External Analysis And Determining Factors For Marketing
To create a successful marketing campaign, businesses must understand their target market. However, to do this, they must first analyze the external factors that are important to that target market.
The external analysis includes identifying the current trends and behaviors of the target market, as well as investigating the company’s competition.
Once these factors are understood, it is then possible to create a campaign that is specifically tailored to those who fall within the target market.
There are a variety of tools and information available to help businesses make informed decisions about their marketing efforts. The best way to utilize this information is to have a clear understanding of the customer and what motivates them.
The purpose of this article is to provide an overview of the different factors that should be considered when conducting an external analysis for a company.
What Is External Analysis?
External analysis is the process of assessing the opportunities and risks that a company faces outside of its operations. This can include evaluating factors such as the political landscape, economic conditions, social trends, and technological developments.
External analysts typically use a variety of methods to gather information, including surveys, focus groups, and interviews. They then use this data to develop forecasts for the company’s future performance.
External analysis is an important tool for companies that want to be proactive in their decision-making. By understanding the factors that could impact their business, they can identify potential threats and opportunities and respond accordingly.
External analysis can also help companies assess their competitive position relative to other businesses in their industry.
Factors Of External Analysis Determining Marketing
There are six key factors that businesses should consider when conducting their external analysis:
1. Economic Factors
To understand a company’s external environment, it is important to analyze the key economic factors that affect it. The three main economic factors that businesses should be aware of our economic growth, inflation, and interest rates.
Economic growth is the measure of how much the economy is expanding. It can be measured by looking at things like GDP (gross domestic product) or job growth. A healthy economy will have strong economic growth, while a recession will have weak economic growth.
The Gross Domestic Product (GDP) is the measure of a country’s total economic output. It is made up of the value of all goods and services produced in a country in a given time.
The GDP growth rate measures how much the GDP has increased or decreased from one period to another. Companies need to know whether the country they are doing business in is experiencing positive or negative GDP growth.
Inflation Effect
Inflation is the rate at which prices are increasing. Interest rates are another key economic factor that companies need to be aware of. They are used by governments to control inflation and stimulate economic growth.
When inflation rises, it can cause problems for businesses because it can lead to higher costs and decreased profits. Interest rates are the price businesses pay to borrow money.
When interest rates rise, it can make it more expensive for businesses to borrow money. This leads to less investment and slower economic growth.
Economic factors are constantly changing, so businesses need to stay up-to-date on the latest news and trends. By doing so, they can make informed decisions about how to best run their operation. And also ensure that they’re making money despite any external headwinds.
2. Political Factors
Political factors are important considerations for businesses when conducting external analysis. Governments can have a significant impact on a company’s ability to conduct business both at home and abroad.
To assess the effect of political factors on a country’s economy, it is important to do an external analysis. This includes looking at things like the type of government in place, the level of corruption, and any recent policy changes.
By understanding the political environment in which a business operates, you can better understand the risks and opportunities associated with doing business in that country.
For example, the government may enact regulations that affect how a company does business or affects the products or services that the company offers. The government may also provide financial assistance to companies, giving them a competitive advantage over their rivals.
Additionally, the political relationship between a country and its trading partners can impact trade relations and business opportunities.
In addition, a country’s political stability can also impact its economy. For example, if a country is in the midst of a civil war, businesses may be reluctant to invest in that country because of the instability.
Finally, the government must take into account its political situation. It must ensure that any action it takes will have popular support at home. If the government does something unpopular at home, it may have trouble getting support for future actions abroad.
3. Social Factors
External analysis is an important tool for understanding a company’s environment and the opportunities and threats that exist. Social factors are one element of the external environment that can have a significant impact on a company.
The most important social factors are the demographics of the population, cultural values and norms, and political environment.
- Demographics are the characteristics of a population, such as age, sex, income, and occupation.
- A company’s ability to reach its target market depends on its understanding of these demographics.
For example, a clothing company that specializes in plus-sized clothing would need to understand the size distribution of the population to identify potential customers.
- Culture refers to the shared values and beliefs that define a group of people. A company’s success can be impacted by its adherence (or lack thereof) to cultural norms.
Cultural values and norms can affect consumer behavior, including what products and services are consumed and how they are marketed.
The cultural value and norms of a country can have a big impact on how a business is received.
For example, in some countries, it is considered disrespectful to show too much interest in someone else’s personal life, while in others it is considered rude not to ask about family.
The key to success when expanding into a new market is to do your research and understand the social norms of the country you are doing business in.
- The political environment can impact the business by dictating the legal environment in which businesses operate and by creating incentives or restrictions on certain industries
4. Technological Factors
Technological factors are important to consider when performing an external analysis.
Technology has been a major driver of change in the world economy, and companies that fail to keep up with technological advances can be at a disadvantage.
Technological advances can create opportunities and threats for a company. For example, the advent of the internet has created opportunities for companies to sell their products and services online, but it has also created competition from companies that operate online only.
In addition, new technologies can disrupt existing business models and create new competitors. For example, smartphone development has disrupted the traditional telecom industry.
Technological advances can create both opportunities and threats for companies. For example, the development of the internet has created opportunities for companies to sell products and services to customers, but it has also created competition from companies that can operate online.
Another important consideration in the external analysis is the impact of globalization on companies. Globalization has led to increased competition, and companies need to be aware of the competitive environment in which they operate.
