Macro environments and breakfast cereals 1. Introduction Company A’s cereals are manufacturers of healthy and nutritional breakfast cereals and ready to go breakfast bars. While their main manufacturing plant is located in Brisbane, their products are distributed in major supermarkets Australia wide. Knowing that breakfast is considered by consumers as the most important meal of the day the company’s focus is on offering a multiple product range to various target groups with the added benefits of additional fiber and cholesterol lowering properties.
Only by complying with strict guidelines within governmental regulations, this company is able to promote the health benefits of consuming their products and endorsements noted on their packaging clearly shows consumers that they are able to stand by their claims. A recent change in their products packaging has also resulted in the company’s conscious efforts to save the planets resources and approval has been observed from environmental groups.
There are six major forces this company considers when marketing products and these are demographic, natural, economic, cultural, technology and political (Kotler, Brown, Burton, Deans, & Armstrong, 2010). This paper will briefly outline each in relation to Company A’s cereals. 2. Macro-environments a. Demographic Environment Of major interests to marketers is the demographic environment as it involves the study of people, population density, age, sex, race and occupation.
These are just some of the areas it covers and by studying these areas companies are able to determine strategic plans to market their products at the right targets (Kotler, et al. , 2010, p. 137). One area that has changed significantly is the aging population, with decreased fertility and increases in life expectancy attributed to advancements in medical care and more focus on health and nutrition, people are living longer than 20 years ago. Over the last two decades from 30 June 1990 to 30 June 2010, the median age of the population has increased by 4. 8 years from 32. 1 up to 36. 9 years.
With this information, company A’s cereals can look at targeting their cereals around this median age group. Age remained steady between 30 June 09 to 30 June 2010 and is predicted that over the next several decades that the aging population will have a significant impact in Australia for health, housing and labor demands in the workforce (“Australian Bureau of Statistics,” 2010). This changes areas of marketing for some organisations, for as people age their requirements change or are different. What consumers wanted or needed are no longer the same requirements today (Lindberg, 1950). . Natural Environment The Natural environment affects “natural resources that are needed as inputs by marketers or which are affected by marketing activities” (Kotler, et al. , 2010, p. 151). The society today is more aware of the implications large manufacturers have on the planet. Conservation movement groups have an enormous impact in consumer’s awareness and opinion. These movement groups can create negative exposure to company’s products, which may result in consumers boycotting them altogether (“Consumer group complains to FTC about Quaker Oats’ cereal ads,” 1988).
To overcome issues associated with environmental groups, organisations today are linking up with eco groups in a bid to win approval and continued business from consumers (Carey & Arndt, 2007). The natural environment is an area of concern for marketers. These areas are important for the cereal industry as the main component or raw products utilise the natural environment for harvesting of their products like oat, rye and grains (Behling, 2005). Another factor for consideration is the shortages of raw products or resources.
Perry Pascarella the executive editor of Industry Week magazine predicted decades ago that companies will face this problem and also suggested that recycling would become an economic necessity (“Government rules, other changes make life chancy for marketers,” 1977). Cereal prices are likely to increase if economic consumptions of the required raw products increases and demand outweighs availability. This may require multiple sourcing points globally, resulting in driving prices up (Parker, 2005). Company A’s cereals have redundant suppliers on hand in various locations.
By having multiple suppliers, it mitigates against unforeseen natural disasters that may affect their supplies of raw products. c. Economic Environment Kotler describes the economic environment as “factors that affect consumer buying power and spending patterns” (Kotler, et al. , 2010, p. 149). For consumers to be able to spend they need to have disposable income. Some of the factors included in the economic environment, but not limited to; income, employment levels, the value of the Australian dollar and the global economy.
There are changes occurring within the economic environment all the time, particularly within income structure. Average disposable incomes vary according to states, with Tasmania and South Australia recorded at 19 percent below the national average (“Australian Bureau of Statistics,” 2008). Due to higher living costs, more women are returning to work resulting in dual income families. Many consumers are feeling the rising cost of living as opposed to increases in incomes and people have been changing the way they buy in efforts to save money.
Bernstein, a US consumer survey, recently showed that breakfast cereals had been traded down by 27 percent of the respondents surveyed to cheaper alternates (Dibadj, Powers, & Keswani, 2010). Consumers are becoming more careful in their spending whilst the economy is attempting to make a recovery of the recent global recession (Balfour, 2009). d. Technological Environment Kotler suggests that the technological environment is the most dramatic of the macro environments for marketers and should closely watch particular trends appearing (Kotler, et al. 2010). One trend is with which the pace that technology changes. Updates are consistent and newer technology supersedes old. Computers are perfect examples of rapid change (Weber, 2008). For Company A cereal company, this can be beneficial for advancements in automated processing equipment, allowing for fasting processes of raw material to finished product enabling them to deliver more efficiently to the wholesalers or buyers and preventing product stock outs (“Skinner’s travels: Why a Harvard professor supports technological advancement,” 1982).
