1.5.5 External Influences

Question 1

Opportunities in external influences for businesses:

Answer 1

• rise in economic activity - increased demand
• new legislation that increases demand for a business’s safety products
• new technology that lowers the cost of production
• lower interest rates, making it easier for a business to borrow money

Question 2

Threats in external influences for businesses:

Answer 2

• new competitors entering the market
• new legislation that makes a business’s products illegal
• a fall in economic activity - decreases demand
• a new technology that makes a business’s products obsolete

Question 3

Business responses to changes in technology (external influences):

Answer 3

• stop producing a product line that has become obsolete due to the rise of new technology
• invest heavily in new technology in order to gain an advantage over competitors

Question 4

Business responses to changes in legislation (external influences):

Answer 4

change company policy to adhere to employment or consumer legislation

Question 5

Business responses to changes in the economic climate (external influences):

Answer 5

• increase productivity and recruit new employees when economic forecasts look positive
• cut investment and spending when economic activity is low

Question 6

Business responses to changes in competition (external influences):

Answer 6

• lower prices to counteract the entrance of a new competitor
• invest heavily in new technology in order to gain an advantage over competitors