The External Marketing Environment

The Environment T he environment which markets exist in are constantly changing Problems, opportunities, successes, and failures are largely based on a company’s ability to adapt To foresee and adjust to change, companies must research and review external competition and factors in the marketplace Trends that company analyze include are: Economy Competition Technology Laws other regulations The consumer

Economy Influences The economy has a significant impact on the marketing activity of a company The factors that contribute to the Canadian Economy include the following: Gross Domestic The GDP is the total value of good and services produced in a country on an annual basis. Positive growth in GDP from year to year would reflect a productive economy and plentiful jobs Inflation Inflation refers to a general rising price level for goods and services, resulting in reduced purchase power. For example, if inflation rises significantly next year we can buy less with the money we have Employment Employment refers to the number of people with jobs from year to year. A high level of employment refers to a vibrant economy and vice versa Real Income This is income adjusted for inflation over time

Economic Influences: Income Disposable Income refers to the amount one has after taxes and other expenses (What you have left after you pay your bills) Disposable Income has consistently fallen in Canada since the early 1990s This trend is due to a rise in hydro, gas, telephone, and so on Due to this trend, many families debt are rising and families are spending less on luxuries and vacations, focusing instead on the necessities

Economic Influences: Value of the Canadian Dollar The Canadian Dollar is heavily effected by the economy of Canada The Canadian Dollar in turn heavily effects Canada’s internal and external markets When the Canadian Dollar is low, Canada’s exports are very valuable for countries such as the United States When the Canadian Dollar is high, Canada’s exports are less valuable and Canadians begin to shop outside of Canada In the case of the USA, Canada traditionally sells 83% of its exports to the USA, while Canada gets 70% of its trade from the USA

Economic Influences: Free Trade Canada is part of the North American Free Trade Agreement which includes Mexico and the United States All these countries have the ability to trade in each others markets without facing heavy tariffs or trade fees Combined, the market of these countries is 360 million consumers with annual output of $10 Trillion Disadvantages in Canada include relocation of Canadian businesses to Mexico where land and wages are much cheaper

Economic Influences: Business Cycles Economic growth is measured in Canada by the amount the GDP increases or decreases In the last 5 years, Canada’s GDP has grown 5% annually The economy of each country is continually expanding or receding in different stages: Recession Depression Recovery Prosperity

Business Cycles: Recessions and Depressions When countries experience periods with a lower GDP, consumer spending is also lowered. Lower spending contributes to a lower GDP and a spiral effect usually takes place A decline in a countries GDP that lasts longer than 6 months is known as a recession When recessions last a long time and are harsher then usual they are known as a depression

Business Cycles: Recovery and Prosperity Just as declines in the economy cause a decline in spending, an increase in the economy often brings with it more spending Businesses respond to this by manufacturing more and marketing more aggressively The initial period of increase in economy is known as the recovery stage When the economy is successful for an extended time it is known as the prosperity stage