Marketin Lecture

Name of the course: Marketing Management Course Teacher: Md. Parves Sultan E-mail: [email protected] Chapter 3; Scanning the Macro Environment of Marketing

In this chapter we will learn

1. What are the major forces in the macro-environment that influence marketing decisions? 2. How does an opportunity come when a change happens in any macro-economic environment? 3. How does a threat pose when a change happens in any macro-economic environment?

Introduction of this Chapter Successful companies look beyond the small world of their immediate business environment. They try to see the world as a whole, as a macro-environment in which the company is a single element. Successful marketers ask questions about the larger world and the place of their company in it. What does the world look like? How is it changing? Do the company’s products meet the needs of the past or the needs of the future? What do consumers want now? What will they want a year from now? In short, marketers try to identify trends. A trend is a direction or sequence of events that shows some durability and momentum. Trends tend to reflect significant social and cultural developments. For example, over the last two decades, Americans have broadened their taste to include a wide variety of ethnic foods. Companies and individual entrepreneurs have responded with ethnic restaurants, fast food chains, and specialty food products. The question you have to ask yourself, as a marketer, is what accounts for this trend? What social and cultural changes led to a shift in food consumption patterns?

Reference: Marketing Management; Philip Kotler; Millennium Edition

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Name of the course: Marketing Management Course Teacher: Md. Parves Sultan E-mail: [email protected] Chapter 3; Scanning the Macro Environment of Marketing

Identifying and responding to the Major Macro-environment Forces Identifying the trends and forces that make up a company’s macro-environment, and then accurately assessing their implications for the company’s future, has never been easy. Globalization has only made the process more difficult. Take a look at this short list of global forces: •

growing debt problems in developing economies

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the speeding up of international transportation, financial transactions, and communication

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the move to market economies in former communist countries

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an explosion of strategic alliances among multinational companies

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the rise of trade blocs in the Europe and North America

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the rapid dissemination of global lifestyles

Now imagine that you are responsible for directing your company’s response to one or more of these forces. How would you go about it? What kinds of information would you look at? You might start by breaking the problem down into component parts. There are six major kinds of forces that make up the macro-environment: demographic, economic, natural, technological, political-legal, and social-cultural. These forces do not exist in isolation. Each affects all the others, collectively resulting in macro-environmental change. Nonetheless, it is helpful to look at each of them separately. When you understand what is included in each of these categories, you can then go on to think about their combined impact.

Demographic environment Lets start with the demographic environment. Demographics is concerned with the structure, growth, and change of populations, crucial information for effective marketing. Suppose you are responsible for producing an advertising campaign for a new luxury car. Your research team comes to you and tells you that Americans love luxury cars. How useful would that be? What could you do with that information? In all likelihood, not a lot. So you send the research team back to get more detailed information. Now suppose they tell you that men, between the ages of 35 and 60, with an income of more than $100,000 a year, and who live in a major urban area, buy 90% of all luxury cars sold in America. This is information you can use. With it, you can go on to: •

Identify those population or household characteristics that most accurately differentiate potential customers.

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Demographic Environment. Find those geographic areas with the highest concentrations of potential customers.

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Analyze the purchasing behavior of the potential customers to establish some understanding of the cause and effect behind their purchasing patterns.

Reference: Marketing Management; Philip Kotler; Millennium Edition

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Name of the course: Marketing Management Course Teacher: Md. Parves Sultan E-mail: [email protected] Chapter 3; Scanning the Macro Environment of Marketing •

Determine media preferences in order to find the most efficient way to reach the potential market with an advertising message.

Gender, age, income, and geographical concentration all play a role in defining the market in the example concerning luxury car purchases given above. Here are six more factors to think about: Worldwide population growth More people does not necessarily mean more customers. What if population growth leads to poverty? How might increasing the demand for increasingly scarce resources impact markets? Will all countries be impacted in the same way? Population age mix Countries vary in their age mix. Some countries, like Mexico, have very young populations. Others, like Japan, have very old populations. What opportunities might exist in an "old" country that don’t in a "young" country? What opportunities might exist in an "young" country that don’t in a "old" country? Ethnic markets Companies are increasingly aware of the distinct buying patterns of different ethnic groups. What are the dangers of marketing to a specific ethnic group? What are the potential rewards? Educational groups Populations are divided into five educational groups: illiterates, high school dropouts, high school degrees, college degrees, and professional degrees. What products might appeal to individuals with college degrees, but not to high school dropouts? How would you design an advertising campaign aimed primarily at illiterate people? Household patterns The emergence of "nontraditional" families has created a new set of buying patterns. What product characteristics might have particular value to a single mother? How do you expect household patterns to change in the next 20 years? Geographical shifts in population Geographical shifts in population create and eliminate markets. What are the particular needs of new immigrants? How have the needs of middle-class Americans changed as they have moved from city centers to the suburbs? The combined effect of the factors described above has been the fragmentation of the market place. It is no longer possible for companies to market to America as a whole. Instead, companies focus on the micro-markets, which contain the most likely customers for their products. Success or failure, therefore, now rests on the marketers’ ability to identify appropriate micro-markets and to predict the emergence of new micro-markets and the decline of old ones. Demographic information is readily available on disk and on the Web. Viable statistics can be obtained on CD-ROM or via the Internet, complete with software for accessing the data. The

Reference: Marketing Management; Philip Kotler; Millennium Edition

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Name of the course: Marketing Management Course Teacher: Md. Parves Sultan E-mail: [email protected] Chapter 3; Scanning the Macro Environment of Marketing software for highly sophisticated analysis of demographic data is also readily available and decreasing in price.

