There are two elements within the external marketing environment; micro and macro. These environmental factors are beyond the control of marketers but they still influence the decisions made when creating a strategic marketing plan.
Micro Environment Factors
- Suppliers: Suppliers can control the success of the business when they hold power. The supplier holds the power when they are the only or the largest supplier of their goods; the buyer is not vital to the supplier’s business; the supplier’s product is a core part of the buyer’s finished product and/or business.
- Resellers: If the product the organisation produces is taken to market by 3rd party resellers or market intermediaries such as retailers, wholesalers, etc. then the marketing success is impacted by those 3rd party resellers. For example, if a retail seller is a reputable name then this reputation can be leveraged in the marketing of the product.
- Customers: Who the customers are [B2B or B2C, local or international, etc.] and their reasons for buying the product will play a large role in how you approach the marketing of your products and services to them.
- The competition: Those who sell the same or similar products and services as your organisation is your market competition, and the way they sell needs to be taken into account. How do their prices and product differentiation impact you? How can you leverage this to reap better results and get ahead of them?
- The general public: Your organisation has a duty to satisfy the public. Any actions of your company must be considered from the angle of the general public and how they are affected. The public has the power to help you reach your goals; just as they can also prevent you from achieving them.
Macro Environment Factors
- Demographic forces: Different market segments are typically impacted by common demographic forces, including country/region; age; ethnicity; education level; household lifestyle; cultural characteristics and movements.
- Economic factors: The economic environment can impact both the organisation’s production and the consumer’s decision-making process.
- Natural/physical forces: The Earth’s renewal of its natural resources such as forests, agricultural products, marine products, etc must be taken into account. There are also natural non-renewable resources such as oil, coal, minerals, etc that may also impact the organisation’s production.
- Technological factors: The skills and knowledge applied to the production, and the technology and materials needed for the production of products and services can also impact the smooth running of the business and must be considered.
- Political and legal forces: Sound marketing decisions should always take into account political and/or legal developments relating to the organisation and its markets.
- Social and cultural forces: The impact the products and services your organisations brings to market have on society must be considered. Any elements of the production process or any products/services that are harmful to society should be eliminated to show your organisation is taking social responsibility. A recent example of this is the environment and how many sectors are being forced to review their products and services in order to become more environmentally friendly.
Wrap Up
Micro and macro environments have a significant impact on the success of marketing activities, and therefore such environmental factors must be considered in-depth during the process of creating a strategic marketing plan. Considering these factors will improve the success of your organisation’s marketing campaign and the reputation of the brand in the long term.
If you are interested in learning more about micro and macro environments, and strategic marketing as a whole, then you may be interested in the CIM Diploma in Professional Marketing. The marketing course is ideal for individuals looking to build practical skills in marketing management and broaden their strategic perspective. For more information about studying with Oxford College of Marketing, call our team today on [0]1865 515 255 or email enquiries@oxfordpeg.com.
A firm has no control over these factors. These factors constitute macro-marketing environment. For a firm, the only option is to accept and respect these factors, and adopt and adjust with them. Management must respond favorably to such environment in order to exploit the emerging opportunities.
These factors include:
1. Demographic Factors:
Demographic factors are related to population. Marketer must study these factors due to the fact that the market is made of people, and people constitute the population. Demographic study provides customer profile that is basic need for market segmentation as well as selecting target market. Therefore, demographic variables have direct and notable impact on firm’s operations. A marketer must analyze demographic factors to get idea about number and type of people to be served as customers.
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Demographic variables include:
i. Total population and population growth rate
ii. Age groups and gender distribution
iii. Geographical [area-wise] concentration of population
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iv. Proportion of rural v/s urban population
v. Literacy rate and level of education
vi. Population mobility [geographical shift] or migration rate
vii. Family system and household pattern
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viii. Occupation-based classification of population.
2. Ecological Factors:
These factors primarily concern with ecological [natural] environment. They are closely related to protection of ecological environment and pollutions – air, water, noise, and land pollutions. At present, the global-level efforts are made to protect environment.
