Macro Environment Marketing Essay Questions

A macro environment analysis for Tata Motors in India In order to define a successful strategy, it is essential to understand the macro environment of an organization. (Book P.68) A firm cannot influence these external factors, but these factors do influence the effectiveness of a strategy. Tata Motors is the largest automobile company in India. In 2008, Tata Motors launched ‘Tata Nano,’ the cheapest car in the world, targeting India’s middle class. (P.1, 1) After the first year, sales decreased by 85% compared to the previous year, while auto sales in general increased by 45% in India. (P. 21, 7) Tata Motors has to deal with numerous external factors which leads to the research question: ‘Which marketing strategy would be the best for Tata Nano to use?’ This question will be answered in this paper using the ‘PESTEL’ analysis and the four marketing strategy concepts: production, product, sales and marketing. The first factor of the ‘PESTEL analysis’ is the influence of politics on a firm. A positive political effect for Tata Motors is the attitude of multiple Indian state governments towards the establishment of Tata Motors plants. (P. 21, 8) The governments invited them to open factories in their states and this attitude was beneficial for the establishment of Tata Nano’s plants. On the other hand, this benefit caused a threat. Local farmers, being guided by regional politicians, protested against the acquisition of their agricultural land at low prices. Two years of turbulence resulted in a relocation of one of Tata Nano’s plants. This caused a delay of over 1,5 years and subsequently a delay in the production. (P. 21, 8) Secondly, the ‘PESTEL analysis’ addresses economic influences. An economic factor that affects Tata Motors is the growing Indian economy. Among multiple sectors salaries increase and due to the increasing competition in the banking sector, banks have become more lenient towards lending money to the public. As a result of rising salaries and the increased availability of loans, more people are able to afford a car. (P. 19, 2) A negative economic factor for Tata Motors is the increasing price of raw materials and thus the increase of Tata Nano’s production cost. (P. 23, 13) The third factor is sociocultural, which differs from country to country. Tata Motors has to deal with the popularity of motorcycles and scooters in India. It is part of the Indian culture to use a two-wheeler for transportation and this resulted in seven times higher sales of two-wheelers, compared to passenger cars in 2007. (P. 19, 1) This fact in combination with the growing middle class (P. 19, 1) and the middle class A macro environment analysis for Tata Motors in India In order to define a successful strategy, it is essential to understand the macro environment of an organization. (Book P.68) A firm cannot influence these external factors, but these factors do influence the effectiveness of a strategy. Tata Motors is the largest automobile company in India. In 2008, Tata Motors launched ‘Tata Nano,’ the cheapest car in the world, targeting India’s middle class. (P.1, 1) After the first year, sales decreased by 85% compared to the previous year, while auto sales in general increased by 45% in India. (P. 21, 7) Tata Motors has to deal with numerous external factors which leads to the research question: ‘Which marketing strategy would be the best for Tata Nano to use?’ This question will be answered in this paper using the ‘PESTEL’ analysis and the four marketing strategy concepts: production, product, sales and marketing. The first factor of the ‘PESTEL analysis’ is the influence of politics on a firm. A positive political effect for Tata Motors is the attitude of multiple Indian state governments towards the establishment of Tata Motors plants. (P. 21, 8) The governments invited them to open factories in their states and this attitude was beneficial for the establishment of Tata Nano’s plants. On the other hand, this benefit caused a threat. Local farmers, being guided by regional politicians, protested against the acquisition of their agricultural land at low prices. Two years of turbulence resulted in a relocation of one of Tata Nano’s plants. This caused a delay of over 1,5 years and subsequently a delay in the production. (P. 21, 8) Secondly, the ‘PESTEL analysis’ addresses economic influences. An economic factor that affects Tata Motors is the growing Indian economy. Among multiple sectors salaries increase and due to the increasing competition in the banking sector, banks have become more lenient towards lending money to the public. As a result of rising salaries and the increased availability of loans, more people are able to afford a car. (P. 19, 2) A negative economic factor for Tata Motors is the increasing price of raw materials and thus the increase of Tata Nano’s production cost. (P. 23, 13) The third factor is sociocultural, which differs from country to country. Tata Motors has to deal with the popularity of motorcycles and scooters in India. It is part of the Indian culture to use a two-wheeler for transportation and this resulted in seven times higher sales of two-wheelers, compared to passenger cars in 2007. (P. 19, 1) This fact in combination with the growing middle class (P. 19, 1) and the middle class becoming more affluent, (P. 19, 2) creates a bigger target audience with people who have more money to spend. This is an opportunity because this audience can be interested in a low-priced, safer, alternative form of transportation such as the Tata Nano. A risk though, can be the fact that two-wheelers still will be preferred among the middle-class. A scooter or motorcycle can be seen as indispensable but a car is seen as a luxury, with higher maintenance costs. (P. 20, 3) On top of that, densely populated India’s roads can be narrow and without parking spaces for cars, which will not result in an interest for the Tata Nano. Tata Motors does not experience a significant technological or environmental influence in their environment. The legal factor does affect Tata Motors and reflects the relevant laws and regulations for a region and firm. (Book P. 73) Because intellectual property is not protected well, the risk for Tata Motors of leaking their lowcost car manufacturing formula to competitors is relatively high. The involvement of suppliers and co-manufacturers thus has to be limited. (P. 21, 10) This fact, together with the high initial investment cost due to the costly technology, (P. 22, 10), resulted in a significant risk for suppliers and makes it for the Tata Nano relatively difficult to find appropriate suppliers. To conclude, Tata Nano operates in an environment with significant political, economic, sociocultural and legal influences. Based on the sociocultural factors that outline the importance of two-wheelers, Tata Motors should use the marketing concept strategy. This strategy states that the right customers should not be found for a specific product, but the right product should be found for the customer. Tata Motors should obtain the knowledge of the needs and wants of their target group, the Indian middle-class, and create a product fulfilling those needs and wants. (Words: 768)

