1.3 Understanding That Business Operate With An External Enviroment Flashcards
How can the external environment affect costs and demand?
Market competition and conditions
Incomes
Interest rates
Demographic factors (ages etc)
What is fairtrade?
It’s about better prices, decent working conditions and fair terms of trade for farmers and workers. It can add value to a product but it can make the unit costs higher. Not many consumers may be able to afford one.
What are some environmental issues?
Smaller households - it is projected that the number of one person households in England will increase by 60% to nearly 11 million households by 2031. Factory emissions, pollution in distribution networks, congestion and destruction of natural environment e.g. Deforestation.
How are companies trying to help the environment?
The UK government also provides grants for firms investing in green technology for example, through Carbon Trust. Being environmentally friendly can often be expensive, but M&S have ‘Plan A’ strategy and have had cost savings from being environmentally friendly (saved £135million)
What are 3 arguments for being environmentally friendly? And what does this mean?
Improved financial performance
reduced operating costs
enhances brand image
-meaning improved sales and customer loyalty and attractive to potential investors.
What are 3 arguments for not being environmentally friendly?
A businesses ultimate goal is profit
Businesses may not be able to use their resources efficiently if there is restrictions on how and where to produce.
As long the company complies with legislation they should be able to do what they want.
What is the first demographic change?
The UK population is increasing. In 2008 there were 61.4million people living in the UK. This is expected to grow to 71million people by 2031.
What is the second demographic change?
The population is ageing - by 2031, 22% of the population will be aged 65 and over compared to 18% aged 16 or younger. The older generation are a major marketing opportunity for all industries, with the older generation being 80% of disposable income.
What is the third demographic change?
Ethnic differences - increased migration into UK over recent decades has resulted in a much more diverse population which has led to different attitudes, demand for different foods and restaurants and different shopping habits providing opportunities but more complex consumer attitudes and demands.
What is the fourth demographic change?
Smaller households - increasing. Rise 60% to nearly 11million in 2031. Ready made meals.
What are 5 benefits of demographic changes?
The UK population is increasing The population is ageing Ethnic diversity Smaller households Higher proportion of women working
How do income levels affect the market?
Income levels can affect the market of product as if income rises then people have more disposable income. If people have less income demand for luxury items/niche products will fall.
What does market conditions mean?
The features of a market such as level of sales, sales growth, price levels, the number and strength of rivals, their market position and market share etc.
