Just as no single person can function on their own, neither can a company. All companies are bound by global trends and standard practices, a phenomenon that is called the ‘macro environment.’ A macro environment can mean opportunities for companies that are aware of the trends and can react and adapt quickly. Those that stay ahead of consumer expectations and market volatility will always do well. However, macro environments can pose a threat to any company that is slow to react to changes and won’t adapt.
In this article, we go in-depth on the macro environment and what it means for every business out there. We talk about the six different factors making up the macro environment and various analytical models that can be used to analyze it. Read on to learn more about the macro environment.
Six Forces in the Macroenvironment
There are six forces that make up the macro environment;
- Demographic
- Economic
- Political
- Ecological
- Socio-Cultural &
- Technological forces
This is known as the DEPEST model (also referred to as DESTEP). Another, slightly different analysis of the Macro Environment is the PESTLE-analysis (replacing the Demographic factor with a Legal one).
Other popular, related models that can help you understand the macro environment include Porter’s Five Forces and Porter’s Diamond models, which focus more on the competitive environment but should be applied hand in hand with macro environment analysis. Whichever model helps you best understand, what’s important is that you’re aware of all contributing factors to the macro environment so that no single factor catches you or your marketing strategy by surprise.
How the Six Macroenvironmental Forces Affect a Company
Demographic Forces
Let’s begin with the first consideration for all marketers, demographic forces. The term ‘demographic forces’ defines people, specifically consumers, and their changing demands. It’s critically important that marketers stay ahead of what consumers want and ensure that they’re always tailoring their message to exactly what consumers want to hear. Staying ahead of the market means knowing the consumers intimately; this means understanding their location, population density, age, gender, occupation, and many other statistics. Knowing consumers’ political leanings, diet trends, pop culture knowledge, and more are contributing factors to understanding and catering to the macro environment. There’s a reason that successful companies are constantly changing marketing strategies; no idea comes from nowhere.
Successful marketers respond to demographic forces and adjust their strategy to meet the consumer where they are in the present moment[1]. Let’s have a look at some of the most important demographic forces in the macro environment:
Global Population Growth
An issue that has concerned us all since the 1970s and a big concern for marketers is global population growth. The global population is expanding at unprecedented rates, even as birth rates decline in most high-population countries worldwide[2]. Thanks to advances in modern medicine, people are staying alive longer, and it’s shifting population density while also shifting age structure. The highest population growth rates are happening outside of the world’s twenty richest countries. This means that over time, more and more consumers are increasingly located in poorer countries and cities. This trend is causing companies with high-valued products to consider producing increasingly low-priced alternatives that will be more popular in these regions.
For companies that are concerned about brand integrity, this can mean creating alternate product SKUs that are marketed without a connection to their original range of products. At the same time, other companies are starting subsidiaries to sell cheaper products that are entirely removed from the main brands. However you choose to react to this data, what matters is that every year the number of consumers living in poorer countries is growing, and this will affect global distribution and the macro environment.
Age Structure
We continue our exploration into the macro environment with age structure. We briefly mentioned age structure earlier, but the issue goes deeper than just its connection to population growth; this issue affects the viability of entire categories of the market. While the population is growing older, the number of babies being born is shrinking. In the US, the annual rate of childbirth has declined by 20% in the last five years, and Singapore has become desperate enough to offer couples a ‘baby bonus’ of up to $10,000 for having a baby[3]. In the macro environment we’re currently living in, couples are far more likely to raise a pet than a child, and globally, consumers are far more likely to be old than young. This has caused a boom in high-priced pet products and a decline in investment in products that relate to early childhood. This is an important macro-environmental factor to consider when deciding on a new demographic to focus your marketing on.
Changing Family Structures
An issue that concerns many people, especially those on the conservative side of politics, is changing family structure. An enormous factor in the macro environment is the change in family structures all over the world. The time of nuclear families is long gone and is largely maintained these days by a very small politically conservative side of the market. The majority of families in the current environment are a combination of single parents, childless, or same-gender couples. Young couples that either have no children or are raising pets as their children have a larger disposable income than those raising kids, which will influence their spending habits. Same-gender couples are more likely to be young, less likely to have kids, and much more likely to be politically liberal and have disposable income. If you’re marketing a product that only appeals to traditional nuclear families, or if your marketing strategy only features traditional families, you may be leaving out a large portion of the consumer base. It’s becoming increasingly rare to feature a white, traditional, two-parent two-child family in marketing materials anymore.
