CSS Solved Business Administration Past Papers | What are different external/macro-environment factors, their importance, and their role in the development of a marketing plan?
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Topic breakdown:
The marketing environment is an integral part of the marketing plan that marketers study in the initial phase. The marketing environment has a significant influence on the employee and overall company performance.
Topic: marketing environment
Subject: Marketing
Introduction:
The marketing environment is a critical factor in the development of a successful marketing plan. The marketing environment may be either an opportunity or threat for the company depending on the company’s resources and strategy; therefore, successful companies focus on marketing research and intelligence to analyze the changing environment. External factors are crucial for any organization as they influence every aspect of its marketing effort. An effective marketing plan must take into account the ever-changing macro-environmental factors.
Marketing Environment:
“The actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful transactions with its target customers.”
Macro Environment:
“The larger societal forces that affect the whole microenvironment.”
External factors in marketing environment
External factors and their role in the development of a marketing plan:
- Demographic Factors:
Demographic factors revolve around the population’s size, age structure, geographic distribution, ethnic mix, and income distribution. This factor is of utmost importance as it is the core driver of demand. It is the population that creates demand and turns into customers for an organization. For an effective marketing plan, segmentation, target market and positioning all revolve around this demographic factor.- Population size and growth:
Population growth trends are important because they can offer marketers an indication of demand for certain goods and services. Differences in population growth patterns between country markets may also suggest different international marketing opportunities for firms. - Changing age structure:
Age groups have a considerable impact on market demand and segmentation. While in the developed world like Europe and America, the elderly population is growing, thus a new considerable market; on the other hand, Asia and Africa are witnessing a steady rise in population. Therefore, their demands are considerably different from the developed world; hence, a specific marketing plan is needed for such demographic groups. - Changing family:
Another dimension of demographic factors is changing family structure that has influenced consumer needs as the demand for residence, food, etc., lessens in smaller families. - Increasing diversity:
With growing trends of globalization, diversity has become a reality, especially in the developed world. Thus, it has opened a window of opportunity for businesses by creating new market segments and considerable market demand.
- Population size and growth:
- Economic Factors:
The economic environment refers to the nature and direction of the economy in which a firm competes or may compete. This affects such things as national income, economic growth, and inflation. The economic environment may vary from one country to another, but economies around the world are linked. The economic environment can and does change quite rapidly. The effects can be far-reaching and require changes in marketing strategy.- Income distribution and changes in purchasing power:
The evolution of technology and modern communication opened the way for the developing world. Economic resources shifted away from the developed world, thus opening new opportunities for business in new markets. Marketers must determine a population’s income distribution. The upper economic strata of society become primary targets for expensive luxury goods, the middle-income groups are more careful about spending but can usually afford some luxuries sometimes, while the lower strata will afford only basic food, clothing and shelter needs. - Changing consumer patterns:
Another aspect of economic factors is the changing consumer patterns depending upon the shits in needs. Changes in major economic variables such as income, cost of living, interest and borrowing patterns have a large impact on the marketplace. Companies watch these variables by using economic forecasting. - Changing interest rate and inflation:
This economic aspect will affect demand and consumer spending. In addition, in the case of a multinational organization, it may considerably influence its earning depending on the exchange rate variation. Furthermore, it is an indication to change the pricing strategy and, in intense cases, review its production or service costs.
- Income distribution and changes in purchasing power:
- Technological Factors:
Technology is the application of science to convert an economy’s resources into output. Technology is the most dynamic of the external factors influencing the marketing plan by creating new opportunities and markets. Technology has not only interlinked the whole world but has forced organizations to focus on innovation. Marketers, while making a marketing plan, must consider the following:- Rapid technological changes:
The past few decades have been the era of technology, where changing technology has given rise to new challenges, thus, new opportunities. Marketers must assess the new technological trends to analyze their impact on both their products and consumer needs. Moreover, it will also help in identifying new opportunities for the organization, either in the form of product or demand. Technologies arising in unrelated industries can also affect the firm’s fortunes. - Research & development:
Technology and innovations require heavy investments in research and development. Most multi-nationals and technology-based organizations have permanently set up an R&D department, which helps the firm not only to master its skills but also fight international competition.
- Rapid technological changes:
- Politico-legal Factors:
Marketing decisions are strongly affected by developments in the political environment. The political environment consists of laws, government agencies and pressure groups that influence and limit various organizations and individuals in a given society. The recent trade conflict between China and US is one example of how political factors influence businesses. New laws and their enforcement are likely to continue or increase. Business executives must watch these developments when planning their products and marketing programs. Marketers need to know about the main laws protecting competition, consumers and society. International marketers should additionally be aware of regional, country and local laws that affect their international marketing activity. Furthermore, pressure groups, codes of ethics and social responsibility actions have also started influencing customer needs; hence, marketers must also keep them in view while making a marketing plan.
- Socio-cultural factors:
The cultural and social environment affects how and why people live and behave as they do—which affects customer buying behaviour. This requires special attention when segmenting a market. One example of failure owing to socio-cultural factors is that of McDonald’s in India. While failing miserably, it had to cater its menu according to the socio-cultural needs of that market. Changing women’s roles, especially in the developing world, has created both opportunities and complications in the market. Interestingly while marketers can change the secondary values, it is impossible to change core values. Marketers, while devising a marketing plan, must predict any possible shift in cultural factors that could impact the product.
- Natural Forces:
Nature in itself has an impact which marketers must take into consideration while making a marketing plan. From pollution to natural resources, this factor can considerably inhibit production capacity. In recent years global warming has emerged as one of the biggest challenges for the corporate world, it has significantly restricted the production capacity of organizations. Natural forces are of prime concern, especially for manufacturing firms; however, they may also influence other businesses to an extent.- Raw Material:
One crucial factor for any business is the availability of raw materials. Apart from non-renewable resources, renewable resources like food, wood, and water are becoming a matter of grave concern. On the other hand, non-renewable resources like coal and gas are depleting fast. Marketers must keep this in view and urge the R & D wing to look for better alternatives. - Increased energy costs:
In the past few decades, majority of multinationals shifted away from the developed world, one factor being the rise in energy costs. Moreover, the shift towards e-commerce is also an example to reduce the rising energy costs. The textile industry in Pakistan is one prime example that has suffered hugely due to increasing energy costs. - Environmental challenges:
Global warming has emerged as the single biggest threat to the survival of this world and businesses. However, businesses have taken considerable measures. like shifting to e-commerce and using green energy, the challenge is still substantial. Environmental pressures upon businesses in the decade ahead are expected to escalate, and firms must seek to balance both the ecological and performance benefit expectations of the mass of consumers.
- Raw Material:
Conclusion:
The environment in which the organization operates is of utmost, be it internal or external factors. External factors are of relatively more importance because they influence internal factors alike. Different macro-environmental factors vary across organizations depending upon their strengths and weaknesses. In a successful marketing plan, marketers must take into account external factors to increase the product’s efficiency, cost and life. A clear understanding of the external environment helps strengthen internal factors in the organization’s favour.
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