Environmental Scan

The process of continually acquiring information on events and changes occurring outside the environment of an organization in order to identify and interpret potential trends that can affect the future direction of that organization is what constitutes environmental scanning (Kerin, Hartley, & Rudelius, 2009). These potential environmental trends arise from different sources: economic, social, technological, regulatory and competitive forces. The interplay of these forces determines the policies an organization will formulate and implement in order to achieve its long-term objectives, primarily its marketing objectives. These forces may contribute either in a positive way, acting as opportunities to be seized at, or in a negative way, as threats to be wary of and to protect against. Although these forces are five in number and the list of trends within each are multiple, I will be focusing on one of them: the economic force, and under it consider the impact of the current economy on completing an environmental scan were one to be done today.

The current U.S as well as global economy has been in recession ever since December 2007. The recession, nevertheless, appears to be in its recovery phase. The impact of an economy in recession is multiple-fold. One downside to it is a high rate of unemployment due to layoffs and foreclosures (Pettinger, 2008). This affects marketing in a major way; with unemployment comes scarcity of money and households have to cut down on consumption especially of non-essential goods and services i.e. luxuries. An upside to the recession however is the lowering of inflation, thus allowing consumers to get better value for money, particularly with purchase of items they consider essential to their living such as foodstuffs, thus enabling them to purchase more of such items. Thus an organization that is involved in the marketing of a luxury product will be hard hit and will have to re-strategize its marketing position, perhaps consider entering into a new line, while another organization marketing a product required daily by the population will be able to capitalize on the situation in a more positive manner by increasing production.

With the lowering of inflation comes the lowering of interest rates by the Federal Reserve Bank and Treasury (Hilsenrath, 2008). This encourages borrowing by producers as well as consumers. For producers this enables them to be able to expand their activities, they may wish to diversify their interests such as investing in new type of product that is more marketable. For consumers low interest rates may mean credit purchases are a more viable option compared to cash purchases especially in an era of pay cuts.

So as to maintain the low inflation rate and counter rising government spending, taxes are increased and this impacts negatively on an organization (Pettinger, 2008). With the tax burden raised on producers and service providers, many will pass on their increased costs to consumers and as the price of goods and services shoot up demand will fall. However as organizations battle to win customers in a bid to increase revenue, this may lead to price wars that may actually end up increasing consumer spending as firms slash prices.

Generally speaking recession leads to lower profitability and lower share prices in the stock market with lower dividend payments (Pettinger, 2008). This often discourages investments in the stock market, and for companies on the stock market this may spell doom as current shareholders may opt to sell out, thus such companies have to brace for a possible downturn in their share prices and even a possible collapse.

Finally, at this time of recession organizations will have to consider exploring new markets, mainly those where recession has not hit so hard, in order to ensure high profits in the future.

References

Kerin, R. A., Hartley, S. W., & Rudelius, W. (2009). Marketing: The core (3rded.). Boston, MA: McGraw-Hill.

Hilsenrath, Jon. (2008, September 30) “Fed and Treasury Are Left With Familiar Aresenal” The Wall Street Journal, A3

Pettinger, T. (2008, October 10). “Economic Recession”. Economics Help.