The Macro Environment includes the major forces that act not only on the firm itself, but also on its competitors and on elements in the micro-environment. The macro-environment tends to be harder to influence than does the micro-environment, but this does not mean that firms must simply remain passive; the inability to control does not imply an inability to influence. Often the macro-environment can be influenced by good public relations activities.
The main elements of the macro-environment are:
- Demographic factors
- Economic factors
- Political factors
- Legal factors
- Socio-cultural factors
- Ecological and geographical factors
- Technological factors
- Demographic factors
- Demographics is the study of population factors such as the proportion of the population who are of a given race, gender, location or occupation, and also of such general factors as population density, size of population and location.
Demographic changes can have major effects on companies: the declining birth rate in most Western countries has an obvious effect on sales of baby products, but will eventually have an effect on the provision of state pensions as the retired have to be supported by an ever-shrinking number of people of working age. Likewise, changes in the ethnic composition of cities, or in the population concentration (with few people living in the city centres of large cities) cause changes in the demand for local services and retailers, and (more subtly) changes in the type of goods and services demanded.
- Economic factors - Economic factors encopass such areas as the boom/bust cycle, and the growth in unemployment in some parts of the country as a result of the closing of traditional industries. Macro-economic factors deal with the management of demand in the economy; the main mechanisms governments use for this are interest rate controls, taxation policy and government expenditure. If the government increases expenditure (or reduces taxation), there will be more money in the economy and demand will rise; if taxation is increased (or expenditure cut), there will be less money for consumers to spend, so demand will shrink. Rises in interest rates tend to reduce demand, as home loans become more expensive and credit card charges rise.
Micro-economic factors are to do with the way people spend their incomes. As incomes have risen over the past 40 years or so, the average standard of living has risen, and spending patterns have altered drastically. The proportion of income spent on food and housing has fallen, whereas the proportion spent on entertainment and clothing has risen. Information on the economy is widely publicised, and marketers make use of this information to predict what is likely to happen to their customers and to demand for their products.
- Political factors - Political factors often impact on business: recent examples are the worldwide movement towards privatisation of former government-owned utilities and businesses, and the shift away from protection of workers’ rights. Firms need to be able to respond to the prevailing political climate, and adjust the marketing policy accordingly. For example, British Telecom, Deutsche Telekom and Telstra of Australia have all had to make major readjustments to their marketing approaches since being privatised, and in particular since seeing an upswing in competitive levels. Almost all the firms’ activities have been affected, from cutting the lead time between ordering and obtaining a new telephone, through to price competition in response to competitors’ cut-price long-distance and international calls. British Telecom was the UK’s fifth biggest spender on advertising during 2003.
- Legal factors - Legal factors follow on from political factors, in that governments often pass laws which affect business. For example, Table 2.4 shows some of the legislation on marketing issues currently in force in various countries.
Sometimes judges decide cases in a way that re-interprets legislation, however, and this in itself can affect the business position. A further complication within Europe arises as a result of EU legislation, which takes precedence over national law, and which can seriously affect the way firms do business in Europe. Case law and EU law are not dependent on the politics of the national governments, and are therefore less easy to predict. Clearly businesses must stay within the law, but it is increasingly difficult to be sure what the law says, and to know what changes in the law might be imminent.
- Socio-cultural factors - Socio-cultural factors are those areas that involve the shared beliefs and attitudes of the population. People learn to behave in particular ways as a result of feedback from the rest of society; behaviour and attitudes that are regarded as inappropriate or rude are quickly modified, and also people develop expectations about how other people should behave. In the marketing context, people come to believe (for example) that shop assistants should be polite and helpful, that fastfood restaurants should be brightly lit and clean, that shops should have advertised items in stock. These beliefs are not laws of nature, but merely a consensus view of what should happen. There have certainly been many times (and many countries) where these standards have not applied. These prevailing beliefs and attitudes change over a period of time owing to changes in the world environment, changes in ethnic mix and changes in technology. These changes usually happen over fairly long periods of time. Since 1970 in most Western countries there has been a development towards a more diverse, individualistic society; a large increase in the number of couples living together without being married; and a marked increase in the acceptance (and frequency)of single-parent families.
Cultural changes over the same period include a major change in eating habits due to an increase in tourism and world travel, and greater globalisation of food markets. A very few cultural changes come about as the result of marketin activities: a recent example in the UK is the gradual replacement of Guy Fawkes night (at least as a family occasion) with Hallowe’en, an American import which has children dressing up in costumes and going from house to house ‘trick or treat-ing.’ Part of the thrust for this change has come about because Guy Fawkes celebrations involve letting off fireworks, which is a dangerous activity for amateurs, but much of the change has been driven by a desire by marketers to sell costumes, and by the influx of US-made films and TV programmes which show Hallowe’en celebrations.
- Ecological and geographical factors - Ecological and geographical factors have come to the forefront of thinking in the past fifteen years or so. The increasing scarcity of raw materials, the problems of disposing of waste materials, and the difficulty of finding appropriate locations for industrial complexes (particularly those with a major environmental impact) are all factors that are seriously affecting the business decision-making framework. In a marketing context, firms are having to take account of public views on these issues and are often subjected to pressure from organized groups as well as individuals. Often the most effective way to deal with these issues is to begin by consulting the pressure groups concerned, so that disagreements can be resolved before the company has committed too many resources; firms adopting the societal marketing concept would do this as a matter of course.
- Technological factors - Technological advances in recent years have been rapid, and have affected almost all areas of life. Whole new industries have appeared: for example, satellite TV stations, cable networks, the Internet, CD recordings and virtual reality, and computer- aided design systems. All of these industries were unknown even twenty years ago. It seems likely that technological change will continue to increase, and that more new industries will appear in future. The corollary, of course, is that some old industries will disappear, or at the very least will face competition from entirely unexpected directions. Identifying these trends in advance is extremely difficult, but not impossible.
The macro-environment also contains the remainder of the organisation's publics.
- Governmental publics are the local, national and international agencies that restrict the company's activities by passing legislation, setting interest rates, and fixing exchange rates. Governmental publics can be influenced by lobbying and by trade associations.
- Media publics: Press, television, and radio services carry news, features and advertising that can aid the firm’s marketing, or conversely can damage a firm's reputation. Public relations departments go to great lengths to ensure that positive images of the firm are conveyed to (and by) the media publics. For example, a company might issue a press release to publicise its sponsorship of a major sporting event. This could generate positive responses from the public, and a positive image of the company when the sporting event is broadcast.
- Citizen action publics are the pressure groups such as Greenpeace or consumers’ rights groups who lobby manufacturers and others in order to improve life for the public at large. Some pressure groups are informally organised; recent years have seen an upsurge in local pressure groups and protesters.
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