Where that once represented the majority of the consumer market, it would be foolish to rely on campaigns of yesteryear and not adapt to where the market is headed. Keeping an eye on macro environment forces and adapting means creating marketing materials that feature racial diversity, sexual orientation diversity, as well as pets, children, and even plants as plant-parenting continues to become more popular. Probably the best example of the macro environment in marketing being executed perfectly is the 2017 HBO feature presentation opening clip. It plays before all HBO films and shows families of all varieties settling in to enjoy an HBO film. Using this clip as marketing ensures that all consumers feel represented and fosters a feeling of loyalty and familiarity with the product.
Economic Factors
Critical to the success of any business is the consideration of economic factors wherever they are. When KFC first moved into China in the late 1980s, it did so very quickly after China opened its borders to foreign investment. It was well received because the meat was such a luxury to everyday Chinese residents at the time, and then came a foreign chicken restaurant with large pieces of chicken being sold for reasonable prices[4]. KFC took a strategic loss in the early years because they were burying themselves into the local culture. This paid off and has resulted in there being more KFCs in China today than McDonald’s and Burger King combined. By the time McDonald’s entered, the market wasn’t desperate for them, and it was difficult for McDonald’s to scale to the level needed to make a profit when selling hamburgers so cheaply. They failed so miserably that they had to sell their restaurants to a local company that now runs Chinese McDonald’s restaurants. This local company called ‘Golden Arches’ runs all McDonald’s restaurants in China, all because they messed up the timing of their market penetration.
All over the world, countries fall into one of two possible income brackets. Countries are either emerging or wealthy, but knowing when a country will move from one to the other can be critical. Keeping track of countries and their ever-changing GDPs, tariffs, political climate, unemployment, inflation, spending patterns, and other indicators can be all the difference when it comes to either succeeding or failing with international sales. Even the biggest players get it wrong, but the closer that you’re keeping an eye on the macro environment in marketing and the changing local climate, the more likely you are to market a product at the perfect moment and see an enormous return.
Socio-Cultural Factors
An element that many marketers don’t think of until it’s too late is socio-economic factors. Once you’ve penetrated a market and are successfully marketing your product, the biggest hurdle to avoid is causing any local cultural or religious offenses. Seeming insensitive to local customs and beliefs can spell death for an international brand because of cultural blunders, but can be avoided with proper prior research. Whether certain cultures won’t eat certain foods on certain days, have differing views on political issues, or have problematic relationships with other countries or customs; it pays to keep a close eye on socio-cultural factors to ensure that you’re seen as trustworthy and a good fit for the local culture (much like KFC in China from our example above).
Technological Factors
Don’t let age or experience keep you from keeping up with technological factors. There is a long history of businesses that are taken down because they failed to keep up with technological innovation. Whether failing to create an app or even going online, falling behind the technological curb can be a death sentence for companies in any sector. Companies that embrace innovation and work hard to stay ahead of technological trends are more visible to consumers and tend to be seen as more trustworthy. It’s important that marketers keep a close eye on the technical environment to ensure that they’re not left behind and forgotten by consumers. Falling behind causes products to be outdated and forgotten.
Blackberry was the industry leader in the smartphone market, peaking in 2010 with 43% of the market cornered[5]. They had a booming stock price, high investor confidence, and the power and resources to continue innovation and stamp out all competition. But then Steve Jobs announced that he was creating a phone with only one button and an enormous screen. Blackberry should have seen Jobs’ track record and assumed that he was once again redefining an industry. They should have put their scientists and engineers to work building a better iPhone than the one Jobs had been working on, but instead, they scoffed. They believed that consumers relied on their physical keyboards and would never switch to typing on a screen, which at the time was clunky and slow. They couldn’t imagine consumers being willing to change, so they ignored Apple until it was too late. Jobs was looking into the future, while Blackberry imagined the future through the lens of the present day.
Innovation isn’t the only area of concern for marketers when it comes to technological factors in the macro environment. For a marketer, perhaps the most important consideration is how technology is implemented when marketing. Using technology in a bad way to promote the value of a brand can be just as lethal as not keeping up at all.
Take Disney as a positive example. In 2011, Disney leveraged their new store in Times Square, using an enormous video billboard and video technology to create a live marketing event that they later turned into a TV commercial. Passersby would wander past the store, and as they did, they would see themselves up on the enormous screen. But not only that, Disney used technology to show them standing next to a famous Disney character. On the screen, they could see themselves in real life, but instead of merely standing on a sidewalk, they’d be next to Mickey Mouse, Donald Duck, or someone else from the Disney canon. It made for an incredible live experience and an even better commercial.
Now take McDonald’s, which wanted to use Twitter and a high-tech website to advertise its ‘Create Your Taste’ campaign. They built a website on which people could design and name a burger. They could then vote on other burgers and push them onto the front page of the website. The site was automatic and high-tech. However, it didn’t take into account that people would vote for obscene, offensive, and disgusting burger names, and then Tweet their burgers to millions of people online. McDonald’s was a laughing stock and had to delete the website. The campaign was ruined. It was advanced technology that the marketers poorly utilized.
