13 External factors (PEST) Flashcards
State the 4 external factor categories
Political, environmental, social, technological (PEST)
Define pressure group
Group or organisation that tries to influence opinion of ordinary people + persuade the government
Define sustainable development
Idea that people should satisfy basic needs + enjoy improved living standards without comprimising the quality of life for future generations
Define urbanisation
Process of constructing more buildings in rural (countryside) land
Define capital intensive
Use of relatively more machinery than labour in production
Give some examples of political external factors
- Some parts of the world are politically unstable, so businesses would have to be cautious if in these countries
- Pressure groups (e.g. ASH) may influence business activity
- Government changes
Give some examples of government changes
New government elected
Improving national security
Explain the impact of improved national security on businesses
Businesses more limited
Because there is restricted movement of goods, people and capital
Leads to businesses not able to operate as easily in many different countries
Therefore ensuring that countries they operate don’t have as many restrictions
Explain the impact of pressure groups on businesses
Business would have to alter their products
Because pressure groups would try to influence businesses to behave more ethically or to act in a more environmentally friendly way
Leads to business changing products to appease pressure groups
Therefore having a good reputation amognst consumers as they are being more ethical
Explain the impact of a business operating in a politically unstable country
Business would have to be more cautious
Because laws in the country are likely to change suddenly and become worse
Leads to business operations possibly being affected by laws
Therefore having to prepare contingency plans in order to prevent losses in such countries
Give some examples of environmental external factors
Global warming
Habitat destruction
Resource depletion
Government promoting sustainable development
What type of businesses are impacted by global warming
Impacts transportation companies + companies with factories
Give examples of resource depletion
Fish stocks falling
Oil, coal, gas, minerals are non-renewable
Fertile soil lost
Give examples of how a business may respond to the government promoting sustainable development
Business can use recyclable packaging
Using energy efficient equipment
Reduce business travel and use video conferencing
Give examples of social external factors
More part-time workers Increased numbers of women at work Changing demand patterns Increased consumer awareness (access to reviews etc.) Urbanisation
Explain the impact of more part-time workers on businesses
Improves flexibility
Because business doesn’t need to pay for unneeded workers all the time
Leads to saving costs
Therefore being able to reinvest profits into business
Explain the impact of increased numbers of women at work on businesses
More labour supply
Because more people are being available for work
Leads to businesses being able to employ the best, skilled workers
Therefore more efficiency and better output
Explain the impact of changing demand patterns on businesses
Having to adapt to consumers’ needs and wants
Because they change over time, e.g. with improving technology
Leads to businesses needing to reconsider how to change products
Therefore consumers being satisfied with products
Explain the impact of increased consumer awareness on businesses
Businesses being more consumer-focused
Because consumers have more access through the internet and reviews online etc.
Leads to businesses having to ensure that products meet consumer’s needs and wants
Therefore consumers being satisfied by products being offered
Explain the impact of urbanisation on businesses
More labour and additional markets
Because people leaving rural areas to towns/cities
Leads to businesses having more markets to satisfy
Therefore being able to expand business and products offered
State how technology reduces costs
Shortens production time
Replace labour with capital (capital intensive)
Social media improves communication between business and consumers
How might large businesses be affected by external factors compared to small businesses
Large firms are in a better postion than small firms to cope with the negative effects of external factors because they might make detailed contingency plans + they have more resources to fall back on
