Question

Question2 marks 30 ?'sヲ9 // 21 Discuss the political, social and economic components that characterise the macro environment in government (marks 15)

Answer 1

The macro or the broad environment includes larger societal forces which affect society as a whole. The broad environment is made up of six components: demographic, economic, physical, technological, political-legal, and social-cultural environment. The marketing environment is made up of the internal and external environment of the business. While the internal environment can be controlled, the business has very less or no control over the external environment.

Now we are discussing economic, social and political components as below.

Economic Environment:-

The economic environment constitutes factors which influence customers’ purchasing power and spending patterns. These factors include the GDP, GNP, interest rates, inflation, income distribution, government funding and subsidies, and other major economic variables. Economic forces relate to factors that affect consumer purchasing power and spending patterns. For instance, a company should never start exporting to a country before having examined how much people will be able to spend. Important criteria are GDP, GDP real growth rate, GNI, Import Duty rate and sales tax/ VAT, Unemployment, Inflation, Disposable personal income, and Spending Patterns.

Social-Cultural Environment:-

The social-cultural aspect of the macro environment is made up of the lifestyle, values, culture, prejudice, and beliefs of the people. This differs in different regions. The Socio-Cultural forces link to factors that affect society’s basic values, preferences, and behavior. The basis for these factors is formed by the fact that people are part of a society and cultural group that shapes their beliefs and values. Many cultural blunders occur due to the failure of businesses in understanding foreign cultures. For instance, symbols may carry a negative meaning in another culture. To understand these forces, Hofstede’s cultural dimensions can be used: Power Distance, Individualism versus Collectivism, Masculinity versus Femininity, Uncertainty Avoidance, etc.

Political-Legal Environment:-

The political & Legal environment includes laws and government’s policies prevailing in the country. It also includes other pressure groups and agencies which influence or limit the working of the industry and/or the business in the society. Every business is limited by the political environment. This involves laws, government agencies, and pressure groups. These influence and restrict organizations and individuals in a society. Therefore, marketing decisions are strongly influenced and affected by developments in the political environment.

Before entering a new market in a foreign country, the company should know everything about the legal and political environment. How will the legislation affect the business? What rules does it need to obey? What laws may limit the company’s ability to be successful? For example, laws covering issues such as environmental protection, product safety regulations, competition, pricing, etc. might require the firm to adopt certain aspects and strategies to the new market. As we have seen, the company is surrounded by a complex environment. The Macro Environment consists of a large variety of different forces. All of these may shape opportunities for the company, but could also pose threats. Therefore, it is of critical importance that marketers understand and have an eye on development in the Macro Environment, to make their business grow in the long term.