Micro Environment on Marketing

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The wider macro-environment

Changes in the wider macro-environment may not be as close to the marketing firm’s day-to-day operations, but they are just as important. The main factors making up these wider macro-environmental forces fall into four groups.

Political and legal factors
Economic factors
Social and cultural factors
Technological factors
(Often referred to as the ‘PEST’ factors in the marketing analytical context, a useful aide-memoire, although in some texts it is sometimes referred to as ‘STEP’). To this is sometimes added ‘Competitive factors’ and although ‘PEST’ analysis relates to a specific organisation ‘Competitive factors’ tend to be subsumed under ‘Economic factors’. Such a PEST analysis means listing all possible points that may affect the organisation under review under each of the P.E.S.T. headings. Recently, some texts have added ‘L’ (standing for legal) and ‘E’ (standing for environmental) to this classification, making the acronym ‘PESTLE’. Even more recently, some writers have incorporated yet another ‘E’ (standing for ecological) with the new acronym ‘STEEPLE’.

3.1 The political and legal environment

To many companies, domestic political considerations are likely to be of prime concern. However, firms involved in international operations are faced with the additional dimension of international political developments. Many firms export and may have joint ventures or subsidiary companies abroad. In many countries, particularly those in the so-called ‘Third World’ or more latterly termed ‘Developing Nations’, the domestic political and economic situation is usually less stable than in the UK. Marketing firms operating in such volatile conditions clearly have to monitor the local political situation very carefully.

Many of the legal, economic and social developments, in our own society and in others, are the direct result of political decisions put into practice, for example the privatization of state industries or the control of inflation.

In summary, whatever industry the marketing firm is involved in, changes in the political and legal environments at both the domestic and international levels can affect the company and therefore needs to be fully understood.

3.2 The economic environment

Economic factors are of concern to marketing firms because they are likely to influence, among other things, demand, costs, prices and profits. These economic factors are largely outside the control of the individual firm, but their effects on individual enterprises can be profound. Political and economic forces are often strongly related. A much quoted example in this context is the ‘oil crisis’ caused by the Middle East War in 1973 which produced economic shock waves throughout the Western world, resulting in dramatically increased crude oil prices. This, in turn increased energy costs as well as the cost of many oil-based raw materials such as plastics and synthetic fibres. This contributed significantly to a world economic recession, and it all serves to demonstrate how dramatic economic change can upset the traditional structures and balances in the world business environment.

As can be seen, changes in world economic forces are potentially highly significant to marketing firms, particularly those engaged in international marketing. However, an understanding of economic changes and forces in the domestic economy is also of vital importance as such forces have the most immediate impact.

One such factor is a high level of unemployment, which decreases the effective demand for many luxury consumer goods, adversely affecting the demand for the industrial machinery required to produce such goods. Other domestic economic variables are the rate of inflation and the level of domestic interest rates, which affect the potential return from new investments and can inhibit the adoption and diffusion of new technologies. In addition to these more indirect factors, competitive firms can...
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