Critical external factors affecting on company’s marketing decisions

Critical external factors affecting on company’s marketing decisions

Research proposal by Olga Semakova, Arina Zdravkova, Sergei Andaykin

Chapter 1

Any firm should know its position and performance in the business, so that it can plan strategies that can help it to further compete and stay in the business. A firm should optimize all the opportunities to maximize its output and at the same try to avoid any possible threats that might affect the firm’s performance.

Good business management is not only a matter of how an individual deals with the factors they can control but about how they respond to the things they cannot. A wide variety of factors including consumer demand, the overall economy, the cost of raw materials, the political and legal landscape and the actions of competing companies have a direct impact on a firm's bottom line. Critical external factors happen in the companies for different reasons. Part of them is unique and requires the original administrative decisions.

The considering issue is urgent and of current interest. Even huge companies suffer losses, because they are not ready for these kinds of disasters.

Given the factors listed above, the firm must be timely and adequately respond to the dynamics of the crisis processes in the enterprise.

The main goal of our report is to analyze the macro environment of companies, identify and characterize the main critical external factors affecting marketing solutions company, to clarify the role of the critical factors in the economic development of enterprises and consider the company’s behavior from the real world under the influence of critical environmental factors.

The theme of our thesis is:

- critical external factors affecting on company’s marketing decisions

The main questions in our research are:

-In which critical situations companies can be and what the reasons of it?

-In which conditions companies have to correct their marketing activity and processes, what from critical external factors influence on it?

-How to solve problems in activity of company caused influencing of critical external factors

Chapter 2

A business does not function in a vacuum. It has to act and react to what happens outside the business. These outside influences that can impact a business are known as external factors. Various external factors can impact the ability of a business or investment to achieve its strategic goals and objectives.

Critical external factors in the world of business are an inevitable fact: the world financial crisis, different natural cataclysms and sharp jump of the foreign exchange market. These factors may not pass without serious economic and social consequences. These adverse events without any protective marketing actions lead to a drop in sales or income.

The analysis of external factors helps develop strategic solutions that provide algorithms interaction between the company management in the short and long term that will support its potential at the level necessary to achieve the objectives, will help find threats and opportunities.

It is crucial for marketing managers to account for these extraneous variables when writing their business plans. Additionally, marketing professionals should continuously research their industries so they can account for various external factors before they affect the business. Companies must be highly adaptable to survive in an ever-changing business environment. There are a number of external factors that can affect a company's marketing strategy.

According to David (1999) these external factors classified into five categories: economic factors, politics, social-culture, technology and competition.

Firstly, and most importantly, is the economic factors. This is extremely important for the organization. If there is an economic problem, the company could have difficulty succeeding and therefore would need to focus on adapting other aspects to make up for the loss of economic funding.

The overall economy is one of the most obvious external environmental factors that impacts businesses. No single business has a tremendous effect on the overall economy but businesses must always respond to economic changes. In a strong economy a business can exercise a great deal of flexibility in terms of prices, expenses and hiring. When the economy is doing poorly, incomes are down and unemployment is high. A business must be very careful about how it prices its products and services and exercise caution in terms of expenses.

The state of the economy can have a major impact on a company's marketing strategy. For example, premium-brand consumer products companies may find consumers switching to cheaper brands during economic downturns. Entire industries, such as the restaurant industry, may also experience decreases in sales because people are not dining out as much. Companies will often need to lower their prices during recessions. Conversely, economic boom periods may put a strain on a company's production and delivery times. Marketers need to adapt their marketing strategies to account for various economic shifts.

Firms around the world often must manage and survive economic crises. In an economy a crisis can be described as that period of dismal economic performance. During this time, the value of institutions, especially financial institutions, drops at unprecedented speeds and everything seems to be valueless. Production is low and often fails to meet the level of demand.

According to Grewal and Tansuhaj(2001) Economic crises create high levels of uncertainly and are potential threats to the viability of an organization. It is the main critical economic external factor that can influence to all activity of organization. As economic weak spots are integrated into the global economy, it is important to develop an understanding of organizational capabilities that can help firms manage their way through such crises.

Political factors - An activity related to government policy and its administrative practices that can have an effect on business.

The external environment of a business is frequently impacted by the political and legal climate. Things like government regulation, sales tax, corporate taxes and import duties can all have an impact on a company's bottom line. Additionally environmental and health regulations can force changes in how a company does business. In some cases certain products or parts of those products can be banned or found to be unsafe which can force a recall of products. In other cases, imports from or exports to a given country can be cut off due to international politics.

The government can be the key to doing this, they control the political climates for countries which would make or break a business with regards to them agreeing or going against current political ideas. This also connects to the legal side of things.

Current laws could prevent businesses and companies from doing certain things and producing certain goods. Also, technology is today becoming very important. It is breaking the boundaries with regards to what can and cannot be produced and made, thus giving organizations much more freedom.

