Five Components of an External Marketing Environment

  Reviewed by: Michelle Seidel, B.Sc., LL.B., MBA
  Written by: Liz Gold      Updated October 20, 2018
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As a business owner, there is only so much you can control. That said, while businesses may be able to control what happens inside a company, there are always external forces at play that are unpredictable and uncontrollable.

What impacts a company's external marketing environment? A company is not alone in doing business. It is surrounded by and operates in a larger context called the macro environment. It consists of all the forces that shape opportunities, but also poses threats to the company. Five external conditions can impact an organization's health. Staying prepared and being alert to external changes can be the difference between success and adversity.

Understand Your Customers

Customers are consumers who buy products or use services. To truly differentiate itself in the market, a company needs to understand its customer's needs and desires. Knowing your target market and understanding the demographics that a company serves can improve strategic decisions that ultimately affect operations. It's always wise to listen to customers; a company can gain insightful information that can lead to improvements or new services and products while sharpening their competitive edge.

Know Your Competitors

Competition is healthy; it forces each company working in the same market to be better in providing services and products. Without competition, one company would monopolize a market and hold too much control, giving them little motivation to improve the products while they can charge a higher price. While it's important to pay attention to this external force and analyze a competitor's strengths and weaknesses, it's also vital for a company to feel solid in its business plan and vision for moving forward. Use competition as a resource, not a distraction.

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Labor Environment

A company's talent and workforce are growing increasingly important. Without a strong culture of employees and leaders, a company will fail. A company can rise and fall on the competence of its employees, so it's critical to find qualified candidates. In assessing the labor environment, companies should look to characteristics that include the average educational level of the community, training programs, technical know-how and diversity, which is increasingly necessary in a globally connected world.

Understand Your Owners' Needs

Owners are an essential part of the equation. Many times, businesses are run by managers and employees and an owner is considered more external than internal. Though an owner or stakeholders may be on the outskirts of the internal dynamics of a company, they do expect a return on their investment. As a result, management has to pay attention to their concerns.

Suppliers and Partners

Vendors and suppliers provide a company with needed resources. It's easy for some companies to become increasingly dependent on a supplier, as they are supplying a fundamental need for the company's lifeblood: customers. A scarcity of resources will impact the supplier and, therefore, the company, perhaps in the form of price increases or supply availability.

SWOT Analysis

One way to determine the strength of a company and how it will perform in a new marketing environment is to conduct a SWOT (Strength, Weakness, Opportunities and Threats) analysis. Knowing its strengths and weaknesses will allow a company to move forward in a more successful direction, capitalizing on its effectiveness.

About the Author

Liz Gold has been published in a variety of capacities writing about everything from Kennebunkport and southern Maine municipal government, art and cultural events, to cloud technology and business transformation. Her experience extends to both corporate and freelance; she's a former Senior Editor at the B2B publication Accounting Today, writing about public accounting firms with a specialization in diversity, technology, best practices, and business development. During her tenure, she was also co-founder and editor of AccountingTomorrow, a blog focused on intergenerational workplace issues that is still thriving today. Most recently, Liz has been writing about accountants working in the cannabis industry on CPA Trendlines and reporting on cannabis trends for Southern Oregon Good Herb magazine in Oregon.

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