3.1.4 - Impact Of External Influences

Question 1

When is pestle used

Answer 1

When a firm wants to better understand the external environment within which its operating

Question 2

What does PESTLE stand for

Answer 2

Political, environmental, social, technological, legal, economic

Question 3

Description of political

Answer 3

Government policies such as investing in infrastructure or exports providing opportunities

Question 4

Example of political

Answer 4

Leaving EU, harder to access markets, harder to fill lower paid vacancies, reduction in value of the pound

Question 5

Description of economic factors

Answer 5

State if the economy and link between economic growth and average incomes

Question 6

4 economic factors

Answer 6

Economic growth
Exchange rates
Inflation
Rate of unemployment

Question 7

Description social factors

Answer 7

Changes in social attitudes and behaviours leading to lifestyle trends damaging sales of one product whilst opening markets for new products

Question 8

Description technological factors

Answer 8

New ways of making existing products, lowering costs, development of brand new products. Developing technological changes early opportunity but for those who don’t, hard to compete with rivals

Question 9

Description legal factors

Answer 9

Passing new laws can distrust existing industries forcing businesses to chnsge the way they make products

Question 10

Description environmental factors

Answer 10

Environmental pressures seen as threat as business change production methods though opportunity bringing about more efficient and cost saving methods or point of differentiation

Question 11

What is porters 5 forces

Answer 11

Structure used for conditions analyses of a business competitive environment

Question 12

The 5 key aspects of a comp environment that affects a firms likelihood of long term success

Answer 12

Rivalry among existing competitors, threat of new entrants, changes in buy powers of customers, changes in buying powers of suppliers and threat of substitutes

Question 13

Features where intensity of rivalry is low

Answer 13

• few companies dominate market, low capacity utilisation, high barriers to entry, non price competition eg marking and branding offering more scope for businesses to survive without cost reductions

Question 14

Features where intensity of rivalry is high

Answer 14

• many competitors of equal size
• products undifferentiated
• slow market growth
• low barriers to entry and overseas comp
• pressure to maintain low costs

Question 15

Description threat of new entrants

Answer 15

Dependant on barriers to entry to break into market eg strong brand identity, customer loyalty, high costs

Question 16

Def of barriers to entry

Answer 16

Factors in the market that can make it hard to new companies to break into the market

Question 17

Description changes in buying power of customers

Answer 17

Unfavourable to a business when power shifts to customer especially for a business with few large customers who don’t buy unless discount is offered

Question 18

When is customer power reduced

Answer 18

When business products are complex so they can’t afford to change firm that they buy from

Question 19

Description threat of substitutes

Answer 19

Chances a product or service in another market may become seen by customers as a viable substitute for the product. Threat is only posed by direct competitors with same product

Question 20

Description changes in the selling power of suppliers

Answer 20

If power in the relationship shift towards suppliers, bad new for business and future profitability