External environment illustration External environment theory

Business in the community

The term business in the community relates to the relationships that a business develops with stakeholders in its external environment. In addition Business in the Community is the name of an organisation set up by businesses and the government to create a responsible approach to business relationships with their communities. The Business in the Community PerCent Club consists of companies that contribute at least 0.5% of their pre-tax UK profits to the community.

There are all sorts of ways that businesses can get involved in the community, including:

  • environmental initiatives, concerned with creating cleaner local, national and global environments
  • educational initiatives e.g. providing educational materials for schools, organising school visits, providing sponsorship for school projects
  • promoting local housing projects and other welfare initiatives
  • creating employment opportunities for the disadvantaged as well as the wider community.

Corporate social responsibility

Many companies such as Cadbury Schweppes and Coca-Cola are committed to what is referred to as Corporate Social Responsibility (CSR). Corporate Social Responsibility involves businesses recognising that they have a responsibility to the wider community, and that by taking this responsibility their reputation is enhanced. Examples of CSR involve providing goods, services and employment to those who might otherwise be excluded from some of the benefits of a modern society e.g. by providing first class access facilities for disabled consumers and employees. CSR also often involves volunteers from a company doing work in their local communities.

Benefits to a business of Corporate Social Responsibility include:

  • motivation of employees who develop pride in representing their organisation in the community
  • developing the skills and experience of employees
  • developing a better understanding among employees of wider society
  • improving team working skills of employees
  • building the reputation of the company.


Markets and consumers

A market oriented company is one that sets out to serve the needs and requirements of its customers. This involves carrying out detailed market research to find out what customers want and then organising and delivering a marketing plan directed at meeting these needs. In a market oriented company the marketing mix will be designed to delight customers.

The marketing orientation of a company can be contrasted with production and sales orientations.

A production oriented company works with the view that products will tend to find their own markets if they can be produced cheaply and to a good standard of quality. Such companies spend a relatively small time investigating consumers' wishes. As a result, they will often come to grief because although their products are good in a technical sense they do not match the benefits the consumers require.

A sales oriented company works with the view that success depends on effective advertising, selling and promotion rather than a real difference between the product you are selling and those offered by competitors. This philosophy will come to grief if consumers shop around and see through the selling strategy.

Market research

Qualitative and quantitative market research enables an organisation to become more market focused. Qualitative research involves working in depth with small groups of consumers to identify their wishes and perceptions. Quantitative research involves using questionnaires and other techniques with larger groups of consumers to get a representative view of feelings in the overall market.

During the mid-1990's Mark's and Spencer became associated with a product led approach particularly in terms of the clothes they sold. They carried out little market research and assumed that they knew what customers want because of past successes. All of this was to change from the late 1990's onwards as M&S realised that they had to listen to consumers. This led to the creation of new ranges of designer labelled clothes and new store layouts.

The market focused company is driven by the needs and wants of its customers. A product led company thinks that because it produces 'good' products consumers will want to buy them.



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Supporting Documents

These downloads will help to put external-environment theory into context using real world examples from real businesses.

Leading a revolution in banking
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Discover how Intelligent finance used external-environment theory to prosper in the financial services industry by downloading our premium case study.

The use of the marketing mix in product launch
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Find out how NIVEA used external-environment theory to succeed in the manufacturing industry by downloading our premium case study.

Creating the right marketing mix
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Learn how Motorola used external-environment theory to thrive in the telecommunications industry by downloading our premium case study.

The use of social media in promotion
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Discover how National Trust used external-environment theory to thrive in the non-profit industry by downloading our premium case study.

Re-focussing a company's culture and marketing mix
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Learn how Argos applied external-environment theory to succeed in the retail industry by downloading our premium case study.