Category: Marketing Q&A

Question: Explain Macroenvironment in Marketing. 

Answers: A macro environment is a condition that exists in the economy as a whole, rather than in a particular sector or region. In general, the macro environment includes trends in the gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro environment is closely linked to the general business cycle as opposed to the performance of an individual business sector.

The Company’s Macroenvironment:

The company and all of the other actors operate in a larger macro environment of forces that shape opportunities and pose threats to the company. There are six major forces (outlined below) in the company’s macro environment. There are six major forces (outlined below) in the company’s macro environment.

• Demographic.
• Economic.
• Natural.
• Technological.
• Political.
• Cultural.

#Demographic Environment:

Demography is the study of human populations in terms of size, density, location, age, sex, race, occupation, and other statistics. It is of major interest to marketers because it involves people and people make up markets. Demographic trends are constantly changing. Some more interesting ones are.

1). The world’s population (though not all countries) rate is growing at an explosive rate that will soon exceed food supply and ability to adequately service the population. The greatest danger is in the poorest countries where poverty contributes to the difficulties. Emerging markets such as China are receiving increased attention from global marketers.

2). The most important trend is the changing age structure of the population. The population is aging because of a slowdown in the birth rate (in this country) and life expectancy is increasing. The baby boomers following World War II have produced a huge “bulge” in our population’s age distribution. The new prime market is the middle age group (in the future it will be the senior citizen group). There are many subdivisions of this group.

• Generation X, this group lies in the shadow of the boomers and lack obvious distinguishing characteristics. They are a very cynical group because of all the difficulties that have surrounded and impacted their group.
• Echo boomers (baby boomlets) are the large growing kid and teen market. This group is used to affluence on the part of their parents (as different from the Gen Xers). One distinguishing characteristic is their utter fluency and comfort with computer, digital, and Internet technology (sometimes called Net-Gens).
• Generational marketing is possible, however, caution must be used to avoid generational alienation. Many in the modern family now “telecommute”–work at home or in a remote office and conduct their business using fax, cell phones, modem, or the Internet In general, the population is becoming better educated. The workforce is becoming more white-collar. Products such as books and education services appeal to groups following this trend. Technical skills (such as in computers) will be a must in the future. The final demographic trend is the increasing ethnic and racial diversity of the population. Diversity is a force that must be recognized in the next decade. However, companies must recognize that diversity goes beyond ethnic heritage. One of the important markets of the future is that disabled people.

#Economic Environment:

The economic environment includes those factors that affect consumer purchasing power and spending patterns. Major economic trends in the United States include:

• Personal consumption (along with personal debt) has gone up (the 1980s) and the early 1990s brought recession that has caused adjustments both personally and corporately in this country. Today, consumers are more careful shoppers.
• Value marketing (trying to offer the consumer greater value for their dollar) is a very serious strategy in the 1990s. Real income is on the rise again but is being carefully guarded by a value-conscious consumer.
• Income distribution is still very skewed in the U. S. and all classes have not shared in prosperity. In addition, spending patterns show that food, housing, and transportation still account for the majority of consumer dollars. It is also of note that the distribution of income has created a “two-tiered market” where there are those that are affluent and less affluent. Marketers must carefully monitor economic changes so they will be able to prosper with the trend, not suffer from it.

#Natural Environment:

The natural environment involves natural resources that are needed as inputs by marketers or that are affected by marketing activities. During the past two decades, environmental concerns have steadily grown. Some trend analysts labeled the specific areas of concern were:

1. Shortages of raw materials: Staples such as air, water, and wood products have been seriously damaged and non-renewable such as oil, coal, and various minerals have been seriously depleted during industrial expansion.
2. Increased pollution: Is a worldwide problem. Industrial damage to the environment is very serious. Far-sighted companies are becoming “environmentally friendly” and are producing environmentally safe and recyclable or biodegradable goods. The public response to these companies is encouraging. However, the lack of adequate funding, especially in third world countries, is a major barrier.
3. Government intervention: in natural resource management has caused environmental concerns to be more practical and necessary in business and industry. Leadership, not punishment, seems to be the best policy for long-term results. Instead of opposing regulation, marketers should help develop solutions to the material and energy problems facing the world.
4. Environmentally sustainable strategies: The so-called green movement has encouraged or even demanded that firms produce strategies that are not only environmentally friendly but are also environmentally proactive. Firms are beginning to recognize the link between a healthy economy and a healthy environment.

#Technological Environment:

The technological environment includes forces that create new technologies, creating new product and market opportunities.

1. Technology is perhaps the most dramatic force shaping our destiny.
2. New technologies create new markets and opportunities.

The following trends are worth watching:  

• The faster pace of technological change. Products are being technologically outdated at a rapid pace.
• There seem to be almost unlimited opportunities being developed daily. Consider the expanding fields of health care, the space shuttle, robotics, and biogenetic industries.
• The challenge is not only technical but also commercial–to make practical, affordable versions of products.
• Increased regulation. Marketers should be aware of the regulations concerning product safety, individual privacy, and other areas that affect technological changes. They must also be alert to any possible negative aspects of an innovation that might harm users or arouse opposition.

#Political Environment:

The political environment includes laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society. Various forms of legislation regulate business.
1). Governments develop public policy to guide commerce–sets of laws and regulations limiting business for the good of society as a whole.
2). Almost every marketing activity is subject to a wide range of laws and regulations. Some trends in the political environment include:

Increasing legislation to:

• Protect companies from each other.
• Protecting consumers from unfair business practices.
• Protecting interests of society against the unrestrained business behavior.

2). Changing government agency enforcement. New laws and their enforcement will continue or increase.

