Cereals Company’s Marketing Theory and Practice

This is an organization which manufactures Cereals in Melbourne, Australia. The company’s name is “G’Day flakes”. This particular company is thinking of developing products which must be suitable for the current Australian market. For this reason they decided to understand certain macro-economic factors which may influence their market and the marketing mix and strategies that the company adopts. A marketing mix is made up of the 4 P’s: Product, Price, Place (distribution) and Promotion.

For each of these factors a strategy is adopted such that the end result is higher sales for the company. These factors are determined according to internal constraints, and also external constraints on the business. What we are to discuss are the external factors; namely the Macro-Economic constraints and trends: these include economic, cultural, demographic, natural, technological and political. Each of these can influence the target market and the marketing strategies for the cereal company. (marketing mix)

Macro-Environment

Macro-Environment can influence a business’ decision making. Unlike internal factors, this is made up for factors which are outside a company’s control. These are external conditions, trends, constraints or simply factors which can have a huge impact on the decisions a company makes and the strategies it adopts. The macro-environment is made up of 6 factors: Economic, Cultural, Demographic, Technological and Politics. (Macro environment)

Economic factors

The first macro-economic condition we will discuss is Economic trends. Now currently, the economic conditions all over the world are poor; most countries are experiencing what they call a “slump” period. However, in Australia, the economic conditions are better comparatively. There is positive growth and unemployment levels are not that high. Since there is a period of boom along with inflation going on, the cereal company G’day Flakes cannot price its product high. Hence, this condition will influence its overall profits. For if the product is priced too high, then consumers will turn to other cereals available in the market.

This in turn will influence the products promotion and distribution strategies. Since the product has to priced at a level such that it attracts the consumers, and they switch to buying this cereal instead of those of the competitors’; G’day Flakes needs to make sure that cheaper yet effective promotional strategies are used. Furthermore, they need to target this product towards the larger population; hence promoting a product affordable by all, because in this period of rising prices, it is must that a product is affordable for potential consumers to switch to it. The GDP of Australia has turned out to be positive in the first quarter of 2009.

This is a positive signal for the business, as it shows growth is happening, people’s incomes are rising, and hence sales are meant to increase. This will allow G’day Flakes to perhaps adopt a diverse marketing strategy, with one product aimed towards the “general population”; priced lower; and another product for the “upper class”, since the incomes seem to be rising. (Australian GDP growth 2009) (Importance of Economic Conditions) (Economic conditions australia) (the effect of economic conditions)

Culture

Cultural trends in the macro-environment consist of attitudes, social trends and life styles. These can greatly impact the marketing decisions that G’day flakes implements.

The current “social and lifestyle” trend is towards health consciousness. In other words, people have started to eat healthy in order to lead a health risk free life. This particular attitude and change in lifestyle is of immense importance to the cereal business. They need to understand that if their product is not healthy; then their target market will be different, perhaps even smaller due to the increase in health risks awareness. In order to increase sales, they need to understand and adapt to this change in life styles. This can be done by adopting alteration strategies for their cereal product, making it low in fat and cholesterol. Also by using appropriate promotional strategies in order to promote the product in a manner such that it is appealing to the eyes of the increasing health conscious market.

People have also adopted a positive attitude towards environmental care. This “social attitude” can be utilized to promote the product, perhaps by using recycled material for the packaging of the cereal. This will then attract the environmental friendly consumer market and will provide good publicity for the company.

Hence, by understand the changing social trends and attitudes of the market, the company will be able to adapt policies and techniques that will best fit that particular market condition, enabling it to obtain higher sales in the market. (Marketing- Buyer behavior)

Demographic

This consists of the details regarding the population size, age, gender ratios, ethnicity, social classes, health, religion and a few other factors, all relating to the population of the country. These statistics need to be thoroughly analyzed by the company in order to ensure an effective marketing mix can be created.

