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Business Environment And Market Research Essay

The business environment refers to external factors that are largely outside the business. These include Political, Economic, Social and Technological factors. These factors can be analyzed using a PEST strategic analysis methodology in order to evaluate whether they have a positive or negative impact on the business itself. Hence the business environment can be summarized as the collection of external factors that are independent of the business that affect the businesses profitability directly or indirectly.

It is therefore essential for companies to restructure their marketing and business practices in response to significant changes in the business environment. These changes include globalization, trade deregulation, computer and technological advancements (Kotler 2001: 417). The most common responses of business firms to a rapidly changing business environment include:

  1. Business Process Reengineering: This involves the radical change, redesign and rethinking of existing business processes and functions in order to achieve drastic improvement of current performance and effectiveness (Hammer and Champy 2004: 16).
  2. Outsourcing: Refers to the process of a company contracting other external companies to provide services that may otherwise be performed by in house employees. This goes a long way to ensure that the company saves on resources and they are able to concentrate all their efforts on their core business.
  3. Benchmarking: This is a process of formulation of standard best practices and functions in order to improve the effectiveness and efficiency of a business. It is a systematic tool that is used to ensure that a company performs in accordance to organizational processes and activities that represent best practices. A benchmark is a point of reference or measure that serves as a basis for comparison of existing and preferred processes and activities.
  4. Mergers and Acquisitions: Mergers involve the coming together of two or more companies in the same industry join together in order to eliminate wasteful competition and benefit from integration. Acquisitions refer to the total buyout of a company by another in the same industry such that the company that’s been acquired ceases to exist as an independent entity.
  5. Globalization: This refers to the integration of regional economies, societies and cultures through a worldwide spanning trade and communication network.
  6. Focusing: This refers to the concentration of marketing efforts and activities to the most profitable businesses and customers (Kotler 2001:417).

Market Research

Market research is the function that links an organization to its market through the gathering of information. This information allows for the identification and definition of market-driven opportunities and problems. The information allows for the generation, refinement and evaluation of marketing actions. It allows for the monitoring of marketing performance and improved understanding of marketing as a business process (Hair, Bush, Ortinau 2002:28). Market research hence can be summarized as any organized effort to collect information about specific markets and use it as a tool for formulating marketing strategy.

Some of the most common market research methods include the following:

  • Surveys: These are carried out in order to find out what the consumer thinks about the products, this may be done through the use of questionnaires, email, internet, post, telephone or face to face.
  • Focus Groups: This is a form of research in which a sample group of individuals are asked to share their thoughts, attitudes and feeling on a particular product or concept. Focus groups normally contain between 6 and 10 people who are typically screened to ensure that they form part of the relevant market segment.
  • Interviews: This is a face to face interaction between a researcher and a respondent selected according to a predetermined criterion with the aim of finding out what the consumer thinks about the product.
  • Test Marketing: This is the process of trying a new product, service or concept on a section of the market prior to a full scale roll out. The products are generally tried out on a particular geographical area or region and are often supported by a full advertising and marketing campaign to evaluate consumer reaction before the product is launched nationally.

Market Research is used in the same context as Marketing Research which is an extensive and systematic process of linking the consumer, customer and public to the marketer through information, the information is used to:

  • Identify and define marketing opportunities and problems;
  • Generate, refine and evaluate marketing actions;
  • Monitor marketing performance;
  • Improve understanding of the marketing process.

Market research efforts result in the collection of the following important information:

  • Market Information: This is general information about the market e.g. different commodities in the market, demand and supply trends.
  • Market Segmentation: these are the different divisions of the market e.g. demographic, geographic, technographic, psychographic, cultural and gender differences.
  • Market Trends: These are the upward and downward variations of market factors such as demand, supply and customers.
  • Customers Analysis: This refers to various customer behaviors and tendencies that are present in any given market segment.
  • Market Competitor Analysis: This refers to a detailed evaluation of businesses that are in the same industry who are competing for the same market share.
  • Marketing Mix Model: These are the variable factors that marketing managers can control in order to best satisfy customers in the target market.

These factors are:

  1. Product,
  2. Place (Distribution),
  3. Price

Marketing researchers specify the information needed to address marketing issues, design the method for collecting information, manage and implement the data collection process, analyze the results and communicate the findings and their implications. (Kotler, et al 1999:320). Steps involved in the marketing research projects include:

  • Definition of the problem
  • Marketing Research design determination
  • Identification of data types and resources
  • Design of Data collection forms and questionnaires
  • Determination of sample size and plan
  • Data collection
  • Analysis and interpretation of the data
  • Marketing Research report preparation

Conclusion: Relationship between Business Environment and Market Research

The Business environment being external to the organization or business unit, results in its importance especially when carrying out market and marketing research initiatives. This is because most of the market and marketing research activities carried out heavily rely on information collected from entities or factors that form the overall business environment. For example customers, competition, market segmentation, demand and supply are all external to the business and form part of the business environment.


Boyd and Walker (1990) Marketing Management: a strategic approach: Irwin

Hair, Bush, Ortinau (2002) 2nd Edition. Marketing Research within a changing information environment: McGraw-Hill Companies

Hollensen, S. (2003) Marketing Management; a relationship approach: Prentice Hall

Kotler,P et al(1999) 2nd European Edition. Principles of Marketing. Europe: Prentice Hall

Kotler,P.(2001) Millenium Edition. Marketing Management: Prentice Hall

McDaniel and Gates (2006). Marketing Research: Wiley

Peter and Dornelly(2004) Marketing Management: knowledge and skills,7e: McGraw-Hill Companies Inc

Wrenn, Stevens and Loudon (2007) Marketing Research: text and cases

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