Economic environment Our discussion of demographics underlined the point that markets are made up of people. Your ability to successfully market to those people depends on an accurate assessment of their buying power. It does you no good to identify a micro-market made up of consumers who would like to buy your product, if those same consumers lack the ability to pay for it. Therefore, economic factors such as income, prices, savings, debt, and credit availability demand the attention of marketers. Income distribution Nations vary greatly in their level and distribution of income. We can divide nations into four basic types of industrial structures: •

Subsistence economies are economies where the majority of the population engages in simple agriculture and there is minimal (if any) disposable income.

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Raw-material-exporting economies are economies where the exporting of natural resources is their primary revenue stream. Depending on the number of foreign residents and wealthy nationals, there may be a market for Western-style commodities and luxury goods.

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Industrializing economies are economies where 10% to 20% of the GDP comes from manufacturing. The existence of a new industrial class and a growing middle class in such economies, creates demand for new types of goods.

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Industrial economies are economies which are major exporters of manufactured goods and investment funds. Such economies possess a large middle class, which makes them good markets for a wide variety of goods. Each industrial structure carries with it unique marketing challenges. What types of products might you successfully market in a subsistence economy? How might advertising campaigns for the same product differ in industrializing and industrialized economies?

Savings, debt, and credit availability Interest rates, savings levels, and the availability of credit all have a profound impact on consumer buying patterns. What marketing opportunities are created by the easy availability of credit cards in the United States? Would the Internet, as a sales medium, be viable without credit cards? What would happen to buying patterns if Americans saved 25% of their income, rather than 4.7%?

Natural environment Any change, for good or for ill, increases economic opportunities for some, while decreasing them for others. The deterioration of the natural environment is no exception. For example, consumer concern about pollution creates pressure on companies to limit the environmental impact of their manufacturing processes. This creates opportunities for companies that supply the equipment and products that help companies achieve this goal. At the same time, suppliers of older equipment and products must adapt or face obsolescence.

Reference: Marketing Management; Philip Kotler; Millennium Edition

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Name of the course: Marketing Management Course Teacher: Md. Parves Sultan E-mail: [email protected] Chapter 3; Scanning the Macro Environment of Marketing What role do you see environmental issues playing in marketing strategies over the next 10 years? How will these issues play out in different countries and regions? Will concern for the environment result in more or less economic opportunity in the long run?

Technological environment The technological environment is perhaps the most dynamic element of the macro-environment. It also poses some of the greatest opportunities and dangers. On the one hand, new technology creates new markets and, with them, tremendous opportunities for companies that are positioned to take advantage of innovation. On the other hand, the failure to anticipate and adjust to technological change can mean a company's elimination from the marketplace. As technological change accelerates, its importance to companies will only increase. For example, in a single generation, developments in computer technology have transformed the world's economies, impacting nearly every aspect of our lives. We tend to take for granted many of the opportunities created by new technology. The course you are taking right now, however, would not have been possible only a few years ago. How has technology made your life different than that of your parents? How will your children's lives differ from yours?

Political-legal environment The political/legal environment is composed of the laws, government agencies, and pressure groups related to a company's industry or product line. Moving in cycles, this element of the macroenvironment moves from periods of deregulation through periods of increased scrutiny and punitive legislation. If a company doesn't like the political/legal environment, all it needs to do is wait, and it will change. Legislation regulating business Legislation regulating business has three main purposes: •

to protect companies from unfair competition

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to protect consumers from unfair business practices

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to protect the interests of society from unbridled business behavior

Of course, the issues are not quite as simple as this list would imply. Any set of regulations carries with it advantages and disadvantages. Regulation of the drug industry might mean safer products for consumers, but it also means higher drug prices and, at least potentially, fewer jobs in the industry. Often it is difficult to tell exactly who will gain and who will lose from regulation. Growth of special interest groups In the last three decades, groups of all kinds have come to realize that organized action can have a powerful effect on the behavior of companies and the policies of government. Companies and governments pay attention to groups that have ability to influence the actions of large numbers of people, or to control the allocation of significant resources. Often, more than one group will have a stake in a particular issues, each accusing the other of representing a "special interest," while

Reference: Marketing Management; Philip Kotler; Millennium Edition

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Name of the course: Marketing Management Course Teacher: Md. Parves Sultan E-mail: [email protected] Chapter 3; Scanning the Macro Environment of Marketing claiming that their side is acting on behalf of the general good. For example, both advocates of gay rights and Southern Baptists took an interest in Disney's employment practices. In your opinion, why did Disney resist the pressure applied by the Southern Baptists? Did moral or economic considerations determine Disney's position?

Social-cultural environment People's perceptions of themselves, others, organizations, society, nature, and the universe all effect buying patterns. Individuals allocate their limited resources to the things that are most important to them, to the things that give them satisfaction. Values, beliefs, and norms are as important as the objective need for a product in shaping a consumer's buying decisions. Most Americans, for example, believe that they need a car. Would this be the case, however, if they placed a higher priority on environmental issues than on economic welfare or individual freedom? Would Americans give up their cars if there were better public transportation options available? Core cultural values tend to persist. Most Americans believe in the value of hard work, honesty, generosity, and family. This was true 50 years ago and it will still be true 50 years from now. However, over time, secondary cultural values change and distinct subcultures emerge. Companies that recognize cultural change can reap considerable rewards. Nike, for example, has capitalized on the increased importance of exercise in the lives of Americans. To what specific groups and subcultures does Nike address it advertising messages? Why?

Reference: Marketing Management; Philip Kotler; Millennium Edition

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