Broadsheet newspapers are full of news and analysis
of what is going on in the world (for example see The
Financial Times online). At first sight, all this might seem
far removed from marketing, but experienced managers systematically
scan the external environments for events that can affect their
organisation. As well as newspapers there are other specialist
publications (for example see Marketing
Week, or see Toursimtrade)
and dedicated research reports that can provide intelligence (information)
to a manager (for example see Mintel).
A manager can also commission their own research if they feel
they need to know more about a specific area (this is covered
in more detail in the Marketing Research section).
So what are the sorts of things that a manager might look for?
We can class them under the headings: political; economic, social
and technological although we should note that there is overlap
between these categories. As long as we identify all the relevant
issues, we don't need to worry too much about which heading we
use. This process is often referred to as a PEST analysis (an
acronym of the headings)
Perl, Regional Director of Marketing
(EMEA), Cunard Line Seaborne Cruise Line.
Weaver, Marketing Manager, Bournemouth
Moore, Marketing and Promotions Officer
Marwell Zoo, Hampshire
The political environment
Broadly, political factors relate to new laws that may
impact organisation's activities. These laws may now originate
from the EU, from national government or even local councils.
Many organisations operate internationally and therefore need
to monitor the political situation in all the counties that they
Sometimes an announcement of a governmental policy (future laws)
need to be considered carefully and it is not unusual for companies
to try to influence governments where they feel that a proposed
law might negatively impact on their activities. For example,
when a government claims that it intends to get more people using
public transport to help protect the environment, car manufactures
may become concerned that car ownership and use may be more heavily
taxed in the future. They may feel that this could have a negative
impact on sales (but manufacturers of small, economical cars may
see an opportunity here).
In additional to government action, political factors might
include the actions of pressure groups (themselves attempting
to influence government policy, for example see Greenpeace).
The political environment will also include foreign policy issues,
in particular relationships (and hostilities) between countries.
For example the 'War on Terrorism' has created an environment
that may cause difficulties for airlines because of increased
concerns about flying. It will also have a serious impact on some
tourist destinations (although it might also mean that local tourism
The economic environment
Economic factors focus on the overall state of the economy. This
refers to the global, regional and national economy.
When an economy is in recession (shrinking, or growing only very
slowly), people generally have less money to spend on goods and
services. They may also be less extravagant in their choices.
This means that a recession might disproportionately affect different
organisations. For example, expensive, overseas travel might decline
in a recession, but on the other hand, there may be an increase
in weekend trips and/or holidays in the UK.
Exchange rates are also part of the economic environment. When
the pound is strong against other currencies, overseas travel,
and imported goods become cheaper, but then the pound is weak,
foreign goods and travel become more expensive. You can see current
exchange rates at FT.com
In a recession organisations might also have less financial resources.
This can mean that there is less money available for marketing
activities. A marketing manager might have to fight harder to
gain resources for advertising, for example. 4.2.3.
The social environment
This broadly refers to the structure of society and the
attitudes of members of society. Marketers often make an assessment
of something called demographics. This is a system that provides
broad classifications of a population according to things like
age, gender, social class, occupation, location and family size.
You might be interested in the demographics of your neighborhood
and you can check them at Upmystreet.com.
In particular look at the ACORN profile (you will learn more about
this in the Marketing Research
Because many products only appeal to certain types of people,
changes in demographics can indicate the potential for growth
or decline in demand for goods or service. For example, the growth
in the number of over 50's might suggest more potential for products
that appeal to this group (such as cruise holidays). Increases
in the divorce rate might increase the demand for smaller housing
and flats and for holidays that cater for single people.
In addition the social environment includes general attitudes
to life, the environment and consumption. Attitudes tend to change
slowly, but when they do, there can be a dramatic effect on markets.
For example a society that comes to value individualism and experimentation
may produce more demand for adventure holidays that a society
that values family commitments and security.
The technological environment
This broadly refers to changes in technology. New technology has
the potential to render whole product categories obsolete and
it can do this in a very short period of time. For example, typewriters
were replaced by word processors in less than 20 years; the DVD
player is rapidly replacing the video recorder. Historically,
transatlantic liners were put out of business by air travel.
New technology also has the potential to allow for changes in
production techniques that can lead to improved or adapted products,
or could reduce manufacturing costs. For example, the modern overseas
tourism industry has only flourished as a result of technological
improvements in aircraft design that have made air travel cheaper.
Future expansion of air travel partly requires technological developments
that make airplanes quieter (for example see this information
New technology can also create opportunities for new marketing
techniques. For example the Internet has allowed firms like Easyjet
to sell direct to consumers without the use of travel agents.