The macro-environment of business travel and tourism Every business travel and tourism organization has a so-called business

environment. This is another term for the factors which affect the organization and its market. Some of these factors the micro-environment are close to the organization, physically and/or organizationally speaking, such as suppliers and intermediaries. These factors can be influenced or even controlled by the organization. However, the business environment also includes the macro-environment; this comprises wider, more remote factors which have great influence, but over which the organization has no control and practically little or no influence. These factors exist at a national or even global level, and are therefore well outside the physical or organizational field of influence of any individual business travel and tourism organization. These macro-environment factors are very influential in business tourism, and organizations therefore must seek to try to anticipate them and proactively prepare for them. In this article we will explore some of the complex issues involved in the macroenvironment in business travel and tourism. First, however, we need to identify the main elements of the macroenvironment, using the well known PEST Analysis technique. PEST analysis Political, economic, technological, social (PEST) Analysis is the technique used to analyse an organizations macro-environment. It involves looking at four types of factors, namely, political, economic, social and technological. Figure 6.1 outlines the scope of PEST analysis. All of these factors clearly have implications for business travel and tourism organizations, as of course they have for organizations in all other industries. Figure 6.1 PEST Analysis factors

The wider macro-environment Changes in the wider macro-environment may not be as close to the marketing firms day-to-day operations, but they are just as important. The main factors making up these wider macroenvironmental forces fall into four groups. 1. 2. 3. 4. Political and legal factors Economic factors Social and cultural factors Technological factors

(Often referred to as the PEST factors in the marketing analytical context, a useful aidememoire, although in some texts it is sometimes referred to as STEP). To this is sometimes added Competitive factors and although PEST analysis relates to a specific organisation Competitive factors tend to be subsumed under Economic factors. Such a PEST analysis means listing all possible points that may affect the organisation under review under each of the P.E.S.T. headings. Recently, some texts have added L (standing for legal) and E (standing for environmental) to this classification, making the acronym PESTLE. Even more recently, some writers have incorporated yet another E (standing for ecological) with the new acronym STEEPLE. 3.1 The political and legal environment To many companies, domestic political considerations are likely to be of prime concern. However, firms involved in international operations are faced with the additional dimension of international political developments. Many firms export and may have joint ventures or subsidiary companies abroad. In many countries, particularly those in the so-called Third World or more latterly termed Developing Nations, the domestic political and economic situation is usually less stable than in the UK. Marketing firms operating in such volatile conditions clearly have to monitor the local political situation very carefully. Many of the legal, economic and social developments, in our own society and in others, are the direct result of political decisions put into practice, for example the privatization of state industries or the control of inflation. In summary, whatever industry the marketing firm is involved in, changes in the political and legal environments at both the domestic and international levels can affect the company and therefore needs to be fully understood. 3.2 The economic environment Economic factors are of concern to marketing firms because they are likely to influence, among other things, demand, costs, prices and profits. These economic factors are largely outside the control of the individual firm, but their effects on individual enterprises can be profound. Political and economic forces are often strongly related. A much quoted example in this context is the oil crisis caused by the Middle East War in 1973 which produced economic shock waves

