Analysis of the Competitive and Economic Environment

Analysis of the Competitive and Economic Environment

External analysis is one of the critical aspects of designing a marketing plan as it explores the wider business environment likely to affect the business. Although the external factors are often beyond the control of an organization, a critical analysis provides the foundation upon which the organization can explore existing opportunities to allow the organization to be more competitive or possible threats that the organization must be prepared to deal with. In a marketing plan, assessing the economic impact is critical in exploring the strategies that an organization must consider to remain competitive in the market (Cepel, Belas, Rozsa & Strnad, 2019). Besides, economic factors significantly determine the consumer’s purchasing power and their spending patterns, and as such, factors are critical in evaluating an organization’s business projection. It is this critical for organizations to explore the key economic indicators that must be considered in a marketing plan.

GDP

GDP is often used to describe whether a country’s economy is experiencing a recession or attractive investment. As indicated in the GDP, a bad economy implies that the economy is bad for investment, and there are lower earnings. Consequently, the purchasing power of the target market is compromised. A company that seeks to go multinational may likely evaluate the GDP to determine whether it is worth investing in a given target market.

Interest rates

Interest rates are another economic aspect that companies must consider when evaluating the potential of a market. An increase in interest rates may likely discourage investment as companies may find it expensive to seek bank loans (Kozubikova, Kotaskova, Dvorský & Ključnikov, 2019). Similarly, products are likely to be expensive as stock prices are affected indirectly.

Inflation

Inflation is an economic dimension that companies have little control over. Higher inflation results in higher product prices hence reducing the purchasing power of consumers. Companies are likely to register reduced profits as there is a reduced demand for their products and services.

Income Distribution

Income distribution defines the economic empowerment of people within different geographical locations or economic status. People who are less empowered economically will have a lower purchasing power than those who are financially empowered.

Government Funding and Subsidies

Government policies can either improve or discourage investments. When products are under government subsidy, prices are likely to be less and affordable by the average majority. Organizations are likely to use fewer costs in production, which translates to reduced prices in consumer goods. On the contrary, lack of government funding and subsidy will likely increase production costs and translate into higher prices for products, which will compromise the consumer purchasing power (Ebrahimi & Banaeifard, 2018).