Macro Environment Overview, DEPEST Analysis, Factors

Owing to the high cost of developing and introducing new technologies many companies are making minor product improvements. They are happy to put their money into copying competitors’ products, and making minor style improvements. Transistors harmed radio business, Xerox harmed carbon-paper business and digital cable TV harmed cinemas. When old industries ignored new technologies, their businesses declined. The rising number of educated people will increase the demand for quality products, books, magazines and travel. Therefore, suppliers exert a very strong influence on the company and its marketing.

EconomyAn economy comprises individuals, commercial entities, and the government involved in the production, distribution, exchange, and consumption of products and services in a society. Therefore, businesses try to understand and analyze the external environment and its impact. Businesses are always limited by the political environment in which they exist. Laws and governments regularly shape how a company can operate and even have sway over the markets that companies can serve. Inflation is a key factor watched by economists, investors, and consumers.

However, macro environments can pose a threat to any company that is slow to react to changes and won’t adapt. Perhaps the most important of all external agents, the political forces of a country are not just restricted to the government and its policies and laws. It further extends to the active presence and role of pressure groups like lawyers, environmental activists, and above all the common people, who possess the utmost power to make as well as throw the current government. Before investing in marketing activities, an organization must conduct thorough research on the spread and use of technology in the targeted areas. They need to understand the technology penetration and user-technology interface of the region and accordingly make plans to use technology for their campaigns and communication. For example, if they find that almost every product used by the consumers is technology oriented, they can easily make technology a strong tool for their product.

Marketing policies, programmes and strategies are planned, organized and executed with the main objective of customer satisfaction and service. It is in marketing that we satisfy individual and social values, needs and wants—be it through producing goods, supplying services, fostering innovation, or through creating satisfaction. In fact, formulation of marketing strategy is in itself a plan to fight against competitors’ move. An aggressive marketing manager knows that his marketing mix will encourage competition and he must anticipate the nature of this reaction while assessing his own situation. Similarly, he understands that activities of his rivals are bound to limit the marketing opportunities of his firm sooner or later.

Marketing Environment – Micro and Macro

Industrial economies have markets that are diverse and carry many different types of goods. Each is important to the marketer because each has a highly different spending pattern as well as different distribution of wealth. Market environment and business environment are marketing terms that refer to factors and forces that affect a firm’s ability to build and maintain successful customer relationships. The business environment has been defined as “the totality of physical and social factors that are taken directly into consideration in the decision-making behaviour of individuals in the organisation.” To be successful in marketing, marketing managers must understand these uncontrollable forces, learn to accommodate them, and if possible take advantage of them in their marketing plans and policies. Macro-environment refers to those factors which are external forces in the company’s activities and do not concern the immediate environment.

Ecology and physical environment play an immense role when determining the success of any firm. For instance, global warming, a revolutionary change in the physical environment, has started alarming the rainfall in different areas. This can cause a scarcity in the production of raw materials like cotton. So, whether it’s topographical elements, climate changes, weather conditions, or any other ecological factor, all are crucial in the macro business environment. Macro Environment refers to all those factors or forces that indirectly affect the business operation and working conditions. These factors are uncontrollable and the organization is not capable of exercising any control over them.

Whether failing to create an app or even going online, falling behind the technological curb can be a death sentence for companies in any sector. Companies that embrace innovation and work hard to stay ahead of technological trends are more visible to consumers and tend to be seen as more trustworthy. It’s important that marketers keep a close eye on the technical environment to ensure that they’re not left behind and forgotten by consumers. Whichever model helps you best understand, what’s important is that you’re aware of all contributing factors to the macro environment so that no single factor catches you or your marketing strategy by surprise. Economic analysis includes the overall economic scenario of the particular region.

Trade and business booms and slumps constitute the economic aspects of marketing environment. Even the most liberal advocates of free market economy agree that the system works best with some regulations. Proper regulations encourage competitions and ensure fair markets for goods and services. Thus governments adopt public policy to regulate business for the good of society as a whole.

Components of Macro Environment

These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. For example, a government can enact tariffs that increase the cost of an imported good a company needs to manufacture its products. Rather than paying the tariff, the company can look for a domestic source for these goods that is cheaper than the imported good.

• The size of a government’s annual deficits and total debt can influence market expectations regarding future tax rates, inflation, and overall macroeconomic stability.
• Six components of macro environment are Demographic, Economic, Natural, Technological, Political and Cultural environments.
• All of us subconsciously imbibe cultural and social values in our lives.
• Don’t let age or experience keep you from keeping up with technological factors.
• Thus, demography offers a consumer profile which is very essential in market segmentation and determination of target markets.

Staying ahead of the market means knowing the consumers intimately; this means understanding their location, population density, age, gender, occupation, and many other statistics. Knowing consumers’ political leanings, diet trends, pop culture knowledge, and more are contributing factors to understanding and catering for the macro environment. There’s a reason that successful companies are constantly changing marketing strategies; no idea comes from nowhere. The political environment includes all laws, government agencies, and groups that influence or limit other organizations and individuals within a society. It is important for marketers to be aware of these restrictions as they can be complex.

Market environment

Changes in major economic variables such as income, cost of living, interest rates, and saving patterns have a large impact on the market place. Suppliers are firms and individuals which provide resources needed by the company to produce goods and services. Supply shortages or delays affect sales in the short run and damage customer goodwill in the long run. Every business should deliver greater satisfaction to its customers than its competitors do. This is important for a company to maintain or improve its position within the market. If a business is unaware of its competitors’ moves, it will find it very difficult to outsmart its competitors.

