The external environment consists of the factors outside the company that influence the company’s ability to function. Some sections of the external elements are manipulated and managed by company marketing, but the others need the organization to make adjustments.

It is important to monitor the core components of a company’s external environment, and keep a close watch at all times. If the company cannot judge its external environment, it may fail to meet the market demands.

Organization’s External Environment – Five Components

Following are the five components of external environment −

Customers

The customers can be attempted to influence, through marketing and strategic release of corporate information. However, finally a company’s relationship with the clients is based on finding ways to let them purchase the services or products. Market research is the tool for determining the effectiveness of the company’s marketing communication, and to make a decision about what changes should be made to forthcoming marketing programs to improve sales.

Government

Government regulations, especially related to product development, packaging and shipping play an important role in the cost of doing business. It also influences the ability to expand into new and emerging markets. The government may enact new regulations on how a company must package the products for shipment, which can increase the unit costs affecting the profit margins. International legal rules create processes that the company must follow to get the product marketed in foreign markets.

Economy

The company must be efficient at monitoring the economy and reacting to it, rather than trying to shape or manipulate it according to its needs. Economic factors affect how the products are marketed, the amount of money spent on business growth, and the nature of target markets the company will pursue.

Competition

Competition affects how a company does business and how it addresses the target market. It is a strategy to find markets with less competition, or the company may decide to compete directly in the same target market. The success and failure of competitors affect the marketing planning, as well. For example, if a long-time competitor decides to stop marketing due to financial losses, then it would be important to adjust the planning to take advantage of the condition.

Public Opinion

Scandals can be harmful to the organization’s image. The public perception about an organization can affect sales. It may go down if it’s negative, or it can boost sales with positive company news.

An organization can influence the public opinion by releasing strategic information through press release. However, it is also very important to monitor and judge public opinion to attempt and defuse potential issues before they go out of control.