MAJOR MACROENVIRONMENTS AFFECTING MARKETING
Macro environment forces profoundly affect the fortunes of marketers. In this article we review developments in the economic, social-cultural, natural, technological, and political-legal environments.
Markets require purchasing power as well as people. The available purchasing power in an economy depends on current incomes, prices, savings, debt, and credit availability. Marketers must pay careful attention to trends affecting purchasing power because they can have a strong impact on business, especially for companies whose products are geared to high-income and price-sensitive consumers.
Nations vary greatly in level and distribution of income and industrial structure. There are four types of industrial structures:
* Subsistence economies-few opportunities for marketers
* Raw-material exporting economies like Zaire (copper) and Saudi Arabia (oil), with good markets for equipment, tools, supplies, and luxury goods for rich
* Industrializing economies, like India, Egypt, and the Philippines, where a new rich class and a growing middle class demand new types of goods
* Industrial economies, which are rich markets for all sorts of goods.
In a global economy, marketers need to pay attention to the shifting income distribution in countries around the world, particularly countries where affluence levels are rising.
Marketers often distinguish countries with five different income-distribution patterns:
1. Very low incomes.
2. Mostly low incomes;
3. Very low, very high incomes;
4. Low medium, high incomes and
5. Mostly medium incomes.
Consider the market for Lamborghinis, an automobile costing more than $150,000. The market would be very small in countries with type (1) and (2) income patterns. One of the largest single markets for Lamborghinis turns out to be Portugal [income pattern (3)] â€“one of the poorer countries in Western Europe, but with enough wealthy families to afford expensive cars.
Over the last three decades in the United States, the rich have grown richer, the middle class has shrunk, and the poor have remained poor. From 1973 to 1999, earnings for US households in the top 5% of the income distribution grew 65%, compared with growth of 11% for the middle class households during the same period. This is leading to a two-tier US market, with affluent people able to buy expensive goods and working-class people having to spend more carefully, shopping at discount stores and factory outlet malls, and selecting less expensive store brands.
Conventional retailers who offer medium priced goods are the most vulnerable to these changes. Companies that respond to the trend by tailoring their products and pitches to these two very different Americas stand to gain.
Savings, Debt, and Credit Availability
Consumer expenditures are affected by savings, debt, and credit availability. US consumers have a high debt-to-income ratio, which slows down further expenditures on housing and large ticket items. Credit is very much available in the United States but at fairly high interest rates, especially to lower-income borrowers.
Here the Internet can offer a helping hand: Consumers seeking a mortgage can go to lendingtree.com, fill out a single loan application, and receive several loan package proposals from competing banks within 48 hours.
Outsourcing and Free Trade
An economic issue of increasing importance is the migration of manufacturers and service jobs off shore. Outsourcing is seen as a competitive necessity by many firms, but as a cause of unemployment by many domestic workers. For example, in December 2003, IBM decided to move the jobs of nearly 5,000 programs to India and China. GE has moved of its research and development overseas. Microsoft, Dell, American Express, and virtually every major multinational from Accenture to Yahoo have already off-shored work or are considering doing so.
The savings are dramatic, with companies cutting 20 to 70 % of their labor costs, assuming the work is of comparable quality. However, beyond the short-term gain for employers it is pain for displaced domestic white-collar employees and is the scarier long-term prospect. The exodus of programming work, in particular throws the future of Americaâ€™s tech dominance into doubt. Many wonder whether the United States can continue to lead the Industry as software programming spreads around the globe from India to Bulgaria, In Mumbai, for example, there is high-speed Internet access, a world-class university, and a venture capital industryâ€”all the ingredients you need to spawn the next earthshaking technology innovation.
Outside the labor market, advocates for and against free trade debate the merits of protective tariffs.
We have observed that. Entrepreneurs from U.S and other advanced countries are not only out sourcing work from large companies like Infosys, Satyam Computers, WIPRO but also from proprietary companies like Sphere IDC at Mumbai in India. The software specialists will remain cost competitive for a long time to come as their overheads are the lowest, and each specialist is capable of putting on 72 hours work per week. In India weekend is forgotten by many enthusiastic software technology specialists who want to convert quality work into cash as fast as possible and the belief that â€˜customer is Godâ€™.