When a firm evaluates how other companies react to its marketing activities, it is attempting to understand the competitive environment aspect of the immediate marketing environment. This environment includes the firm's direct competitors, indirect competitors, and other market players that influence its ability to serve customers and achieve objectives
. The competitive environment is part of the firm's microenvironment , which consists of actors close to the company such as competitors, suppliers, marketing intermediaries, customers, and publics
. By analyzing competitors' responses, strengths, weaknesses, pricing strategies, and market positioning, the firm gains insights into market dynamics and competitive threats or opportunities
. Understanding competitor reactions helps the firm adjust its marketing strategies-such as product offerings, pricing, promotion, and distribution-to maintain or improve its market position. This competitive analysis is a crucial component of environmental analysis, which also includes broader macro-environmental factors like economic, social, technological, legal, and political forces
. In summary, evaluating how other companies react to a firm's marketing efforts is an exercise in understanding the competitive environment , a key element of the firm's immediate marketing environment that directly affects its strategic decisions and market success.
