environmental factors must be studied in depth because they affect buyer’s demands and hence product’s demand. Consumer spending pattern and income distribution must also be looked for so as to have a bulls eye view about economic environment.

Credit availability and saving trends in economy has an influence on the purchasing ability of the consumer. The availability of installment schemes and EMI options has boosted service sector, reality sector and consumer durable products.

Following are some of the factors of economic environment:

(i) Recession or Boom

If the economy is going through a recession it is obvious that businesses generally will not be doing well due to low aggregate demand in the economy. On the other hand, a boom period will lead to higher business profits and revenue for most of the businesses in the economy. Recent global recession brought software industry in country to perform at very lower profit levels.

(ii) Inflation

High rate of inflation leads to lower purchasing power for consumers resulting in lower demand for goods and services. Moreover, a higher inflation rate will make business uncompetitive in the international market leading to lower sales for the business.

(iii) Tax Structure in Country

High level of taxes will lead to low disposable income and contraction of demand in the economy. Business will find it difficult to attract consumers. Moreover, taxes affects overall spending pattern. Debit card swapping sometimes attracts 2 percent tax hence many consumer purchase products with cash only.

(iv) Unemployment

High level of unemployment in the country can also adversely affect a business. People will not have enough money to purchase a firm’s product. With the rising per capita income in India as a result of increase in job opportunities, spending increased rapidly in a last decade

(v) Labor Costs

High labor cost will result higher production costs. This will make a firm’s product more expensive as compared to other firms affecting its sales and profit margin.

(vi) Prevailing Rates of Interest

Higher Interest rates will lead to a fall in the aggregate demand in the economy thus leading to difficulty for business to find customers willing to buy its product. Lower interest rates will lead to an increase in demand in the economy.

(vii) Income Distribution

High level of disposable income is good for business producing luxury goods. A large disparity in income distribution will promote businesses dealing in luxury goods as well as inferior goods.

With duel income sources per home, spending and distribution pattern have changed significantly.

  1. Natural Environment

Marketers need to be aware of the threats and opportunities associated with the four trends associated in the natural environment which are stated below:

  • Shortage of raw material
  • Increased cost of energy
  • Increase in pollution
  • Government policies

Natural environment consists of natural resources that are required as inputs by marketers or that are affected by marketing activities.

All corporates are now looking for eco-friendly approach because of showing respect towards Mother Nature and trying to act more pollution free in an effort to save environment.

First cause of concern for marketer is the shortage of raw material is growing because of increase in consumption. Second is government intervention in natural resource management. So companies should accept social responsibility and less expensive devices can be found to control and reduce pollution.

It is a common practice in the scenario of pollution and social natural awareness. Companies are making Eco- friendly strategies to deal with problems of pollution and short resources.

Many companies are using handmade papers for internal use and promoting save paper campaign.

Idea launched this concept of paper saving on a broad scale. Aircel introduced save tiger campaign for saving tigers all over the country.

  1. Technological Environment

Technology is the most influential force that is shaping marketing environment which includes forces that are the new technologies affecting new product and market opportunities. Technology has created miracles in the area of robotic surgery, antibiotics, laptop computers, which affect every organization’s marketing environment.

The technology is a synonym for change. It changes rapidly with destroying all the previous researches, like invention of handy sub devices demolished floppy from the market. Android based smart phones have destroyed all the other previous platforms like java based and Symbian based operating system compelling mobile manufacturers to use new android based operating system. Even school going kids are well aware of the latest smart phone product and features of that.

Internet usage have increased very drastically, so because of increase in the usage of smart phones with the availability of internet in a fingertip, number of internet cafes have reduced. Such is a power of technology.

There are approximately 700 million mobile users in India in 2012 rising up to 900 million in 2016 shows the technological advancement and factor needs attention of marketers.

New technologies create new markets and opportunities. However every new technology replaces an older technology. Thus marketers should watch the technological environment closely. Companies that do not keep up will soon find their products outdated.

  1. Political and Social Environment

Markets works best under some regulative forces. Well-conceived regulation can encourage competition and ensue fair markets for goods and services.

Thus, governments sets up public policies to guide businesses that also limit business for the good of society as a whole. Almost every business activity including marketing activities are subject to laws and regulations.

Every company operates under some obligation and without that chaos will rule the corporate sector with competition running the top management. Social sector is keeping corporate sector to work under some obligatory forces which show some responsibility towards society and country.

Many organizations are now engaged in social work for showing their concern for problems of economy and providing some assistance to the government and other social agencies for overcoming them.

Many corporate sector companies are initiating Fund raising campaigns, portals for child education, drought management, water purity education, save girl child campaign etc. showing social responsibilities.

India’s top most software company’s CEO took project named ‘AADHAR’ to give unique identification number to every citizen of the country. This project got praised by government and corporate sector.

This cause related marketing have been criticized because of intention of increase in sale rather than tendency of giving.

  1. Cultural Environment

Cultural factors affects how people think and how they consume. So marketers are keenly interested in the cultural environment.

The cultural environment generally includes people’s thinking about following:

  • People’s view of themselves: It includes people view about themselves which vary in their emphasis than their view of outer world
  • People’s view of others: People are becoming more and more introvert and so their views of others are changing
  • People’s view of organization: People vary in their attitudes toward corporations, government agencies, trade unions, universities and other organization.
  • People’s view of society: People vary in their attitudes toward their society based on their culture, opinions, character etc.
  • People’s view of nature: Recently people in general have recognized that nature is fragile and can be destroyed by human activities.
  • People’s view of universe: Finally, people differ in their beliefs about the origin of the universe and their place in it.

Religion plays an important role in every human being even if in life of a staunch atheist.

The cultural environment includes institutions and other forces that affects society’s basic values, perceptions, preferences and behaviors etc.

Cultural core beliefs are so strong that it affects buyers’ demands to that respect greatly. So company must take that environment into consideration before making marketing strategies. Because of software sector development in India, sale of consumer durable goods increased widely. So marketing department must have studied nature and culture of this software sector employees before even their introduction in India.