The digital marketing environment consists of the micro and macro-environments. These enviornments are continuously changing alongside changes and advances in technology. The individual components within these different environments all directly impact the strategic decision making of a business. Whether or not a business can monitor and adapt to these changes will depend on the successful outcome of that business.
“The micro environment is known as the ‘operating environment” (Chaffey & Chadwick 2019), and it focuses on internal smaller forces such as suppliers, competitors, intermediaries and customers. In order for a digital marketer to create an successful marketing strategy it is important they understand the behaviour and interactions between these players. This particular environment aims to focus on the customers, their needs and wants and how they can best them.
The Macro environment however, focuses on external forces, out of the company’s control, that directly affect and influence the digital market. This environment is also known as “the remote environment”(Chaffey & Chadwick 2019).As shown in the image below, the macro-environment includes: International (economic, legal constraints & cultural), society (public opinion, moral and ethical constraints), country specific (economic, legal constraints & cultural) as well as technology (innovation and trends). It is important to regularly analyse a company’s situation in order to stay up-to-date with possible opportunities and threats, this also gives a company an advantage to adapt to new challenges and stay ahead in the game.
Image sourced from: https://www.smartinsights.com/digital-marketing-strategy/online-marketplace-analysis/
Michael Porter’s five forces (1979), a business strategy tool, identifies 5 elements that make up the competitive environment of a company and allow informed decisions to be made as a result. Porter states “the collective strength of these forces determines the ultimate profit potential of an industry” (Porter, 1979). The forces include: bargaining powers of customers, threat of substitutes, threat of new entrants, extend of rivalry between competitors, power of suppliers.
Image sourced from: https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html
The digital environment impacts these forces massively. As the internet allows more businesses to operate online, consumer choice expands, buyer power online increases whereas bargaining power of suppliers reduces. Customer knowledge also increases as they have access to more information and companies become more transparent – forcing prices down. Product substation becomes a massive threat as barriers to entry are reduced allowed new competitors to easily enter the market. The impact of micro and macro environment on business purchasing and marketing is huge, hence the need for a differentiated decision making strategy.
“It is at the seams between marketing and the other functions that communication most often breaks down and processes stall.” – Aditya Josh and Eduardo Gimenez for Harvard Business Review July-Aug 2014 Issue
It is crucial for strategic decision making that all departments of a company (marketing, product, finance, accounting, research and development etc) come together to collaborate and communicate. “Strategy and planning decisions involve aligning marketing goals with business and customer strategies and aligning the priorities of marketing and sales.” (Joshi & Gimenez 2014). Other strategic planning techniques include of a SWOT (strengths, weaknesses, opportunities and threats) and/or a PESTLE analysis (political, economic, social, technological, legal and environmental) (Lumen learning, 2017).
Ultimately, strategic decision making relies on the teamwork of an entire business, integrating people from all departments. By establishing a common goal and coming together to achieve that goal, the business will be able to overcome challenges within the digital marketing environments and continue to move forward in the right direction.
References:
Chaffey, D & Chadwick F 2019, ‘Digital media and technology, an opportunity and threat’, Digital Marketing, 7thed, Pearson United Kingdom.
Joshi, A & Gimenez, E 2014, ‘Decision-Driven Marketing’, Harvard Business Review. <https://hbr.org/2014/07/decision-driven-marketing>
Lumen learning 2017, ‘Microenvironment vs. Microenvironment’. < https://courses.lumenlearning.com/wm-retailmanagement/chapter/microenvironment-vs-macroenvironment/>
Porter, M 1979, ‘How Competitive Forces Shape Strategy’, Harvard Business Review. <https://hbr.org/1979/03/how-competitive-forces-shape-strategy>