Ecological Considerations
No matter how you feel politically, ecological considerations should be at the forefront of every marketer’s mind. People around the world have never been more aware of or concerned about the environment than they are right now in this present moment. As governments continue to move slowly in enacting environmental legislation, people become more frustrated and insistent on demanding change. Because of this, companies that share consumers’ concerns for the planet are far easier to market for because they can begin their campaigns on the right foot. Putting forward the company’s environmental position in marketing campaigns is a low-effort way to gain maximum trust and appreciation from a large segment of consumers.
Important trends that concern consumers include the growing shortage of raw materials and the increased use of non-renewable resources. Steps that businesses can take to improve their carbon footprint, such as switching to environmentally conscious packaging or donating money to an environmental cause, can go a long way in improving consumer confidence. For some food-focused companies, this has meant switching their utensils to edible utensils made from hardened forms of jelly; while others are using a styrofoam alternative that’s produced using mushrooms. Some of these changes come with a financial cost, but the benefit added from increased consumer spending can more than make up for the increased expense.
Political Forces
Political forces shape every nation, and it’s a big consideration for all marketers. They are often a consideration that is ignored by larger companies, only for them to be forced to spend millions of dollars later on legal fees when local governments litigate[6]. Uber is a prime example of a large company that moved into municipalities and ran its business its own way, uncaring about local laws. Luckily for them, the public was so mad at traditional taxi drivers at the time that they supported Uber’s strategy, which stopped a lot of governments from taking them to court, but not all.
It’s important that you study local laws and understand them perfectly; nothing should be assumed based on the country that you and your company are from. You should know which rules you can ignore and which must be followed in the letter. Are there any laws enforced in the country you want to expand into that have flatly outlawed the products you intend to sell?
Back in 2013, Durex launched a campaign called ‘SOS Condom’, which would allow people to order a single condom to be delivered to their address during times when they may have wanted to engage in unexpected sexual intercourse[7]. The problem? They launched it in the exceptionally politically conservative city of Dubai in the United Arab Emirates. The campaign did not last long in a culture such as this. Know the political climate of the area you wish to expand into and don’t let ignorance within this macro environment in marketing allow you to repeat the mistakes made by others.
Closing Words
As we have seen, companies around the world are surrounded by a complex macro environment. One of the most important things a marketer can ever do in their career is keep a very close eye on changing macro-environmental factors. The environment consists of a large variety of different factors and forces, all of which may shape opportunities for companies but can just as easily pose threats. Therefore, it’s critically important that marketers understand all contributing factors and have an eye on the macro environment as it develops; only then can you expect your business to grow and thrive.
Remember these key points on the macro environment in marketing:
- There are many contributing factors to the global macro environment, and only by taking them all into consideration can you ensure the success of your future business.
- Demographic forces, global population growth, age structure, changing family structures, economic factors, socio-cultural factors, technological factors, ecological considerations, and political forces all play a part in making up the macro environment.
- Even some of the biggest companies in the world have tried and failed to market effectively when they don’t take heed of the macro environment carefully.
[1] CFI Team, Demographics, Corporate Finance Institute. 2021. https://corporatefinanceinstitute.com/resources/knowledge/economics/demographics/
[2] Gallagher, James. Fertility Rate: ‘Jaw-Dropping’ Global Crash in Children Being Born. BBC. 2020. https://www.bbc.com/news/health-53409521
[3] Ministry of Social and Family Development Information Website Sponsored by the Government of Singapore. Accessed 2022. https://www.babybonus.msf.gov.sg/Pages/Home.aspx
[4] Fraser, Jordan. KFC Won the Battle for China. Medium. 2019. https://medium.com/swlh/kfc-won-the-battle-for-china-475ed045b03e
[5] Appolonia, Alexandra. Nixdorf, Katie, Leslie, Robert. How Blackberry Went from Controlling the Smartphone Market to a Phone of the Past. Business Insider. 2022. https://www.businessinsider.com/blackberry-smartphone-rise-fall-mobile-failure-innovate-2019-11
[6] Hull, Dana, Berthelot, Benoit. Uber Lobbied Politicians, Broke Laws in Global Push: Reports, Bloomberg, 2022. https://www.bloomberg.com/news/articles/2022-07-10/uber-lobbied-politicians-broke-laws-in-global-push-reports-say
[7] Stampler, Laura. Durex Started a Condom Delivery Service in Dubai, Business Insider. 2013. https://www.businessinsider.com/durex-started-a-condom-delivery-service-in-dubai-2013-1