Such efforts can lay down certain restrictions in terms of use of natural resources, cost of raw material, quality of products, production process and technology, disposal of wastes, pollution control measures, and so on. These factors affect to the several aspects of production, distribution, and disposal of products. A firm must understand that people want better quality products at low price, but not at a cost of quality of life.
Analysis of ecological environment involves:
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i. Availability and use of natural resources
ii. Pollution and pollution control measures
iii. Contemporary legal provisions
iv. Ecological awareness and use of eco-friendly products
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v. Contribution of corporate world for protection of environment
vi. Working of national and international agencies/organisations for protection of environment
vii. World-wide efforts for protection of environment.
3. Economic Factors:
Economic environment consists of economic forces that affect company’s costs, revenues, and profits on one hand, and customers’ purchasing powers and willingness to spend on the other hand.
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Economic forces include a large number of variables, such as:
i. Economic growth rate
ii. Interest rates
iii. Inflation rate
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iv. Functioning of stock markets and commodity markets
v. Industrial and agricultural policies
vi. Fiscal and monetary policies
vii. Export-import policies
viii. Liberalization, globalization and privatization processes
ix. Government’s long-term planning and investment in infrastructural facilities
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x. Quality and availability of basic facilities/services like transportation, banking, warehousing, insurance, communication, etc.
4. Socio-cultural Factors:
Social and cultural factors affect consumers’ tastes and preferences. People buy or favour those products which suit or complement their social and cultural norms, values, traditions, and habits. Knowing these factors of the target market, a manager can effectively design product- mix and promotional programme.
Social-cultural environment is ever-changing and requires the manager to undergo adjustment and readjustment in his marketing mix to balance between what consumers want and what company offers. Ignoring or underestimating this environment can harm severely the company’s interest.
Socio-cultural variables are:
i. Cultural norms, values, beliefs, and rituals
ii. Castes, creeds, and racial aspects
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iii. Social traditions, customs, habits, and superstitions
iv. Family and reference groups
v. Age and life-cycle stage
vi. Role of women
vii. Social classes
viii. Religious events and festivals.
5. Political and Legal Factors:
A firm has to operate within the present political system and legal framework. Political factors affect economic policies. Every marketing decision is subject to be affected by political and legal factors. Governments have formulated a series of legislations to regulate business operations to restrict unfair trade practices and protect consumer and social interests. These laws may create new opportunities or challenges for businessmen. A manager must know business philosophy and approach of the current governments, and legal provisions that he has to observe while dealing with other parties.
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Some of political and legal factors are:
i. Political philosophy
ii. Political and legal reforms
iii. Government approach to different sectors
iv. Political stability
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v. Acts or legal provisions relating to business operations and recent amendments
vi. Working of judiciary and administrative machineries.
6. International Environment:
The world had become a global village. Most countries have permitted free trade [with little restrictions]. A marketer has to deal with and satisfy cosmopolitan customers. Liberalization, globalization, and privatization promoted multinational companies that carry their operations in many countries. A businessman is required to follow global business theory – act locally, but think globally. Every firm, whether large or small, is, directly or indirectly, influenced by international economic and political forces.
These variables include:
i. Working of international agencies and organisations [World Bank, UNO, etc.]
ii. Functioning of MNCs – Multinational Companies
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iii. Export-import policies of different nations
iv. Availability of global aids and assistance
v. Global peace v/s conflict
vi. Liberalization, privatization, and globalization pace
vii. International agreements among countries
viii. Political stability in the dominant countries
ix. International business norms and values.
7. Technological Factors:
Technological factors affect the firm’s production process, product quality, cost effectiveness, and, hence, competitive ability. A wise manager must know the latest technology in the relevant field. Technology has released wonders in fields of business transactions, communication, entertainment, medical science, agriculture, and manufacturing systems.
At the same time, it has released horrors in fields of hydrogen bombs, horrible chemical weapons, crime styles, deterioration of ecological environment, and so forth. Every new technology is a force for creative destruction. New technology compels old one to exit. New technology brings superior products having more capacity to satisfy consumer needs.