Question

Question 6: The marketing manager of a national brand of flavored milk is considering her micro and macro environment in order to complete the situation analysis for this years marketing plan. She notes some key points. Small traders are..pot consistently affording appropriate fridge space to flavored milks. Energy drinks are continuing to hold favour in the teen market. Young adults aged 18- 25 are more conservative than their slightly older cohort 25-35. UHT or long life milk has processed to the point where taste tests show little noticeable difference. Having long life milk means the product can stay longer in the fridge before having it replaced. The main benefit of this is to the firm which can reduce production and distribution costs. This benefit has been derived through which macro environmental factor? (Marks: 7)

Answer 1

I'll pick three sentences as exceptionally relevant.

1) Small traders are not consistently affording apppropriate fridge space (to flavored milk)

^ because milk isn't a durable commodity like Redbull, the inventory-keeper sees it as a necessarily short-term investment (brief asset life); but short-term demand isn't that high.

2) Having long life means the product can stay longer in the fridge (before having it replaced)

The asset life increases, and the keeper can start thinking of milk as a long(er)-term investment - this may be more feasible for demand conditions in a specific local market (a particular residential neighborhood or a major busy highway trucker junction)

3) The main benefit of this is to the firm which can reduce production and distribution costs.

^ Because the number of production cycles in a period of (say) 1 month goes down, the firm's output is essentially contracting. This means Total Cost of production must necessarily go down.

Also, once can think of the original retail delivery cycle as being out of the sync with aggregate demand conditions; with the production cycle aligned, the delivery cycle is also adjusted (delayed). This necessarily means distribution costs (e.g. transport vehicle rental hours, fuel, trucker wage) goes down.

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The six main Macro Environment Factors are:

1. Demographic forces

2. Economic forces

3. Natural/physical forces

4. Technological forces

5. Political and legal forces

6. Social and cultural forces

Of these, the one of relevance here is the Economic force.

The economic environment generally impacts both the organisation’s production and the consumer’s decision-making process. It is the incentive structure guiding the action of individual agents, and it may or may not be appropriate for a given set of objectives.

Initially, the economic incentive (price signal) was there but the firm hadn't acted upon it. When they did, they derived benefit out of the Economic force.