Textbooks continue to serve as primary course material for undergraduate and graduates studying marketing principles, marketing strategy, and international marketing. Elbeck et al. (2009) state, “An instructor’s decision to adopt a particular textbook will influence the marketing knowledge, business major selection, and career choices of tens, if not hundreds of students” (p. 49). In their early chapters, marketing textbooks generally provide established frameworks for understanding the external business environment and its relationships to markets and marketing activities. The external business environment, or marketing environment, is a multidimensional set of uncontrollable forces that can influence how companies and consumers might behave. Marketing textbooks generally identify five dimensions of the external business environment (see Tables 1-3) with slightly varying terms, including:
The External (Business) Environment
In Principles of Marketing, 15th ed., Kotler and Armstrong (2013) state that the company’s macro environment shapes both opportunities and threats for companies. In Marketing, 12th ed., Lamb, Hair, and McDaniel (2013) agree that marketers generally cannot control elements of the marketing environment, but rather must understand how they change and can potentially impact target markets. In Marketing Channels, 8th ed., Rosenbloom (2012) notes that channel managers must take into account how the uncontrollable environment can influence the activities of their member and nonmember participants. In their text, Marketing Strategy, 5th ed., Ferrell and Hartline (2011) say the following:
The final and broadest issue in a situation analysis is an assessment of the external environment, which includes all the external factors — competitive, economic, political, legal/regulatory, technological, and sociocultural — that can exert considerable direct and indirect pressures on both domestic and international marketing (p. 101).
Emphasizing the importance of these factors, Lamb, Hair, and McDaniel (2013) assert that marketing managers cannot plan intelligently if they fail to understand the environment and its impact on how firms work and compete. In fact, they suggest the following:
If there is one constant in the external environment (outside the firm) where firms work and compete, it is that things are constantly changing. If the organization doesn’t understand or fails to react to the changing world around it, it will soon be a follower rather than a leader (p. 87).
Generally speaking, the external business environment can be characterized as one that:
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Is uncontrollable and constantly changing;
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Imparts difference influences on different industries, companies, and business units;
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Has short-term and long-terms effects on marketing activities;
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Affects and is affected by marketing activities;
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Creates and shapes opportunities, challenges, and threats for companies;
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Exerts direct and indirect pressures on domestic and international marketing.
Without question, marketing strategists must constantly scan the business environment to identify threats or opportunities that could affect industries, companies, products, brands, and consumers. For instance, international market entry decisions should take into account the political risk and regulatory climate within a given country since these factors could help or hinder operations. Economic recession may compel luxury product manufacturers to offer more value-conscious merchandise to their portfolios. Ongoing competitive pressures from generic drugs and expiring patents drive leading pharmaceutical companies to innovate in order to stay competitive.