Mini Lecture: Analyzing the External Environment

Analyzing the external environment involves tracking conditions in the macro and micro marketplace.

The macro-environment includes: The micro-environment includes:
  • Economic factors
  • Competition
  • Demographic trends
  • Suppliers
  • Cultural and social trends
  • Marketing intermediaries (retailers, wholesalers)
  • Political and legal regulations
  • The public
  • Technological changes
  • The company
  • The price and availability of natural resources
  • Customers

 

Macro-Environment Considerations

When you are assessing the external environment, you should consider external factors such as political, legal, economic, and technological considerations.  It’s also critical to examine the demographic, cultural, and social environments shaping the market place.  Let’s break each of these down.

Political and Legal Environment

  • All organizations must comply with government regulations and understand the political and legal environments in which they do business.
  • Different government agencies enforce regulations that have been established to protect both consumers and businesses.

The Economic Environment

Economic factors include variables such as:

  • Inflation
  • Unemployment
  • Interest rates
  • Whether the economy is in a growth period or a recession

Demographic, Cultural, and Social Environments

The demographic and social and cultural environments are constantly changing the global marketplace. They include:

  • Social trends (such as people’s attitudes toward fitness and nutrition)
  • Demographic characteristics (such as people’s age, income, marital status, education, and occupation)
  • Culture (which relates to people’s beliefs and values)

Technology

Technology changes the way people communicate and the way companies do business. Marketers increasingly use online ads and mobile marketing and organizations must adapt to new technologies to succeed.

Conducting a Competitive Analysis

When a firm conducts a competitive analysis, it focuses on direct competitors and tries to determine their strengths and weaknesses, image, and resources.  Competitive analysis involves looking at any information available on competitors and is another means of collecting competitive information (for example, utilizing mystery shoppers).