3). Increased emphasis on ethics and socially responsible actions. Socially responsible firms actively seek out ways to protect the long-run interests of their consumers and the environment.

• Enlightened companies encourage their managers to look beyond regulation and “do the right thing.”
• Recent scandals have increased concern about ethics and social responsibility.
• The boom in e-commerce and Internet marketing has created a new set of social and ethical issues. Concerns are Privacy, Security, Access by vulnerable or unauthorized groups.

#Cultural Environment:

The cultural environment is made up of institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviors. Certain cultural characteristics can affect marketing decision-making.

Among the most dynamic cultural characteristics are:

1). Persistence of cultural values. People’s core beliefs and values have a high degree of persistence. Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government. Secondary beliefs and values are more open to change.

2). Shifts in secondary cultural values. Since secondary cultural values and beliefs are open to change, marketers want to spot them and be able to capitalize on the change potential. Society’s major cultural views are expressed in:

1. People’s views of themselves. People vary in their emphasis on serving themselves versus serving others. In the 1980s, personal ambition and materialism increased dramatically, with significant implications for marketing. The leisure industry was a chief beneficiary.
2. People’s views of others. Observers have noted a shift from a “me-society” to a “we society.” Consumers are spending more on products and services that will improve their lives rather than their image.
3. People’s views of organizations. People are willing to work for large organizations but expect them to become increasingly socially responsible. Many companies are linking themselves to worthwhile causes. Honesty in appeals is a must.
4. People’s views of society. This orientation influences consumption patterns. “Buy American” versus buying abroad is an issue that will continue into the next decade.
5. People’s view of nature. There is a growing trend toward people’s feeling of mastery over nature through technology and the belief that nature is bountiful. However, nature is finite. Love of nature and sports associated with nature are expected to be significant trends in the next several years.
6. People’s views of the universe. Studies of the origin of man, religion, and thought-provoking ad campaigns are on the rise. Currently, Americans are on a spiritual journey. This will probably take the form of “spiritual individualism.”

Question: Explain Microenvironment in Marketing. 

Answers: The microenvironment in marketing consists of five components. The first is the organization’s internal environment—its several departments and management levels—as it affects marketing management’s decision making. The second component includes the marketing channel firms that cooperate to create value: the suppliers and marketing intermediaries (middlemen, physical distribution firms, marketing-service agencies, financial intermediaries). The third component consists of the five types of markets in which the organization can sell: the consumer, producer, reseller, government, and international markets.

The fourth component consists of the competitors facing the organization. The fifth component consists of all the public that has an actual or potential interest in or impacts on the organization’s ability to achieve its objectives: financial, media, government, citizen action, and local, general, and internal publics. So the microenvironment consists of six forces close to the company that affects its ability to serve its customers:

• The company itself (including departments).
• Suppliers.
• Marketing channel firms (intermediaries).
• Customer markets.
• Competitors.
• Publics.

The Company’s Microenvironment

As discussed earlier the company’s microenvironment consists of six forces that affect its ability to serve its customers. Let’s discuss these forces in detail:

#The Company:

The first force is the company itself and the role it plays in the microenvironment. This could be deemed the internal environment.

• Top management is responsible for setting the company’s mission, objectives, broad strategies, and policies.
• Marketing managers must make decisions within the parameters established by top management.
• Marketing managers must also work closely with other company departments. Areas such as finance, R & D, purchasing, manufacturing, and accounting all produce better results when aligned with common objectives and goals.
• All departments must “think consumer” if the firm is to be successful. The goal is to provide superior customer value and satisfaction.

#Suppliers:

Suppliers are firms and individuals that provide the resources needed by the company and its competitors to produce goods and services. They are an important link in the company’s overall customer “value delivery system.”

1. One consideration is to watch supply availability (such as supply shortages).
2. Another point of concern is the monitoring of price trends of key inputs. Rising supply costs must be carefully monitored.

#Marketing Intermediaries:

Marketing intermediaries are firms that help the company to promote, sell, and distribute its goods to final buyers.

1. Resellers are distribution channel firms that help the company find customers or make sales to them. These include wholesalers and retailers who buy and resell merchandise. Resellers often perform important functions more cheaply than the company can perform itself. However, seeking and working with resellers is not easy because of the power that some demand and use.
2. Physical distribution firms help the company to stock and move goods from their points of origin to their destinations. Examples would be warehouses (that store and protect goods before they move to the next destination).
3. Marketing service agencies (such as marketing research firms, advertising agencies, media firms, etc.) help the company target and promote its products.
4. Financial intermediaries (such as banks, credit companies, insurance companies, etc.) help finance transactions and insure against risks.

#Customers:

The company must study its customer markets closely since each market has its own special characteristics.

These markets normally include:

1. Consumer markets (individuals and households that buy goods and services for personal consumption).
2. Business markets (buy goods and services for further processing or for use in their production process).
3. Reseller markets (buy goods and services in order to resell them at a profit).
4. Government markets (agencies that buy goods and services in order to produce public services or transfer them to those that need them).
5. International markets (buyers of all types in foreign countries).

#Competitors:

Every company faces a wide range of competitors. A company must secure a strategic advantage over competitors by positioning their offerings to be successful in the marketplace. No single competitive strategy is best for all companies.

#Public:

A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. A company should prepare a marketing plan for all of their major public as well as their customer markets. Generally, the public can be identified as being:

• Financial publics: influence the company’s ability to obtain funds.
• Media publics: carry news, features, and editorial opinion.
• Government publics: take developments into account.
• Citizen-action publics: a company’s decisions are often questioned by consumer organizations.
• Local publics: includes neighborhood residents and community organizations.
• General publics: a company must be concerned about the general public’s attitude toward its products and services.
• Internal publics: workers, managers, volunteers, and the board of directors.