Answer :

A firm has no control over these factors. These factors constitute macro-marketing environment. For a firm, the only option is to accept and respect these factors, and adopt and adjust with them. Management must respond favorably to such environment in order to exploit the emerging opportunities.

These factors include:

1. Demographic Factors:

Demographic factors are related to population. Marketer must study these factors due to the fact that the market is made of people, and people constitute the population. Demographic study provides customer profile that is basic need for market segmentation as well as selecting target market. Therefore, demographic variables have direct and notable impact on firm’s operations. A marketer must analyze demographic factors to get idea about number and type of people to be served as customers.

Demographic variables include:

i. Total population and population growth rate

ii. Age groups and gender distribution

iii. Geographical (area-wise) concentration of population

iv. Proportion of rural v/s urban population

v. Literacy rate and level of education

vi. Population mobility (geographical shift) or migration rate

vii. Family system and household pattern

viii. Occupation-based classification of population.

2. Ecological Factors:

These factors primarily concern with ecological (natural) environment. They are closely related to protection of ecological environment and pollutions – air, water, noise, and land pollutions. At present, the global-level efforts are made to protect environment.

Such efforts can lay down certain restrictions in terms of use of natural resources, cost of raw material, quality of products, production process and technology, disposal of wastes, pollution control measures, and so on. These factors affect to the several aspects of production, distribution, and disposal of products. A firm must understand that people want better quality products at low price, but not at a cost of quality of life.

Analysis of ecological environment involves:

i. Availability and use of natural resources

ii. Pollution and pollution control measures

iii. Contemporary legal provisions

iv. Ecological awareness and use of eco-friendly products

v. Contribution of corporate world for protection of environment

vi. Working of national and international agencies/organisations for protection of environment

vii. World-wide efforts for protection of environment.

3. Economic Factors:

Economic environment consists of economic forces that affect company’s costs, revenues, and profits on one hand, and customers’ purchasing powers and willingness to spend on the other hand.

Economic forces include a large number of variables, such as:

i. Economic growth rate

ii. Interest rates

iii. Inflation rate

iv. Functioning of stock markets and commodity markets

v. Industrial and agricultural policies

vi. Fiscal and monetary policies

vii. Export-import policies

viii. Liberalization, globalization and privatization processes

ix. Government’s long-term planning and investment in infrastructural facilities

x. Quality and availability of basic facilities/services like transportation, banking, warehousing, insurance, communication, etc.

4. Socio-cultural Factors:

Social and cultural factors affect consumers’ tastes and preferences. People buy or favour those products which suit or complement their social and cultural norms, values, traditions, and habits. Knowing these factors of the target market, a manager can effectively design product- mix and promotional programme.

Social-cultural environment is ever-changing and requires the manager to undergo adjustment and readjustment in his marketing mix to balance between what consumers want and what company offers. Ignoring or underestimating this environment can harm severely the company’s interest.

Socio-cultural variables are:

i. Cultural norms, values, beliefs, and rituals

ii. Castes, creeds, and racial aspects

iii. Social traditions, customs, habits, and superstitions

iv. Family and reference groups

v. Age and life-cycle stage

vi. Role of women

vii. Social classes

viii. Religious events and festivals.

5. Political and Legal Factors:

A firm has to operate within the present political system and legal framework. Political factors affect economic policies. Every marketing decision is subject to be affected by political and legal factors. Governments have formulated a series of legislations to regulate business operations to restrict unfair trade practices and protect consumer and social interests. These laws may create new opportunities or challenges for businessmen. A manager must know business philosophy and approach of the current governments, and legal provisions that he has to observe while dealing with other parties.

Some of political and legal factors are:

i. Political philosophy

ii. Political and legal reforms

iii. Government approach to different sectors

iv. Political stability

v. Acts or legal provisions relating to business operations and recent amendments

vi. Working of judiciary and administrative machineries.

6. International Environment:

The world had become a global village. Most countries have permitted free trade (with little restrictions). A marketer has to deal with and satisfy cosmopolitan customers. Liberalization, globalization, and privatization promoted multinational companies that carry their operations in many countries. A businessman is required to follow global business theory – act locally, but think globally. Every firm, whether large or small, is, directly or indirectly, influenced by international economic and political forces.

These variables include:

i. Working of international agencies and organisations (World Bank, UNO, etc.)

ii. Functioning of MNCs – Multinational Companies

iii. Export-import policies of different nations

iv. Availability of global aids and assistance

v. Global peace v/s conflict

vi. Liberalization, privatization, and globalization pace

vii. International agreements among countries

viii. Political stability in the dominant countries

ix. International business norms and values.

7. Technological Factors:

Technological factors affect the firm’s production process, product quality, cost effectiveness, and, hence, competitive ability. A wise manager must know the latest technology in the relevant field. Technology has released wonders in fields of business transactions, communication, entertainment, medical science, agriculture, and manufacturing systems.

At the same time, it has released horrors in fields of hydrogen bombs, horrible chemical weapons, crime styles, deterioration of ecological environment, and so forth. Every new technology is a force for creative destruction. New technology compels old one to exit. New technology brings superior products having more capacity to satisfy consumer needs.

Following technological factors are important:

i. Suitability and availability of technology

ii. Pace of technological change

iii. Replacement costs

iv. Opportunities for innovation

v. Research and development (R & D) budget

vi. Government role in developing and/or importing new technology

vii. Regulations affecting technological change/reforms

viii. Technological transfer among nations.