3.1.4 Impact Of External Influences

Question 1

PESTLE analysis.

Answer 1

Political, economic, social, technological, legal, environmental. An effective way to analyse key features of the external environment

Question 2

Political

Answer 2

Competition policy
Industry regulation
Govt. spending & tax policies
Business policy & incentives

Question 3

Economic

Answer 3

Interest rates
Consumer spending & income
Exchange rates
Economic growth (GDP)

Question 4

Social

Answer 4

Demographic change
Impact of pressure groups
Consumer tastes & fashions
Changing lifestyles, attitudes towards race, religion, sexuality

Question 5

Technological

Answer 5

Disruptive technologies (e.g. e-Commerce)
Adoption of mobile technology
New production processes
Big data and dynamic pricing

Question 6

Legal

Answer 6

Employment Law
Minimum / Living Wage
Health & Safety Laws
Environmental legislation

Question 7

Environmental

Answer 7

Sustainability
Tax practices
Ethical sourcing (supply chain)
Pollution & carbon emissions

Question 8

Political- impact of EU

Answer 8

harder to access EU markets
• harder to fill lower paid job vacancies without free movement of labour
• more expensive imported materials due to the reduction in the value of
the pound
• less foreign direct investment to the UK from foreign multinationals
• EU laws will need to be replaced, which may allow the UK Parliament
to relax legal responsibilities placed on firms in areas such as
employment protection or environmental standards

Question 9

Economic factor depends on

Answer 9

Income elasticity

Question 10

Economic variable- the exchange rate

Answer 10

This impacts not only on exporters, but also on
businesses that sell imported products, or use imported components
or materials. Meanwhile, for those who compete against these firms
without using imported supplies, exchange rate movements will also
have an indirect effect.

Question 11

Economic variables- The rate of inflation:

Answer 11

As it rises this tends to cause uncertainty and lead

to reductions in investment and decisions to expand.

Question 12

Economic variables-the rate of unemployment

Answer 12

An increase will reduce average incomes

but make it easier to recruit staff without needing to offer high wages.

Question 13

Social- trend examples

Answer 13

greater awareness of the need to eat healthily
• changed attitudes to smoking
• an increased desire for convenience and speed of service
• an ageing population

Question 14

Technology opportunities

Answer 14

Technological changes can allow new ways of making existing products,
lowering costs, improving quality, reliability, durability or recyclability.
Thev can also enable the development of brand new products, similar to
existing ones, such as electric cars, or the launch of really new product
concepts, such as fitness trackers like the Fitbit watch.

Question 15

Legal factors

Answer 15

Passing new laws can, once more, disrupt existing industries, forcing
businesses to change the way they make products, the materials they use,
or even banning certain products. Firms directly affected by such legal
changes will face a strategic challenge as to how to turn what appears to
be a threat into an opportunity.

Question 16

What to do about external influences

Answer 16

Make the most of favourable external factors while they last: An
external change that works in a business’s favour should be capitalised
upon, giving the business time and money to help prepare contingency
plans in the event that the factor moves against it.
Minimise the impact of unfavourable external influences: This
can be through adjustments to controllable aspects of the business’s
performance, so cope with a negative exchange rate movement by
considering shifting factory location, for example.