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It is very important to consider the external environment that your business operates in before beginning the marketing process and to continue monitoring for any changes that may influence your marketing activities. To do this you can develop a PEST (Political, Economic, Social & Technological) model to help you identify and understand the various environmental factors that can impact your business and its marketing activities.

Political and Legal Factors

You are required to comply with laws and regulations designed to ensure markets operate with appropriate levels of competitive pressure to protect consumer rights and maintain market efficiencies. In Australia, the Competition and Consumer Act 2010 (CCA) aims to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.  

It is important when developing marketing initiatives to be aware of any relevant restrictions under the Trade Practices Act to avoid potential fines, negative publicity and expensive civil damage suits.^[1] There are also many laws and regulations in place with respect to advertising on the internet and dealing with disadvantaged or vulnerable consumers. For more information visit Australian Competition and Consumer Commission (ACCC).

The Office of Fair Trading also provides guidelines regarding legal aspects of advertising. 

Economic Factors

Economic conditions can greatly affect levels of disposable income for consumers and influence the prices they are willing to pay, and the types of purchases they will make. For example, an economic recession or slowdown may reduce the consumers' disposable income, thereby reducing the consumer spending to the lowest level. At this stage, markets often lower prices and increase promotions to stimulate demand as much as possible. Other factors that can affect the economic environment are inflation levels, unemployment, income and resource availability.

Social and Cultural Factors

A successful marketing strategy should reflect the needs and wants of consumers. For example, a greater emphasis has now been placed on environmentally friendly products and services. As a result, Virgin Blue Airlines now offers customers the opportunity to offset their carbon emissions for each flight by paying a slightly higher fare during the booking process.

Technological Environment

It is important to monitor advances in technology and consider adopting new technologies that  can increase your marketing capabilities. The internet is a technology that continuously improves and often provides to introduce new ways of doing things that often result in greater efficiency and effectiveness. The internet offers excellent opportunities to cost effectively research markets, analyse competitors and identify other ways to improve your business.

^{[1] Kurtz, D.L 2008 Contemporary Marketing, Thomson.}