throughout the Western world, resulting in dramatically increased crude oil prices. This, in turn increased energy costs as well as the cost of many oil-based raw materials such as plastics and synthetic fibres. This contributed significantly to a world economic recession, and it all serves to demonstrate how dramatic economic change can upset the traditional structures and balances in the world business environment. As can be seen, changes in world economic forces are potentially highly significant to marketing firms, particularly those engaged in international marketing. However, an understanding of economic changes and forces in the domestic economy is also of vital importance as such forces have the most immediate impact. One such factor is a high level of unemployment, which decreases the effective demand for many luxury consumer goods, adversely affecting the demand for the industrial machinery required to produce such goods. Other domestic economic variables are the rate of inflation and the level of domestic interest rates, which affect the potential return from new investments and can inhibit the adoption and diffusion of new technologies. In addition to these more indirect factors, competitive firms can also pose a threat to the marketing company so their activities should be closely monitored. It is therefore vital that marketing firms continually monitor the economic environment at both domestic and world levels. Economic changes pose a set of opportunities and threats, and by understanding and carefully monitoring the economic environment, firms should be in a position to guard against potential threats and to capitalize on opportunities. 3.3 The socio-cultural environment This is perhaps the most difficult element of the macro-environment to evaluate, manifesting itself in changing tastes, purchasing behaviour and changing priorities. The type of goods and services demanded by consumers is a function of their social conditioning and their consequent attitudes and beliefs. Core cultural values are those firmly established within a society and are therefore difficult to change. They are perpetuated through family, the church, education and the institutions of society and act as relatively fixed parameters within which marketing firms are forced to operate. Secondary cultural values, however, tend to be less strong and therefore more likely to undergo change. Generally, social change is preceded by changes over time in a societys secondary cultural values, for example the change in social attitude towards credit. As recently as the 1960s, personal credit, or hire purchase as is sometimes known, was generally frowned upon and people having such arrangements tended not to discuss it in public. Today, offering instant credit has become an integral part of marketing, with many of us regularly using credit cards and store accounts. Indeed, for many people it is often the availability and terms of credit offered that are major factors in deciding to purchase a particular product. Marketing firms have also had to respond to changes in attitude towards health, for example, in the food industry people are now questioning the desirability of including artificial preservatives, colourings and other chemicals in the food they eat. The decline in the popularity of smoking is a

classic example of how changes in social attitudes have posed a significant threat to an industry, forcing tobacco manufacturers to diversify out of tobacco products and into new areas of growth. Changes in attitudes towards working women have led to an increase in demand for convenience foods, one-stop shopping and the widespread adoption of such time-saving devices as microwave cookers. Marketing firms have had to react to these changes. In addition, changes in moral attitudes from the individualism of the permissive society of the 1960s and early 1970s to the present emphasis on health, economic security and more stable relationships, are all contributory factors to a dynamically changing socio-cultural environment that must be considered by companies when planning for the future. 3.4 The technological environment Technology is a major macro-environmental variable which has influenced the development of many of the products we take for granted today, for example, television, calculators, video recorders and desk-top computers. Marketing firms themselves play a part in technological progress, many having their own research department or sponsoring research through universities and other institutions, thus playing a part in innovating new developments and new applications. One example of how technological change has affected marketing activities is in the development of electronic point of sale (EPOS) data capture at the retail level. The laser checkout reads a bar code on the product being purchased and stores information that is used to analyse sales and re-order stock, as well as giving customers a printed readout of what they have purchased and the price charged. Manufacturers of fast-moving consumer goods, particularly packaged grocery products, have been forced to respond to these technological innovations by incorporating bar codes on their product labels or packaging. In this way, a change in the technological environment has affected the products and services that firms produce and the way in which firms carry out their business operations. 4 Other macro-environmental factors The macro-environmental factors discussed are not intended to be an exhaustive list, but merely to demonstrate the main areas of environmental change. Other sub-environments may be important to marketing management, for example, in some countries the religious environment may pose an important source of opportunities and threats for firms. In the UK, demographic changes are considered important by a number of firms. In general, the UK population has been stable at approximately 56 million for a number of years, but the birth rate is falling, while people are living longer. Firms that produce goods and services suitable for babies and small children (e.g. Mothercare) have seen their traditional markets remain static or decline slightly. Such companies have tended to diversify, offering products targeted at older age groups. A larger older sector of the population offers opportunities for firms to produce goods and services to satisfy their particular needs. The over-55 age group is the modern marketers current major opportunity. In all advanced economies such as the Australia, UK and USA it is this age group that has the largest disposable income, and special products and services such as holidays and pension-related financial services are being marketed to this sector.

