1.3 External Environment Flashcards
What are external factors
Factored that are happening outside the business that impact the business. This means that the business has to be dynamic.
PESTLE
Political , economic , social , technological , legal , environmental
Define interest
Cost of borrowing , reward of saving
What are political factors
-If the demand of the economy is low , the government will try to increase it by lowering tax and working with the BoE to lower interest rates . Vise versa if demand is too high.
-political parties have different values
-government can change consumer behaviour through tax
How is inflation stopped
When inflation goes up , the BoE puts interest up , the consumers can’t afford new inflated prices , consumers stop spending , business have to lower prices to meet demand
Labour supply factors
-unemployment = 4.1% means less people with disposable income
-more choice of workforce , business can offer lower wages
What is unemployment and what are the different types
-people who want to work but cannot get it
-made redundant, dismissed , school, college , or uni leaver
What is GDP
Gross domestic product
-sum of all the finished goods in a country for a year
Different stages of the economy over time
Boom, downturn, recession/slump , recovery
What is happening in the boom stage of the economy
-highest point of GDP
-high confidence , demand , employment, disposable income , borrowing
-low inflation , interest
-good salaries
What is happening in the downturn stage of the economy
-caused by external factors
-decaf ease in employment , demand , investment and confidence
What is happening in the recession/slump of the economy
-two consecutive quarters of declining GDP growth
-low demand , employment , investment and confidence
-less disposable income
What is happening in the recovery stage of the economy
-increasing employment , demand , investment and confidence
Seasonal demand and supply examples
-fuel , heating needed in different months
-religious festivals/timings impacts demand
- summer seasons , holidays +tourism
-farming is seasonal
How do businesses prolong the season of demand of their product
-advertising
-pricing
-upselling
What are exchange rates
The value of one currency expressed in terms of another currency
What is SPICED
strong pound imports cheap exports dear
Good for domestic business (UK to UK) (£ to £) however other countries can’t afford it)
What is WPIDEC
Weak pound imports dear exports cheap
Exports go up as it is cheaper for global businesses to buy
Why do exchange rates change
Depending on the GDP of your country and other countries and the inflation of a currency
Calculation for interest rates
Total repayment - amount borrowed / initial borrowed amount x 100
What’s APR
annual percentage rate - the law says this must be announced before borrowing