Another area is in the irrigation systems, by having computerized irrigation crops are consistently watered correctly ensuring that water consumption is resourceful (“Computerized irrigation helps conserve water,” 2001). Advancements within the computer technology allows companies to collaborate with global supplies, sister manufacturing plants, distribution centers and logistic transport companies much quicker reducing lead times on customers order satisfaction (Coyle, Langley, Gibson, Novack, & Bardi, 2008, p. 26). Federal and state governments within Australia encourage organizations to invest more into R&D to offset trade deficits with increases in export earnings (Kotler, et al. , 2010, p. 154). Firms are pressed to control costs during recessions, if firms elect to cut costs to R&D programs, they may lose long-term advantages. Srinivasan suggests that during a recession an increase in R&D increases companies profits (Srinivasan, Lilien, & Sridhar, 2011). e. Political Environment
The political environment has a strong influence in the marketing decisions of corporations as stated by Kotler and consists of government agencies, state or federal laws and any pressure groups that limit or influence organisations (Kotler, et al. , 2010). As state laws vary, marketers need to know each state law that may be applicable to their industry. As the breakfast cereals are part of the Food industry, there are certain requirements that companies must follow for example the listing of all ingredients or additives be printed on the product packaging (“Bill to require listing of fat, cholesterol content of foods,” 1988).
Company A’s cereals ensure that they follow the laws pertaining to the health claims on their products. Endorsement by the Heart Foundation gives them a higher standing with consumers over their competitors. This tick of approval guides consumers in making healthier food choices quickly. Only once a product has been certified by the Heart Foundation that it meets all the nutritional criteria may it display the National tick of approval (“Heart Foundation,” 2011) There are benefits to companies acting ethically and social responsible.
Greater customer loyalty is often granted to those seen to be conducting or adapting these behaviours. Enhanced brand or company image ensures that consumers continue to purchase or promote company products. Being a socially responsible company also enables executives to attract and retain quality employees who also enjoy being associated with a company of high ethical standards (Cacioppe, Forster, & Fox, 2008). f. Cultural Environment The cultural environment addresses issues of consumers behaviours, perceptions, values and preferences and these cultural forces can affect marketing decisions (Kotler, et al. 2010, p. 155). Australia has a diverse culture of people throughout society. Companies who understand trends in the areas of attitudes and behaviour of subcultures can target specific groups for the products (Kotler, et al. , 2010). For Company A’s cereals, assessing the subcultures can be beneficial to ensure that their products address consumer’s values and perceptions. Marketers can look into areas that cultures would avoid their products, for instance colour on packaging, selection of ingredients that certain groups may not partake in (Nguyen, Nguyen, & Barrett, 2008).
Different products can be aimed at subculture groups that show alternate buying behaviours and needs (Kotler, et al. , 2010, p. 155). Conclusion Marketing within a company operates under micro and macro environments. The combined processes are dynamic to the success of an organisation. With declines in birthrates due to decreased fertility rates or women choosing to start families later in life has seen population shifts. Life expectancy has increased and there is a higher age group within the population. The elderly have different needs to the younger generations.
They require more from their food than just substance and are more health conscious than before. If they can get added benefits from their breakfast cereals, which can be proved they are more likely to continue purchasing that product. Many consumers are much more aware nowadays of the changes to the planet and offer loyalty and support to organisations that are attempting to work with eco groups in efforts to preserve the planet. Organisations that are aware of the financial impacts of recession and hard times for the economy can alter products to cater for all financial economies.
This can be positive for future growth. Reducing shelf prices during recessions slightly can be beneficial for gaining loyalty and slight increases gradually as the economy picks up can ensure success of their products. Technology is advancing at an alarming rate worldwide. Organisations need to use it to their full advantage to stay in the competition. It is not only beneficial for promotion of their products, but at the very start of production processes. If lead times can be cut due to automated systems the result is quicker restocking or replenishment on shelves.
For each day that a company’s product is not on the shelves they are losing money and the chance for competitors to reap the benefits. By carefully watching for all trends in the external influences, marketers are able to continually promote their products successfully, which ultimately will see continual growth and success for their organisation in this volatile business environment. References Australian Bureau of Statistics. (2008). Household Income and Income Distribution, Australia Retrieved 25 June 2011, from http://www. abs. gov. au/ausstats/[email protected] nsf/mf/6523. 0 Australian Bureau of Statistics. (2010).
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