The analysis of the macro marketing environment is to better understand the environment, adapt to the social environment and change, so as to achieve the purpose of enterprise marketing. Environmental scanning is an ongoing process and organizations are always refining the way their particular company or business goes through the process. Environmental scanning reinforces productive strategic plans and policies that can be implemented to make the organization get the maximum use of the business environment they are in. Environmental scanning helps a business improve their decision-making process in times of risk to the external and internal environments the business is in.

Once you’ve penetrated a market and are successfully marketing your product, the biggest hurdle to avoid is causing any local cultural or religious offences. Seeming insensitive to local customs and beliefs can spell death for an international brand because of cultural blunders, but can be avoided with proper prior research. With a clear understanding of these vast trends and forces in play, you can make informed decisions to ensure success. Another vital aspect of the macro environment is its physical setting. This includes the geographical location, the presence of ecology and biodiversity, temperature, weather and climate, and predominant seasons.

Even some of the biggest companies in the world have tried and failed to market effectively when they don’t take heed of the macro environment carefully. In this article, we go in depth on the macro environment and what it means for every business out there. We talk about the six different factors making up the macro environment and various analytical models that can be used to analyze it. If you had previously conducted market analysis but do not intend to repeat it, macroenvironmental analysis can help identify any possible oversights within the initial study. Roughly, there are two kinds of atmosphere that exert some forces on the business activities and the long-term market existence of an organization.

To see that consumer satisfaction is provided as per the dictates of the target market. They, combined together, provide resources that are needed by the company. The technological environment is perhaps crucial in shaping our destiny.

• Industrial economies have markets that are diverse and carry many different types of goods.
• The macro environment is described by mnemonics as PEST, i.e., Politics, Economics, Society and Technology.
• This is important for a company to maintain or improve its position within the market.
• Their maneuvers normally revolve around interest levels and access to credit.
• It further extends to the active presence and role of pressure groups like lawyers, environmental activists, and above all the common people, who possess the utmost power to make as well as throw the current government.

A public is defined as – “any group that has an actual or potential interest in or an impact on a company’s ability to achieve its objectives”. Public relations are certainly a broad marketing operation which must be fully taken care of. Companies would be wise to spend time monitoring the public understanding, their needs and opinions, and dealing with them constructively. Microenvironment implies the factors and forces in the immediate environment which affect the company’s ability to serve its market. Some trend analysts believe that the 90s will be the “Earth Decade”, in which protection of the natural environment will be the major issue facing business and the people.

The large and diverse demographics offer both opportunities as well as challenges for businesses. The marketing intermediaries are also an important component for company’s overall value delivery network. They include those individuals or firms who help the company in promotion, sales and distribution of its goods to the final buyers.

Management creates appropriate steps that will position the organization in the current business environment. The third steps analyzing all the information that the business has collected. When analyzing the information organizations are made aware of the trends or issues that the organizations may be influenced by.

The company should develop a strategic advantage over their competitors. They must take measures to conserve and allocate efficient use of our scarce resources that can restore the balance in our ecological environment. Economical use of energy and natural resources are the essential ingredients of marketing strategies. The marketing executives must pay due attention to the quality of our life and our environment. There are also legislations to control and regulate monopoly and unfair trade practices in many countries.

The first step of the environmental scanning process requires the identification of the needs and the issues that have occurred that caused the organization to decide an environmental scanning is required. Demography refers to studying human populations in terms of size, density, location, age, gender, race, and occupation. This is a very important factor to study for marketers and helps to divide the population into market segments and target markets. An example of demography is classifying groups of people according to the year they were born. Each classification has different characteristics and causes they find important.

Environmental scanning can be defined as ‘the study and interpretation of the political, economic, social and technological events and trends which influence a business, an industry or even a total market’. In order to understand the different spending patterns, marketers need to also take into consideration about the development of digital technology and its effect on market growth and employment. It is key for a marketer, especially in a digitally-dominated market, to anticipate demand in order to capitalize on potential market growth. Technology has developed to the extent where purchase patterns can be analysed in order to forecast future demand. External micro environment – Local forces that affect its ability to serve its customers.

Economically, “The strategic challenge of the next decade is navigating a world that is simultaneously integrating and fragmenting. Stock markets have set new records and economic volatility has fallen to historic lows, while political shocks on a scale unseen for generations have taken place. Other trends that also affect the global, regional, and local economies are discussed in this chapter as well as below. In general, countries that have gained from globalization include Japan, South Korea, Taiwan, Malaysia, Singapore, Hong Kong, Thailand, and China. China’s markets and growing economic prowess have particularly been noticed.

The marketing manager has little control over the actions of competitors. They can merely anticipate competitive actions and be prepared to deal with them. Competitors considerably influence the selection of target markets, suppliers, marketing channels as well as product mix, price mix and promotion mix. Social and cultural forces usually influence the welfare of a business concern in the long-run.

macro environment consists of has created such wonders as penicillin, bypass surgery, Internet, etc. It has also initiated such horrors as the nuclear bomb, submarine and machine gun. Some mixed innovations have also come our way, such as the automobile, TV, other household appliances and credit cards. Indian population is getting older for two reasons — birth rate is slowing falling and life expectancy is increasing so the proportion of older people is increasing and middle-class family size is becoming smaller. Government which decides the success of a company through its policies and its legislations.

These factors also exert their influence on the company’s marketing and the company in turn can influence these factors. A company has to understand this and tactfully use the situation to the best to serve its own interests of effective marketing. A company’s macro environment consists of such forces which are far away from it and are strong and large. These factors exert their influence on the company’s marketing but the company cannot influence these factors.