A company operates in two kinds of environments, internal/ micro and external/ macro environment. The internal environment comprises of its department like operations/ manufacturing, management, marketing, finance, accounts, human resources (HR), research and development (RND), management information system (MIS), etc. The internal environment needs to be analyzed to identify a company’s strengths and weaknesses. The external environment consists of six major forces or actors: demographic, economic, natural, technological, legal-political, and social or cultural. The external environment needs to be analyzed to identify possible opportunities and threats. Companies need to understand the current trends to foresee the future trends, which will aid in better planning, exploiting opportunities, and avoiding possible threats.
Demographic Economic Natural
Company
Technological Legal-political Social or cultural
DEMOGRAPHIC ENVIRONMENT:
It shows explosive population growth worldwide, or in specific territories, a changing age, sex, ethnic mix, changes in education, income, race, religion, occupation, household ownership, family size, geographical population shift from rural to urban areas, etc. See the chapter in the book of ‘Marketing Management by Philip Kotler for further elaboration on age, income, and household groups.
ECONOMIC ENVIRONMENT:
It shows a slow down in real income growth, low savings, high debt, difficult availability of credit, etc.
NATURAL ENVIRONMENT:
It shows potential shortage of certain raw materials, unstable cost of energy that fluctuates production cost, increased pollution, and a growing green movement’ to protect the environment. Companies have to adopt their system to the new regulations and demands from the public interest groups like non-government organizations concerned with protecting the natural environment. Other companies tack this as an opportunity and produce recyclable products and finite nonrenewable resources.
TECHNOLOGICAL ENVIRONMENT:
It exhibits/show acceleration technological changes, innovational opportunities for new discoveries, increasing RND budget, and changing regulation about technology. Technological environment: hurt for example xerography (or photo copying) hurts carbon paper business, autos railways business, television, hurts newspaper business, and cell phone hurt landline telephone business, so companies must have a for sight on future technologies.
LEGAL-POLITICAL ENVIRONMENT:
It shows changing government policies and regulations, the influence an policy makers by pressure groups of business community, and public interest groups of civil society. See the table in the afore- said book to note Us regulation affecting marketing practices. For instance the Government of Pakistan in posed ban on cigarette smoking in 1996, thus badly hurt the cigarette industry.
SOCIO-CULTURAL ENVIRONMENT:
It shows changing values of society members, their belief’s, attitudes, behaviors, preferences, customs, traditions rituals and psychographics including social classes, personality, and lifestyles.
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