Professional Studies for Screen-Based Media
Foundation Degree South West
The Marketing Environment and Objective Setting

Analysing the external environment


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)

Stuart Perl, Regional Director of Marketing (EMEA), Cunard Line Seaborne Cruise Line.

Jon Weaver, Marketing Manager, Bournemouth Borough Council

Heather 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 operate in.

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 benefits)

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

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 In particular look at the ACORN profile (you will learn more about this in the Marketing Research section).

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 from Boeing).

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.