1.5 External Factors Flashcards
EXTERNAL FACTORS - PESTEC (DES/TYPES)
Affects the business, cant directly control. POLITICAL, ECONOMIC, SOCIAL, TECHNOLOGY, ENVIORMENTAL,COMPETITIVE.
POLITICAL (DES/TYPES)
Government having an influence on bus economy. Could be legislation, Government policy and Government spending. // Minimum wage increase=paying more labour=smaller profit.
POL- LEGISLATION/GOVERNMENT POLICY/GOVERNMENT SPENDING (type/impact)
Minimum wage=costs rise, Equality Act=, Health and Safety=training, Trade, Raise cooperation taxes=VAT raised=Higher prices.// Recycling// Grants and allowances, tax, interests.
POLITICAL- Competition Policy (des/impact5)
Ensure fair competition, Competition- Main areas, customers, mergers, stops domination in market. to maintain customer choice and fair market prices.// businesses colluding with other organisations to fix prices. (cartel), cant use market power=pay supplier low prices, blocks mergers&takeovers, fined, force change prices.
ECONOMIC - (AREAS6)
INFLATION, INTEREST RATES, INTERNATIONAL TRADE, BOOM/RECESSION, EXCHANGE RATES, EMPLOYMENT.
INFLATION (DES/IMPACT)
Rise on prices affect customers/business./ increase on material price=high product costs=drop sales=lower profits. Less likely buy luxury.
EMPLOYMENT (des/impact)
When high, business find easier to recruit new workers & pay them less=lower demand for products.
Exchange rates (des/impact)
If bus in international trade=affect price expensiveness to foreign. Higher value of £ > expensive overseas. Buying supplies= higher the value £= less expensive to buy. Customers affect.
Boom/Recession
Boom= demand is high, employment low=price rise quick. Recession opposite.
Interest Rates
Rise rates costs business and customer. Increase mortgage/loans=less likely to buy goods=less demand=bus increase fin costs=lower profit.
ECONOMIC- ECONOMIC POLICY (des/types/ex)
Try create growth. (Fiscal Policy, Monetary) more jobs created, more tax will be paid, higher levels of employment.
ECONOMIC POLICY (FISCAL)
Increase tax=reduce sales customers less to spend. Increase VAT=Price increase. Increase cop tax=reduce profit of the year.
ECONOMIC - (MONETARY POLICY)
Increase interest rates=increase borrowing fin. Lowering interest rates=firms invest more in growth.
SOCIAL/ETHICAL (DES/EX)
What customers want, when, what- changes with customers. demographics, lifestyles, tastes and trends, ethical. Demographics=population. Lifestyle= Healthy foods/nut info. Trends=what’s popular. Ethical=reduce waste, recycling, wage produced, child labour.
TECHNOLOGICAL (DES/TYPES)
refers to ways new practices and equipment can affect businesses. ICT, ECOMMRCE, AUTOMATION, RESEARCH AND DEVELOPMENT.
TECH- ICT
processes and communication within a business quicker and more efficient.
TECH- ECOMMERCE
Online- widens the number of customers, lowers the costs of production, is highly competitive
RESEARCH AND DEVELOPMENT
innovation of new products, systems and services.3D printers, smart phones, tablets, apps.
AUTOMATION
enables machines to do work that was previously done by people, reducing unit costs of production and making the business more profitable. Self scan.
Benefits/ Disadvantages of Technology
increase efficiency-few workers=more output, increase flexibility-adapt more, better communication, competition edge, enhance reputation.// Cost of hardware/equipment, staff training, Costs of replacements/upgrading, computer viruses, loss electronic info.
ENVIORMENTAL
Weather=floods, Green=recycle, minimize their carbon footprint/cut down on pollution to rivers and the environment, products and services are seasonal e.g. summers increase sales=sun tan lotion.
COMPETITIVE
Price wars= cut prices in attempt to increase their share of the market. Imitators= reduces the cost of launching/building own brand by relying on the innovation done by its competitor. Price differentiation= stand out with price.