Both local and federal regulations can have an impact on a company's marketing strategy. On a small scale, local ordinances may prevent outdoor promotions in certain areas. On a national scale, the government often regulates certain industries more stringently than others. For example, federal regulations have restricted the advertising and promotions of the tobacco industry. Labeling laws covering food products have changed because of the fight against obesity. Also, foreign countries can impose embargoes on U.S. companies, which may hinder their exports to those particular nations.

Competitive strategies can also affect a company's marketing strategy. No business has control over the products and services offered by competing firms or their prices, advertising, manufacturing, hiring, or sales methods. Therefore, it is important for company marketing managers to monitor their competitors on an ongoing basis. One way to monitor competitors is by using a SWOT (strengths, weaknesses, opportunities, threats) analysis. For example, companies can study the strengths and weaknesses of their competitors and compare them to their own strengths and weaknesses, according to a writer on QuickMBA, an online reference site.

Competing companies will obviously be impacted by many of the same external environmental factors, such as political, social and economic changes. Some environmental factors can also differ. For example, companies based in different countries, or whose manufacturing takes place in different countries, are impacted in different ways by the political and economic environment. In the end, the outcome of competition frequently comes down to which company does the best job of adapting to its environment.

Technology is another external factor affecting marketing strategy. All products have a certain life cycle, which includes the introduction, growth, maturity and decline stages. Products often enter the decline stage when new technologies are introduced to the market. Companies will need to decide if they will introduce their own new technology and still keep producing older products. For example, black and white televisions were still around after the introduction of color televisions. A company may even reduce the prices of older products and technologies when introducing new ones.

Socio-cultural factors

Marketing and product development must be in tune with the social standards that the different groups in your market possess. A consumer won't normally buy a product with which he doesn't identify or feel as though someone like him could use. Important ethnic and cultural factors that define a company's market opportunities include religion, ethnic background, language and gender roles.

Another group of factors is not less important is the environmental factors.

A natural disaster example include floods, tsunami, hurricanes, volcanic eruptions, earthquakes, and other geologic processes. A natural disaster can cause loss of life or property damage, and typically leaves some economic damage in its wake, the severity of which depends on the affected population's resilience, or ability to recover. (G. Bankoff, G. Frerks, D. Hilhorst (eds.) (2003). Mapping Vulnerability: Disasters, Development and People.)

Environmental concerns are important to businesses both in the short and long term. In the short-term, things like natural disasters can disrupt production and supply operations, or even destroy company assets. For example In a area, such as San Francisco, an earthquake can have disastrous consequences and leave lasting damage, requiring years to repair. Manufacturers should avoid install their factory in such vulnerable areas. Programs such as environmental risk assessment can help companies prepare to handle many of the most likely short-term crises. For example, if a business has a manufacturing plant in an area prone to hurricanes, they could hedge against the possible loss by developing an action plan to relocate employees or supplies if threatened by a hurricane. Many organizations conduct regular analyses of the macro environment factors connected to them, and revise their strategies accordingly.

List of literature:

1) Kotler, P., Marketing management

2) Kotler, P., Principles of marketing

3) Hollensen, S., Global Marketing

4) David, F.R.1999. “Strategic Management Concepts”,7^th Edition, Prentice Hall, Upper Saddle River, New Jersey

5) Dwyer, R. and Tanner, J.,Business marketing: connecting strategy, relationships and learning

6) Grewal R.,Tansuhaj P.(2001):Building Organizational Capabilities for Managing Economic Crisis: The Role of Market Orientation and Strategic Flexibility. Journal of Marketing Vol. 65, No. 2 (Apr., 2001), pp. 67-80

7) G. Bankoff, G. Frerks, D. Hilhorst (eds.) (2003). Mapping Vulnerability: Disasters, Development and People.

Chapter 3

Methodology of our research can explain how the results were achieved; how data was collected; how data was analyzed.

The first type of research should be Analytical. We can use facts or information already available, and analyze these to make a critical evaluation of the material. We are going to use the following types of recourses:

- Academic journals;

- New articles, abstracts, academic opinions, theses;

- Books;

- Information from the Internet, including search engine Google Scholar and data bases.

The second type of research should be Conceptual. Conceptual research is that related to some abstract ideas or theory. It is important to use because some theories can explain the research questions.

The third type of research should be Comparison. To choose the most appropriate decision we can compare two different variants of company’s behavior in critical situation.

Moreover in this research can be used the Case study. It will be useful to analyze background of research problem, some real situations that happened in the past. So, in general our research will include:

· Definition of the problem;

· Analysis of secondary and primary information;

· Analysis of the data;

· Conclusion

The starting point of this study is the exact wording of the goals and objectives. They derive directly from the research problems. The selected target dictates the choice of the main trends and techniques of research in terms of subject matter, the size of the territory, a period that covers the study. With the formation of this phase, we will use different studies to obtain evidence to clarify the content of problems and goals. The selection of sources is carried out to facilitate the search for the required information. The analysis of the information gathered suggests its study, treatment with the various methods and techniques, as well as extract the necessary information. Moreover, we will use statistical and mathematical methods of information processing.

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