What is Macro Environment?

Although businesses are autonomous in their identity and functioning, yet they are bound together within a common environment. Roughly, there are two kinds of atmosphere that exert some forces on the business activities and the long-term market existence of an organization.

Demography, Economy, Physical, Socio-Cultural, Politico-Legal and Technological forces constitute the external or macro environment whereas Consumers, Competitors, Suppliers, Dealers and Distributors, Investors and the common Public comprise the internal or microenvironment.

Both micro and macro environment components have a significant share in realizing the vision, strategies, and objectives of an organization. In the business front, all these forces play a major role in shaping marketing policies, programs and campaigns.

The macro environment is the broader context within which a company conducts its commercial operations. It is the fundamental guiding factor throwing light on the overall market conditions like nature and kind of people, society, culture, lifestyle, the role of government, economical condition along with presence and use of technology. A close analysis of these aspects informs the organizational heads of the environment in which they are about to operate and most importantly if this is what they are looking for.

Role of Macro Environment in Business

As the principle guiding force, macro environment agents play a pivotal role in determining the decisions of an organization. It helps the management to have a complete understanding of the external or bigger environment prevalent in the region.

It further facilitates the decision-making bodies to plan and devise the most appropriate strategies and goals; all of which shall hit the target in the given market scenario.

Such aspects make the macro environment the parent arm where planning, strategizing and decision-making are performed with the microenvironment being the implementation organ of all these features in the practical field. Hence, a proper understanding of the external factors is crucial for the successful conduct of marketing and communication plans.

Six Macro Environment forces – The DESKTEP model

1. Demography

It has a broad implication referring to the physical attributes of the population of the targeted region (size, age, gender, occupation, density), population growth rate, migration trends (inter-migration or intra-migration), changes in demographic structure, nature and characteristics of communities, among others. A comprehensive understanding of all such features gives a clear picture of the overall demographic composition of the region so that marketers can pinpoint the viable audience group within that region, as their prime targets.

For example, if the region is dominated by matured and senior adults like that in US, marketers will never try to sell any youth-centric product over there. Instead, they will either think of some commodity that will appeal to the majority of the demography or move out from the place. At the same time, if the region is flooded with youths, the same heads will think of attracting the population towards their product.

Migration trends reveal another significant characteristic of demography. For example, if marketers find that a major proportion of population migrates from rural to urban areas within the country; they can immediately make the commodities available within their reach while conducting campaigns and strategizing communications in all areas.

While observing the present demographical structure, marketers also pay heed to forecasted changes and shifts in the long-run. For example, with growing urbanization in semi-urban areas, joint families can break down into single units, or a sudden government’s policy to limit population growth can result in an adult demography in the long run. With this, they shall be prepared for marketing to the upcoming demography and make the necessary adjustments in their plans.

2. Economy

It includes the overall economic scenario of the particular region. Is it a mixed economy where both government and private players enjoy a 50-50 share in every sector? Or is it a capitalistic economy where the government has no control over the market except for formulating laws and securing law and order in the state?

In case of the latter, marketers will definitely have a wider edge and be free of direct governmental interference in their business operations. Besides these, some other statistics like current GDP, GNP, PCI, the standard of living, purchase pattern and frequency of the target group will also enable the management in taking important decisions especially those relating to product prices.

3. Socio-Culture

The social structure of a place gives an idea about the predominant culture and psychographics of the target audience. Organisations need to know if the area has a mixed population of various communities, for example, most metropolitan cities or it has a major share of a local population like the Marathi in Maharashtra, Bengalis in West Bengal, etc.

It may so happen that a significant area of the targeted region is inhabited by tribal groups having their distinct culture and lifestyle. In such a case, the company heads must take the right approach to communicate to such an audience without hurting the sentiments of the unique clusters.

Socio-cultural aspect also talks about the eating habits of the people. As an example, people living in the western world prefer to have high protein food like beef, ham, etc. which is why their burgers come in that fashion. However, people living in the tropics live on chicken, mutton and eggs so do their burgers. Hence, eating habit and consumption pattern reveals a lot about the probable likes, dislikes, and preferences of consumers.

4. Technology

Before investing in marketing activities, an organization must conduct a 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.

5. Ecology

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. By having a concrete understanding of all these features, marketers will know where to sell what kind of products.

For example, products like heaters and electric blankets will never be of any use to equatorial and tropical regions; although these are the highly populated zones in the world. Again, air conditioners or coolers will never appeal to the Western countries, living in the temperate zone. Therefore, before launching a product, successful companies study the environment and ecology of a place to know about the needs and demands of its inhabitants.

6. Political Forces

Perhaps the most important of all external agents, political forces of a country is 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.

Even before thinking of any business, an organization always observes the political and legal situation of a nation. It is because the unstable government or political tensions will act as a barrier to implementing the marketing strategies.

Interestingly, all the above components are often inter-linked. Ecology of an area determines its demography (more people living in tropical zones), economic and political affairs affect demand and supply of commodities and technology plays a significant role in shaping social thinking and cultural lifestyle of people. The macro environment is, therefore, an umbrella that engulfs all the above components and lays a comprehensive path to plan and implement business policies of an organization.