13 External factors (PEST)

Question 1

State the 4 external factor categories

Answer 1

Political, environmental, social, technological (PEST)

Question 2

Define pressure group

Answer 2

Group or organisation that tries to influence opinion of ordinary people + persuade the government

Question 3

Define sustainable development

Answer 3

Idea that people should satisfy basic needs + enjoy improved living standards without comprimising the quality of life for future generations

Question 4

Define urbanisation

Answer 4

Process of constructing more buildings in rural (countryside) land

Question 5

Define capital intensive

Answer 5

Use of relatively more machinery than labour in production

Question 6

Give some examples of political external factors

Answer 6

1. Some parts of the world are politically unstable, so businesses would have to be cautious if in these countries
2. Pressure groups (e.g. ASH) may influence business activity
3. Government changes

Question 7

Give some examples of government changes

Answer 7

New government elected

Improving national security

Question 8

Explain the impact of improved national security on businesses

Answer 8

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

Question 9

Explain the impact of pressure groups on businesses

Answer 9

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

Question 10

Explain the impact of a business operating in a politically unstable country

Answer 10

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

Question 11

Give some examples of environmental external factors

Answer 11

Global warming
Habitat destruction
Resource depletion
Government promoting sustainable development

Question 12

What type of businesses are impacted by global warming

Answer 12

Impacts transportation companies + companies with factories

Question 13

Give examples of resource depletion

Answer 13

Fish stocks falling
Oil, coal, gas, minerals are non-renewable
Fertile soil lost

Question 14

Give examples of how a business may respond to the government promoting sustainable development

Answer 14

Business can use recyclable packaging
Using energy efficient equipment
Reduce business travel and use video conferencing

Question 15

Give examples of social external factors

Answer 15

More part-time workers
Increased numbers of women at work
Changing demand patterns
Increased consumer awareness (access to reviews etc.)
Urbanisation

Question 16

Explain the impact of more part-time workers on businesses

Answer 16

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

Question 17

Explain the impact of increased numbers of women at work on businesses

Answer 17

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

Question 18

Explain the impact of changing demand patterns on businesses

Answer 18

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

Question 19

Explain the impact of increased consumer awareness on businesses

Answer 19

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

Question 20

Explain the impact of urbanisation on businesses

Answer 20

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

Question 21

State how technology reduces costs

Answer 21

Shortens production time
Replace labour with capital (capital intensive)
Social media improves communication between business and consumers

Question 22

How might large businesses be affected by external factors compared to small businesses

Answer 22

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