External Situational Analysis

Rahat Mehra | | 2 min read

An external Situation analysis looks at macro factors affecting business. Examining your external research/analysis gives a complete picture of the current situation and planning a marketing strategy. 

A Typical market system comprises of 

  • Core environment (producer-strategy-channel- market-end user) external factors: socio-economic, government policies, technology, intermediary, competitors, suppliers.   
  • Complementary goods and competition goods
  • Essential terms: types of markets (monopoly, oligopoly, monopolistic and perfect market) and their characteristics. 

List of external factors:

  • Political: Qatar- development, Trump- H1B visa. 
  • Economic: RBI changes rates cyclically to attract customers, 9/11 and COVID-19 effects
  • Sociology: L’Oréal/ PNG replacing the word “fair.”
  • Demographic: Baby boomers, GEN-X, Millennials
  • Government policies: E.g., China- blocking trade and encouraging MSME.
  • Technology: Packaging, Safety, and health- COVID-19, disruptive changes- Live streaming- forward integration- subscription by Rhapsody.
  • Intermediaries: Location, willingness, capability to provide support services, increase in E-commerce, wholesalers (preferable more than distributors), online food delivery- Swiggy/ Zomato   

QUEST Analysis: 

  • Explore important events- get inputs from experts- solution suggestions of experts- find high/medium/low priorities- implement solutions strategies. E.g., Machine learning’s impact on different industries.

ETOP: Opportunities and Threats (only external environment)

  • Qualitative analysis: forces are high/moderate/low
  • Threats: competitors, substitutes, new entrants, buyers, and suppliers (porter’s five forces)
  • E.g., BHEL, a Sports cycle manufacturer.

EFEM: Quantitative analysis

  • Find external factors- Give them weight- do the rating of the elements- weight*Rating (weighted score)- count the total weighted score of the company.

The external analysis includes macroeconomic, global, political, social, demographic, and technological research on a macro scale. The primary purpose of the external study is to determine the opportunities and threats in an industry or any segment that will drive profitability, growth, and volatility.