1.3 External Environment

Question 1

Name the PESTLE factors.

Answer 1

Political.
Economical.
Social.
Technological.
Legal.
Environmental.

Question 2

How may competition affect costs and demand?

Answer 2

Presence of competitors may reduce demand.
May also increase costs as business has to pay for marketing or research into development of current/new products.

Question 3

How may market conditions affect costs and demand?

Answer 3

Increasing market could increase demand but may also increase costs as business has to fight to gain a market share.

Question 4

How can consumer income affect costs and demand?

Answer 4

Incomes increase - increase in demand for luxury items.
May also invest more heavily into promotion and advertising therefore costs increase.

Question 5

How can interest rates affect costs and demand?

Answer 5

Increased costs as increased cost of borrowing and may also reduce amount spent by consumer.

Question 6

How may demographic changes affect costs and demand?

Answer 6

Aging populations mean a change in demand for e.g. senior holiday packages.
Migration means more demand for cultural shops rather than standard food shops.

Question 7

How can environmental and ethical factors affect business costs and demand?

Answer 7

Demand for ethically sourced/produced products will increase a businesss costs.
May also decrease demand if business fails to meet these customer needs.