5. Legal Factors
Legal factors are important to consider when conducting an external analysis of a company. The company’s legal structure, as well as the laws and regulations affecting its industry, can have a significant impact on its ability to compete and make a profit
The legal environment is one such factor, as it can impact how a company does business. For example, a company might need to take into account antitrust laws when pricing its products.
Other legal considerations might include licensing and intellectual property laws.
Regulations from government agencies can also have an impact on marketing decisions. For instance, the Food and Drug Administration might require companies to provide detailed information about their products to ensure consumer safety.
The legal environment must be analyzed along with the economic, social, and technological environments to understand a company’s external environment.
What Are The Benefits of External Analysis?
For a company to be successful, it must conduct an external analysis here are some of the benefits of external analysis:
1. Helps Small Businesses
Small businesses have several unique considerations when it comes to performing an external analysis.
One of the most important is that small businesses usually don’t have the same level of resources as larger businesses, so they need to be especially selective in their analysis.
Additionally, a small business’s customer base is often more localized than that of a larger company, so it’s essential to understand the specific needs and wants of that customer base.
Finally, a small business may not have as much visibility in the marketplace as a larger company, so it’s important to track industry trends and competitors closely.
2. Aids Larger Companies
External analysis is important for all businesses, but it is especially important for larger businesses.
Larger businesses have more complex supply chains and are more likely to be affected by changes in the economy or the political environment.
External analysts can help large businesses understand these changes and identify opportunities and threats.
External analysis can also help businesses make decisions about where to expand or how to respond to competition.
3. Helps Identify New Markets To Expand And New Products To Offer.
When looking to expand a business, it is important to identify new markets to enter and new products or services to offer.
This allows businesses to grow their customer base and increase profits. There are several ways to go about identifying these new opportunities. One approach is to conduct an external analysis of the market.
This involves studying the environment in which the business operates, including the political, economic, social, technological, and legal factors that could impact its success.
Additionally, it is important to look at the competition and how they are affecting the market.
By understanding all of these factors, businesses can develop a well-informed strategy for expanding into new markets or introducing new products or services.
4. Helps In Knowing Competitor’s Strategies
To stay ahead of the competition, businesses need to understand their competitors’ strategies.
One way to do this is by performing an external analysis, which involves studying a company’s environment and the industry in which it operates.
This includes looking at factors such as the market size, competition, regulatory environment, and industry trends.
By understanding a competitor’s strengths and weaknesses, businesses can develop marketing strategies that will help them stay ahead of the curve.
For example, if a company sees that its competitor is strong in terms of R&D, it may want to focus on improving its innovation process.
Alternatively, if a company notices that its competitor is weak in marketing, it may want to invest more in marketing activities.
5. Predict Future Trends.
Organizations can develop strategies that capitalize on opportunities and mitigate threats by understanding the environment in which they operate.
One of the benefits of external analysis is that it can help organizations identify new markets. A business may not be aware of all of the potential customers who could purchase its products or services.
External analysis can help identify these potential customers by looking at factors such as population trends, economic conditions, and technological developments.
6. Provide Valuable Insights And Potential Growth
When it comes to businesses, whether they are small or large, one of the most important things that they can do is conduct an external analysis. This means looking at the environment in which they are operating and assessing the opportunities and threats that exist. By doing this, businesses can develop a more accurate understanding of their current situation and identify potential areas for growth.
7. Defend Against Potential Threats
External analysis is the process of reviewing a company’s environment to identify possible threats and opportunities. The goal of this analysis is to develop a plan that will help the company defend against potential threats and capitalize on any opportunities.
Many factors to consider when conducting an external analysis. The first step is to identify the company’s industry and its competitors. It is also important to assess the political, economic, social, and technological environments in which the company operates.
Threats can come from a variety of sources, including new entrants into the market, substitute products or services, regulatory changes, supplier or customer concentration, and natural disasters or other unforeseen events.
Companies need to be prepared for any potential threats by having a plan in place to address them.
8. Gauges Customer Sentiment Towards Products
The use of customer sentiment gauges has become an essential tool for companies to understand how their customers feel about their products and services. This information can be used to improve the products and services that are offered, as well as to make decisions about which new products or services to offer.
There are some different ways to collect customer sentiment data. One method is through surveys sent out to customers. Another approach is to look at comments that are posted on social media sites or in online reviews. In addition, companies can track how often customers visit their websites or interact with them on social media.
External analysis is an important part of understanding customer sentiment. By looking at what is happening in the larger environment, companies can get a sense of how customers may be feeling about their products.
9. Helps Avoid Making Costly Mistakes
Making a business decision is not easy. It involves a lot of research, thought, and time. To make the best decision possible, it’s important to do an external analysis of the industry and the company you’re looking to enter.
This analysis will help you understand the factors that could impact your business and what you can do to mitigate any risks. It will also give you a better understanding of your competitors and how they may impact your bottom line.
By doing an external analysis, you can avoid making costly mistakes that could jeopardize the success of your business.
Conclusion
In conclusion, an organization’s marketing efforts must be based on an external analysis that considers the current environment and the factors that will affect the business in the future.
The analysis should include a review of the company’s strengths and weaknesses, as well as an examination of the opportunities and threats that it faces.
By taking all of these factors into account, a company can develop a marketing strategy that will help it to achieve its goals.