According the statistics in June 2007, 67.4% of the Australian population was of working age (15 to 64 years). This is mainly the population that G’day Flakes should wish to target. It is because these are the people who earn, and hence can afford to buy cereals. Hence, when creating a product, the company needs to take into account the age factor. For instance, the younger generation preferring the sweet cereals, where as the older generation would go for the more whole-wheat healthy meal cereals. Also, this factor, the age distribution will be necessary when deciding the ways in which the product must be promoted.

According the age distribution recorded on 30 June 2007; the population consists of more people within the age group of 20-50; and the greatest population of 35-39 yrs. This is important to incorporate into the marketing strategy, hence a product must be created such that it is targeted towards the majority.

Furthermore, it has been identified that the ratio of males to females in Australia is 98.8:100 in June 2007. Also, the factor that generally most females do grocery shopping together with the sex ratio must be taken into account when developing a promotional mix; such that it is more appealing to the female population.

Also from 1986 to 2006, the percentage of living with a partner has declined by 4%. This shows that the trend is more towards living independently, and moving in with a partner or marrying at a later age. This is bound to influence the target market and the strategies adopted. Questions regarding, whether or not large family packs of cereal should be promoted instead of smaller ones for single individuals would all be determined by understanding the statistics of how many people live alone, or with families. (australian social trends)

Also, understanding of the income distribution; then classifying the population into bands of income determining their “class” will also help create segments in a market which can then be catered to separately in order to obtain maximum sales. (Population by Age, Sex and regions australia)

Natural

Within the Macro-environment, there are natural factors, ones which are caused due to climatic changes. These too can influence business activity. In Australia, from December to February there are Summers, whereas from June to August it is the winter period.

In Australia, from a bushfire, to cold and dry spells, to heavy rainfall; can all act as barriers for business activity. A heavy rainfall can delay cause transport problems; hence if the distribution is in an area where such risks are present, appropriate measures need to be taken by the company; this will influence the placing strategies adopted.

If the company decides to have its own growth and plant production, then this will influence the costs of marketing. Care needs to be taken that the southern and eastern Australian areas where bushfires of extreme periods of drought are at risk are all avoided. This could even increase the costs of plantation, resulting in a lower budget for marketing. All these factors need to be considered when developing a marketing mix for the cereal as these factors are bound to influence internal costs. (climate of australia)

Technological

Technology is changing quite rapidly. Advances in technology have allowed business’ to improve their efficiency greatly, thus resulting in higher profits.

When looking at technological factors in terms of benefiting marketing, certain issues need to be looked upon. Firstly, would technology allow the firm to produce products cheaper and better? If so, then such technology must be invested upon for the benefits of long run, even if it means lowering down the marketing budget initially. For the particular cereal factory, if it is cheaper to produce cereal using large machinery requiring few or no labors, then such investments should be made. However, the costs of unemployment would have an impact on the sales sooner or later.

Competitors’ technology also needs to be taken into account. If improved technological changes are allowing other companies to gain a competitive edge, then such changes need to be adapted within G’day Flakes as well.

Furthermore, improvements in technology may perhaps allow faster and cheaper transportation, which is another important aspect of the marketing mix. (PESTEL analysis)

Political

This category is based on Legal constraints on business activities. The government of any country has laid down laws which each business must follow to avoid stiff court fines and poor publicity. These laws may include: work place laws, labor rights, consumer rights and competition laws. Such laws may sometimes result in benefits for the company, and at other times they can act as barriers in lowering costs and obtaining higher profits through “unlawful” means.

The Australian government puts strict emphasis on consumer rights. Care must be taken that consumers are provided with safe products worth the price that they are paying. Hence, when incorporating these issues into a marketing mix, care must be taken to use high quality materials from the very start in order to obtain a safe product.

The ASCC Australian safety and compensation council ensures that companies provide safe working and health conditions for the employees. These will increase costs for a business, resulting in a lower marketing budget, which can result in a limited promotional activity. (OHS)

Conclusion

Above we shed some light upon 6 different factors from the Macro-environment and how they can influence decision making within developing a marketing mix. It needs to be understood that these factors can vary with time, hence a constant communication with ones environment will allow a better understanding. This in turn will benefit the company with better communication with and understanding of the consumer market, and thus higher sales and profits.