The Company’s Macro Environment
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.
a. 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 work force is be-coming 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 the important markets of the future are that disabled people (a market larger any of our ethnic minority groups).
b. 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 (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 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.
c. 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:
- 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.
- 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, lack of adequate funding, especially in third world countries, is a major barrier.
- 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.
- 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.
d. 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:
- Faster pace of technological change. Products are being technologically outdated at a rapid pace.
- There seems 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.
e. 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 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.
f. 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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.”