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The Marketing Environment

The marketing environment surrounds and impacts upon the organization. There are three key elements to the marketing environment which are the internal environment, the microenvironment and the macroenvironment. Why are they important? Well marketers build both internal and external relationships. Marketers aim to deliver value to satisfied customers, so we need to assess and evaluate our internal business/corporate environment and our external environment which is subdivided into micro and macro.

Macroenvironment

The macroenvironment is less controllable. The macro environment consists of much larger all-encompassing influences (which impact the microenvironment) from the broader global society. Here we would consider culture, political issues, technology, the natural environment, economic issues and demographic factors amongst others.

Again for Walmart the wider global macro environment will certainly impact its business, and many of these factors are pretty much uncontrollable. Walmart trades mainly in the United States but also in international markets. For example in the United Kingdom Walmart trades as Asda. Walmart would need to take into account local customs and practices in the United Kingdom such as bank holidays and other local festivals. In the United Kingdom 2012 saw the 60th anniversary of Queen Elizabeth II’s reign which was a national celebration.

The United States and Europe experience different economic cycles, so trading in terms of interest rates needs to be considered. Also remember that Walmart can sell firearms in the United States which are illegal under local English law. There are many other macroeconomic influences such as governments and other publics, economic indicators such as inflation and exchange rates, and the level nature of the local technology in different countries. There are powerful influencers such as war (in Afghanistan for example) and natural disasters (such as the Japanese Fukushima Daiichi nuclear disaster) which inevitably would influence the business and would be out of its control.

To summarise, controllable factors tend to be included in your internal environment and your microenvironment. On the other hand less controllable factors tend to be in relation to your macro environment. Why not list your own controllable versus uncontrollable factors for a business of your choice?



Internal Environment

The internal environment has already been touched upon by other lessons on marketing teacher. For example, the lessons on internal marketing and also on the functions within an organization give a good starting point to look at our internal environment. A useful tool for quickly auditing your internal environment is known as the Five Ms which are Men, Money, Machinery, Materials and Markets. Here is a really quick example using British Airways. Looking internally at men, British Airways employees pilots, engineers, cabin crew, marketing managers, etc. Money is invested in the business by shareholders and banks for example. Machinery would include its aircraft but also access to air bridges and buses to ferry passengers from the terminal to the aircraft. Materials for a service business like British Airways would be aircraft fuel called kerosene (although if we were making aircraft materials would include aluminium, wiring, glass, fabric, and so on). Finally markets which we know can be both internal and external. Some might include a sixth M, which is minutes, since time is a valuable internal resource.

Let’s look at an example of how the internal environment would impact a company such as Walmart. We are looking at the immediate local influences which might include its marketing plans, how it implements customer relationship management, the influence of other functions such as strategy from its top management, research and development into new logistics solutions, how it makes sure that it purchases high-quality product at the lowest possible price, that accounting is undertaken efficiently and effectively, and of course its local supply chain management and logistics for which Walmart is famous.

Microenvironment

The microenvironment is made from individuals and organizations that are close to the company and directly impact the customer experience. Examples would include the company itself, its suppliers, other marketing input from agencies, the markets and segments in which your business trades, your competition and also those around you (which public relations would call publics) who are not paying customers but still have an interest in your business. The Micro environment is relatively controllable since the actions of the business may influence such stakeholders.

Walmart’s Micro environment would be very much focused on immediate local issues. It would consider how to recruit, retain and extend products and services to customers. It would pay close attention to the actions and reactions of direct competitors. Walmart would build and nurture close relationships with key suppliers. The business would need to communicate and liaise with its publics such as neighbours which are close to its stores, or other road users. There will be other intermediaries as well including advertising agencies and trade unions amongst others.

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Tim Friesner

Marketing Teacher designs and delivers online marketing courses, training and resources for marketing learners, teachers and professionals. View all posts by Tim Friesner

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