3.1.3 Flashcards
What are the 4 factors that shape the external environment?
1) Environmental, Social Factors
2) Market Factors
3) Democratic Factors
4) Economic Factors
Name 2 Environmental and Social Factors
1) Consumers prefer environmentally friendly products
2) growth in popularity of fair trade products
Name 2 Market Factors
1) Changes in the power of competitors
2) growth in sales within the market
Name 2 Demographic Factors
1) changes in migration
2) changes in birth and death rates
Name 2 Economic Factors
1) Consumers’ incomes
2) the level of interest rates
5 Examples of positive factors occurring from changes in External Environment
1) more popular product -> rising demand
2) major competitor leaves the market
3) country’s consumer levels increase
4) interest levels fall -> cheaper to loan
5) rising incomes -> rising demand
4 Examples of negative factors occurring from changes in External Environment
1) demand for environmentally friendly products -> higher costs
2) new competition in the market
3) market with product surplus -> lowering price
4) higher unemployment -> less spending
5 What are the components of the external environment?
1) Market conditions and competition
2) Incomes
3) Interest rates
4) Democratic Factors
5) Environmental issues and fair trade
What is the definition of market conditions?
Describes a while range of factors effecting the market
What are the four different types of market conditions?
Political
Labour Supply
Incomes and Economic
Seasonal demand
How do market conditions affect costs and demand?
Political Factors
If demand falls, the gov will lower taxes to increase spending rates
If demand rises, the gov will increase taxes to lower spending rates
How do market conditions affect costs and demand?
Labour Supply
High unemployment means good supply of labour -> easier to employ for cheap -> higher productivity to keep their jobs
Lower unemployment means bad supply of labour -> harder to employ for cheap -> people available may need training -> increasing business costs
How do market conditions affect costs and demand?
Income and Economic Factors
A recession will mean lower incomes and the demand will fall
Economic boom will mean higher income and demand will rise
How do market conditions affect costs and demand?
Seasonal Demand and Supply Factors
Weather and holidays change demand and supply
Impossible to avoid seasonality
Food producers can cope with seasonality in Supply by preserving food
What are the three types of competitor?
Perfect competitor
Oligopoly
Monopoly
What is a perfect competitor?
Where all firms compete on an equal basis. They have similar/identical products and prices.
What is oligopoly?
A small number of large firms that dominate the market. Charge similar prices
For oligopoly, what does the business have to do to get ahead?
Focusing on marketing and brand image increase demand. However it requires a lot of promotion, increasing costs.
What is a monopoly?
One business has complete control over its market. There is no competition
What is the definition of interest rate?
Affects the cost of borrowing
2 Effects of high interest rates?
1) increase in cost of borrowing
2) less money to spend, decreasing demand
2 Effects of low interest rates?
1) decreased cost of borrowing
2) high incomes, rising demand.
What are features of demographic change?
Population, age, sex, race, consumer tastes
Different demographic buy different things
4 Features of Environmental Factors
1) traffic pollution, packaging in landfills, burning waste
2) Government legislation forces businesses to deal with environmental issues, through large fines
3) some businesses try sustainable methods. But cardboard rather than metal rises costs
4) can better rep and increase their demand. Can save business money long term.
What are the two government legislation protecting the environment?
The Environmental Protection Act 1991
The Environmental Protection Act 1995
What was the first environmental act about?
Introduces the notion of pollution control, therefore make businesses reduce the amount of pollution they create
What was the second environmental protection act about?
It controlled pollution and made provisions for restoring contaminates land and abandoned mines.
What is fair trade?
A social movement promoting improves trading terms and living conditions for producers of products in less-developed countries.
What is sustainable production?
Supply does not impose cost on future generations be depleting it for example.