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The Macro Environment factors are: 1) Demographic Environment 2) Economic Structural Environment 3) Technological Environment 4) Political Environment MACRO-ENVIRONMENTAL FACTORS A business and its forces in its micro environment operate in larger macro environment of forces that shape opportunities and pose threats to the business. It refers the major external and uncontrollable factors that influence an organization's decision making, and affect its performance and strategies. These factors include the economic factors; demographics; legal, political, and social conditions; technological changes; and natural forces. The important environmental factors are; (1) Economic Environment (2) Political and Governmental Environment (3) Socio-cultural Environment (4) Natural Environment (5) Demographic Environment (6) Technological Environment (7) International Environment. 1. Economic Environment: - Economic environment of business has reference to the board characteristics of the economic system in which the business operates. The business sector has economic relation with the government, capital market; household sector and global sector. These sectors together influence the trends and structure of the economy. The form and functioning of the economy vary widely. The importance external factors that affect the economic environment of a business are; (i) Economic Conditions: - The general Economic conditions prevailing in the country viz. national income, per capita income, economic resources, distribution of income and assets, economic development etc. are important determinants of the business strategies. Business cycles and economic growth of the economy are important factors defining the economic environment. (ii) The economic system operating in the country also affects the business enterprise to a very great extent. The economic system of a country may be capitalist, socialist, communist or mixed. (iii) Economic Policies: - The government decides the economic environment of business through Budges, Industrial regulations, Economic planning, Import and Export regulations, Business laws, Industrial policy, Control on prices and wages, Trade and transport policies, the size of the national Income, Demand & supply of various goods etc. (iv) Economic Growth: - The stage of economic growth of the economy has direct impact on the business strategies. Increased economic growth rate and increase in consumption expenditure, lower the general pressure within an industry and offers more opportunities then threats. (v) The rate of interest affects the demand for the products in the economy, particularly when general goods are to be purchased through borrowed finance. Low interest rated provides opportunities to the industries to expand whereas rising interest rates pose a threat to these institutions. (vi) Currency Exchange: - Current exchange rates have direct impact on the business environment. When the rupee was devalued in 1991, it was to make Indian products cheaper in the world market and consequently boost India's exports.

2. Political and Governmental Environment: - Political environment refers to the influence

exerted by the three political institutions they are; Legislature, Executive, Judiciary etc. The legislature decides on a particular course of action. Government is the executive and its job is to implement whatever was decided by parliament. The judiciary has ensure that both the legislature and executive function in public interest and within the boundaries of constitution. Legal and political environment provides a framework within the business is to function and its existence depends on the success with which it can face the various challenges constructed out of political and legal framework. 3. Socio-cultural Environment: - Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. Social class and caste of a person goes a long way in deciding the business activities in relation to its production and marketing activities. Tradition, customs and social attitudes have changed the attitude and beliefs of the persons which have their effect on organizational environment. Class and caste are influencing the purchasing pattern. Socio-cultural environment may include expectations of the society from business, attitudes of society towards business and its management, views towards achievement of work, views towards structure, responsibility and organizational positions, views towards customs, traditional and conventional, class structure and labour mobility and level of education. 4. Natural Environment: - Environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries (for example, more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities. 5. Demographic Environment: - Demographic factor include Size, growth rate, age composition, sex composition etc. of population, Family size, Economic stratification of population, Educational level, Caste, religion etc. All these demographic factors are relevant to business. These factors affect the demand for goods and services. High population growth rate indicates an enormous increase in labour supply. Population with varied tastes, preferences, beliefs, temperaments etc. gives rise to differing demand pattern and calls for different marketing strategies. 6. Technological Environment: In order to survive in today's competitive world, a business has to adopt technological changes from time to time. New technologies create new products and new processes. Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organizations providing the products. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology. 7. International Environment: - Another environmental factor which is fast emerging as the force to reckon with is the international environment. Implications of global or international

environment are; (i) Due to liberalization, Indian companies are forced to view business issues from the global perspective. (ii) Safe and protected markets are no longer there. World is becoming small in size due to advanced means of transport and communication facilities. (iii) Learning of foreign languages is must for every business manager. (iv) Acquiring familiarity with foreign currencies is also must. (v) Facing political and legal uncertainties is inevitable.

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