The Macro Environment

The macro environment

Introduction

Marketing's role is to match the capabilities and resources within the organisation with market opportunities external to the organisation. Understanding customer needs is central to achieving this aim, but marketers must also be aware of factors that can cause customer needs to evolve. A change in customer needs will impact upon the organisation's ability to serve its customers. This means that marketers have to be knowledgeable about what is happening in the external environment, or macro environment.

Beyond the organisations that immediately influence a company's operations lies the macro environment. This consists of the larger social and international forces that affect the society within which a company operates. There is little a company can do to manage these powerful macro environmental forces, so it is important that marketers understand the macro environmental factors that affect products and services in order to devise the optimal marketing strategy to cope with these conditions. This topic explores the features of the external environment that impact upon marketing decisions.

Demographics

The demographic environment itself is affected by changes in the mix of age groups in the population. If the population becomes older, this will lead to rising demand for products and services consumed by older people and a similar fall in demand for products consumed by younger people. The development of ethnic markets can also be relevant. In a number of countries, the ethnic mix of consumers is changing due to immigration and other factors. This will be reflected in changing demands for various goods, not only from the specific ethnic group but from other consumers whose tastes have been affected by them. Furthermore, as ethnic groups emigrate to other countries, their own tastes can affect those of consumers in the host nation (e.g. Asian foods are now sold in UK supermarkets). The demographic environment is also affected by the level of education in a country, since changes in education have an impact on the wealth of a nation and the tastes of its people.

The lifestyles of a population also have an impact on the macro environment facing marketers. In Western countries there has been a growth in households made up of single people; and a large proportion of women now go out to work. This has resulted in an increase in the sales of convenience foods. There is also a greater proportion of couples whose children have grown up and left home. Such couples have more disposable income to spend on luxuries, holidays and home improvements.

Economics

The economic environment is important to marketers because it affects the amount of money people have to spend on products and services. One of the components of the economic environment is the distribution of income. Economies around the world not only vary in their absolute or total level of wealth but also in how their wealth is spread within the population. For example, poor countries may be classified either as those which have a highly unequal spread of wealth or those where it is more evenly shared. The former group of countries may be markets for luxury goods, despite the level of poverty. In contrast, the second type of country may be more attractive to marketers of inexpensive goods for the mass market.

Consumers around the world differ in the extent to which they save money and the use they make of credit facilities. A high propensity to save will result in a lower propensity to consume. However, these patterns will also have a secondary effect on the overall macro economy of a nation. A country where people have a high propensity to save is likely to be characterized by low interest rates, which will affect industry’s borrowing costs.

The economic environment is made up of factors that affect consumer buying power and spending patterns. The circular flow of goods and income makes the economy go round. The diagram below illustrates the basic economic concept of the circular flow of goods.

As an exchange process, marketing helps to keep that circular flow moving.

Nations have different levels of income:

• Subsistence economies consume what they produce, so provide limited market opportunities.

• Industrial economies offer rich markets with varied goods.

The operation of the economic environment is affected by government economic policy. In struggling economies, consumer purchasing power is reduced. Consumers at different income levels spend their money on different things. Economic variables affect these spending patterns.

Marketing

The economic problems faced by some countries have meant that some international marketers cannot be paid in hard currency. To make sales, therefore, they have had to barter their products. An example of this was the barter of Pepsi-Cola for Russian vodka by the Pepsi company and the former Soviet government.

Nature

This is important to marketers insofar as it is the source of many raw materials and fluctuation in supply can affect the prices paid for purchases. Furthermore, the increasing cost of some raw materials has meant that recycling of some materials, such as aluminium, has become economic.

There is increasing pressure from public opinion as to where raw materials are sourced from, and their effect on the natural environment. Paper manufacturers have had to pay attention to sourcing pulp from renewable forests, where trees are replanted to make up for those which have been felled. There is also pressure on them not to use chemicals and bleaches in their processing of paper. The increased cost of energy is also having an effect on the types of products that appeal to consumers. For example, in some countries there is a trend towards small cars and products that save energy.

Finally, due to developments in technology, it is possible for manufacturers and consumers to cause less damage to the environment. Various European countries encourage the use of catalytic converters in cars to reduce the levels of poisonous gases that are emitted into the atmosphere.

The natural environment consists of natural resources, such as oil and water, which are required as inputs by marketers or are affected by marketing