Question

Explain the elements of the external environment that can have an impact on the marketing mix.

Answer 1

External environment of an organization refers to the factors that are external to the organization that has direct and indirect impact on the functioning of the organization.

The directly interactive forces of external environment: -

• Owners – Owners may or may not participate actively in managing the business however they expect return on their investments. Owner is one of the element that affect the organization in a positive or negative way because of the way they manage it.
• Customers – This refers to the individuals and groups that purchase the products or services of the organization. This is one of the important component of the environment and can be influenced by marketing strategies. Customers affect the organization in a positive or negative ways with respect to purchasing of products, word of mouth marketing, etc.
• Suppliers and partners – Suppliers are the one who supplies raw materials and other resources to the organization. They may be either the part of organization or independent organization. Supplier relationship management is the strategic planning and managing the interactions with the suppliers in order to have long-term relationship and mutual benefits. Once the strategy is made about fulfilling the demands and necessities of the customers, developing or sourcing is done. This means building relationship with the suppliers of the raw materials.

• Competitors – Competitors are also important component that influence the way business should be conducted in order to gain competitive advantage. Intensity of competitive rivalry depends on various factors which includes innovation, advertising expense, powerful business strategy, supply chain, value chain, online and offline marketing strategies etc. Hence to be on top companies needs to come up with strong strategies to exceed in all of these factors.

• Labor force – This refers to the source that is external to the organization from where the organization recruit best talents. Companies focus on recruiting qualified and talented employees which can help the organization in increasing its productivity and improving its performance.

3. The indirectly interactive forces of the external environment: -

• Economic forces – In order to identify the demand, it is important to assess the economic performance of the country. This depends on the population, per capita income and demography of consumers.
• Legal/ Political forces are the forces that include factors like current government in power, government policies, current legal framework, etc. Business should consider all legal aspects and laws of the country. Business should understand the legal complexities of the country because it may lead to fines and penalties without proper legal advice.
• Sociocultural forces – Culture refers to the views, ideas, belief that influence the behavior of individual or group. Culture plays important role when doing business globally.
• Technological forces – This has resulted in technological advancement like satellite, digitizing, etc. The technology influences the operation of business, makes it competitive and improve the quality of products and services.
• Natural forces - It is very important to consider the climate, location, geography, geology and weather as this will affect the operation of business, its products and services.